BAILOUT

Think About It
Alan Greenspan is going around the nation to promote his new book and to preach to the people that this current recession is not his fault, hoping all the blame will fall on his successor, Bernard Bernanke. I respectfully beg to differ. We have said in this column recently that this entire financial collapse started when Greenspan’s Fed kept interest rates at an unrealistic 1% for over a year during 2003-2004. The boom created by such quixotic actions always leads to an economic downfall within 5-7 years. Today, “We are it.” If you believe at all in the sanctity of the Federal Reserve, Bernard Bernanke is doing “a hell of a job” (excuse me, Pastor Jim) with his tools. He is attempting to get money flowing again in a market which has frozen because of the sub-prime mortgage debacle, and is emasculating the price of houses. As I have said before, however, I do not believe in the sanctity of the Federal Reserve, a pseudo-government consortium of private banks, which has absolute control of the US dollar, now worth 51 cents to the British and 68 cents to Europe.
If you remember the S & L bailout of 1989, Bush #1 pushed through the Resolution Trust Corporation to buy about 1,000 failed Savings and Loan Associations, and sell the their assets at a loss. RTC was funded by selling $157 billion of floating interest 30 year government bonds, which will eventually cost us between $500 billion and $1 trillion with interest. You will recall my saying if you owe $1,000 and can’t pay, you are in trouble. But, you see if you owe $157 billion and can’t pay, you have friends.
Now, back to the sub-prime debacle. We have talked about how these unrealistic mortgages were pooled, then sliced and diced and sold to investors. In order to sell the most odious of these packages, they relied on loss-insurance, or “credit-default swaps.” For a premium, an entity promises to buy defaults from you when they go bad. This industry guaranteed about $2.4 Trillion of bonds. The problem now is that the loss insurers are about to go broke, because of the massive amount of losses approaching. Two of the largest insurers, MBIA and Ambac, are likely to be bailed out by you and me. The reasoning: you and I cannot afford to let them fail! Pardon me? My dollar is worth 51 cents to the British now, and will probably be worth maybe 45 cents after the bailout, where is my profit? The Federal Reserve can print as much money as they like with no backing but their word, and every time they print more, the value of the dollars I hold goes down. My old granddaddy, who hoisted a few toddies before he quit, said: “You cannot drink yourself sober, and you can’t spend yourself rich.” Well said, granddad!
It appears the big mortgage bankers of New York, who originated, sold, and then also got caught holding a bagful of these collateralized debt obligations, may continue without a bailout. Why? Because No 1, they have sold big pieces of their ownership to foreign entities to raise more capital; and No 2, if we bail out MBIA, Ambac and others, their bad loans may eventually be bought at par (with our money, of course).
This is your money, Madison. This is your money, America. How much longer are you going to let your Federal government steal it from you? I repeat: We are the bosses, they are the employees. Our government, in the name of free trade and prosperity, has fostered turning us from a producer nation to a consumer nation, from a creditor nation to a debtor nation, from THE major world power, to a world (?) power. We have extended their employment contracts. We have stood and watched. We should be ashamed.