With this proposal, Paulson has abandoned hope of holding financial-sector players responsible for their mortgage disaster and is instead intent on distributing those losses to taxpayers. The problem is, it's not clear what the government is buying or what the ultimate price tag will be. -JRacioppi, NJVoices
Right on target, Joe!
And not only that ... we have yet to find out what is hidden in the $62 Trillion credit default swaps (amount per Bloomberg news today) ... up from $900 Billion in 2001 (can you BELIEVE it?!)
Repeating myself, you have hit the nail on the head ... this is a scheme for taxpayers to bail out the global financial sector players who got us into this mess ... and I would add: apparently before the $62 Trillion credit default swaps debacle hits the skids ...
Listening to Paulson and Bernanke this morning ... I could feel a chill creep over me. These two are dissembling (the kindest thing I can say) ... and to me it seems obvious.
I sent the following email to the Senator Dodd's Senate Banking (...) Committee:
Two things:
1. It seems to me that Secretary Paulson and Chairman Bernanke are using people's fears over their retirement funds and mortgages to hide the problems in the $62 Trillion credit default swap industry (amount per Bloomberg news today).
2. I couldn't believe my ears when I heard Chairman Bernanke say we couldn't limit executive pay because they then might not participate in the bailout, letting their companies fail instead.
These two are the problem ... looking to them for a solution is leting the fox guard the hen house.
Let me see if I understand these credit default swaps (CDS) ...
They are a form of insurance ... highly profitable to the issuers up to now ... depending how the rate of default ... which was calculated as relatively manageable ... up to now ... when the sub-prime mortgages went in the tank ... meaning that sub-prime default's could bring down the whole $62 Trillion CDS thing ...
See ... the brilliant global financial sector mathematicians calculated the default risk as manageable with big payouts to the "insurance" salespersons ... so they took their fees upfront ...
oops!
So ... the REAL problem seems to be that if the mortgages go south ... they exceed the CDS inndustry rate of default and the $62 Trillion CDS industry goes south right behind it ... now THAT is going to be exciting!
Will the $700 Billion stem the southward flow? I don't think anyone knows for sure.
Anyhow that's how I would look at it ...
What's more ...
It seems obvious that the reason that Secretary Paulson and Chairman Bernanke want unrestricted flexibility in the use of the $700 Billion is that they do not KNOW where the money needs to go to stave off the collapse of the $62 Trillion CDS industry ...
Now THAT would explain their urgency and fear ...
The problem then becomes of their not being up front with us or Congress ... apparently because "they know what is best for us" and "we can't handle the truth."
And without transparency we don't know if this will work.
So what they are really telling us -- in my opinion -- is that if the plan is not approved, the $62 Trilllion CDS industry will in all likelihood fail ... and if it is approved, we don't know whether it will fail or not.
And Paulson and Bernanke want us to trust them?!
OK, that being said ... let's take another look at the credit default swaps (CDS) ... because from my pov, unless we get a handle on the risk involved in these things we don't know whether the the $700 Billion bailout will work or not ...
See, apparently CDS's were sold as insurance without the "experience" analyses of rates of disability, morbidity, mortality, fertility and other contingencies as in the forms of insurance with which we are more familiar. The actuaries (specialized mathematicians) used SOMETHING to calculate the rates for selling CDS's. The Senate banking committee looking into this mess should be asking for the THAT information ... to determine just how big a scam has been perped by the global financial sector gurus.
I would suggest that they based the rates on a guess with an eye toward how much they could generate in fees and bonuses, and NOT on anything real ... and if that can be proved, isn't it fraud? or shouldn't it be?
I mean, if you paid life insurance to an insurance company only to find out the company was going bankrupt because it had not set aside enough to pay off your policy ... but had paid its salespersons and executives high salaries, fees, and bonuses ... and then asked your heirs to take out a loan to pay off your policy?
And somebody actually thought this was a good idea? ANY kind of idea except bad?!
2 comments:
People in high places better shot down this bailout pronto. Mass demonstrations will be the only way however. Neither Democrat nor GOP-Republicans will stop the bailout without a hard push by *We the People*. Sure, a few politicians will speak out against the bailout but the majority will be strongly for the bailout. They will use fear against us just as they did for Iraq. The corporate media will be in full support of the bailout by week's end. In the end the corporations win and the bailout goes through.
Something has gone awry with capitalism. How odd that the working class are asked to bailout the rich.
I'm worried as to what will happen next. It feels like 9.12.01. I'm in the dark again and the government is playing the fear card.
I'm an all hat no cattle kinda guy and need guidance. Any ideas Gus?
The problem, dion, as I see it that in market capitalism if you are not bringing goods and services with real value to "exchange" in the market, you are not a "real" player.
When our global financial sector gurus decided to get rich quick on instruments of debt by selling off our productive capacity ... well ... as they say ... the rest is history.
Folks in the urban areas had better be damned worried. Folks in the rural heartland can survive by themselves. I'd tell you my backup plan ... but then it might get too crowded to be a backup plan ... ;-)
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