Friday, April 11, 2008
Vacation
I'll be spending the next week plotting the inevitable downfall of our economy and markets from my mountain retreat.
Tuesday, April 8, 2008
I Love Me Some Volcker
http://www.bloomberg.com/apps/news?pid=20601087&sid=akNtk9A7NN8I&refer=home
``What appears to be in substance a direct transfer of mortgage and mortgage-backed securities of questionable pedigree from an investment bank to the Federal Reserve seems to test the time-honored central bank mantra in time of crisis: lend freely at high rates against good collateral; test it to the point of no return,'' he said.
Volcker said the modern financial system has ``failed the test'' of the marketplace. When asked whether he predicts a ``dollar crisis,'' he said, ``you don't have to predict it, you're in it.''
``What appears to be in substance a direct transfer of mortgage and mortgage-backed securities of questionable pedigree from an investment bank to the Federal Reserve seems to test the time-honored central bank mantra in time of crisis: lend freely at high rates against good collateral; test it to the point of no return,'' he said.
Volcker said the modern financial system has ``failed the test'' of the marketplace. When asked whether he predicts a ``dollar crisis,'' he said, ``you don't have to predict it, you're in it.''
Monday, April 7, 2008
Sunday, April 6, 2008
Welcome to the New and Improved Socialist America
I have a few things to get off my chest regarding the bailout of Bear Stearns.
The Fed chose to backstop the sale of Bear with 29 billion dollars of taxpayer money without which the transaction would never have taken place. The justification for doing so, according to Bernanke, is that had Bear been allowed to fail it would have triggered financial armageddon. There is probably some truth in that explanation but the end in this case certainly does not justify the means.
The action Bernanke and Paulson took is definitely unconstitutional and probably illegal. So you'd figure that when they appear before Congress to answer questions regarding this unprecedented transaction that perhaps our representatives might have some pointed questions. You'd figure wrong. The congressional hearings were a circle jerk. I heard more praise of the bailout then criticism. It saved the market from going down so it had to be done. Coincidentally, almost every one of the questioners have taken large campaign contributions from Wall Street.
I want to vomit. I had to turn the TV off. You mean to tell me that after having acted prudently throughout the housing bubble (20% down on a house I could afford, fixed mortgage, sold at the top) that now I have to help bailout those that acted imprudently? Are you fucking kidding me? I could have bought three or four houses, taken out ARMs with zero down and generally just speculated recklessly like many of those around me, but no, I did not. Now when the shit hits the fan I should have to bail out the risk takers with my tax dollars?
We now have, in this country, privatized profit and socialized risk.
The thing with Bear is that they fucked up and should have to face the consequences just like the individuals who speculated and got it wrong. But no, these guys award themselves billions in bonuses and now expect to be bailed out. Filing bankruptcy would have insured the return of those bonuses that were looted from the company but thanks to our Fed and Treasury there are no consequences for failure.
Did you not see the CEO of Bear on CNBS just days before they blew up? According to him everything was just fine, no cause for alarm. Three days later they are on the verge of bankruptcy? Where are the handcuffs? What am I missing? You see it's illegal for executives to make false statements to the market. Where are the cops?
Furthermore this whole scam is an exercise in obfuscation. Even though the taxpayer is on the hook for the losses we are not allowed to see just what Bear has on the books. The whole idea is to avoid taking realistic marks on the toxic waste that is everywhere.
So without objection from Congress we have now institutionalized the taxpayer bailout of any financial concern dubbed too big to fail. There will be many more of them and I suppose the Fed is going to take all of their bad paper onto it's balance sheet? We are now the United States of Subprime. The Fed keeps going at this rate and I'm going to have to turn my walk-in closet into a vault to hold all the gold I'm going to have to buy as protection against the complete debasement of our currency, our values and our society in general.
This bailout was a watershed moment. We have entered a new era in which anything goes. I could not possibly be more ashamed of my country.
The Fed chose to backstop the sale of Bear with 29 billion dollars of taxpayer money without which the transaction would never have taken place. The justification for doing so, according to Bernanke, is that had Bear been allowed to fail it would have triggered financial armageddon. There is probably some truth in that explanation but the end in this case certainly does not justify the means.
The action Bernanke and Paulson took is definitely unconstitutional and probably illegal. So you'd figure that when they appear before Congress to answer questions regarding this unprecedented transaction that perhaps our representatives might have some pointed questions. You'd figure wrong. The congressional hearings were a circle jerk. I heard more praise of the bailout then criticism. It saved the market from going down so it had to be done. Coincidentally, almost every one of the questioners have taken large campaign contributions from Wall Street.
I want to vomit. I had to turn the TV off. You mean to tell me that after having acted prudently throughout the housing bubble (20% down on a house I could afford, fixed mortgage, sold at the top) that now I have to help bailout those that acted imprudently? Are you fucking kidding me? I could have bought three or four houses, taken out ARMs with zero down and generally just speculated recklessly like many of those around me, but no, I did not. Now when the shit hits the fan I should have to bail out the risk takers with my tax dollars?
We now have, in this country, privatized profit and socialized risk.
The thing with Bear is that they fucked up and should have to face the consequences just like the individuals who speculated and got it wrong. But no, these guys award themselves billions in bonuses and now expect to be bailed out. Filing bankruptcy would have insured the return of those bonuses that were looted from the company but thanks to our Fed and Treasury there are no consequences for failure.
Did you not see the CEO of Bear on CNBS just days before they blew up? According to him everything was just fine, no cause for alarm. Three days later they are on the verge of bankruptcy? Where are the handcuffs? What am I missing? You see it's illegal for executives to make false statements to the market. Where are the cops?
Furthermore this whole scam is an exercise in obfuscation. Even though the taxpayer is on the hook for the losses we are not allowed to see just what Bear has on the books. The whole idea is to avoid taking realistic marks on the toxic waste that is everywhere.
So without objection from Congress we have now institutionalized the taxpayer bailout of any financial concern dubbed too big to fail. There will be many more of them and I suppose the Fed is going to take all of their bad paper onto it's balance sheet? We are now the United States of Subprime. The Fed keeps going at this rate and I'm going to have to turn my walk-in closet into a vault to hold all the gold I'm going to have to buy as protection against the complete debasement of our currency, our values and our society in general.
This bailout was a watershed moment. We have entered a new era in which anything goes. I could not possibly be more ashamed of my country.
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