I listened to some of the Fed Chairman Ben Bernanke’s address to congress about the bailout. It was stunning. The man seemed to have only one solution on the table – complete bailout without questions or accountability now. No questions, no alternatives, just dump the money on me and we’ll figure it out. Not only that, it was only two pages. Here’s the text. Want scary – read these parts:
Sec 8 – Review:
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.
Sec 10 – Increase in statutory Limit on the Public Debt:
Subsection (b) of section 3101 of title 31, United States Code, is amended by striking out the dollar limitation contained in such subsection and inserting in lieu thereof $11,315,000,000,000
So, if I’m reading right, he’s saying they must give him the money to dispense with in any way he pleases WITHOUT any oversight or review by courts or congress – even after the fact. Get out of jail free cards were never so easy to get!
And if you think that the $750 billion is what it’ll cost, he just tipped his hand. Sec 10 says that the national debt may be raised to $11 TRILLION dollars. Our national debt currently stands at 9.7 trillion. So in other words, Bernanke is giving us a guess of what this bailout will cost: 11.3 – 9.7 = 1.6 Trillion dollars. That jives – most projected numbers for government projects are about half of the reality.
Even worse, there is a staring match going on between the Fed and the embattered loan companies who aren’t keen to reveal the extent of their bad loans just yet. I kid you not, one of these mortgage brokers was quoted saying:
“If we can just get liquidity back (aka – money given to us), we’ll be able to move all this debt at current or better market value.”
You must be kidding me? With home prices dropping anywhere from 5%-50% depending on region – exactly where does this guy plan to sell this debt? In other words, these guys are flat lying through their teeth in order to cover up the extent of how bad it is (likely – since once a bailout starts -aka foot in the door – they can just keep shoveling since you wouldn’t want to stop now would you?), or they’re completely incompetent (even worse).
I’m emailing all my congressmen/senators today about this – and I highly recommend you do to. Here’s what I sent (sans the swearing):
1. A step-by-step bailout with regular re-evaluation. The markets are mostly stabilized right now (Wall Street). They believe a bailout will be coming and are now just sitting still. Ensure the markets that targeted support will be given by the government on a case by case basis. Just as we have been doing so far. Congress, if you bail these jokers out and give them a blank check – I’ll seriously be pissed off at every one of you.
2. If you are getting bailed out – you’re upfront and honest about the debt situation or you GO TO JAIL. What the f*ck! These guys running this thing can sit and lie to you while putting their hands out for wads of cash – cash they f*cked up the first time??? Only an idiot gives a fool money. Their either fools or criminals – they should be treated as such.
3. If you get bought out – you lose your company. If the government buys you – then they get to set the rules of lending, they get all your perks, they get all your bonuses, they get everything until you’re paid back in full with interest (or all your assets are sold). Maybe at the end they give it back to you – much poorer and hopefully wiser.
4. Something very shady is happening – somebody likely needs to be going to jail. Bernanke didn’t offer one alternative than pass me the loot with no strings, oversight, or jailtime attached. That’s NOT open and honest government. Something very fishy is going on – and has been. There’s NO WAY these experts didn’t know what was going on. My single personal finance class told me that even before the housing crash were were headed for big trouble. How did they not?
5. The market needs to experience some SERIOUS pain. Unless folks lose some serious money. Unless some lose houses. Unless some go bankrupt, unless some folks go to JAIL – we will be in this situation again in 10-20 years. The problem was half lack of oversight, but as any behavioral psychologist will tell you – unless *core behaviors* change – we will do this again (like many other countries: Argentina’s a great example) every 10-20 years. Only a fool keeps lending money to relatives that can’t manage money. We simply have all been living beyond our means for too long. We all need to experience some personal ass kicking and loss or we will not change the core behavior of the people who did this. Instead, it will reinforce bad loaning behavior, it’ll reinforce bad consumer behavior (aka running up huge debts they can’t afford), and will ruin the value of our markets.
The US is taken the first big step into becoming a second-world economy. The US dollar and markets are now no longer considered bullet-proof – so now folks are going to start take their money elsewhere.