BAILOUT ?? !! .. NO!! An Intervention
Bailout is the errant term for an insightful economic intervention proposed by the Treasury Dept for the Bush Administration.
Sloughing off badly performing assets which tarnish the excellent selling of US backed securities; and re-establishing a core value of American assets (good debt or othewrise) to stabilzie markets and international asset holds.
By appropriating the $700 Billion, (via an increase in the public borrowing power) Americans get:
Debt .. an addition to the public debt (see previous post for that cost over time and as stated in constant government budget/GDP apportionment).
Stability in banking & consumer assets ... as more Americans depart the Glass-Steagall insured deposits separation for an entrepreneural venture or portfolio risk .. more are at risk.
Market righting .. an overreach is balanced by trim --r emoval of ballast and the trimming of luffing sails -- a good trimming is needed here.
Profit? -- a heathier US economy & banking system; and renewed international investment in American bonds -- an international envy (there are not enough EURO bonds and what do you do with dollars in the safest sense?). The mortgage bundling/bungling of FreddyMac/FannyMae risked that well earned sales value & reputation of the American Mortgage bond market.
Dumping $$$ ? -- that is allayed ..especially in dollar washes and balances - IF the stabilization program occurs -- if not, then excessive dollars are dumped; and bundled securities (such as the Freddy Mac Fannie Mae series of mortgage doubtfuls are dumped, as disclosure and lessened performance will ripen them until adjusted for true value). That includes the US stock markets & realty markets.
The US Treasury would buy back most of the likely to over-ripen bonds before that happens and reissue good debt, good credit & cash especially by firmer US backed Treasury bonds (without ambiguous mortgages). The US will replace Fanny Mae & Freddy Mac stock with solid bonds as appropriate; like a corporate treasurer would in deflating and dewatering.
Reform? Most likely there will be reform, starting with a more permanent equity owner oversight of Freddy-Mac & Fanny-Mae; short-term and emergency exclusion of short-selling in some fashion by greater disclosure regulations; surer future performance (no chance of British style "repos" here & a revisit of the short-term capital gains tax (if only to fund regulation & market fees).
Populism & the little guy / fat cat syndrome? -- This isn't just saving Wall Street & the Hamptons folks ... Bailey Savings & Loan etc is involved; so are your ordinary 401-K retirement plans; and other pension benefits & guarantees which are now insureed the Pension Benefit Guanranty Agency of the US Government; the Federal Deposit Insurance Corporation which brought in the old Saving & Loans Industry's FSLIC. In short, if the Federal governemnt doesn't intervene in advance, it will be commanded to pay plenty for recession & wash-out induced social services forward.
What does cancelling debt do? It draws down assets -- a debt when performing is an asset --not a trick of double book-keeping. Banks cannot afford it; they pay when you and I are late re-paying or paying or absorn a cost -- sometimes borrowing and cost-absorbing to ruin. When relieved of bad debt, they are healthier, and with the envisioned program recount and revive with healthier debt and credit provided by the US government; which is acting as an inbestor.
This is not laissez-faire, it is modern economics ..Keynesian, Samuelson & Friedman ..all the pragmatic modern economics Americans have learned and led with internationally.
Yesterday's political salvo in Congress' House of Representatives, which is now seen as genuinely a partisan rebuttal to partisan faulting, should only have delayed the rescue with a gain in profits a floor and bargain buyers benefit today.
In the 1929 crash, the new Federal Reserve System was willing to lend money, insert liquidity , but was outvoted by its internal board, with parochial rural interest & west coast banks unwilling to risk their capital on Wall Street. History proved the folly of that populisim and parochial approach. Modern banking and Federal Reserve action in crashes of the last twenty-five years particularly have proved the soundness of Central Banking intervention.
In this rescue plan, the Treasury will shore up the Federal Reserve member banks with bad debt relief, conserving the Fed's self-financing portfolio. Over the Congressional adjournment, contact your member of Congress and communicate your vote preference for non-partisan objectivity, and pass this speedily needed plan.
Sloughing off badly performing assets which tarnish the excellent selling of US backed securities; and re-establishing a core value of American assets (good debt or othewrise) to stabilzie markets and international asset holds.
By appropriating the $700 Billion, (via an increase in the public borrowing power) Americans get:
Debt .. an addition to the public debt (see previous post for that cost over time and as stated in constant government budget/GDP apportionment).
Stability in banking & consumer assets ... as more Americans depart the Glass-Steagall insured deposits separation for an entrepreneural venture or portfolio risk .. more are at risk.
Market righting .. an overreach is balanced by trim --r emoval of ballast and the trimming of luffing sails -- a good trimming is needed here.
Profit? -- a heathier US economy & banking system; and renewed international investment in American bonds -- an international envy (there are not enough EURO bonds and what do you do with dollars in the safest sense?). The mortgage bundling/bungling of FreddyMac/FannyMae risked that well earned sales value & reputation of the American Mortgage bond market.
Dumping $$$ ? -- that is allayed ..especially in dollar washes and balances - IF the stabilization program occurs -- if not, then excessive dollars are dumped; and bundled securities (such as the Freddy Mac Fannie Mae series of mortgage doubtfuls are dumped, as disclosure and lessened performance will ripen them until adjusted for true value). That includes the US stock markets & realty markets.
The US Treasury would buy back most of the likely to over-ripen bonds before that happens and reissue good debt, good credit & cash especially by firmer US backed Treasury bonds (without ambiguous mortgages). The US will replace Fanny Mae & Freddy Mac stock with solid bonds as appropriate; like a corporate treasurer would in deflating and dewatering.
Reform? Most likely there will be reform, starting with a more permanent equity owner oversight of Freddy-Mac & Fanny-Mae; short-term and emergency exclusion of short-selling in some fashion by greater disclosure regulations; surer future performance (no chance of British style "repos" here & a revisit of the short-term capital gains tax (if only to fund regulation & market fees).
Populism & the little guy / fat cat syndrome? -- This isn't just saving Wall Street & the Hamptons folks ... Bailey Savings & Loan etc is involved; so are your ordinary 401-K retirement plans; and other pension benefits & guarantees which are now insureed the Pension Benefit Guanranty Agency of the US Government; the Federal Deposit Insurance Corporation which brought in the old Saving & Loans Industry's FSLIC. In short, if the Federal governemnt doesn't intervene in advance, it will be commanded to pay plenty for recession & wash-out induced social services forward.
What does cancelling debt do? It draws down assets -- a debt when performing is an asset --not a trick of double book-keeping. Banks cannot afford it; they pay when you and I are late re-paying or paying or absorn a cost -- sometimes borrowing and cost-absorbing to ruin. When relieved of bad debt, they are healthier, and with the envisioned program recount and revive with healthier debt and credit provided by the US government; which is acting as an inbestor.
This is not laissez-faire, it is modern economics ..Keynesian, Samuelson & Friedman ..all the pragmatic modern economics Americans have learned and led with internationally.
Yesterday's political salvo in Congress' House of Representatives, which is now seen as genuinely a partisan rebuttal to partisan faulting, should only have delayed the rescue with a gain in profits a floor and bargain buyers benefit today.
In the 1929 crash, the new Federal Reserve System was willing to lend money, insert liquidity , but was outvoted by its internal board, with parochial rural interest & west coast banks unwilling to risk their capital on Wall Street. History proved the folly of that populisim and parochial approach. Modern banking and Federal Reserve action in crashes of the last twenty-five years particularly have proved the soundness of Central Banking intervention.
In this rescue plan, the Treasury will shore up the Federal Reserve member banks with bad debt relief, conserving the Fed's self-financing portfolio. Over the Congressional adjournment, contact your member of Congress and communicate your vote preference for non-partisan objectivity, and pass this speedily needed plan.
posted by scotty of course at 10:17 AM
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