They Don’t Know What They’re Doingby Brad Warbiany
For anyone who thinks this “bailout” is any more than a haphazard guess about what the market needs to remain mobile, here’s your answer… They’ve changed their minds — again:
An already disheartened Wall Street turned sharply lower Wednesday after Treasury Secretary Henry Paulson said the government won’t buy banks’ soured mortgage assets after all, disappointing investors who hoped to see the bad debt wiped off companies’ books. The Dow Jones industrials fell more than 270 points, and all the major indexes dropped more than 2 percent as the market retreated for a third straight session.
Paulson said the government’s $700 billion financial rescue package will not purchase troubled assets from banks as originally planned. He said that plan would have taken too much time, and that the Treasury instead will rely on buying stakes in banks and encouraging them to resume more normal lending.
While the market had been pleased by the government’s decision weeks ago to buy banks’ stock, investors still hoped to see the financial industry relieved of the burden of the mortgage assets whose decline in value helped set off the nation’s financial crisis.
Paulson also announced a new goal for the program to support financial markets which supply consumer credit in such areas as credit card debt, auto loans and student loans. He said “with a stronger capital base, our banks will be more confident” to support economic activity.
Now I understand why his initial proposal desired a lack of oversight on his powers… He had no clue what was going on and wanted free reign to change his plans in mid-stream. Now he’s decided to throw money at the credit card and auto loan companies, because he’s worried that lagging consumer spending will be the next domino.
Perhaps to say that he has no clue what’s going on isn’t fair. He probably knows exactly what’s going on — he just can’t tell us, or we’ll realize that the whole system is in danger. As an unnamed banker reportedly said in Aug’07, “the deleveraging will not be denied.” I think our government is scared shitless. Right now Paulson, Bernanke, the ECB, and financial movers the world over are trying to keep a burst bubble inflated, and the only way they know how is to pump air in, because they can’t fix the hole.
Just when will the world realize that the emporer has no clothes?