The Congress should not use taxpayer dollars to bail out Wall Street.
This bill does nothing to fix the root causes of the current problem. The bank liquidity crisis is caused by a decade of lack of effective regulation and oversight in the banking, mortgage, and securities markets. Rampant deregulation and lax enforcement has allowed greedy and even criminal speculators to profit from unsound and deceitful business practices.
The current Senate proposal uses taxpayer dollar bills to cover up the problems temporarily. This is like using paper dollars to smother a bonfire. It may block the flames for a short while, but will eventually be fuel for an inferno.
The notion that taxpayers will profit from the 700 Billion dollar “investment” into worthless Mortgage-backed securities is as ludicrous as the claim that the Iraq war would pay for itself.
This bill is a bad law. Let the market work to kill off incompetent bankers and speculators. We will endure the tough times ahead and emerge a stronger economy without the incompetent gamblers the bailout would preserve and cause to prosper at taxpayer expense.
Thursday, October 2, 2008
Wednesday, September 24, 2008
Bailout Mistake
There may be a few problems with the proposed taxpayer bailout of the equity markets.
Aside from the immorality of rewarding already rich Wall Street weasels for their malfeasance in bringing the economy to ruin, the prospect of a taxpayer bailout only postpones the problem, and saddles the next administration with a huge debt and the prospect of continuing to prop up a fragile economy led by insolvent financial services giants.
If the intent of the bailout is to restore investor confidence in the market, as stated by the Secretary of the Treasury, then it has already failed. Investors are evacuating from the market like from a burning building, and are not likely to return soon. After the current debacle, the equity markets will not likely recover for many years if ever.
Indeed, the equity markets may never return to past levels, because the bailout sets a precedent of government intervention in equity markets that completely changes the economic principles of the markets. The precedent shifts risk from investors to taxpayers. Once that precedent is established, who knows what new investment dynamics will apply? Marx and Lenin would be saying “I told you so.”
The gutless Congress, with an eye on elections in a few weeks, will bluster and posture for the cameras, but will eventually roll over and agree to the bailout to avoid blame for the eventual and unavoidable economic crash.
A hasty bailout extends the legacy and flawed philosophies of the current presidency into the next administration. The needless rescue inflates the federal deficit to the point that the incoming administration will have very little opportunity to make significant change. The additional 700 billion will be borrowed from mostly foreign sources at unavoidably higher interest rates. The huge deficit and interest payments will cause the value of the dollar to further decline, thus increasing inflation as the cost of oil and other imports increases in lock step.
In the Senate hearings yesterday, the spokesmen for the Executive branch reminded me of snake oil salesmen, whose basic pitch was “give us the money, or bad things will happen”. They have a concept. They have no plan, no strategy, no tactics, and few specific actions they are willing to share in public. They offered only vague ideas of how the bailout funds would be spent. The administration has already authorized $300 Billion for the bailouts of Wall Street investment bankers and AIG. Now the request is for another $700 Billion, with no end in sight. Put in perspective, the cost of the six year Iraq war is $560 Billion.
This vague approach is not surprising, since this administration generally has a shoot-from-the-hip approach to major issues. They just seem to careen from disaster to catastrophe without learning that preparation, planning, and follow up are necessary for any major activity.
Remember some of the high points of this presidency:
“We know where the weapons of mass destruction are located.”
“The war will pay for itself.”
“Mission Accomplished”
“Good Job Brownie.”
“The Economy is strong (last month)”
We, the taxpayers, are in for tough times ahead, regardless of what the economic “experts” predict. The bailout does not fix Wall Street. It will only slow down the probable crash past the next election. At best, we can hope for a long and deep recession with a lot of belt-tightening all around.
We should just take our lumps now and let the markets sort things out. Congress should not saddle taxpayers with a huge additional debt. Let the incompetent and greedy financial companies fail. Let those responsible for bad loans fail, both lenders and borrowers. Let the Congress establish adequate regulation in the wake of the wreck. Wall Street and Main Street will survive, and will go on, poorer and wiser, but ready to rebuild.
Thankfully, there is an election soon, which affords the only glimmer of optimism in the shambles that the current bunch of incompetents has left us.
Aside from the immorality of rewarding already rich Wall Street weasels for their malfeasance in bringing the economy to ruin, the prospect of a taxpayer bailout only postpones the problem, and saddles the next administration with a huge debt and the prospect of continuing to prop up a fragile economy led by insolvent financial services giants.
If the intent of the bailout is to restore investor confidence in the market, as stated by the Secretary of the Treasury, then it has already failed. Investors are evacuating from the market like from a burning building, and are not likely to return soon. After the current debacle, the equity markets will not likely recover for many years if ever.
Indeed, the equity markets may never return to past levels, because the bailout sets a precedent of government intervention in equity markets that completely changes the economic principles of the markets. The precedent shifts risk from investors to taxpayers. Once that precedent is established, who knows what new investment dynamics will apply? Marx and Lenin would be saying “I told you so.”
The gutless Congress, with an eye on elections in a few weeks, will bluster and posture for the cameras, but will eventually roll over and agree to the bailout to avoid blame for the eventual and unavoidable economic crash.
A hasty bailout extends the legacy and flawed philosophies of the current presidency into the next administration. The needless rescue inflates the federal deficit to the point that the incoming administration will have very little opportunity to make significant change. The additional 700 billion will be borrowed from mostly foreign sources at unavoidably higher interest rates. The huge deficit and interest payments will cause the value of the dollar to further decline, thus increasing inflation as the cost of oil and other imports increases in lock step.
In the Senate hearings yesterday, the spokesmen for the Executive branch reminded me of snake oil salesmen, whose basic pitch was “give us the money, or bad things will happen”. They have a concept. They have no plan, no strategy, no tactics, and few specific actions they are willing to share in public. They offered only vague ideas of how the bailout funds would be spent. The administration has already authorized $300 Billion for the bailouts of Wall Street investment bankers and AIG. Now the request is for another $700 Billion, with no end in sight. Put in perspective, the cost of the six year Iraq war is $560 Billion.
This vague approach is not surprising, since this administration generally has a shoot-from-the-hip approach to major issues. They just seem to careen from disaster to catastrophe without learning that preparation, planning, and follow up are necessary for any major activity.
Remember some of the high points of this presidency:
“We know where the weapons of mass destruction are located.”
“The war will pay for itself.”
“Mission Accomplished”
“Good Job Brownie.”
“The Economy is strong (last month)”
We, the taxpayers, are in for tough times ahead, regardless of what the economic “experts” predict. The bailout does not fix Wall Street. It will only slow down the probable crash past the next election. At best, we can hope for a long and deep recession with a lot of belt-tightening all around.
We should just take our lumps now and let the markets sort things out. Congress should not saddle taxpayers with a huge additional debt. Let the incompetent and greedy financial companies fail. Let those responsible for bad loans fail, both lenders and borrowers. Let the Congress establish adequate regulation in the wake of the wreck. Wall Street and Main Street will survive, and will go on, poorer and wiser, but ready to rebuild.
Thankfully, there is an election soon, which affords the only glimmer of optimism in the shambles that the current bunch of incompetents has left us.
Tuesday, May 27, 2008
Bush is such a tool
Words cannot express my sense of powerless rage at what George Bush and friends have done to my country. He has a true genius for destruction.
"An aide to the prime minister of Canada called President Bush a moron. Well that's not fair. Here's a guy who never worked a day in his life, got rich off his Dad's money, lost the popular vote and ended up president. That's not a moron, that's genius!" —Jay Leno
"An aide to the prime minister of Canada called President Bush a moron. Well that's not fair. Here's a guy who never worked a day in his life, got rich off his Dad's money, lost the popular vote and ended up president. That's not a moron, that's genius!" —Jay Leno
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