Thursday, September 25, 2008

Did previous bailouts cure what they promised? NO

BEFORE the PREVIOUS bailouts

we were politely informed of the threat that
IF WE DID NOT agree to:

+ BEAR STEARNS - $29 Billion
+ FANNIE MAE, FREDDIE MAC - $200 Billion (early estimate)
+ AIG - $85 Billion

Rates on loans to the people for:
+ Mortgages,
+ Autos,
+ Student loans,
+ Small business
would spike much higher; Mr Paulson and Mr Bernanke implied more draconian consequences.

Loans IN FACT have not dried up; rates have NOT spiked!

None the less each bailout has been billed as something "extraordinary" “we had to do” and “this time will be the last” - when will the hyperbole and bailouts stop? That has an obvious answer – when the “monkey” is back in the hands of those who created the problems. And our government officials learn what independently determined cause and effect truly is!

How did the “monkey” grow into a “gorilla”?
Wall St / Financial Services may have, either implicitly or explicitly, borrowed and leveraged, reportedly as high as 30, 40, 50 to 1 against long term paper, borrowing short term, to capture the spread.

Recognizing the obvious – "when not if" problems
Isn't it curious how the masters of the universe’ / financial engineers' models failed to recognize the obvious unsustainable rise in real estate values.

POTS - Part of the Solution

The Treasury / SEC should create (but not commit taxpayer dollars) an anonymous virtual "auction" agency and let all potential investors see what might be put up for sale / bid - NOT who's selling it!

Private money bids - are the most efficient at assessing risk, and the most efficient use of resources. This requires very little US taxpayer money; admittedly it may take a bit longer - but offers promise of a "better market-based solution".

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