Wednesday, February 11, 2009

Killing an Insect with a Nuke and Missing

I cannot figure out who is giving financial advice to the Congress. Everyone knows, or at least they say they do, that the current United States financial crisis began with the issuing of sub-prime mortgages. I have written about that previously. Once those mortgages were bundled into securities by the securities fraud folks at Fannie Mae and Freddie Mac and sold to investment banks world-wide, the trap was sprung. Now, there is a lot of talk about how the credit market froze. They talk about it like it is unrelated. Why did that happen? It happened because all of those securities based on mortgages are bundled groups of mortgages. Some may be full value and some may be worth squat. Therein is the problem. Banks holding billions of dollars in purchases of those securities don’t know what they are worth. Worse yet, there currently seems to be no way to determine how much they are worth. Therefore, the banks don’t know whether they have money or not. Just like anyone else, they don’t lend money if they don’t know if they have any. And they certainly won’t lend to another bank holding a lot of those same securities. So, once again, we are back to mortgages and securities fraud.

In order to “stimulate” the economy, the Democratic congress has come up with a bill to spend almost $800 billion dollars on a lot of projects. No where in that bill is the mortgage crisis addressed. Thus, the title of this writing. They are trying to use an incredibly large program (nuclear weapon) to kill a pest (mortgage securities) which they should have just stepped on with their shoe (address the mortgage problem). Worst yet, they missed. If they took care of the uncertainty in the mortgage securities, banks would know how much money they have and the economy would begin to function normally again. Surely, it would take some time to recover but the base cause would be addressed. Making the next few generations bear the brunt of this by spending money we don’t have on things that should at least be discussed, not jammed through, is immoral. You don’t spend $800 billion dollars in slush funds without at least having some hearings on the content of the bill. This is Congress doing their best Bernie Madoff impression.

No comments: