Thursday, April 9, 2009

Who's Neck Is the Fed and the Treasury Saving?

Here's a question that seems worth asking. Just who is it that now owns all the so-called "toxic assets." The toxic assets are bonds sold to finance pools of subprime mortgages, bonds sold to finance pools of leveraged buy outs of publicly traded companies, bonds sold to finance pools of commercial real estate ventures. These bonds are "toxic" because no one wants to buy them from whoever it is that now owns them.

Waaaaaah, Waaaaaaah. Move on, cry babies. Take your losses and leave the rest of us out of it. Just because you aren't as wealthy as you thought you were really isn't a public problem---until the politicians decided to make it one.

Do you own any toxic assets? Neither do I. Who does? Whoever it is, it is their necks the Fed and the Treasury is working overtime to keep whole. Why? Don't you think that's a reasonable question? In fact, the losses due to these toxic assets have already occurred. The Fed and the Treasury cannot remove the losses. But they can redistribute the losses to you and me.

If you or I buy a financial security and its market value goes down, you or I will be the loser. That's happened more than once to me personally. How about you? Why is it that the owners of these wretched bonds called "toxic assets" are now not supposed to lose their money?

I really don't want to hear about "too big to fail" or "it would cause instability in financial markets." Those are bogus answers designed to get you and me to divert our attention elsewhere. No business is too big to fail. We already have instability in financial markets.

AIG needed to go bankrupt; it still does. Just who's neck is being saved? GM needs to go bankrupt. Chrysler needs to go bankrupt. Any financial institution that has owners' equity (called bank capital by bankers) below the legally required level needs to go bankrupt.

We have bankruptcy law and the FDIC (responsible for monitoring failing banks and getting them out of the system through asset repurchase) for a reason. Why aren't we using them? We all need to ask our local politicians these simple questions.

The sooner these bad performers are gone, with the present owners lose their investments, the sooner the economy will be on its way to recovery. Don't you wish your neck was valued as highly as whoevers' necks it is that the Fed and the Treasury are protecting with your tax dollars?

Just a question.


Ethan Lavallee said...

GM needs to go bankrupt so that they can kill the $50 an hour jobs. CEO's could stand to have their salaries renegotiated too. (some making millions to make the same bad decisions over and over again). I blame the last administration for even considering bailing these companies out. If it was my landscaping business about to fail, you know damn well they would have laughed. Just goes to show you that the govt. greases the big money wheels and the poor get stuck with the bill.

Fiddlinmike said...

Amen Ethan, with a couple extra thoughts....

CEO pay has gotten out of control because of ignorant and indifferent company ownership (boards and investors) who could stop it, and improve their profitability in the process. Many times the mega-incomes are the result of bonuses tied to the price of a company's stock, which has become virtually a random number with no connection to management performance. They might as well tie pay to who wins the Super Bowl next year.

Finally, as for who is "stuck with the bill", assuming you're talking about paying for the new debt through taxes, it's certainly not the poor. Far from it. 5% of all taxpayers pay over 50% of the taxes - and they're the ones targeted for tax increases.

Actually, the way the "poor" get screwed is in having to pay more for their cars - thanks to our government's plan to perpetuate GM's incompetence. They also get screwed when the 5% who have money are forced to hand it over to US debtors, rather than investing it somewhere that might employ a "poor" person.