Take a Step Back

Posted by Ray on September 24, 2008 under Main | Be the First to Comment

Bernanke, Paulson, the media and Wall Street are still selling this bailout. The committee meets today were a joke and they were straight-out asking these guys how to sell this to you, the voter. While doing nothing will certainly cause severe financial pain doing this plan will cause more.

Here is what we are struggling with, they keep saying that you and I will benefit from this bailout because they are buying assets, not simply giving the firms money…but they are. They keep saying that these investments, long-term, will be profitable so if these things are so profitable and good for us then why are the banks desperate to get them off their books? You also have to remember that these securities have maturity dates ranging from 10 to 40 years, do you hear them telling you this? Nope, they avoid that topic.

Also, if they are such great investments why are the super rich not buying them? While we do think that they are going to be profitable investments we also think that the government has zero business buying this stuff. The security is also not the problem, it is the fact that they were leveraged, they could have done the same thing with US government issued bonds, but they did not.

So to recap, they want us to buy securities that may be profitable over 40 years, hire the same people who traded them to buy them for the government, give Wall Street the freedom to issue more credit (because they did so well the first time), and let you pay for these things through taxes. Not to mention they are still collecting interest on your monthly payments. How does that make good policy?

Are there going to be repercussions to the CEO’s and CFO’s who did this? Are they going to have to give up their net pay from the last 5 years? Are there going to be indictments? Are they going to cap executive pay? Will the Countrywide CEO payback his $100M golden parachute? Nope, nope, nope, nope and nope.

Simply put they want to create credit for corporations, not us. They want you to believe they are unfreezing credit markets, but they are unfrozen. Credit is still be issued, check your mailbox you will see, they simply want to unfreeze this one market, sub-prime securities. Do not forget the Fed is loaning money out at 1% and have injected over a Trillion dollars into the market over the last 13 months, not including Fannie, Freddie and AIG…that’s 2 Trillion dollars.

In order for the market to recover it must fail. It has failed and those who caused this must pay. If they do this package they are merely postponing the inevitable and we will have $700B less to help when this happens, a major bank failure. We have to realize that this whole situation started 20 years ago.

Greenspan worked hard to open the credit markets to everyone. The Democrats and Republicans worked hard to deregulate the markets, specifically Glass-Steagal, No one can pin the blame on one party, it was both of them, but you can blame one man…Greenspan. He is no maestro or genius his loose monetary policy created this problem.

This bailout is a perversion of law and common sense.