Steven Pearlstein--Telling It like It Is

A Delicate Balance

By Steven Pearlstein Friday, July 11, 2008; D01

You know something's up when both the secretary of the Treasury and the chairman of the Federal Reserve give speeches calling for a new mechanism to allow them to manage the orderly liquidation of a major financial institution.

You have a sense that things are getting desperate when General Motors has to offer six-year loans at zero-percent interest to unload its gas-guzzling trucks and SUVs, and people openly speculate about how long it will be before the automaker runs out of cash.

And you can feel the foundation shaking under Wall Street when Fannie Mae and Freddie Mac have to pay three-quarters of a percentage point more to borrow money than the U.S. Treasury, which implicitly guarantees their debt, and top government officials feel compelled to reaffirm their support.

We're nearing that delicate point in the cycle when even the usual cheerleaders have hung up their pompoms, consumer and business confidence has dis…