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Tuesday, July 29, 2008

The Repugnant Bailout Nation

In Flecks latest - The Repugnant Bailout Nation, he agrees with some of our assessment's:

1. There seems to be little outrage as the US, a country where free enterprise is supposed to reign, moves to nationalize losses without even contemplating reform.

We are at another moment when those of a bullish persuasion... are determined to put lipstick on the pig at every opportunity.

2. None of Paulson's cockamamie schemes, from super SIVs to bailing out Fannie and Freddie (after Bennie and the boys at the Fed bailed out Bear Stearns), will help the economy.

Yet we must continually endure the cheering by stock market operators every time this country, the supposed bastion of free enterprise,

"successfully" takes another step in its move to nationalize all losses that are inconvenient to those in power.

As soon as any facet of each financial minicrisis ends.... folks act as though all is well, even as financial institutions continue to implode.

At nearly every one, there's a lot more than meets the eye, because much of the surface strength centers on...

the perception that these institutions have correctly marked their mortgage-related assets.

Recently, the portfolio of Cheyne Finance, one of the more infamous structured-investment vehicles, or SIVs, was sold at 44 cents on the dollar.

3. I suspect that similar assets are not marked anywhere near that valuation on financial institutions' balance sheets.

So, the game of "everything's contained" continues, albeit in a different form.

Of course, the fantasy has friends in high places -- namely the Fed, the Treasury and Congress which last week engineered a huge bailout for FNMA & FHLMC.

Never mind what this portends for our economy -- Wall Street applauded legislation many of us find repugnant.

The government's efforts will not create a bottom for financial stocks because of the fundamental problem in this country:

4. People carry too much debt against homes that are sinking in value, homes they really couldn't afford in the first place

and homes that have become all the more burdensome due to the inflation that's ravaging their paychecks.

That the implosion of the housing debt bubble is dragging the economy down with it will just put additional pressure on jobs and the ability to service housing debt.

5. Even now, after all the dishonesty and failure, Fannie and Freddie could emerge from this taxpayer rescue more powerful than ever.

That is a truly disturbing prospect because the same incompetence and greed that brought us this mess...

will lead to further troubles if the cabal that surrounds Fannie and Freddie gets more powerful,

which appears to be the case from the legislation just foisted on U.S. taxpayers

The Nattering One muses... Welcome to further nationalization of the Grand Illusion because...

the homes in question were never worth a quarter of the asking price to start with.

And that is a FACT which is bourn out by wage levels, fair rents and gross multipliers.

Welcome to the sharecropper nation where further bailouts by the powers that be are all designed to keep you as DEBT SLAVES to their banking masters.

We gently repeat two of our mantras: This will not end pretty. And... you can cut all you want...

and craft bailout after bailout... it will only prolong and worsen the inevitable.

This is trainwreck in progress, a fait accompli and there is no way out
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