Why would an organization with a reputation for unbearable inefficiency, incompetence and ineptitude like the Federal Government cause the Dollar to Strengthen, the world’s stock markets, including our own, to take off like a roman candle on the fourth of July? How do bankrupt companies holding half the nation’s mortgage debt, getting seized by the bankrupt federal government, having its CEO’s fired redound to the benefit of the planets stock markets? By what magic does the Federal Government wield its magic piggybank and make the disastrous sub prime crisis go away? How? That’s easy!
And Your Kids!
And their Kids!
Think of it this way: Someone has to pay the tab for all the crazy, wild, insane, mortgages that were written by greedy bankers who wallowed in profit for years. The way things were shaping up it was going to be paid by bankers and foreign governments who foolishly bought our mortgage debt. Like the bankers who wrote mortgages for people who should never have gotten them; the global financial industry made a bad investment when they bought our mortgage debt. For a long time, years in fact, mortgages were the goose who laid the golden egg and everyone involved made money: Lots and lots of money. Now the game is up and the system collapsed in the form of Freddie and Fannie and if they default then all the foreign investors and all the banks have to pay the piper. That’s the essence of our “financial crisis” the possibility that such mass defaults of Fannie and Freddie would essentially destroy the global economy and the reserve currency, the US Dollar. All those bankers, all those governments, feeling and looking kinda stupid for having as much sense as a $20,000 a year janitor in Southern California getting a zero down mortgage for a $700,000.00 home with the fee’s rolled into the mortgage and $60,000 extra for a BMW based on the amazing appreciation rate of houses in the area! Think of all the egg on all those rich faces! Think of the carnage of a global financial collapse! Unthinkable!
But what could the greedy masters of money do? What the bankers and the foreign investors really needed was a rich patsy even more stupid or gullible then themselves to come in and guarantee all the bad investments so the banks and foreign investors get saved. They pondered and pondered and then came the shining idea that saved the day and gave the worlds markets a shot in the arm! The only rich entity on the face of the earth so stupid as to do this criminally stupid deed is Uncle Sam! The United States Government has just bought out all the bad loans, become the leading mortgage lender in the world, and passed on all the losses to you by using your tax dollars to save the banks and foreign investors! We’re going to be GENERATIONS paying off this mistake. If the markets pick up and the financial crisis calms down it may be possible to sell this debt back to the private sector with new terms eventually taking generations of Americans off the hook. If this does not calm the waters and if the economy should endure more shocks like massive instability in oil prices for example then the next time people lose faith it will be in the US governments’ solvency and the value, if any, of the US Dollar. Either way the losses have been transferred to all of us and we will pay all or part of an outrageous figure via our bankrupt government who will borrow the money from China and tax us beyond the stars to pay the interest for generations.
Bloomberg has some good articals on the nationalization of Fannie and Freddie but the one I like best is the one that is called: Paulson Says Fannie, Freddie Crisis `All Consuming’ Here is the URL: http://www.bloomberg.com/apps/news?pid=20601068&sid=acZSZRcvrhGw&refer=home
Here are a few quotes to wet your appetite!
Sept. 8 (Bloomberg) — Treasury Secretary Henry Paulson said the discussions over how to prop up Fannie Mae and Freddie Mac were “all consuming” in recent weeks, when he was forced to make a decision he would rather have avoided.
“This is the first time in my career I had trouble sleeping, and it wasn’t because it was a difficult decision,” Paulson said in interview with Bloomberg television.
“Government intervention is not something that I came here wanting to espouse, but it sure is better than the alternative,”
As John McCain might say: My Friends, we’ve been shafted! Now the big three auto makers are about to make a bid for a federal bailout. Have you ever owned an auto industry? Give it a month or two because Ford, GM and Chrysler are “too big to fail”. Like I say: We’ve been shafted.