11/24/2008 08:35:00
So this weekend brings news that our wonderful government is planning on bailing out yet another bank . Really? I guess the fact that this tactic failed the first half dozen times or so doesn't mean it won't work this time around, right? Oh but wait despite what it sounds like there are some fresh tactics, only it's not what we need but rather what the people who stand to lose the most actually want:
The federal government was nearing an agreement Sunday night to rescue Citigroup Inc. by helping to remove billions of dollars in toxic assets from its balance sheet, people familiar with the talks say.
The agreement, which was still under discussion and could fall apart, would mark a new phase in government efforts to stabilize U.S. banks and securities firms. After injecting nearly $300 billion of capital into financial institutions, federal officials now appear to be willing to absorb bad assets, on a targeted basis, from specific institutions.
Ahhh yes! So now instead of just handing out wads of cash (which we are still doing) we are also taking the hit on the unprofitable mortgages, securities, bonds and CDOs that have led us into this mess to begin with? Nice. Very Nice. Let's just encourage the market to create more of this garbage in the future by providing virtual guarantees that the government will back it up no matter what. Well while he haven't ever actually been living in a true free market system, I think at this point the idea of a free market has been totally lost. The politicians are so desperate to keep this crumbling system from falling in on itself that they will literally do anything even if it means damning this country for the rest of our grand children's lives.
The term "too big to fail" is nothing more than a nice way of saying, "Our campaign depends upon donations from this institution and allowing them to fail like the shitty companies they are will negatively impact my chances for reelection". Let's be honest, politicians simply can't be trusted on complex economic issues. Politicians can't be expected to understand that not allowing something "too big to fail" to fail when it is clearly ready to, is simply giving the institution the opportunity to become even larger thereby creating an even larger problem in the future. Of course politicians, especially those in this country, have a well-recognized ability to dismiss the consequences of their decisions. I mean after all they'll probably be out of office by then, so it's somebody else's problem, right?
Bottom Line: Duck and cover people. Dig in deep and keep your cash to yourself. Do yourself and everybody in your family a favor: Skip out of this years Christmas spending spree. I know, I know. Everybody on that fat caustic talking tube in your house can't stop from tripping over themselves to shove the "consumer spending needs to go up" nugget down your throats. But think about it for a minute: A system that is dependent upon an ever increasing torrent of consumer spending propped up by an ever expanding amount of available credit that results in an rapidly inflating pile of debt that cannot and will not be paid in this or any foreseeable lifetime is doomed to failure. It is absolutely doomed to failure. Whether it happens now or later is largely irrelevant. It will happen.