Anybody who's read my blog in the last week can probably tell what side of the fence I sit on as far as the bailout bill currently before Congress and the Senate. I'm not just flatly against it, I'm angry and pissed off. Angry, enough that I've probably made at least 100 phone calls, and faxes to various Congressmen, Senators, and other government officials in the past several days. Come to think of it, that's about the same number I made in the weeks following the Bear Stearns bailout.
Now here is why
I'm one of the many people that saw this disaster coming, not three months ago, not a year ago, but I first started to put the pieces together way back in 2003. The more I learned about not just mortgages but derivatives and the leverage occurring in our financial system for more it bothered me, but at the same time I said to myself, "it can't really be that bad". The people on Wall Street are smart, they wouldn't create something this utterly idiotic. Of course later I realized this monster was not accidental either, just as Enron wasn't an "accident", it was a scam on a gigantic proportion.
Then when the first ripples of the sub-prime crisis hit in early 2007 with the failures of companies like New Century, I popped my head up again and said, this is really happening. At this point I began spending A LOT of time following the credit markets very closely, watching as one domino after another fell exactly as predicted.
As totally terrifying as it sounds the events leading up to this are almost identical to the events that lead to many of the worlds great financial crisis, The Great Depression being the most notable, but also Japan's "lost decade" as another example. As these events have played out government officials and regulators have practically followed the exact same playbook on how to make the crisis 10x worse. Instead of forcing leverage out system and rapidly putting the firewall regulations in place to prevent a systematic event, they've instead allowed the system to further leverage up, and reduced regulation. This has been happening at a frightening pace over the last year, in a desperate attempt to paper over the problems facing us, and hope that they go away. Can we not learn from history?
You can not solve a problem by applying more of the cause. It's akin to giving a continuing to give a heroin addict another hit to make him feel better, when in reality he needs to go into detox or will eventually die of his addiction. It's as simple as that. Yet on more than a dozen occasions in the past year the Treasury and Federal Reserve have attempted to solve the crisis du jour by administering this extra hit of heroin, and proclaimed the problem was on it's way to being fixed.
The bailout in front of us is just another hit of heroin, a massive one. It will do NOTHING to solve the underlying problem. While it may provide a short term high, it won't help the long term situation. We need to go into detox now, before the ticking bombs in our financial system blow up. This detox will be really, really painful, many more Wall Street firms will go under, our economy will go through a deep recession, huge amounts wealth will evaporate. But you know what, the bailout won't prevent this either, it will just add on yet another layer of misery to main street.
What this bailout will do?
Face it the financial train is off the tracks, and no matter how hard we want it to we can't simply throw money at it and put it back on. What we can do is focus our effort on moving things out of the way and minimize the collateral damage. Instead this bill is a method by the pig men of Wall Street to throw as many taxpayers in front of the train as possible, hoping to slow it down before it hits them. It is a looting operation by the banks of the US taxpayer plain and simple. It is being sold by fear and frankly the finance industry is trying to hold the American people hostage. Sorry I'm angry, I see through the smokescreen and I'm not going to sit by and take it.
Aloha Matt,
I can't agree more. I am so mad at the fact that we are bailing out the fat cats with their golden parachutes and where is the help for those people with the adjustable mortgages.
Matt - We are being frightened into making an uninformed decision and expected to give carte blanche authority to the very people who were watchng over the financial system while this disaster was happening.
I almost expect Dick Cheney to bring out that worn out color coded Homeland Security chart to promote more fear and panic.
YUP. You are correct. I dont know much about economics to quote someone famous but I do know enough to read into this one. I saw Bill Clinton talk on the Daily Show the other night. He said exactly what I was thinking. Of course he cant point fingers and say what really is going on but he had a good solution. Not to take ownership but make the people a percentage owner or something like that. At least there is a profit to be made. Instead of just bailing them out over and over. I dont believe for one second there is not evil in the initial plan.
Stewart: Exactly, we are being herded right now. Guess what Hank Paulson, the man asking for $700B and absolute authority with no oversight in solving it is one of the KEY people who created this monster. He was the Chairman and CEO of Goldman Sachs one of the largest investment banks involved in this at the time the beast was being created.
I respect yours and many other opinions. I am hoping this or another blog becomes a platform for different perspectives and ideas. Growing a bit tired of a train of opinions all slanted a particular way. I do not like this plan. I do not think anyone does. Alternatives? I'd love to hear...
Below are links to three "alternative" proposals:
Karl Denninger - Open Letter to Senate/Congress
John P. Hussman, Ph.D. - An Open Letter to the U.S. Congress Regarding the Current Financial Crisis
Mike Shedlock - Open Letter To Congress On The $700 Billion Paulson Bailout Plan
I Matt;
I am very angry that we are bailing out those rich guys on wall street, where is the help for Americans with adjustable mortgages. People are loosing their homes everyday. Great POST!!!!!
I share yor thoughts and have serious concern. At some point the Eternal Optimist needs to face reality. This crisis will go down in history with the American Revolution, the Civil War, WWI, the Great Depression, WWII, and 9/11.
The good news is we survived all the aforementioned challenges. The American people have a strong resolve. We will survive this challenge, but it will change our lives in a significant way.
God Bless America!
I guess the lessons that I walked away with from those above mentioned history lessons are probably far different than the average person. Most people wouldnt be able to tell you why the civil war was fought or any of the reasons behind any of those events. This will be no different. History will be rewrote. History even a day old has been overwritten every single day the last 8 years. It is the 1984 playbook. There is no conspiracy its a script.. a movie.. 1984 the musical.
What I don't get is the fact that every buyer I come across right now seems to be able to qualify for a mortgage. I don't see the financial markets freezing up otherwise where is all this cash coming from?
Matt, thanks for your continuing updating on this Crisis! I feel much the same way you do....thanks to your clear explanations of what is going on....I had a melt down on Monday....sending emails to Senators and Congressman. I am continuing to do so each day. I thank you for providing me the insight to feel the need to take action.
I'm happy...but I can see why you are mad. Go Twins!
Thank you for sharing those information and you valuable opinion.
Aloha
Stephanie
Can anyone explain how this number of $700 Billion was arrived at?
And does anyone know if this won't double or treble?
Remember - the Iraq War was sold to the Nation on the basis that it would cost $80 Billion, to be repaid from Iraqi oil revenue. Today the cost of the war is in the many hundreds of billions and growing daily .....
Matt, love the analogy about the heroin addict. There is a lot of fear being generated in order for Congress to force through a measure that will spell the end of our economic system and usher in a new realm of socialistic government involvement. The market fix and going through detox is not popular since people expect Congress to fix it and make everything ok. Instead, government interference will be expensive, costing each household OVER $10,000 a piece, and will prolong the adjustment.
The first step in a long term fix is let companies that made risky and poor decisions fail.
I think anyone who doesnt have their head up something or have a dire stake in perpetuating the current institutions lies can see through this and can look back and see through the lies now. It doesnt take much to see it. You can pull up headlines from what the government said one day and go back or forward a year to see them lie about it. Unfortunately there is a huge effort to hide this from the people. Oh but of course thats leftist socialism? No thats just opening your eyes. You seriously have no excuse this time. Its all right there just google away until you find it.
KUDOS! My husband was telling our family, last Thanksgiving dinner, that this crash was imminent. He is a former Wall Street Accountant - from the old school - ( back in the 60's) and an economist. You happen to be right on. I couldn't agree more. HOW can these folks in DC do anything this weekend and patch up that which was a crumbling for years in a weekend? Band aid - no way. Temporary plug in the dam & a damn expensive one at that. I will subsribe to your blog ..
Stewart: No, clue how they came up with $700B but that is a drop in the bucket compared to the bad debt sitting out there on financial company balance sheets. I would not be surprised to see it end up being several trillion, and the bill is purposely written using language that doesn't actually cap the amount.
Yeah Matt - the same way we were told the Iraq war would only cost $80 Billion .... and now the price tag is what? .... ten times that?
I try to stay off politics on my blog but I am mad as hell and don't want to take it anymore. Just like your heroin example I used life support vs allowing natural death to corruption. Buffet snatched part of goldman up for $5 billion. I say if they are salvagable, let the free market take them.
We cannot allow ourselves to let a lame duck president scare us into $1 tril + more debt and deflate the value of our dollar any further.
Oh yea, one more thing, I mentioned Enron too. It seems like we have been living in a three ring circus and no one pays attention to anything but what is going on in the middle ring
And another thing, I used the term "du jour" also.
LOL, we must think along the same lines although I think you are way smarter :)
Wow, some honesty from a government agency.
"The director of the Congressional Budget Office said yesterday that the proposed Wall Street bailout could actually worsen the current financial crisis."
At least the CBO gets it if a stupid little blonde from LV gets it, SHEESH!
I didn't see it coming since 2003 but around 2005 I knew it was about to hit the fan. I thought it would be in the fall of 2007, though. It doesn't matter--I am pissed too.
After hearing Bush talk on the subject it's at least apparent they finally get it. I do believe this is partially political though as any short term crisis would spell doom for any republican candidate. In the end we will all lose as the damage has been done. Sadly enough even amadinejad, sees the end coming and has forecast our own doom. We def need to put some regulations into place sooner than later.
Yeah Matt! Way to get angry. More of us need to get angry, in just this way. The calls, the emails, the faxes, keep them coming everyone. This crap must stop. We won't be sheep, and we won't be taken advantage of.
Congress hears us but some in congress seem to think we don't understand the gravity of the situation. We have to tell them we do, and we're not going to take on anymore burden to bail out Goldman Sachs and the others.
I agree with you, Matt..... I think ALL companies that go under
(financial ones in this mess) should be broken up into their component parts,
and the parts (Depts.) that are making a profit be SOLD to OTHER companies
ALREADY showing a profit, based on good business ethics to try to pay off the
debt that they incurred.
I say GOOD business ethics because SOME companies do WELL
"raping and pillaging" others in the process of day to day operations.
I could say more...BUT I, like you.......are too ANGRY ......
\ /
O O
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parked...
Matt, We are certainly being led over the side of a cliff. This 700bil will be gone in a matter of weeks and the problem will still be here. Going further into debt to solve a "too much debt" issue just makes no sense at all. Let's bleed now and be done with it.
I'm with Missy, I have watched so many talking heads this week that I am more confused than ever...will park and read.
But Wait! There's MORE!!! A VERY concerned Bill Gross was on Squak this morning saying that we need ANOTHER (additional) 500B in CAPITAL for the banks! What??? So just getting the "toxic" loans off the books and insuring every nation on the earth is not enough? 500 BILLION MORE??? It's sick. We should have a post of how to contact your congress reps.
Thanks Matt. I don't want to take it anymore either. Please continue to write on this topic.
THE BUSH ADMINISTRATION NEVER INTENDED FOR THIS BAILOUT TO PASS! This is a classic case of reverse psychology in an effort to delay any bill from being passed in a timely manner because the powers that be want the economy to collapse. They want the dollar to lose its value and then the real agenda will be allowed to play out. The North American Union and the Amero have been in the works for few years now and this is exactly the type of catalyst they need to further their agenda. If we're panicked, our economy is in the crapper, our dollar becomes worthless, then we as Americans will almost demand that something be done to re-tool the system and we'll hand our civil liberties over and welcome the NAM and Amero into our lives as the only way to save our asses. Yes, something needs to be done quickly or we're headed for serious problems...yes, we need oversight and accountability for whichever amount of money is injected into the system...but the fact remains that our dollar is sliding further down in value, the jobless rate will skyrocket into the double digits as more and more companies (not just banks) begin to fail (Bill Heard Enterprises closed 13 auto dealers this week leaving more than 2500 without jobs) we will see a huge jump in the jobless rates and then the domino effect with begin. Again, just what they want so they can control us. When we're scared and panicked, we feel vulnerable and practically beg for help to those in power.