A nation of morons, led by idiots

Problem: Too-big-to-fail financial institutions

Solution: Bigger financial institutions (BAC+CFC+ML/JPM+BSC/BCS-LEH ad nauseum).

Problem: Lack of control over government spending.

Solution: Spend more, a lot more, borrow more, a lot more.

Problem: Fred and Treasury create serial bubbles, ending in tears.

Solution: Give Fred and Treasury more power.

Problem: Lack of price discovery and/or transparency in financial asset values.

Solution: Bury mortgages in government entity with neither accountability nor transparency.

Problem: Archaic and incompetently-implemented regulation creates over-levered institutions run by Jeff Skilling wannabes.

Solution: Bail out Skilling wannabes, witch-hunt the (relatively) innocent, and promise to regulate the already failed Ponzi scheme out of existence. 

Wash, rinse, repeat.

There is only one thing necessary to understanding what is happening and it is this: no one at US banks, no one at the Federal Reserve and no one in politics can accept the reality that real estate assets in this country remain oversupplied, overpriced and overleveraged. 

It is that simple.

TAF, TSLF, SuperSIV, TARP, none of that matters. No matter what acronym is created to disguise the fact that assets are overpriced, or what government intervention is created to prop up those asset prices, the market will inevitably overpower it. This time is not different. In fact, it is continuing to play out almost exactly as the Great Depression did...

Five Things You Need to Know: Will the Bailout Succeed?

by Kevin Depew

Minyanville Sep. 22 2008

Earlier on NakedShorts

The case of the exploding heads
Sep. 19 2008

Comments

[Roger Streit]

Well put. And succinct too.

[Walt French]

What do you suggest though?

First, accept that doing NOTHING would be better than taking $700,000,000,000 from taxpayers and spending it on the second most unproductive sector of the economy (after building McMansions, which may decrease output/manhour; and yes, maybe I've got the order wrong).

Second, take the analogy of American businesses not earning much money, so stocks are weak. You think that giving S&P Futures traders a few hundred billion bucks is gonna somehow flow back to make stocks fundamentally earn more money -- new products, higher efficiency, ???? Is there ANY linkage at all that flows backwards?

OK, now that we've stopped panic-induced stupidity, we can take the time to diagnose the problem (as expertly done above) and figure out how to make mortgage lending a high-volume, profitable enterprise again. And the answer is rather simple: the American consumer needs good, steady income, good savings, reasonable credit terms and expectations of reasonable value from the commitment. I.e., some combination of good jobs, good income distribution to the median worker and a relative deflation of housing prices so that they're affordable.

Simple, he says, not necessarily easy. The massive re-distribution of wealth to those who then used leverage to buy more assets, is likely to reverse, with no small pain to the readership of this blog.

But I still think it's a better shot than throwing $700bil into a black hole.

[Hank Fredericks]

I think if you read it again, there is an implied suggestion of not repeating the same mistakes.

[Graham Cox]

Easy to ID the problems. What do you suggest though?