Sec of Treasury Paulson wants to Commit Trillions
of Tax Payer Dollars to the Mother of All Bailouts
I am familiar with the henhouse. Let me in and I will fix it!
Just three days ago, after looking at the prospect of bailing a string of
distressed financial institution in the country, the government seemingly
drew a line in the sand, and refused to bail out Lehman Brothers. The
authorities clearly saw Lehman’s demise as a trial balloon to see how the
markets would react if the government stayed on the sidelines. That trial
balloon quickly turned into the Hindenburg. Immediately reversing course,
the Government has decided to go “all in” and bail out every institution
with financial exposure to U.S. mortgages.
Simply put, Americans will not be allowed to visibly suffer losses after the greatest asset bubble in U.S. history. But make no mistake, the losses are real and Americans will pay one way or another. Moving beyond the guided munitions of selective bailouts, the Government is now trying the financial equivalent of carpet bombing. (For AIG, Merrill Lynch, and especially Lehman Brothers, this gives new meaning to being a day late and a dollar short). To continue with the military analogies, Paulson's bazooka turned out to be a nuclear tipped ballistic
By committing trillions of tax payer dollars (not the “hundreds of billions” that treasury sec Paulson predicts), the plan will save commercial and investment banks
from certain bankruptcy. In his statement today, Paulson made clear that
Congress must pass new legislation to allow the Government to acquire even
those loans too poorly collateralized to currently qualify for GSE or FHA
absorption. The losses baked into these mortgage products, which Wall
Street has been reluctant to even estimate, will now be borne wholly by taxpayers.
In his press conference, Paulson assured us that this plan was designed to
safeguard our savings. But in typical government fashion, the plan will
have the reverse effect as savings is wiped out through inflation. He also
claims that the plan will safeguard home equity by keeping real estate prices
high. Since when did high home prices become a strategic national priority? If
the plan succeeds, the gains for home sellers will simply be matched by losses
for homebuyers, who end up paying inflated prices, and taxpayers, who get
stuck with the losses when those buyers default.
Paulson’s distress and confusion was clearly evident when he fielded
questions from reporters. The first asked Paulson to describe his fears
regarding the probable economic consequences of government inaction.
Paulson provided no answer and promptly exited stage right.
When the U.S. government owns all mortgages, the real estate market will be
completely subject to political, rather than financial, concerns. Will
foreclosures be outlawed? Will loan term easements and principal reductions
become standard campaign issues?
While it is dizzying to predict how this plan will be implemented, it is
fairly simple to foresee the macroeconomic consequences. The U.S. dollar
will be shattered beyond repair. The government simply has no means to make
good on the trillions of new liabilities. Interestingly, while both Paulson
and President Bush acknowledge that the plan will put “significant amounts
of taxpayer dollars on the line,” they did not mention any tax increases.
Given the politics, no such move is forthcoming. The printing press is
their only solution.
The government has also decided to insure all money market funds, adding
trillions more in unfunded liabilities to the Federal balance sheet in the
blink of an eye. Of course, since bad real estate loans are not the only
toxic assets on the balance sheets of financial institution, we will also
need to absorb other classes of asset-backed securities, such as those
backed by credit card debt and auto loans. So while the move ensures that
depositors will not lose money, is does insure that the money itself will
lose value. Is the trade-off really worth it? Washington thinks so.
Further, since I assume the plan will apply to all mortgage debt, U.S.
taxpayers will also be on the hook to bail out foreign institutions that
loaded up on the financial sludge. However, once the government takes them
off the hook, do not expect them to re-invest the windfall back into other
U.S. dollar denominated assets. This get-out-of-jail free card will likely
scare them straight. The global mass exodus from the U.S. dollar and
Treasury debt is about to begin: do not get caught in the stampede.
Although gold initially sold off as the apparent need for a financial safe
haven ebbed, look for a spectacular rally to commence as its traditional
role as an inflation hedge returns with a vengeance.
For a more in depth analysis of our financial problems and the inherent
dangers they pose for the U.S. economy and U.S. dollar denominated
investments, read my new book “Crash Proof: How to Profit from the Coming
By Peter Schiff who you will remember is a WALL STREETER.
who has investment newsletters* * * * * * * * * * * * * * * * * * *<=== BACK TO THE FRUGAL TIPS and CHEAPO LIFESTYLE WEBPAGE
Our POSTER is ANITA SANDS HERNANDEZ, Los Angeles Writer, Mother of 4 and career Astrologer. Catch up with her websites TRUTHS GOV WILL HIDE & NEVER TELL YOU, also The FUTURE, WHAT'S COMIN' AT YA! FRUGAL LIFE STYLE TIPS, HOW TO SURVIVE the COMING GREAT DEPRESSION, and Secrets of Nature, HOLISTIC, AFFORDABLE HEALING. Also ARTISANRY FOR EXPORT, EARN EUROS..* Anita is at firstname.lastname@example.org ). Get a 35$ natal horoscope "my money/future life" reading now + copy horoscope as a Gif file graphic! No smarter, more accurate career reading out there!
<=== BACK TO TRACKING THE ECONOMY, an INDEX PAGE
<===BACK TO MONEY SECRETS ONLY THE EXPERTS KNOW
<=== BACK TO SECRETS THE GOV DOES NOT WANT YOU TO KNOW
<===BACK TO THE SECRETS OF THE OLIGARCHS, THE EMPIRE INDEX PAGE
<=== SHOW ME THE FIX INDEX PAGE.
<== SHOW ME THE HAPPY R)EVOLUTION PAGE
<=== BACK TO "GUERILLA CAPITALISM" -- THE SOLUTION!
<==== BACK TO THE "VITAL SIGNS OF A DYING ECONOMY" the "FUTURE" WEBPAGE
<==== BACK TO THE WALL STREET MELTDOWN WEBSITE, with "WHAT TO DO TO SURVIVE" TIPS
<=== BACK TO ENRON PLANET, the DOOMSDAY SCENARIO!
<====BACK TO THE HOLISTIC GOURMET, BON MARCHE
<=== BACK TO THE FRUGAL ARTISAN IMPORT/ EXPORT TYCOON AND HIS "STUFF"
<=== BACK TO THE GLEENERS PAGE
<== BACK TO THE FUTURE INDEX PAGE
<=== BACK TO THE GENTLEMAN FARMER'S GARDEN INDEX
<=== INVESTIGATE DOING DRIP IRRIGATE- LINES in drought areas, lucrative, easy to learn in one day.
<=== BACK TO "DONE WELL, ACTIVISM IS A DELIGHT and IT CREATES CAREERS for YOU as well as PLANETARY EVOLUTION"
<=== BACK TO THE MALTHUSIAN INDEX PAGE
<===BACK TO THE PHILOSOPHY INDEX PAGE
<=== BACK TO THE LUCK IN LOVE WEBSITE; MARRY, don't just DATE
<== BACK TO THE PROPAGANDA STUDIES WEBSITE, HOW GOV LIES TO YOU
<=== BACK TO ALL POINTS OF THE COMPASS POLITICAL PHILOSOPHY TUTORIAL
<=== BACK TO JERRY'S REFRIGERATOR & the Tin Foil Hat Collection of CONSPIRACY THEORIES!
<====BACK TO THE FREE MONEY WEBSITE
<==== BACK TO THE HARD TIMES WEBSITE
<===== BACK TO THE POVERTY INDEX PAGE
<==== BACK TO THE "TIPS to SURVIVE THE FUTURE" INDEX PAGE
BACK TO THE "FIX YOUR FLAGGING AMBITION" SEMINAR
<== BACK TO THE SNOOKERED INDEX PAGE
<===BACK TO THE REALITY 101 SEMINAR FOR TEENS
<==== BACK TO THE SHOW BUSINESS ARCHIVE, for writers, producers, video documentarians.
<====HOW TO TINKER WITH OTHER PEOPLE's BRAINS for 100$ the hr. CALL IT TANTRUM YOGA not therapy
<====BACK TO THE NEW AGE EMPOWERING INDEX
<===BACK TO "HOW TO MERCHANDISE YOURSELF" INDEX
<===BACK TO THE ALL ABOUT TAXES INDEX PAGE
<=== MEET ANITA WHO WRITES or GOOGLES AND POSTS ALL THESE ARTICLES
<=== TAKE ME TO THE HOLISTIC PET, HOW NEVER TO NEED a VET
<=== BACK TO THE TRUTHS ABOUT DENTISTRY THAT WILL SAVE YOU 100 THOUSAND!
<=== BACK TO THE SNOOKERED WEBPAGE, HOAXES & THEFTS that WE ALL HAVE KNOWN
<===BACK TO EVERYTHING YOU NEED TO KNOW ABOUT WEB STUFF (for dummies) so you can make your own website.
<=== BACK TO THE CONVERSATION INDEX
<===== BACK TO THE PHILOSOPHIC DIFFERENCES INTERPRETED WEBSITE. HEAD TRIPS ARE US.
<=== BACK TO "HOW TO MARRY A BILLIONAIRE" SEMINAR 4 a SUPER BEAUTY or how to GIVE UP JOCKS, MARRY RICH & SAVE THE WORLD
<==== PORTAL TO 7,000 CLASSROOMS on REALITY/ LIFE 101, UTOPIA NOW, REPUBLISH ANY OR ALL FREE, ATTRACT AD REVENUE
<===BACK TO THE ACTIVISM INDEX PAGE, FUN FAMILY FROLICS THAT FIX!
<== BACK TO THE HISTORY OF THE WORLD PART I -- the INDEX PAGE<== BACK TO THE HISTORY OF EMPIRES INDEX PAGE
<===BACK TO "HOW TO WRECK AN ECONOMY" (AND WHO DID IT)
<===BACK TO THE "LIFE 101" THOUSAND HINTS FOR WEALTH AND GOOD KARMA PAGE ( A PORTAL)