Blaming Accounting Rules for the Crisis? Whatever…

Wow…I thought that the Democrats who forced companies to peddle questionable loans were guilty of the credit crisis. Apparently, there are some who blame a relatively new accounting rule, FAS 157. This argument seems, at best, far-fetched. FAS 157 refers to the ‘Mark to Market’ rule that’s getting tossed around the news.

Under this relatively new accounting rule, companies classify their assets into 3 categories (Level 1, 2, and 3). Simple, right?

Level 1 Assets are the easiest to value…these would include stocks & bonds (i.e. any asset with a readily determinable market value). Riskier Level 3 assets don’t have a readily known market value and are thus more difficult to determine a price. You guessed it, mortgage-backed securities based on sub-prime mortgages are Level 3…nobody knows what these suckers are worth! Level 2 Assets are somewhere in the middle.

Guess what…management gets to decide the value of Level 3 assets! Good for them, right? Maybe, maybe not. At the moment, this rule doesn’t seem to be helping the financials one bit…many of these entities are burdened with bad sub-prime paper and there’s no current market in which to sell this stuff. As such, management at banks who hold this toxic paper have recently taken massive write-downs on these assets…these write-downs are magnified with FAS 157, as many institutions have written down their subprime to a level WAY BELOW what some believe this paper will be worth in the future. These write-downs cause all kinds of problems for banks (increased losses and asset devaluation)…as such, bank’s debt/asset ratios get screwed up, which lowers their credit rating and limits their ability to borrow from other banks. To make things worse, investors jump ship when things like this occur, magnifying the bank’s problems further.

Some believe that the dollar values of these questionable Level 3 assets have been written down so much by management that these losses have been over-done. Folks in this camp would argue that the sub-prime slime WILL be worth something some day...maybe they’re right. This is the type of argument Paulson has been trying to make all along (i.e., the taxpayer will eventually make some money on these undervalued mortgage securities, EVEN IF we pay above current market price). By purchasing a ton of sub-prime securities, the government would essentially create a new market for this paper, with the hope that other buyers would eventually jump in once the paper had more concrete value.

All of this may not seem important at first glance, but the different methods of valuing assets is EXTREMELY important, especially for banks…as you know, bank’s credit ratings are determined by the soundness of their financial statements. As such, the credit ratings banks receive are a direct reflection of the entities’ overall financial health. Bottom line: a bank’s credit rating helps to determine how much one bank is willing to lend to another bank…this is pretty straightforward stuff when you think about it.

While the means in which a bank’s assets are valued is important, I’m not sure how suspending the ‘Mark to Market’ rule would remedy the current crisis. Investment bankers don’t enter into stupid transactions unless they're forced to do so by the government (this is why the crisis happened, btw). If we suspended FAS 157 and the values of sub-prime securities suddenly shot up on paper, wouldn’t rating agencies have to adjust their models to reflect these higher valuations? In a nutshell, wouldn’t credit rating agencies have to take these higher valuations post-FAS 157 with a grain of salt?? Not every bank will be able to unload their sub-prime and take advantage of Paulson's higher asking price.

Even with a sudden improvement to some bank’s financial statements through the suspension of the mark-to-market rule, I don’t believe most banks would start lending more money to one another. It seems like credit rating agencies would STILL have to take into account the fact that there’s NO MARKET for subprime...duh.

Do you believe that banks will magically start lending more money to one another simply because an accounting rule has changed and sub-prime mortgages are suddenly recorded at higher valuations? Maybe some banks will…I honestly don’t know. It probably depends on an individual bank’s overall financial health, and how the financial industry collectively views the rule change.

At first blush, it seems that changing this accounting rule might (and I stress, might) positively impact a few banks, but most banks would still be in big doo-doo.

FMC

I'm Really Fuming Now...You've Got to See This

http://www.americanthinker.com/blog/2008/09/memory_lane_lynching_franklin.html

What Caused the Loan Crisis?

This is a wonderful editorial series on the crisis:

http://www.ibdeditorials.com/series11.aspx


v/r,
FMC

The Biggest Affirmative-Action Play in US History

I’ve already seen traitors like Barney Franke and Chris Dodd go on the offensive, claiming they’re going to “hold hearings” to get to the bottom of this credit crisis…what a joke. These guys and others who supported ‘affordable housing’ programs took advantage of the regulatory environment to meet their specific objectives. These objectives included, among other things, punishing banks by imposing government penalties if specific quotas for sub-prime mortgages were not met. Dems like Franke, Dodd, and Schumer effectively achieved their vision…more homes for poor folks…look where it got us…a socialist-type of environment where wealth must now be distributed among all Americans in order to keep the economy afloat.

Dems took advantage of the regulatory environment to promote their own agenda. All of these guys are on the record in recent years defending Freddie and Fannie, claiming these institutions were in solid financial shape. How could Fannie be in such great shape when they’ve been restating their financial statements for several years? This is insanity.

Think about it…if the government told you that they would impose fines on your business if you didn’t sell specific products, would you sell these products to avoid paying the fine? This is exactly what happened. Liberals coerced banks to offer loans that supported the Dem’s ‘affordable housing’ agenda. The trickle-down effects of this strong-arm approach eventually led to predatory lending among mortgage brokers to meet artificial demand, and rating agency/investment bank collusion to package worthless securities products. Of course, there’s more to this story (pls read Glass Steagall Act post on this website)

I realize that it’s convenient for many Americans to ignore the fact that President Bush, along with John McCain and Alan Greenspan, REPEATEDLY called for more regulation of Fannie & Freddie as early as 2001 while the Dems opposed these controls (this is all on the record and undeniable). If we would have listened to the President early on, we wouldn’t be in this mess. The facts don’t lie. I realize this belief doesn’t fit the popular template that permeates our society, but who the hell cares. I care more about the country…we need to look at the facts.

John McCain has an opportunity here…he has the TRUTH about how the crisis unfolded. All roads point to Fannie &Freddie, and senators like Franke, Schumer, Dodd, Clinton, and Obama. If McCain doesn’t expose specific individual’s actions, he probably won’t win.

The Dems are already slamming the Republicans on this, and it’s all a slew of lies…why don’t Republicans fight back?? We’ve got the truth on our side regarding this entire thing…if the McCain camp doesn’t fight back on this issue, they don’t deserve to win.

FMC

A Must-See for Undecided Voters

The Democrats chose not to adopt new regulations proposed by Republicans that would have prevented the housing crisis altogether.

http://www.youtube.com/watch?v=cMnSp4qEXNM&feature=related


http://www.youtube.com/watch?v=H5tZc8oH--o

PLEASE forward these links to anyone who may be an undecided voter. They need to see this.

FMC

Quote of the Week

"Never let your dog watch your food, and never let Congress watch your money."

- Barry Goldwater, Jr.

INVESTMENT TROUBLES? DON’T PANIC

For those of you who have temporarily taken a big hit to your retirement account, PLEASE don’t sell right now! I know that this goes against every human instinct you may be feeling at the moment, but you simply CANNOT sell at a loss.

Contrary to popular belief, Wall Street is full of liberals who love government intervention when it benefits them. After some form of the bailout is implemented, we WILL SEE A RALLY in the markets.

Luckily, I sold all of my stocks a month ago...the market was just too difficult.

If I still had money in the market now and was sitting on a 25% loss, I’d wait for a short-term rally following the bailout package. I actually believe folks will recoup much of their investment, if not all of it, after the package is implemented. HOWEVER, I believe this rally will be short-lived. If it were me, I’d sell into strength on the rally and begin increasing my cash position. I’d even stay out of bonds for a while. Things are too uncertain at the moment.

Cash is king for the next couple of years...at the moment, capital preservation is more important than going for gains. Again, wait for the impending rally and sell into strength…if you end up being down 5% for the year, consider yourself lucky.

This strategy does not apply to investments in tax-incentive instruments (ex. Roth or Traditional IRA)...I'd leave these alone.

FMC

WE’RE IN A QUANDARY

The government is trying to figure out how to get the toxic paper off bank’s financial statements; the banks are trying to figure out how to sell their bad paper without becoming insolvent; the American people are trying to figure out how a plan can be implemented that doesn’t hit their pocketbook; and Congress is trying to solve the problem quickly so they can go campaign over the weekend. It’s really a mess. The only people who are going to benefit from this mess are those who made shady deals early on and got out of this business a year ago...the rest of us will have to pay in some form or another.

All of this can be traced back to housing. Shady lending practices and government corruption veiled in ‘affordable housing’ programs are among the things that got us here.

It appears to me that the correction is going to come, no matter what we do. The losses will have to be taken at some point by the banks, and many of the weaker banks will simply go under & get bought by bigger, stronger banks like JP Morgan Chase, USBank, and others. We’ll see massive consolidation going forward …only the big fish will survive.

To my knowledge, though, consolidations don’t solve the lending liquidity issue. This problem stems from the faulty paper…this paper has to go on somebody’s books…so get ready, we're gonna pay!

FMC

THIS IS A TOUGH SITUATION

I get the fact that we’re in a bad situation. Banks aren’t making as many loans to one another because the assets of many banks cannot be easily valued…so, the liquidity freeze in lending among banks makes it more difficult for farms, small businesses, and consumers to get loans. This freeze in lending is just as psychological as it is rooted in numbers. Think about it…the businesses that have the toxic paper on their books haven’t taken their losses on this paper, so their bottom line (net income) has not been negatively impacted yet. Bank A says ‘I’m not lending to Bank B cuz’ I don’t know how much their assets are really worth!’ If banks don’t lend to each other, they don’t lend to us. Would you lend money to a friend in trouble if you weren’t sure that friend could pay you back? (in this scenario, your friend needs the money to make a loan to another person)

I understand that something has to be done here to flush the toxic waste and bring the losses onto the bank’s books…if Paulson’s goal is to buy as much of this paper as possible, I just don’t see how we’ll pay rock-bottom prices for the junk (see GOOD IDEAS, BAD IDEAS blog for my thoughts on the reverse auction)

If banks sell their paper at too low of a price, they run the risk of recording too much loss. When this happens, they run a higher risk of becoming insolvent. So…my argument is that banks will try & get the highest price they can for their mortgage security paper, which means a higher price tag you and I must pay as taxpayers.

Paulson's argument must be that the gov & the banks are more concerned with simply getting the bad paper off bank's books so that lending can resume...fair enough. I just see that there are limits as to what banks will be able to sell...also, with this plan, there are NO LIMITS to how much the taxpayer will have to ultimately pay. I understand the short-term thinking behind the deal...it'll probably work in the short-term; however, the plan doesn't take into account the inherent Washington tendency to turn a deal like this into something worse a few years down the line.

I prefer open market mechanisms be used to the greatest extent possible if we’re going to tinker with the bank system. There has to be a plan that will have the desired effect of giving banks an opportunity to slowly unload their mortgage securities over time, while at the same time borrowing funds from the government at low rates that these banks would have to pay back.

I don’t know what all of the mechanisms would be, but I don’t like Paulson’s blank check idea with the reverse auction…this approach puts the banks in the driver’s seat. Yeah, this would get banks moving again quickly, but it would put strain on the taxpayer and lay the groundwork for more government programs. Larger government programs are what I fear the most…Paulson’s plan would work in the short-term, but can you imagine the types of federal programs that could easily be inspired by such a massive bailout?

Sure, more banks would fail under a slower moving approach to the bailout, but as a taxpayer I’m not as concerned with helping every bank. If you’ve read my previous posts, you know that I’m of the mindset to let the weakest banks go under; many of these will get bought up anyway by the likes of JP Morgan, USBank, etc.

The massive banks have more capital and are big enough to handle the losses of the banks they’ve just acquired….this is why JP Morgan just bought a failed WaMu! The big boys like JPM have enough capital to buy distressed banks and are in a better position to wait things out until home values stabilize.

v/r,
FMC

SO WHAT HAPPENS NEXT?

So what happens after we throw a whopping $700 billion into the financial markets, assuming this amount of money can even be effectively distributed?

My guess is that Wall Street will get back to business as usual. Things will likely look better in the short term…folks will blindly say, ‘I guess we did the right thing…look at how well the markets are doing!’

If Wall Street-types believe that a second bailout is a real possibility four to six months from now, do you think that they’ll be more or less aggressive with their lending practices? As far as I know, the regulatory environment will not change one bit immediately following the bailout package. Why should we think that Wall Street will change at all in the short term? I’m afraid that the American people are being sold a bill of goods.

There’s no way we can stop this economic slowdown...as such, I’d prefer to implement market incentives rather than government intervention any day of the week.

FMC

PAULSON’S WAY OR THE HIGHWAY

I think the bailout sets a dangerous precedent and is a huge mistake. Let’s consider some other alternatives:

0) Eliminate the capital gains tax for a couple of years…this would flood money into our markets…

1) Borrowing is not the only way to raise money; companies can issue more stock as well. This is already happening…look at Warren Buffet’s recent deal with Goldman Sachs...hmmm, the market is already adjusting...imagine that.

2) Cut corporate taxes dramatically, at least in the short-term

3) Include a plan to balance the budget…this sounds obvious, but the concept is foreign to most politicians; cutting spending would increase market confidence a great deal ;however, no one is speaking this language (lobbyist corruption in Washington doesn’t promote reductions in spending, so this is wishful thinking, I know)

4) Offer up lower interest loans backed by the government to troubled entities and let these folks slowly work through their troubles over the next five years

5) Do one more rate cut of 50 basis points

6) Simply let more banks fail…they got themselves into this mess in the 1st place


I don't trust government to become landlord for an additional 5% of all U.S. mortgages (this is what the $700 billion represents, I believe). We won’t pay market prices for any of this junk paper...as taxpayers, we’ll pay ABOVE MARKET for this toxic waste.

If the companies with worthless paper are allowed to sell these bogus securities, they'll effectively take big losses...as such, these companies could become insolvent anyway due to the large losses taken on the books. How does the bailout help these companies? Let's get more capital infusion via stock issuances and offer up incentives instead.

If taxes are raised post-bailout, we’ll be in even worse shape. Let’s do ourselves a favor and vote the big spenders out of Congress. We need reform and we need it now in the form of effective (not more) government and investor incentives.

FMC

GOOD IDEAS, BAD IDEAS

Good idea: Some folks in Washington are toying around with an idea that would give bankruptcy court judges the authority to renegotiate someone’s mortgage terms if that person were to declare bankruptcy. This seems like a logical way to keep more people in their homes. A renegotiated mortgage could lower monthly payments and possibly prevent foreclosure. To my knowledge, bankruptcy court judges have not previously held this authority.


Bad idea: Paulson stays in his current job…come on, Mr. Treasury Secretary, quit getting kicked around by the talking heads in Congress and take that high-paying CEO job that you know you want!


Good idea: Implement a staged approach to putting money into the market at set increments going forward...this way, the market could gauge the impact of the cash infusions & we could reduce the risk of overspending. This would also allow us to STOP spending if the market stabilizes to an acceptable level.


Bad Idea: Allowing the dishonest folks who originally created the exotic mortgage securities to determine the price that the U.S. government must pay for these securities …this is the ‘reverse-auction’ that has been proposed.

This is how I understand the reverse auction mechanism: banks would compete to unload their worthless paper, naming the price they’re willing to sell…this competition among banks theoretically drives the price down. Technically, this means lowers prices paid by the taxpayer. The only problem with this scenario is that no one really knows how much their paper is worth in the first place. You & I are buying this stuff and trusting the government to pay the best (lowest) price. Do you trust that the brainiacs who got us into this in the first place (the deal-makers who securitized the mortgages) will set a fair price?? This puts them in the driver’s seat a 2nd time…I know where these people’s priorities are…they want to make money, which means getting the highest price they can obtain. Paulson seems all too eager to buy this stuff up as quickly as possible, so do you think that we'll really get the lowest possible price?

I say let the taxpayer set the price….have the government throw out EXTREMELY LOW-BALL OFFERS on these pieces of junk and see who takes the bait. Shouldn’t we ensure that we (the taxpayer) get the lowest possible price on this paper? I don’t know about you, but I just don’t trust the deal-makers who got us into this mess in the first place to name their price. Since it’s my money going out the door here, I WANT TO NAME THE PRICE!

The taxpayer should pay pennies on the dollar for this junk. Those investments banks who do not want to accept OUR low-ball offers can go under….screw ‘em!


Good Idea: Not fretting about the crisis…it’ll all be over in a couple of years.

NO BIAS, NO BULL…YEAH, RIGHT

Last night, I saw a reporter on CNN who compared McCain and Obama’s economic plans. I believe his name was Ali.

Ali began his shtick by saying that both McCain and Obama’s economic plans are unrealistic. He also said that that neither candidate would be able to implement their existing economic policies. Fair enough…I tend to agree with this statement, especially in lieu of recent events.

Ali then proceeded to show how much both McCain and Obama’s plans would impact the deficit if either candidate’s plan was implemented.

The result for McCain’s plan showed an increase in the deficit of $302 billion (shame on McCain!), while the net result for Obama increased the deficit by a mere $14 billion (all hail the Messiah!). Accounting is my profession, so I was amused at how these numbers were brazenly presented by CNN under the guise of ‘No Bias, No Bull’.

It is IMPOSSIBLE to determine the end result on the deficit for either candidate’s proposal. One can come up with countless arguments for debunking the figures that were shown (unknown variations in economic growth, risk of terrorist attacks, increased inflation, impact of taxes on company profits, etc.).

Let’s look at one example: payroll taxes. To my knowledge, Obama’s proposed payroll taxes have no upper limit, so the payroll tax can technically go to 100%. How in the heck can a net impact on the deficit be determined if there are no limits on how much payroll tax can be increased under Obama? This shoot-from-the-hip journalism on CNN doesn’t pass the smell test for me...I guess they got their intended message out there, though.

In my view, it’s perfectly fine to declare yourself a conservative, liberal, libertarian, vegetarian, librarian, or whatever. What really gets under my skin is when networks claim to operate fairly but present information in a biased fashion.

To me, bias veiled in objectivity is offensive. Some reporters at CNN operate on a level of hypocrisy that's on par with some nasty things I don't care to mention. Of course the left's ability to rationalize their behavior is legendary, so I don't expect a change in approach.

If CNN and the other networks just admit ON AIR that they’re in the tank for Obama or another candidate, I could accept their arguments at face value. I’d actually respect them more if they did this...this approach would be honest; but let’s cut the $#%#…feigning objectivity when you’re really supporting a candidate undermines any credibility or journalistic integrity. These folks just don’t get it, and probably never will.

FMC

IS BAILOUT A BUSH HEAD-FAKE?

The $700 billion bailout could be a huge opportunity for John McCain.

The bailout is so radically far-left of center in its approach that it doesn’t pass the smell test for most conservatives. The plan is so far-reaching for Republicans (and most taxpayers) that Democrats can’t help but to intuitively embrace it.

Don’t underestimate the Republican’s ability to drive Democrats crazy and send them into a frenzy…Republicans have been doing this for years; it’s actually pretty easy to do…look at what’s happening now.

Could this whole thing have been crafted by design to a certain extent? Could the bailout be the biggest political head-fake in the history of our country? The left would say ‘Absolutely not…Bush is too dumb to think of such a thing’. One of Bush’s greatest strengths, though, is that he’s still a very skilled politician and is continually underestimated.

We probably need a bailout of some type, but to suggest a bailout so large with so few strings attached seems to scream 'politics'. Why couldn’t the bailout have waited a few months? Why not try a bailout of $300 billion and let a few more banks fail before doing something so drastic?? Bernanke and Paulson have been continually wrong over the past year on the economy...this leads me to believe that this move is as much political than anything else.

The bailout by Bush allows McCain a political opportunity to: 1) disagree with the President’s bailout plan (further distancing himself from Bush policies), 2) demonstrate his Maverick qualities by developing a bi-partisan approach to solve the issue, and 3) catch Obama in supporting Bush’s bailout on some level (yes, this is a real possibility!).

Wouldn’t it be ironic if later this week the Obama camp did not disapprove of the Bush bailout?? This is as good as supporting Bush! This is not a position the Obama camp wants to be in…perhaps this is why Obama is proceeding with caution (i.e., inaction for political reasons as McCain's camp has suggested). Obama has to be extra careful on this issue due to his direct associations with Fannie & Freddie, both of which are at the heart of the entire debacle.

I just can't see Obama getting elected if this bailout continues to send a Democrat-led Congress into a tailspin. McCain should be hoping for a Congress divided all the way to November 4th. This gridlock would continue to highlight the ineptitude of Congress, building on the Republican's platform of reform.

FMC

October Surprise Came Early

It baffles me that our government presented a plan that would not implement ONE PENNY worth of budget cuts to help with this crisis. Let’s go ahead and spend $700 billion, but let’s not do a corresponding budget cut in any area to offset this new cost…incredible.

Corruption in Washington is so deep (on both sides) that to even consider a federal budget cut is seemingly beyond comprehension. NOT ONE PENNY IN CUTS. Doesn’t this bother anyone? I haven’t seen talk of a massive budget cut proposal to accompany this new emergency outlay anywhere in the news.

Governor Palin is perhaps the only one who has even alluded to trimming unnecessary spending in our government (aside from McCain’s earmark stance). This reduction in spending approach gets some folks on the left so angry (it limits their power with constituents and special interests...let's face it, there are a lot of folks to keep happy). With that said, I believe Palin is actually right on the money concerning limited spending….if a government spends frivolously beyond its means, how can this benefit the people?

Going forward, both Presidential candidates will likely have to completely revamp their economic plans. If Obama implements his current spending plan, the U.S. would add roughly $500 billion in additional costs to the deficit. I don’t feel comfy with the prospect of increasing our national debt this much, especially in the current environment.

On the other hand, if McCain doesn’t reduce U.S. presence in the Middle East AND cut domestic spending dramatically, I’m not sure we will be able to turn the economic crisis around over the next four years. McCain’s approach to cutting earmarks is great, but earmarks alone won’t do it. We need massive budget cuts and we need them now.

I was very disturbed to hear that some in Congress wanted to add additional mortgage bailout initiatives to the $700 billion plan. Whoa…this is exactly the approach that got us into this pickle in the first place (i.e., the belief that every American deserves a home whether or not they can afford it). This goes to show that certain folks in Congress will spend more if they can, even if our country is on the potential brink of disaster. The spending culture in Washington is very disturbing to me…we can’t keep throwing money at every problem we see.

While some may believe that it’s every American’s patriotic duty to pay more in taxes, I disagree with this premise. Any politician who goes down this road will likely end up with egg on their face. Americans are (rightfully) angry about the current situation and do NOT want to pay higher taxes to bail out CEOs and to keep people in thier homes...this is pure distribution of wealth.


Final thought:
For decades, many of us have lived beyond our means as individuals at one point or another. The problem I see now is that when people cannot sustain their desired standard of living, they begin looking to government for answers...this way of thinking is extending beyond party lines.

The scary thing is that many Americans may get exactly what they’re looking for…more government in our lives.

v/r,
FMC

Walk Softly & Carry a Big Bazooka

I can’t help but remember Paulson’s testimony to Congress where he used the (very cool) bazooka metaphor (i.e., if the market believes the government can step in & utilize a back-stop to save Fannie & Freddie, there will be more confidence in the markets). This approach worked for a while, then things reversed again in the stock market a few months later.

The $700 billion bailout seems like Round 2 of the Paulsonesque-thinking of economics…there are no specifics presented to justify such a large bailout, yet by providing a big $ number, this sends a strong message intended to calm the markets and prevent a run on certain banks.

The bazooka thing only worked for a short time. Perhaps Round 2 of Paulson’s psychological game will last a bit longer, but I’m not optimistic. Somebody’s gonna have to pay for this (you & me!).

Paulson needs to provide another pithy comment for this bailout...something like, "Walk Softly & Carry a Big Howitzer".

Blog's 1st Day - Final thoughts

Okay, my previous posts were a bit pointed, but I felt a need to speak my mind on the bailout issue.

btw, I'm a supporter of a free market approach, and I'm a conservative at heart. I'm voting for McCain/Palin.

I believe in the trickle-down approach to economics in that the ONLY real tax is a tax on the taxpayer herself. Kinda deep, huh? Not really...I just believe that businesses pass on increased costs (higher taxes, etc.) to consumers...in my mind, this is a real world approach.

Thanks to those of you who sent me an email today...pls dive in and provide comments on the blog!

Peace,
FMC

Glass Steagall Act

It looks like the Glass Steagall Act was originally in place for good reason. The Clinton administration and lobbyists worked to repeal this legislation, which created enough deregulation of the credit environment that led to the real estate boom from the early 1990s to now. Throw in Greenspan's low interest rates & no limits on how much investment banks could borrow, and yippee...everybody gets a home...now we're feeling the pain of this overblown growth that happened for nearly two decades. Credit companies levered up way too much. The approach worked as long as there were buyers of homes and mortgage-backed securities.

http://en.wikipedia.org/wiki/Glass-Steagall_Act

Everybody's talking about whether or not we should bail out these credit & insurance companies....of course we shouldn't, but this is again the wrong choice and only focuses on the resulting symptom rather than the underlying problem...the real problem behind this issue is how BOTH Democrats & Republicans were complicit in this whole debacle w/ lobbysists since the 1990s. Once the legislation was repealed, credit companies and investment banks ran w/ this new loose lending environment & began packaging worthless securities products (and the rating agencies began writing up bogus ratings to support these practices).

I hate to say it, but Washington AND Wall Street are both corrupt, and both Rep. & Dem. are still too afraid of losing power to say no to lobbyist requests. I don't see things changing any time soon. Politicians want the campaign dollars that these large companies provide...why else would Glass Steagal have been repealed?? It was obviously working to some extent.

I've just realized, for the 1st time in my life, how truly corrupt our government and financial system are. My prediction is that we'll create another gigantic piece of legislation like Sarbanes-Oxley that only drives more business to England and other countries and doesn't solve the heart of the issue (government & Wall Street lobbyist & campaign corruption).

We just needed to keep Glass Steagal in place (and modify it along the way)...it's that simple...now the resulting actions fo 'fix' the problem will likely be overblown, sort of like Sarbanes-Oxley...when will we ever learn that we only need 'just enough' regulation to get the job done, no more.

Also, this whole bailout mentality that the Bush administration now supports is very disturbing (and surprising) to me. I've been a Bush supporter through thick & thin, but I just can't support the extent of the bailouts. I can see saving GSAs Fannie & Freddie, but the other companies??

It's wishful thinking, but the leadership of these gigantic credit institutions should be prosecuted and forced to pay back at least part of the money they took to the bank. I don't believe this will happen...by attempting to prosecute the real offenders, the politicians would reveal their own dishonesty...by prosecuting the CEOs, politician's relationships to the lobbyists and others would be revealed.

v/r,
FMC (Free Mkt Capitalist)

Palin Gets It

Here's some good info on the 'Ponzi Scheme' we're experiencing:

http://www.bergenjerseyforeclosures.com/blog/info/entry/repeal_of_glass_steagall_act

http://en.wikipedia.org/wiki/Ponzi_scheme

Palin actually framed this issue perfectly yesterday in the Hannity interview without naming names (politically smart since both parties are guilty here).

Based on her words, I believe she completely understands the corruption side of the issue and the regulation side of the issue.

She seems to be the only trustworthy one out of the bunch.

v/r,
FMC (Free Mkt Capitalist)

Acceptance of Socialism in America?

We're now officially on the road toward becoming a Socialist country. How are these bailouts Constitutional? The taxpayers will bear the burden for decades...if Stalin were alive, he would be laughing at us. I wouldn't be surprised if these bailouts get challenged and go all the way to the Supreme Court.

The gov. has taken over private businesses and now the taxpayer has to pay the debt. Another $1 trillion dollars that all Americans will have to pay...unbelievable. Politicians covet their jobs to such an extent that they're ignoring economics altogether. Why not let some economic failure happen? What's wrong with a little short-term failure?...seems like as a country we may need this. We'd bounce back as a country economically...we always do. Some short-term 'failure' might afford some more taxpayers an opportunity to buy a home at a lower price (provided they can get the loan, I know). At any rate, taxpayers will have to pay more across the board to keep home prices artificially high and to keep people in their homes...markets are being buoyed up artificially...this is what France does...yuk!

In this day and age, there's an attitude that living in an apartment is somehow a complete failure and that living in a house is a Constitutional right. Apartments aren't so bad...come on!

We need a serious change in Washington, and we need it fast. Government handouts got us into this mess, and all we're doing is giving out handouts again (this time in the form of a subsidized mortgage market).

The way i see it, we've privatized the gains and socialized the losses of the mortgage market. Our government has completely failed us, and it all started back in the 1990s.

Would there really be a complete collapse of the financial system if we allowed more banks to fail?? I don't know the answer to this question, but why is everyone is taking what Paulson says as gospel...why not wait and see what happens to liquidity in the market with these bank failures? Only fools rush in...there are no facts presented by these two men...at least I haven't heard anything specific from Bernanke and Paulson that I can sink my teeth into.

How do we know that we would TRULY be better off with these massive bailouts? I believe that fewer people are questioning the bailouts because they're afraid. I seriously question this approach by the Treasury and Fed, despite the greedy market apparently agreeing with this knee-jerk decision today by the government.

How does this bailout approach help the next generation? Americans need to suck it up and feel some financial pain NOW so that their children and grandchildren don't have to shoulder this burden. $1,000,000,000,000 is a lot of money to add to our existing deficit.

v/r,
FMC (Free Mkt Capitalist)