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The Deal's Getting Done, But Will It Work?

by: David Merkel September 28, 2008    
David Merkel

David Merkel

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One week ago, I posted Oppose The Treasury’s Bailout Plan.  Since then, most criticisms of Henry Paulson’s original proposal supposedly have been incorporated into the new compromise bill, including my criticisms.

But my concern at present is whether the bailout will work at all. I think the complexities of the reverse auctions on small illiquid distressed securitized assets will prove difficult.  Further, the talk that the bailout won’t cost anything is highly unlikely.  Of all of the U.S. government’s bailouts, only the Chrysler bailout made money.  So long as you are in a fiat money system, in a bailout, the job of the government is to prevent contagion and minimize loss, in that order.  Bailouts don’t make money, and that should not be expected.

But hey, if they are going to play for profit, let them play big.  I was joking around when I wrote my article 2300 Smackers, and I am joking a little here as well.  Why not use the $700 billion to capitalize 10 new banks with $70 billion of capital each?  Let them lever up 10:1 — you have $7 trillion of buying power.  Let the public participate alongside the government and the power expands further.  With a profit motive, they will buy and finance what makes sense, and five years from now, the government would sell its stakes, and pay down debt.

The rough part is that they have a non-profit-oriented main shareholder, looking to bail out dodgy institutions.  Also, if the risk is smaller than $7 trillion, these institutions won’t do well.  Also, what of the financials who don’t have government sponsorship?  Couldn’t the government just take super-senior convertible bond stakes in institutions that are under duress?  (Oh, that sounds like one-off bailouts?  Could be a lot cheaper than the current plan…)

And what of the borrowing?  Can this be funded at reasonable yields, and with the dollar at current purchasing power levels?  I have my doubts, though the markets have been benign over the last few days.

Consider the actions of the Federal Reserve in concert with the Treasury.  As I pointed out in Entering the Endgame for Monetary Policy, there is a panic quality to the Fed’s actions.  This concept is endorsed by Brad Setser, Randall Forsyth, and Michael Panzner, among others.  With the short term money markets in disarray, we have Asian Central Banks cutting rates, which aids the West, but increases inflationary risk.

Three notes to close:

  • I don’t know what Monday will bring in entire, but a failure of Fortis seems likely.   Note that the ECB is not on the hook here but the Belgian central bank (which probably feeds into their Treasury).
  • What the FDIC did with WaMu affects other banks like Wachovia.  Bidders will let the holding company fail, and bid for the operating bank subsidiary assets.  Holders of holding company securities get hit, as their likelihood of getting reasonable recoveries disappears.
  • We are putting a lot of faith in the health of Citigroup, Bank of America, and JP Morgan.  If one of them fails, the game is over.  Given their complexity, and the recent takeovers, the odds of there being a significant mistake are high.  Consider further that they are counterparties for more than 50% of all derivative transactions, so the synthetic leverage is high as well.

All “solutions” to the crisis at this point in time are bad solutions.  The time to act was 10-15 years ago, where we could have implemented contra-cyclical policies in bank regulation, as well as enforcing a strict separation between regulated and nonregulated financial intermediaries.  (No ownership, no lending, no derivative agreements.)

I don’t know what this week will bring us.  Last week was bad for me on a relative performance basis.  My inclination is to look at companies that have good global demand, and not much debt.  As for bonds, keep them short, unless you are buying long TIPS.

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This article has 83 comments:

  •  
    Sep 28 07:39 AM
    Even with the usd700bn David does not expect a rally in the stock markets as "I do not know what this week will bring us". Maybe time for some fast trades and then observe.
    Reply
  •  
    Sep 28 08:18 AM
    from the ny times re the current bailout agreement:


    "Among the last sticking points...how to pay for any losses that taxpayers may experience after distressed debt has been purchased and resold...

    In the end, lawmakers and the administration opted to leave the decision to the next president, who must present a proposal to Congress to pay for any losses."

    for me, this is unacceptable
    Reply
  •  
    Sep 28 08:20 AM
    I liken this bailout to attempting to use an umbrella to slow a drag car after it posts a few second quarter mile.
    Reply
  •  
    Sep 28 08:22 AM
    Good article. Although I agree with most of what this writer has had to say in recent weeks, I think that fingering a named bank as 'likely' to fail tomorrow is unhelpful in this environment. Why not pick on one which is, as I write this, actually failing - the UK's Bradford & Bingley. (BTW, any problems with Fortis would involve the Dutch as well as the Belgian governments.)

    As for the stock markets, the folks who've been manipulating them for months are unlikely to let the moment pass without helping along what would probably happen anyway - a relief rally. The herd will doubtless follow. How high and how sustainable is anybody's guess.
    Reply
  •  
    Sep 28 08:31 AM
    I would agree with OldLimey about a few days of relief rally (you can't tell me the market isn't being rigged. I'm an open minded guy but I won't even hear you). Credit and equity markets are still grossly out of tune. Which do you think is wrong?

    I'm guessing that herds of people chasing a rigged market are the ones about to get slaughtered. Especially when on Monday morning we all turn on CNBC and hear those windbags declaring (for the seven billionth time) the bottom.

    I'm also curious to see if this causes the bozos over at the SEC to reconsider their recent short selling ban.
    Reply
  •  
    Sep 28 08:58 AM
    "Why not use the $700 billion to capitalize 10 new banks with $70 billion of capital each? Let them lever up 10:1 — you have $7 trillion of buying power. Let the public participate alongside the government and the power expands further. With a profit motive, they will buy and finance what makes sense, and five years from now, the government would sell its stakes, and pay down debt."

    You want to create 10 banks and employ the people that got us on this mess? Why don't the government buy 700 billion dollars in gold instead. Move the currency to the right direction.
    Reply
  •  
    Sep 28 08:59 AM
    I remember reading Benjamin Graham’s The Intelligent Investors many years ago and he said the stock market indices will grow at the combined rate of inflation and productivity gain. If you look at, say, Dow Jones from 1930 to today, you see it has been growing at an average of about 6.5% a year, about half of it is inflation and the other half is productivity gain in average. The market stayed between 600 and 1,000 over more than 12 years between 1966 and 1982. Then, in the next 16 years between 1982 and 1998, it made up all the losses and shot up ten-fold to 10,000, that was about 13% a year advance and about twice the historical rate. Not only that, it overshot the historical trend (which says about DJI should be about 5,500 in 1998) by a lot. If you believe in the historical trend, it says DJI should be at 10,000 at about this time. This may mean the market is simply still correcting the overshoot of the 1982~1998 era and it may hover where it is between 10,000 and 13,000 for several more years. It may rise again when it goes under the historical trend.
    This all assumes that our elected representatives and government officials behaves rationally (collectively) to rein in the excess in the Wall Street as well as to limit the money supply growth (to moderate future inflation). If they all behave properly, what happened in the last few years would be just a little blip in the long history of the market. If they don’t, we may turn ourselves into a banana republic in a big way.
    If the DJI dips below 10,000 and stays there for sometimes, there will be hardship.
    The bail out as currently structured is simply irresponsible. We do not need a bail out to save, however briefly, the failing companies whose management teams should mostly be blamed for their failure. Investors who had ignored the historic lesson should also blame themselves and should not look to the tax payers to bail them out. We need a “bail out” that channels all the reserve we have to create new jobs (highway, energy, and so on) to avert the hardship. We need a “bail out” that institutes sound regulations in the financial market to let the market behave orderly and responsibly. We need a “bail out” that places safeguards for the vast majority of investing public not to be taken by people offering too-good-to-be true investment schemes.
    Let the mismanaged companies fail. Let us think how we pilot through this troubled financial time with whatever it takes but prudently. It may take more than $700 billion. $700 billion is just a talking number. We don’t have that kind of money. Unfortunately, many of us, including those in the negotiation, think that is the money we have in pocket and will be spent one way or the other.
    Reply
  •  
    Sep 28 09:16 AM
    I really think this is a bad idea..... Companies took subprime risk and failed, You loose, Game out! Good day Sir!.... Whats next ? Can I get a bail out of my home fiances.... With the increase of energy,food,Gas I'm or the verge of going under myself. I'm told to suck it up and cut back, Drive less ,and turn up the thermostat . I think we have some bailing out to do from the family side first before we go giving 700 billion dollars to companies that made wrong investments.
    Reply
  •  
    Sep 28 09:38 AM
    The gist of the original bialout plan remains: spend billions of taxpayer dollars to buy mortgage-backed securities whose value has plummeted as a result of financial gimmicks of capitalist elites.

    Come November, vote the political cronies out of office. I'm sure the elites will find some other work for them to do....
    Reply
  •  
    Sep 28 09:40 AM
    Am I 'misremebering',or did not the WSJ article of a week or two ago describing previous emergency funds/plans state that the one implemented during the Depression to purchase, renegotiate, and hold domestic mortgages closed out in 1951 with a profit?

    The term 'bailout' seems somewhat inaccurate and not constructive.

    If everyone adopts a Cassandra-like, "can't work" point of view we can be sure it will be likely to fail.

    Let's give it a chance, hope it works, and that it provides a stable environment so that people can reorder their investments thoughtfully and not in a panic, and that our 'leaders' have an opportunity to fix things that have been shown not to work.
    Reply
  •  
    Sep 28 10:16 AM
    The bailout is good for you and me. I certainly don't want to be in a Great Depression. And I don't want to have to buy guns.

    beanieville.blogspot.c...
    Reply
  •  
    Sep 28 10:19 AM
    I wonder if David Merkel, whose opinion I respect, would tell me if he sees inflation as less of a threat here than deflation. I get a sense from the article that he does. If it remains the big fear then I hoard cash and keep my debt low, figuring cash will be king soon enough... Commodity prices will fall, and so gold would be something to stay away from, etc.
    But at least until the government makes the hoped-for profit on this deal, isn't it massively inflationary? You are diluting the currency by a huge amount, correct? So my strategy for this would be opposite of what I just said, get out of dollars, probably into gold, etc.
    I thought I knew what the enemy was a couple of months ago: deflation, and I was investing accordingly. Now I'm confused-- we seem to have hugely opposing forces at work here and I really don't know what to plan against-- a slowdown, or hyperinflation??
    Reply
  •  
    Sep 28 10:19 AM
    The bailout is sort of like using gasoline to put out a fire, The problem is currency inflation which has been going on for most of my lifetime (I'm 84). Everybody - that is business people, working people and politicians - likes to goose the economy. It just feels better when your income is going up. Too much money, too much debt, too much dishonest activity. There is enough blame for all of us. I think the right way out is to let the whole house of cards fall down. Maybe the next generation will re-build on a more solid foundation.
    Reply
  •  
    Sep 28 10:53 AM
    The Paulson plan - even with amendments - is still based on clinging to the very same "Trickle Down" ideology that the plan PROVES is bankrupt. Wealth did not trickle down, debt trickled down. And to cure this, the plan asks taxpayers to Trickle Up with their tax dollars -- not to pay their own coerced debt, but to bail out exploitative, weathy institutions and investors at the top. I agree with Unfaire and others, any investment of public tax dollars needs to begin at the bottom. Future interventions at the top are already provided for - did anybody notice that the failure of WaMu was handled perfectly: depositors are safe, investors lost.
    Reply
  •  
    Sep 28 12:00 PM
    You say that the Govt has only ever made money from Chrysler. I keep reading everwhere that they made money from the Savings & Loan crisis in the late 80's. What is correct? If they did make money from S&L how much did they make?
    Reply
  •  
    Sep 28 12:32 PM
    Drumsfeld:

    As I recall, taxpayers picked up around $126 B of the $160 B in losses. Of course, the balance was lost by depositors.

    As the rich will get richer in this current bailout scheme, the rich picked up great properties for pennies on the dollar through the Resolution Trust Corporation's giveaways. It's the same old story; the little guys get bent over while the bigs guys laugh all the way to the bank.

    Unfortunately, this bailout will only give these thieves a temporary respite. The next shoe to drop--commercial real estate loans, credit default swaps, derivitives?
    Reply
  •  
    Sep 28 01:02 PM
    This is unfortunate, but it should serve as a wake up call to all American investors. If you want to protect your money, you need to diversify and invest at least some of it overseas. These are hard times for American investing firms. I personally use offshore bank accounts and they have helped me with diversification and asset protection. If you want to read more on why offshore investing is smarter, feel free to visit my website.

    Best,
    Frank Miller
    Reply
  •  
    Sep 28 01:02 PM
    so ... the banks are insolvent and the government is stepping up to shower these banks with free money. Unfortunately, asset prices are still too high, and as banks are forced to deleverage, more bad loans will surface. After $700B it is unlikely that there will be another $700B of free money to shower these banks with. The $700B bail-out is basically a time-out to give Bush the exit without economy collapsing on him. However, if there is justice, economy WILL collapse before Bush leaves the white house; it is utterly fitting to have Bush presidency that began with the collapse of world trade center, end with collapse of American economy. The last 8 years, no matter what, is a reflection on the character of Bush administration which includes Bernanke Fed.
    Reply
  •  
    Sep 28 01:06 PM
    P.S. DRumsfeld:

    John McCain was involved in trying to steer the bank regulators to ease up on Charles Keating's Lincoln Savings which bellied up. His friend, Keating, let McCain use his private jet and vacation home in the Bahamas numerous times, gave him $112,000 and let McCain's family participate in a shopping center deal. All this from a guy who claimed during the debate that he has been fighting special interests and corruption for the past 26 years. What a jerk!
    Reply
  •  
    Sep 28 01:24 PM
    I am going to be critical here, not just to David but to a lot of media and bloggers out there too. Everyone is entitled to their opinion, and that's what makes our country great.

    However, when I read statement like this below, I really question these people's judgments:

    >>>All “solutions” to the crisis at this point in time are bad solutions. The time to act was 10-15 years ago, where we could have implemented contra-cyclical policies in bank regulation, as well as enforcing a strict separation between regulated and nonregulated financial intermediaries. (No ownership, no lending, no derivative agreements.)<<&l...

    In hindsight, everything is 20-20. If I had known what I know now 10-15 years ago, I would have bought as much AAPL, RIMM, GOOG, POT as I could on margin! There will be time when we need to look back and reflect upon what had gone wrong and try not to make the same mistakes again. And that's exactly what Ben Bernake is trying to do by making sure that we don't make the same policy mistakes that we did back in the 1930's.

    Folks, we have a 5-alarm fire going on right now in our financial system. Let's try to put the fire out first before we start blaming the builder for not putting in a sprinkler system 10-15 years ago.
    Reply
  •  
    Sep 28 01:35 PM
    "Let them lever up 10:1..."

    Yes. Do more of EXACTLY WHAT CAUSED THE PROBLEM IN THE FIRST PLACE. Great idea there. Should we also put a couple hundred million into capitalising some new real estate agencies who will be responsible for reminding people that real estate only goes up? How about a few billion to take the place of all the builders who've gone belly-up? Right now, houses aren't getting built and it's up to the government to remedy this drag on the economy.

    Nice work taking a dumb idea and making it dumber. For my part, I will continue to oppose the plan by voting with my wallet (the only vote that matters). Short Treasuries, own gold. As David Fry points out, this is how traders give Hankie the Jersey salute.
    Reply
  •  
    Sep 28 01:53 PM
    For several days I've been discussing this with some of my old buddies - I attended UCLA and Stanford - what going down makes no sense and "the plan" makes no sense and is doomed to fail. We did not attend undergraduate and graduate programs at some fly by night school...

    We plugged some figures in from at least what is *known* from the government - - what we found, is that since these debts were used as investment instruments the problem has been magnified or "multiplied" throughout the world's economy over at least the past decade in much the same way you calculate the "multiplier effect" on cash infusions. Big problem, of course, is that the investments and paper were phantoms. It is not a $700 billion or a $1trillion problem -- it may be in the $1trillion x 10's. The money being thrown at this, given amount in the worldwide credit pool, is a grain of sand at the beach.

    If this will not work, then why are they doing it? That is the $700 billion question. Some ideas range from the following:

    1. This will buy time until there is an election and perhaps an inauguration of a new president to provide a transfer of power to provide initial stability for what will be America's darkest days.

    2. The United States is facing extortion by an element that may destabilize our country in some way if we don't pay-up.

    There are too many strange things going on in our country. The price of gasoline is going *down*, while shortage in some states become more severe. They blame it on Ike, but after the storm passed news reports, too many to cite, said that there was no damage and later reports that gasoline production was "on-line" days after Ike passed.

    We see snippets of things in the press like this from the AP:

    "There must be no rush to misjudgment regarding this critical threat to America's economic future for generations to come," said Rep. Thaddeus McCotter, R-Mich. "All Americans want responsible progress toward a positive, pro-taxpayer solution."

    Yet the AP REMOVED this quote from their web-published story within MINUTES of publication. What this guy is saying -- we are facing a THREAT that may impact generations -- so we must assume at least 80 years into the future. A major recession -- even the Great Depression did not last one generation....

    I have a few questions for the board here:

    1. What is REALLY going on?

    2. What is/are the THREAT(S)?

    3. What are the consequences of failure?

    4. What will "success" look like?

    Something doesn't pass the economics 101 smell test...
    Reply
  •  
    Sep 28 02:11 PM
    David Merkel, thanks for another well reasoned article. You get more valuable comments than most others do on SA.

    Curbs-In, your questions get at the issue of what the objectives of the recent government and Fed actions are and what the "bail-out" wants to accomplish. The factor repeated again and again by our "leaders" is action is needed to return confidence to the system. That begs the question: are we simply dealing with a confidence game?

    Unfaire, I find your discussion very interesting in light of a recent SA article I published: seekingalpha.com/artic...
    You discussion of fundamentals lines up very well with the cyclic analysis of my article.



    Reply
  •  
    Sep 28 02:18 PM
    David, I am confused by your statement "We are putting a lot of faith in the health of Citigroup, Bank of America, and JP Morgan. If one of them fails, the game is over. " Why is that so? When the FDIC closed down WaMu the loss was entirely to WaMu's stockholders and bondholders. As far as I know JPMorgan took over all of WaMu's derivative contracts as well as it's other assets. They didn't pay much, but WaMu's assets collectively were still worth Billions (after the write-down's). Are you saying that if the FDIC went in and closed down Citigroup, Bank of America, or JP Morgan their balance sheets would turn out to be in WORSE SHAPE THAN WASHINGTON MUTUAL'S!? That is pretty hard to believe.
    Reply
  •  
    Sep 28 02:36 PM
    jlounsbury59, Thanks for your comments. Well, nobody seems to have confidence... The Chinese, just yesterday, called this an American "fast food" style fix. The American public's confidence is nil. I've spoken with several of my European colleagues and they are angry with their respective governments for getting involved ("taken-in") by the American financial system.

    dlr, as jlounsbury59 used the phrase "confidence game," if you think about it, another phrase comes to mind when we look at the banks -- "shell game"... As David says, when one goes down, "game over" -- I don't even know if you'll need one of them to go down to have game over. If they are noting but "props" on a stage, they can be around forever in a reduced role. After all, it is a confidence game... Appearances and reality will be different from this point forward...
    Reply
  •  
    Sep 28 02:49 PM
    Mark your calendars and make sure you laminate a copy of today's newspaper ladies and gentleman.

    Some of you may have the front pages of when a man stepped on the moon, or when JFK was shot, or the coverage of 9/11... but today is the day the dream called the United States of America died.

    The history section of the library is filled with empires that dominated the world in their day -- and they are all gone. We all knew America's reign wasn't going to last forever -- but few of us realized just how quickly it would end or that we would die by our own sword.

    The generation that talked about flower power and peace and put Woodstock on the map has proven to be the most greedy and selfish generation ever to have lived -- and they haven't even started hitting us with the bill for their "entitlement"... programs yet.

    The sissies running the country now are unable to take even the slightest little bit of pain. Everything requires a pain killer, a trip to the nail salon, and of course massive government "relief". Great Depression? Who do you debt addicts think you are kidding?

    In your selfish rotten effort to avoid even slight discomfort, the flower children (who are now CEOs, Congressman, etc) are saddling their children with more debt than the world has ever known -- and the only way to pay for it is to be a mortgage banker or lawyer, since we no longer teach math or science or engineering and no American wants to be a "nerd" anyway. Heck, Americans refuse to even get their hands dirty.

    George Washington and friends launched a full scale revolution over tax rates that are a fraction of what we already pay.

    Lewis and Clark managed to explore the west without a government subsidy, and they didn't file a lawsuit every time they twisted an ankle.

    Heck, even John D Rockefeller hauled barrels of oil by hand when he was a young man. How many CEOs today have ever done an honest day's labor? They went from private prep school to university to grad school to the executive suite -- a life of privilege the whole way.

    I am ashamed at what America has become. This is no longer the America that was able to tame the west, defeat the Nazis and put a man on the moon. Today's America would go deep into debt to pay an illegal alien do it for them.
    Reply
  •  
    Sep 28 02:49 PM
    If the idea of ten banks with 70B and leverage authority of 10 to 1 is a tongue in cheek it is creative and simple. Simple to operate and manage. To simple for this administration and congress.
    Reply
  •  
    Sep 28 02:50 PM
    wethereyet? Emm... That was during the 1920's when the dollar had backing - gold standard. I think what you we'll see in the future is a revisit of the Weimar Republic. Sadly...

    There was an article on Seeking Alpha a few days ago about this... That we can't take "the truth" about what is really going on... The tip toes of the Washington DC bureaucrats on this issue gives me, my family and everyone I know pause...
    Reply
  •  
    Sep 28 03:05 PM
    Market intervention is merely extending the the sick market. It doesn't cure it and just makes it more excruciating grind to the bottom.

    We ought to let market do it's thing even with threats of depression from Paulson/Bernake/Bush the very people who contributed to this crisis.

    So let the bottom fall out for quick across the board climatic selling and let the market determine the value of bonds and stocks.
    Reply
  •  
    Sep 28 03:14 PM
    Peter Lynch wrote:
    Folks, we have a 5-alarm fire going on right now in our financial system. Let's try to put the fire out first before we start blaming the builder for not putting in a sprinkler system 10-15 years ago.

    Peter - as much as I respect you, you missing one very important point. This is turning point, end of very important cycle. The public is fed up with constant bailouts. NO MORE BAILOUTS. It is going to hurt a lot, but we need this fire, and these these 'risk blind' morons to burn and collapse.
    That's what the Taxpayer is saying. Let it burn, and let it collapse - as a great episode to be remembered, and taught in business schools for generations.

    Peter - there are banks in USA, that were well managed. Take for example the US Bancorp. These banks will need to survive. The idea of creating new banks, or capitalizing well managed regional banks, is a great one.

    The only people in this land, that want the bailout, are the Wall Street investment banks that screwed up, and the crack addicts (addicted to leveraged capital), like Bill Gross or Warren Buffet (he is up here in derivatives).

    The era ended. Let it burn. Let it hurt. It is time to figure it out. You are one of the greatest investors in this country, but you are missing the important point here.
    Reply
  •  
    Sep 28 03:15 PM
    What about outsourcing? How are people going to cope with job losses when we continue to outsource jobs? No Job, no house. Simple as that. Instead, of fixing that we are putting band aids to fix "other" root causes. This bailout is a scam!
    Reply
  •  
    Sep 28 03:16 PM
    After reading about this for several days now, I'm convinced nobody really knows what the situation is. The P&B team supposedly told a special few the real story in secrecy because it was so scary, they didn't want us commoners to panic. Think about it. They are saying even banks with little or even no exposure to this "toxic waste" are no lending. That hurts may head trying to understand. So if we help out the bad banks, the good banks will feel like lending again? If the problem is really as big as they are inferring, $700B will be like a mosquito hitting the windshield of a fast moving train. AND, the latest scare tactic is that if we don't spend the $700B now, 1 million to 5 million people could loose their jobs. Do the math - - @$700B, you could write a check for $700,000 to $120,000 to each unemployed person. I'd rather give them generous unemployment benefits than perpetuate this debacle any longer and let the greedy to continue to reap the benefits. Is there a chance that we are in a crowded theater and somebody yelled fire and ever body is panicking, running for the exits and all it was, was somebody opened their cell phone with one of those flickering candles on the screen? Does anybody have any real data, as in proof that this is for real?
    Reply
  •  
    Sep 28 03:18 PM
    Peter Lynch, unfortunately due to bad judgment by the private and public sectors, there is no water in the hose. The fire will burn until it burns itself out -- and to wherever that leads...

    The future? Oil, if it hasn't already peaked will do so shortly. What will we use for energy without money to develop alternative resources? If the economy "rebounds" oil will be driven up and up, killing off any rally. This is not the crisis of the 1920's/30's or the 1970's, 1980's or 2003. This is a different animal and it is very difficult to see the future or a way out that is positive or painless.
    Reply
  •  
    Sep 28 03:34 PM
    I have a very uneasy feeling about this whole situation. I'm not much for conspiracy theories, but the facts are:

    1. Goldman Sachs made a ton of money shorting the mortgages (and most likely the financials owning them) last year;

    2. Now, shorting of financials is prohibited;

    3. Goldman Sachs recently converted itself into a bank holding company which entitles it to access the bailout money;

    4. Paulsen wants (or wanted) a blank check for $700,000,000,000.

    5. Paulsen is the former CEO of Goldman Sachs with no doubt a continued close relationship with Goldman Sachs management. (and who knows if not a financial one at least indirectly).

    That smells a little fishy to me. A prudent person doesn't usually let the fox guard the chicken coop.
    Reply
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    Sep 28 03:42 PM
    I find interesting that some people think that the outcome of the depression would had been avoided if they had done things differently. How do they know? I can also speculate with the same level of certainty that the depression would had been a lot worst had they done something else. In other words it is impossible to know. To me after this bail out comes the drop of the dollar as more and more countries become more and more sure that the US will either print to pay or won't pay at all. Once the dollar drops governments will start raising trade barriers to US products to protect their own constituencies. In a nut shell, the dies is cast and the depression is unavoidable.
    Reply