The Financial House is infested with termites and the administration is trying to keep the lid on a steaming pot. The sub-prime fiasco is the tip of the iceberg and it has just started to shake up the financial institutions with the first victim being Bear Stearns. That said, the credit cruch is tightening while the Fed is trying to stop the bleeding with a bandaide approach in order to camouflage the uncertaintees of other financial entities which are in denial of their problematic solvency. Several years ago Congrees passed Capter 12 legislation which it thought would help the creditors while throwing the individual borrower under the bus. It will all come to a headlong overboil, when the shit hits the fan. The trillion dollar credit card debt is a house of cards. The temporary financial fix needs to be supplemented with immediate oversight legislation in order to stop the bleeding before a financial implosion cripples the financial market to a point that will make the ‘29 crash look like a puff of smoke. I wouldn’t be so pessimistic if GW et al were not in office. We all know his track record of accomplishments and associations.

Some folks got the gold mine, and some folks got the shaft. 

The gold mine was for the real estate and mortgage brokers who steered would-be homeowners into easy-credit sub prime mortgages.  Can’t lose, they said, because real estate value gonna rise FOREVER! 

Then the fine print kicked in, and the interest rate hit the ceiling, and real estate tanked. And the buyer got the shaft. 

Shaftee couldn’t pay?  No problem for the broker—he had his commission and his BMW, and the bank wrapped the mortgages in tasty bundles and fed them to Biggies on Wall Street.  Nice snack.

But two million shaftees had to drop the house keys in the mailbox and move the family into Mom’s basement.  There are seven million more shaftees collecting cardboard boxes for the big move, too.

Now when the move-to-Mom’s-place started, people like Treasury Secretary Paulson and Federal Reserve boss Bernanke wagged a scolding finger at those unfortunate basement-dwellers: “Naughty naughty.  No government help for you.  Let this be a lesson to ye in the Sacred Laws of Market Discipline, and may the pawnshops have mercy on yer miserable souls.  And don’t bother me at work.”

But then the bogus bargain mortgages, the rotten root of the problem, started to stink up the board rooms of the rich and famous.  They had pretended that these all-but-worthless papers were real money and used them as collateral to borrow more money.  Big mistake. Feet of clay.  Rotten roots. 

The investment bank, Big Bad Bear Stearns, which had been gobbling up these rotten roots, suddenly developed terminal indigestion, and in a quick flip-flop Mr. Bernanke and the other People Who Matter said, “Market Discipline? Um. . .heh heh. . .just kidding. After all, these are real people losing money—you know, the guys with a $400k income.  Hell, I play squash with these guys! We can’t let them take a hit. Forget the rules, BAIL THEM OUT.”

And now JP Morgan Chase is swallowing Bear Stearns, indigestion and all. If Morgan makes money on the deal, good.  But if the indigestion crops up again, Bernanke will front them $30 billion of taxpayers’ money to buy Maalox. As they say, privatize profits, socialize losses.

Something wrong with this picture? Yup. 

Everyone, including Mr. Bernanke, agrees that the real problem is those rotten roots, the failed mortgages.  OK,  then, fix the dang failed mortgages.  Feed the roots, and you feed the tree.  Bernanke is polishing the apples at the top, but they’ll wither again if the roots keep dying. Rather than drop thirty billion into the laps of the Wall Street moguls, how about easing the interest rates or re-setting the rules for the folks in Mom’s basement?
Editors at the Wall Street Journal are feeling sorry for the bankers who will be looking for work after Morgan eats the Bear.  How about some sympathy for the poor shaftees at the bottom, the ones the Bear et up?

The government blew a golden opportunity BIG TIME. Bear was for sale when its stock was selling at $80. The Chinese were interested and wanted a Wall Street Bank to launder their trillions of extra US bucks. BUT our government STOPPED the sale because after all we can’t have slanty-eyed people owning a Wall Street firm…

What a laugh if they had sold to the Commies for $80 a company worth $2… and we wouldn’t be having this discussion now…. just a good ole-fashion Yankee laugh.

The entire upper-level “team” should be pushing shopping carts along the side of the highway picking up bottles and cans…then they can find out what “moral hazard” and “the hand of the market” really means.

So if you don’t like what they are doing, make a sign, and stand in front of Bear Stearns and protest!

My father, a great oil company capitalist once told me of a Mobil Oil tax man who was cornered by the IRS for some “questionable deductions” he was asked to “come in for review and bring all relevant papers.”

He showed up in Washington with three railroad boxcars filled to overflow with company documents which he felt “might be relevant”

IRS not having the staff, nor the time to go through all those papers dismissed the case.

The punch line was most of the papers in those cars were just ordinary waste paper.

There was another incident where the company left $750k in the Grand Central lobby to break a truck drivers strike, Some homeless dude walked in, picked up the attaché case and walked off into the sunset…  The company couldn’t report the loss because then they would have had to explain why the money was where it was…. so they just got another $750K and did the same thing again… I assume it worked, for the strike was over the following day.

But I digress. The point is that these folks (with the money) can do pretty much as they please. There is only one thing they fear, and that is a massive, or majority embrace of socialistic government.

As long as they can keep the liberals/conservatives, the blacks/whites, the Protestant/Catholic/Jews middle-class/poor divided, they don’t have to worry.

Wall St. always has been a rigged game, study its history. Our rigged government has just followed their lead and decided to become obvious about it.

Deals that used to be done in back rooms are now front page news because they don’t fear any reprisal.
Some people might complain for a few days then it’s back to BAU.

If anyone thinks they can change it by voting D or R, think again. Heads they win, tails we lose. Vote independent and/or get ready for the inevitable revolution. Because that’s what will be needed to really change anything.