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Generational Dynamics Web Log for 19-Nov-2008
Bailout fever seems to be petering out as Paulson reiterates his claims of victory

Web Log - November, 2008

Bailout fever seems to be petering out as Paulson reiterates his claims of victory

With no immediate crises going on, politicians just settle for rhetoric.

What's interesting about what happened in Congress on Tuesday is that almost nothing happened.

Treasury Secretary Hank Paulson lauded his achievements, but lawmakers bickered with him over the question of why he hasn't used the $700 billion bailout fund to end foreclosures.

Recall that the original proposal for the Troubled Asset Recovery Program (TARP), the official name for the bailout, was to purchase near-worthless mortgage-backed securities from financial institutions. Then last week, Paulson reversed direction, saying that he would use the money to bail out banks directly.

Committee members who angry about not ending foreclosures had apparently thought that purchasing worthless mortgage-backed securities would mean the end of the foreclosure problem.

Anyway they argued about that for an hour or two.

They also argued about whether some of the $700 billion TARP money should be used to bail out auto manufacturing firms.

In the afternoon, CEOs of GM, Chrysler and Ford came to Congress to beg and plead for a bailout. The car people were almost in tears, but the heartless lawmakers (both Republicans and some Democrats) were looking for some sort of guarantee that the bailout money wouldn't just go down the drain.

So they argued about that for an hour or two.

In fact, Paulson has spent $250 billion of TARP money, and plans to leave the remaining $350 billion unspent, to be used by the incoming Obama administration.

In the play "Finian's Rainbow," the pot of gold at the end of the rainbow finally turns into a pot of worthless dross. One gets the feeling that the same thing has happened to the $700 billion bailout pot.

Meanwhile, Gen-X President-elect Barack Obama gave a talk on Tuesday to a bunch of environmentalists. He promised to spend lots of money to reduce emissions to combat global warming.

He promised to implement the "cap and trade" scheme that's been a total, absolutely failure in Europe.

As I wrote last year in "UN Climate Change conference appears to be ending in farce," I explained that the "cap and trade" plan is scam. The idea is to create a new class of near-worthless securities, backed by "carbon credits," in the same way that near-worthless securities were created from subprime mortgages.

The only good thing I can say about this buffoonery is that there isn't a snowflake's chance in hell that anything will ever come of sham; even a Democratic Congress will find it almost impossible to endorse this scam in the midst of an ever-worsening financial crisis.

Meanwhile, the stock market has been continuing its general downward trend that began in October 2007. It's now down 41% from its peak on October 7, 2009.

On any day when the market goes higher, you hear shrieks of "Hooray! We've reached a bottom."

Last week on Thursday, the market spiked up 6.7%, and Art Cashin, the UBS floor manager at the stock exchange and devoted believer in the "capitulation" theory, announced on Friday morning that capitulation had arrived, and the market was going up again. Unfortunately, it fell sharply on Friday and Monday, so he's had to back off. Tsk, tsk. Well, it rose 1.8% on Tuesday, so let's see what he says on Wednesday morning.

I used to write a web log entry on the economy and the stock market almost every day, but there hasn't been much new lately. It's just the same old bickering and arguing, one idiotic remark by analysts and journalists and politicians after another, the long faces when the market is down, the euphoric cries of "we've reached bottom" on days when it goes up.

We haven't had a major financial crisis for a few weeks now, so it shouldn't be too long now.

(Comments: For reader comments, as well as more frequent updates on this subject, see the Financial Topics thread of the Generational Dynamics forum. Read the entire thread for discussions on how to protect your money.) (19-Nov-2008) Permanent Link
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Generational Dynamics Web Log for 19-Nov-2008 Bailout fever seems to be petering out as Paulson reiterates his claims of victory

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Generational Dynamics Web Log for 19-Nov-2008
Bailout fever seems to be petering out as Paulson reiterates his claims of victory