Image by jeeked via Flickr
AFTER the bailout passed into law this afternoon,
stocks plunged more than 400 points
on the Dow Jones Industrial Average.
Even Wall Street knows this is a bad idea.
New World Order Strikes Again
The House has passed the legislation with a vote of 263-171. This is a sad day for us here in the United States, the day that our government finally told the masses who elected them, “So, what are you gonna do about it?”
Recap
Let’s recap the crisis, for anyone who still doesn’t get it.
Congress passed laws allowing investment firms to do shady deals and use more leverage to bring in more income.
The securities firms sold ‘new and improved’ assets which were really worth less than the paper they were printed on, all the while knowing there was no real value there.
After a few years of this the investors became hip to this ponzi scheme and decided not to trust any more of this crap. Suddenly there were hundreds of billions of ‘dollars’ worth of the things that were worthless.
About the same time, the SEC and the government made them actually value the things according to how much they could be sold for, which was zero because nobody was buying them. The trust eroded on Wall Street and without trust, that system falls apart regardless of its value.
Since nobody was buying them much of the cash flow had dried up, and these huge corporations were in danger of falling apart. Some of them did fail: you know their names. But it’s important to remember that they failed because of the LEVERAGE they had assumed, not because they had no cash at all. When you are leveraged 30:1, it only takes a drop of about 3% to bankrupt you.
Meanwhile, while all this was happening, we got a new Treasury Secretary from the investment firm of Goldman-Sachs, a man who had been intimately involved with and a major mover of these worthless instruments. In 2005, the year before coming to the US government and the peak of the economic boom, Paulson pocketed over 35 million for his efforts.
Now Mr. Paulson has successfully bullied a bill through Congress that will reward all the major players in the subprime fiasco. There’s practically nothing in that bill to help homeowners, but those CEO golden parachutes are alive and well and will soon be paying out millions of dollars to the same greedy people who caused all this to happen.
And once again, worthless paper can be valued at whatever price seems good to the guys selling it. And even though it’s well known that these papers are worthless, Paulson has promised to pay an inflated price for them. Buyers BEWARE!
Summary
Since they couldn’t win at their game, even when they cheated and lied, they got the rules changed during the endgame and now the rules say they win even when they lose.
You and me? We lose.
Thank you United States Senators and Representatives. We will remember you at the polls next month.
I am Jon, and I say Vote Them OUT!
Don’t even LOOK at all the pork in that bill. Unless you want your head to explode. http://deepbackground.msnbc.msn.com/archive/2008/10/03/1489413.aspx
Yeah, there’s more than 850 billion dollars worth!
It’s estimated that the ENTIRE SUBPRIME MORTGAGE mess has a total value of 1.4 trillion dollars. That’s just the subprime part of all mortgages in the US.
If we add the roughly 400 billion the US has already spent to this additional amount, we find that the government is willing to fork over nearly ALL of the total value of the loans to the subprime lenders while at the same time doing absolutely nothing to relieve the mortgage holders.
In other words, the government could have used that cash to underpin the basic assets (the houses with mortgages), thereby helping THE PEOPLE, and the investment firms would have been propped up as a by-product. Instead, the govt chooses to directly support the investment houses while letting the people suffer.
Notice how the market reacted by dropping in response to the bailout passing the house. I am expecting a severe downturn in our economy now, maybe even a slight depression, courtesy of our elected officials.
Vote Them OUT!