Random static

We were told often in the last month or so that the economy was ok.  We were told that, while things were slow, the economy would eventually rebound.  We were told that government wouldn't need to get into any more firms after brokering the deal with Bear Sterns.  Everything was pushing up roses.  Now we are being told that the government needs to inject $700bn dollars into the market in order to buy assets which no one else will buy.

The government will buy these assets at a price which is close to premium value.  This will allow the markets to unfreeze.  Banks will sell their bad debts to the government and the government will hold these assets until such time as it sells them back.  According to this theory, once the credit dn market is working again the value of these assets will again rise.  Additionally the plan will allow the government to buy up other assets (student loans, car loans, etc) anything the government deems to be a "toxic" asset.    In short, this plan stinks to high heaven. 

There are so many things wrong with this plan. 

First - how can the government possibly think that it can create a market for these assets when Wall Street itself cannot determine what their true value is?  The fact is it cannot.  What will happen is that the government will hold these assets which it bought at a premium for years.  These assets will remain worthless and the government will eventually sell them back to the banks at a loss.  The banks will effectively shank the government - they will sell these assets at premium and then buy them back with the net affect of the government taking a loss.  Great idea Hank Paulson! 

Second - $700bn is only the start of what the Fed would like.  The true cost of this plan will be over $1 trillion dollars.  Think about it, the government is and has lent billions of dollars to the banks through both the discount window and the other credit lending facilities.  These actions will continue.  This plan is the end of the US Economy as we know it. 

Third - It is clear that most of the American people think that the government has no place saving companies who knowingly made bad loans to people who could not afford them.  These companies, with the encouragement of the Federal Government via various affordable housing acts and low interest rates, lent money to anyone and everyone.  Reckless lending should be punished, people should reap both the rewards and the penalties of the market.  Let the market sort this out. 

Americans must not give in to scare tactics by the administration.  We must give careful consideration to the fact that we simply do not have the money to bail these companies out.  Further, we should not simply keep printing money - inflating our currency and layering on debt for generations and generations. 

We face a reckoning in this country.  Do we want to bail out Wall Street?  Do we want to continue with our entitlement programs (Social Security, Medicare, LIHEAP etc)?  Do we want to pursue a nationalized health care program?  We can't afford to do any of these programs yet we are discussing raising our debt limit to $11.5 trillion dollars and printing out $700 billion for this disaster of a plan.

This further shows the disaster of centralized financial planning caused by the Federal Reserve.  Paul Volker, Alan Greenspan, Ben Bernanke - all of these men devalued our dollar by simply printing more of them.  They kept interest rates at an artificial level for years and years.  This had the affect of pushing the crisis down the road.  Well, the road has ended this week in Washington. 

Call your congressman or woman.  Tell them to vote against this socialist plan by the Bush administration.  Let the chips fall where they may and have faith that the market will fix itself.  

We supposedly tout the benefits of a free market all the while trying to insulate and protect ourselves from the very workings of the free market.  We want to profit but not fail, we seek to reap the monetary benefits while not accepting the monetary risks.  We are hypocrites. 

With the government picking and choosing which investment banks to bail out and how these businesses run - where are we as a country?  Successive policy makers at the Federal Reserve caused this problem.  The artificial rates set by Greenspan and friends certainly encouraged people to purchase as much house as possible.  These same policy makers created a situation where it was then desirable for the average American to then refinance their house and use it as a bank to make larger and larger purchases.  The US Economy was leveraged and Americans were buying things they simply could not afford. 

Now we are knee deep in the mess we've made.  In 2009 Alt-A mortgages are scheduled to reset and could further erode the credit industry.  Private student loan lenders are, in large number, ceasing their operations; more and more investment banks and pension funds are feeling the hit from their poor investments in these mortgage backed securities.  With no solution in sight the government has stepped in to try to stem the tide, essentially hanging the US Taxpayer out to dry for the mistakes of these private firms.  Nothing is too big to fail. 

We must accept the losses of these companies, the accompanying economic downturn and the deep impact it will have on the economy.  We have to do that because when it does turn around - companies will learn from this market and not repeat the same mistakes of the past. 

The government can not pick and choose which companies it will let default and which it will save.  It's either all IN or OUT.  My fear is that we are seeing the demise of market capitalism in the United States and a transition to a more managed and planned market.  Be afraid if that happens. 

Our long primary date with Barry Obama is now over, and still we're confused about just who he is?  Sure he's eloquent - he can give a great speech.  He's tall, very handsome, has the Kennedy-esq charisma - he's the guy all the girls at the party head towards. 

But who is he?  What's his record like?  Does he have any notable achievements on his own?  He was the head of the Harvard Law review - but he never published anything!  Nor did he clerk for any judges either state or federal while in Law School.  His class at the University of Chicago was average.  Where are his friends from early on in life?  Does he have any roomates that can testify to how great he was?  The answer to all these questions is a resounding no.  What associations have emerged from the early Obama?  Jeremiah Wright, Bill Ayers, questionable schools in Malayasia.  All these things are very troubling.  Which leads me to my point - a man running for President of the United States needs a narrative.  People need to know who he is.  He should have friends and testimonials - not vague ideas and airy phrases.  And when he doesn't?  That's when you need to be worried - because, sometimes the guy at the party who all the girls like is the same one who slips the drugs into your cocktail, America doesn't need to wake up finding herself in a bathtub full of ice wonder where her kidney is...

We've lost face in the wake of the naked aggression of Russia toward the republic of Georgia.  How can a nation which supposedly is allied with Georgia not take stern action in response to an invasion of another soverign nation?  Those who lump the Russian aggression in Georgia with the US invasion of Iraq are foolish and ignorant. 

With Poland now in line to host US interceptor missiles and the Ukraine now requiring 72 hour notice from the Russian navy before they use the Ukrainian ports the stage is set for greater escalation of the Russian gamble. 

The United States ought to station defense troops around Tbilisi and call the Russian bluff.  Further, the United States should reorganize the G-8 into the G-7 (what is was originally anyway).  Russia should be notified that they will not be allowed into the World Trade Organization and further they should be isolated by both the E.U. and the U.N. 

It seems apparent that only firm action will stop the Russians from their ambitious plan to split Georgia and re-take the country.

The rating agency Standard & Poor's said it may downgrade a $19bn chunk of subordinated debt issued by two agencies despite the Treasury plan, citing "heightened financial risks".

This raises implicit concerns about the credit worthiness of the United States itself, though S&P denies any plan to cut the US sovereign rating at this stage.

Hank Paulson, the US treasury secretary, brushed aside complaints that the rescue package amounts to a taxpayer bail-out for shareholders, insisting that the new authority to buy stock is merely intended to reassure investors and may never be activated if all goes well. The authority expires at the end of 2009.

(Here)

Another insightful comment from John McCain -

"``Wall Street is the villain in the things that happened in the subprime lending crisis and other areas where investigations and possible prosecution is going on,'' McCain said during a taped appearance on ABC's ``This Week'' program." (Here)

The big losers here are the American people.  Wall Street is most certainly not the villain - companies were out to make a profit, people were out to buy a house...the two interests converged and at the intersection you have people taking out loans without reading the fine print and companies profiting from it.  You then have folks not being able to pay these loans and companies not able to sell the securities backed by these bad mortgages.  Companies are punished because they can not raise capital, and people are punished when their homes get foreclosed on. 

This is the market.  A system that is free has to provide the opportunity to make bad decisions and to have these decisions punished.  The market will self correct. 

To all those Republicans who voted no on HR 3221:

Thank you. 

The colossal colluding with Democrats over this bail out has pushed me over the edge.  Coupled with their terrible monetary policy and blind spending I see no difference between Democrats and Republicans. 

Where have all the small government conservatives gone?

Hi, I heard you on a commerical that NPR was doing for their story on the bailout of the mortgage industry.  You said something like

"did I make a mistake, yes.  Do I like my house, yes.  I just want what everyone else in America has a right to - a roof over my head and a way to pay the bills, clothes and medicine that's all."

I disagree with your presuppositions. 

First you suppose that everyone in America has a right to a roof over their head?  Where is this written in the Constitution?  Where is this written in any federal laws?  State laws?  etc?

Second - you assert that you have a right to a job, food, clothes, medicine?  All these things of which you have no rights at all.  In fact...it was your blatant assertions that you had a "right" to things which got you in trouble in the first place.

Did you have a right to borrow a large sum of money to purchase a large house which you thought you could afford?  Sure.  However you should have read the fine print when you realized that you so called "Adjustable Rate Mortgage" was going to adjust to a rather unwieldy payment.  If you didn't already know - it might not have been wise to buy a house using a NINJA Loan (No Income, No Job, No Assets).  And now you come and complain over the fact that your mortgage was bundled and sold with hundreds of other mortgages to make someone profitable.  You ask for relief from who else?  Uncle Sam!

Folks, get over it.  You made your bed, now lie in it.  Don't put yourself at the mercy of the government and expect every tax payer in the country to throw some of their hard earned money to give you some debt relief.  Get over it.

I'm frankly, very concerned that we are giving a blank check to the two GSE's to bail out these people who deserve exactly what they get.  You can not have individual risk taking and socialized assumption of that risk.  It just doesn't work.   We can't bail these people out.  The economy would be better served long term to restructure these GSE's and let the people fall by the way.  Let private organizations take care of these people. 

Another thing you don't have a right to is free medical care.  Got a problem - go to a doctor, they won't refuse you - at worse you'll be in debt...at best you'll pay out of pocket.  Too bad.  That's why we have jobs. 

Last rant - get a job.  Can't afford gas prices...food etc?  Get a second job.  Work.  One of the things that made America exciting and new and a land that people want to come to is that fact that people have so much opportunity.  Don't whine and depend on the government, get a job...

Ankle Grabber...

"Could you bend over and grab your ankles please..."

I'm no economics expert, but lets think about the role the Federal Reserve has played over the years creating an environment where people with low credit, shady credit...or even NO credit could buy a home.  First though let me preface by saying that I think people should own homes.  People who have savings, can make a 10 - 15 - 20% down payment and who have decent credit history have every right to pony up and place some cash down on their little slice of America. 

My problem is with the government creating an artificial bubble to encourage people to own things they can not afford - namely housing. 

See it all started with Alan Greenspan.  Alan thought that low interest rates would allow many Americans to borrow money easily and purchase things like houses and all sorts of other things that they could not normally afford.  Alan was correct.  Banks lent money at low rate to those who, by and large were not  credit worthy.  These people bought and spent and consumed.  When the money ran out or the debt become too large - they did what every American did - they refinanced!

This worked for many years as banks lent and people borrowed.  Foreign governments and large investors swept in to buy the US debt until these countries owned a significant proportion of the federal debt.  This worked by and large...until now...

Now these good americans who borrowed and borrowed suddenly couldn't afford to make their mortage payments.  Perhaps they bought more house than they could afford?  Perhaps they did not read the fine print on their mortage? Maybe they didn't really understand what a teaser rate was?  Either way  - the piper has come calling.  And now the US Taxpayer is on the hook for the thousands, perhaps millions of people that bought more house than they could afford...

Ankle Grabber Junior

Enter - Ankle grabber Junior.  Mr. Hank Paulson.....