Sunday, October 05, 2008

FedSmith's Take on the Bailout

Over at FedSmith there is a brief analysis of the bailout bill that was passed. It's still awful.

By the way, my web wanderings have led me to several commentators suggesting bank holiday and bank runs coming to a branch near you in the next week or so. All rumor as far as I can tell. I do know that my IRA (a rather puny creature) took a 15% hit and its current value is now below what I actually deposited. I'll be chatting with Chase about options, I don't want to keep on losing money.

1 comment:

The North Coast said...

Well, Kheris, I just got finishd watching Fuld, the former CEO of Lehman Brothers, attempt to justify his take-home compensation (after stock losses) of over TWO HUNDRED MILLION DOLLARS, his reward for his and his top employees' contribution to collapsing the global financial system.

This guy owns a home he paid $14 MM for, among his other homes.

As long as he and his other key employees, and their confreres at similarly troubled firms and banks continue to sit on massive winnings made by setting us up for the worst financial debacle in world history, we should not have to contribute a dime of public money toward propping up these firms.

The proper emergency action, necessary to protect the innocent, that authorities could take would be to ensure all "demand money"- all bank deposits and money market funds up to any amount,and then let fall what will fall. Additionally, the states should beef up their insurance guarantee funds to protect holders of fixed life insurance policies and annuity contracts. If you bought a variable annuity or policy, sorry, you're on your own, but you knew those were basically securities products and were in no sense guaranteed to begin with.

Instead, our government's response to the situation is to engineer a bailout to "unfreeze credit markets"- in other words, recreate the same condition, floods of EZ money, that got us into this situation, while enabling the culpable parties to continue to skim billions in fees and commission off it. In other words, ramp up the party to 2004 levels.

At the moment, the Dow is down over 500 points, and everyone in the G7 countries is scrambling for money to shore up tottering institutions. It becomes more clear every moment that all the tax receipts of every G7 country for the next 5 years isn't going to be enough to rescue the global financial system, and we shouldn't try.

Just protect the innocent, and isolate solid institutions from the spreading blight,so that someone remains standing, including the U.S. Treasury, which should be protected- not endangered by attempts to bail what is too big to bail. That is all we can do.