They Don’t Know What They’re Doing

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?

  • Mark

    >> Just when will the world realize that the emporer has no clothes?

    When the majority of us are cold and hungry…

  • Brad Warbiany


    Really? From 1936-1940, still mired in the Great Depression (and still cold and hungry), FDR was getting 52-64% approval ratings…

  • thomasblair

    You all have had some really good content lately. The stuff about California politics has been enlightening, especially to me over here in Alabama.

  • Brad Warbiany

    Thanks, Thomas…

    There are many things to enjoy about California, like the climate, the scenery, etc. The government, on the other hand, has derailed. Hopefully states like Alabama can learn from our example and not follow the same path.

    Now, you do need to start working on your state’s beer laws. You need to free the hops!

  • Akston

    Wasn’t it more like $850 billion? Or are we not counting the graft pork incentives?

    And yep, these are not omniscient gods striding the Earth with benevolent will and fairy dust. They are just other people, some smarter, some not. As smart as they could possibly be, they are not 300 million times smarter than you or me. Only the market is that “smart”. Anything that one Economy Czar can dream up cannot possibly respond to an economy of America’s size interacting with 6 billion other people around the world. To invest that much power in a single person is not only absurd on the face of it, but patently unconstitutional.

    The Soviets collapsed trying to implement this kind of absurdity.

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  • TerryP

    Akston, that is the whole problem, the democratic way of doing things is built on a few people making decisions for everyone else. The republican way of doing things is becoming that way as well.

  • Mark

    It appears as if Paulson, et al have perpetrated the classic “bait and switch”. Does the Federal Trade Commission have jurisdiction over the Treasury Department? No? Does the intent of Congress count for anything?

    What are the chances of Congress telling Tresury ‘no you can’t have the other $350 billion’? Snowball in where?

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