Posting opinions, letters and correspondence from far and wide. Even some to/from my elected representatives.

Friday, September 26, 2008

Get your Bailing Buckets ready for the "Great Turn"!

Here's the "conventional" wisdom on this:
  1. There is no other way to fix this massive cash flow problem.
  2. The only way to fix this cash flow problem is to take 700,000,000,000 of American tax payers dollars and give it to ah... well some people that need it really bad.
  3. Don't slow things down because that would make things so much worse.
  4. Don't slow things down because that would be political.
  5. We are in a precarious position if we don't act now.
  6. We don't want no judicial review.
  7. We just want the Treasurer to divie it out as he pleases.
  8. We want an ex Goldman Sachs treasurer because he'll be fair and transparent and he understands the little people don't need that money as much as his crony friends do.
This all sounds like Stalinism. In fact, if you look up Wikipedia for "Stalinism" you will see that we have all of the ingredients for the "Great Turn". Here's what Stalin used as reasons for taking over the Russian capitalist system.
  1. Russia had seven years of war. The United States has seven years of war.
  2. Russia had a massive class struggle. The United States has a massive class struggle.
  3. Russia demonized the evil capitalists, bankers and other "elitist" groups (even though Stalin was doing business with them the whole time). The United States Congress has been demonizing the "Banks", "Wall St" and "greedy Executives" (even though they've been in bed with them the whole time).
  4. Stalin promoted Leninist policies as the ONLY way to improve the lot of all Russian citizens. President Bush (and the Democrats claim the ONLY way to save the national economy is by taking 12,000 dollars of your income as collateral to save the American economy.
But is the sky really falling?
  1. Private equity firms are ROLLING in cash. Billions of dollars remain locked up in Blackstone, Cerberus, Hathaway and numerous other private equity firms.
  2. Why did Berkshire Hathaway just commit 4 billion to Goldman Sachs if they need a bail out so bad?
  3. Why does AIG continue to make excellent profits on core insurance businesses?
  4. How come insurance products have so easily and smoothly shifted to companies such as AXA group without problems?
  5. How did JP Morgan Chase manage to buyout Washington Mutual with such ease if the financial institutions are in such a bad cash flow crunch situation?
  6. Why is Bank of New York, DTCC and other clearing houses not altering the cost of overnight overdraft rates if the "meltdown" is so imminent?
Here are the primary causes (in order of importance) of this mess:
  1. Idiots in State and Federal government, yes that would be people like Chuck Schumer, decided that money to buy a house was just too difficult for people to get at. Why there is a class bias against those in minority groups who live in tough areas. So we will first develop studies that propose that minority groups are not being given a fair deal by Banks when those banks charge higher interest rates, extra charges or require additional insurance before approving a loan.
  2. The media repeats the class warfare premised "predatory lenders" accusation so that the banks cave in to political pressure and the recommendations of bone headed and spineless (nay, economically clueless) public relations departments.
  3. Then, the Chuck Schumers of the world go and develop lending programs that specifically target sub prime lenders so that the torrent of loans descends upon them.
  4. Those programs will include bringing together the worse elements of race baiting shakedown experts (aka Jesse Jackson), dubious Banking organizations out to make an extra buck and a quasi private/public enterprize called Fannie Mae.
  5. Now we have all of the components brought together to provide money at low interest rates and no strings attached to the most unreliable borrowers in the country.
  6. Oh except I forgot one thing, when the lending has turned into a tidal wave, we won't turn off the spigot even when economists and others tell us it would be good idea to do so. So in 2005 it was recommended that the laws regulating Fannie Mae should be changed so that Fannie Mae would be required to operate according to private Banking rules and regulations but the Democrat's blocked the legislation to do it. Even Alan Greenspan, in testimony to Congress, supported the bill.
  7. Oh hang on, there's another thing,... Yes, now that we discover that there is a big problem with these mortgage backed securities, Congress will intervene so that all of the private equity firms and anyone with ANY skin in the game (especially the Banks themselves) will stop what they're doing to fix it all and wait for the Government to bail them out. Think about it, why would the banks foreclose on a home if they thought they could wait it out and get the Government to subsidise the loan? And that is exactly what the banks have been doing for 18 months. Instead of accepting the loss on some of these mortgages. Instead of recalculating the real value of their depressed mortgage back securities. They are now lobbying Congress to bail them out. And their best lobbyist on hand turns out to be an ex Goldman Sachs executive himself, none other than Paulson, the United States Federal Treasurer.
There's something very disturbing about watching a country make a dramatic turn to Socialism.

Call your Congresman and Senator's today!

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