Thirteen Reasons for the Stink Around the Economy
By Lee Russ
Tuesday, December 11, 2007 at 11:14 AM
Select quotes from Paul B. Farrell's "13 reasons Bush's bailout won't stop recession," at MarketWatch:
1. The best-and-brightest lost $165 billion, but exited rich, with hundreds of millions.
2. They must be smoking hundred dollar bills from lobbyists because this government intervention scheme smells bad.
Why? Because all these solutions are being dreamed up by the same political and financial geniuses who got us into the problems in the first place.
3. This time Washington's just trying to salvage an out-of-control Wall Street.
4. They got greedy, sold junk. Now people [in other countries] don't trust us anymore.
5. It's almost funny. Supply-siders pretend to trust the free market to work out problems. Yet the elite of the conservative free-market supply-siders on Wall Street, at the Federal Reserve and (except for the Veep) in the White House, pushed for and got government intervention to minimize mortgage credit losses created by Wall Street's excessive greed.
6. Washington knows this is just a PR photo-op pandering to Middle America's fears.
7. Wall Street got too greedy, made mega-billions. The average managing director made $2.52 million repackaging mortgages. Bubble pops. Housing collapses. Defaults. Foreclosures. Local revenues dropping. Federal, too.
8. Congress, the SEC and other state regulators will demand answers, such as why was Goldman shorting the SIVs** they were selling, many of which quickly went into default? What did they fail to disclose? Sounds like a massive conflict of interest with major liabilities. These hearings could drag on a long time, further undermining the international credibility of the dollar.
**An SIV is a "structured investment vehicle," defined at Wickipedia as: "a fixed income maturity transformation fund, similar to a CDO or conduit. SIVs are a type of structured credit product; they are usually from $1bn to $30bn in size and invest in a range of asset-backed securities, as well as some financial corporate bonds. Unlike a CDO, an SIV has an open-ended (or evergreen) structure; it plans to stay in business indefinitely by buying new assets as the old ones mature." Got that?
9. The truth: [Paulson and Bernanke] had the data long before August, and mislead [sic] us. One is a former chief of a leading Wall Street bank packaging the SIVs. The other is our Fed boss with a staff of thousands of economists and data-crunchers. They knew the truth many months ago, and did nothing.
10. Paulson's first response in August was not to help the two million subprime mortgage holders. No, Paulson's first response was to create a $100 billion bailout fund to help his old Wall Street cronies keep all those junk mortgage credits off their balance sheets. More conflicts? You bet.
11. Remember Bush Sr.'s chairman of the Council of Economic Advisers, Michael Boskin? He miscalculated U.S. tax revenues by $12 trillion a few years ago. Remember the low-ball estimates of drug entitlements? Or the estimates on Iraq war costs?
12. Rate freezes will drag out the recession, ultimately making it worse. Property values will drop further, new home construction will be delayed, equity-to-mortgage ratios will fall, but the income of junk mortgage owners won't improve in a recession
13. Deep down, Washington and Wall Street know you can't stop the coming downturn. Recessions are natural, inevitable, essential; a positive way of cleaning out the excesses of a prior bull market. So stop whining. It will flush itself! Stop fighting, go with the flow.So who is Farrell, who has such an unremitting disgust for America's current economic leadership? Here's his bio from Barnes & Noble's site:
PAUL B. FARRELL, JD, PhD, is an investing and personal finance columnist for CBS MarketWatch. Dr. Farrell has written more than 1,000 columns, many of which have been syndicated on America Online, Yahoo!, and E*Trade.com. He frequently appears on television and radio, including CNBC, CNN, Bloomberg, and FOX. He has written four books and previously worked as an executive vice president of Financial News Network, associate editor of the Los Angeles Herald Examiner, and as an investment banker with Morgan Stanley.When the true believers in the markets have this to say about the economy and the folks at the top, grab your wallet, store some food and water, and make sure the door's locked. Securely.