As I sit here listening to Dick Dale and the Del Tones play “Banzai Washout” (I love XM) while drinking my second cup of coffee, I wonder about quite a number of things going on today. Elections in Angola and Pakistan, both significant in their own ways to American interests. McCain and Palin and Obama Oh My! Jobs losses mounting. Fannie Mae and Freddie mac are about to be taken over by The Government. Ummm…There was a football game yesterday, or so I heard …. Hmm…. Dunno that I can cover it all In one blog-post….Hmmm… Let’s Cover the Insane Incompetence of One Henry Paulson first.
A few Months ago, Mister Paulson urged Congress to put together a package that would act as a bailout of sorts for The two Mortgage Giants. He thought it would provide confidence to the housing market. But it didn’t work quite that way now did it? Between the two firms this year, there’s been a total of almost $15,000,000,000 in losses. This quote from a story on Bloomberg:
….Mudd and Syron must approve of any government intervention under the law, unless the FHFA declares that either firm has insufficient capital. The legislation gave the Treasury the power through the end of next year to extend unlimited credit to or make equity purchases in the firms.
The FHFA was scheduled to release its own assessment of the companies’ capital levels as early as this week as part of a quarterly appraisal of their finances.
Analysts have speculated that the Treasury would wipe out common shareholders, while seeking to shield preferred stock-owners from total loss. Fannie and Freddie preferred shares are typically owned by banks and insurance companies. Their $5.2 trillion of debt outstanding is held by investors including Asian central banks, and would probably be guaranteed, analysts said.
Now I don’t know how many common shareholders there are, but I hope those that are common shareholders in either of these have other money put away elsewhere. I don’t know how much this is going to cost the American taxpayers, but with several TRILLION dollars in Mortgages owned by these two, I fear for the Short term Health of the economy MUCH more now than I did a few days ago, and I have not been of the opinion that the economy has been all that healthy to begin with.
Oh yeah, these two companies, which will be in a “Conservator-ship”, which is kind of like being made wards of the state, for lack of a better term, have to sell bonds to help pay off their debt. That won’t change. But it does raise one question. How do you expect people to want to invest in bonds from these two when you throw common shareholders under the bus? I don’t know about you, But I would not buy. I don’t have that kind of money to throw away in a company that is in no position to protect its investors, and would do a great many things with said money if I did. I would like to see these investors protected, but then again, If these two organizations were in a position to do so, there would be no talk of wiping out common shareholders, and we wouldn’t be in this mess, now would we?
In Other News, the net job loss here in the U.S. in August was 84,000. There has been a total of over 600,000 jobs lost since January, and Unemployment has hit it’s highest rate in 5 years. The one piece of good news that I have seen is that no one is predicting Unemployment will hit 7%, at least not as far as the story i read on CNN Money i read. But then again I am not all that certain that all that many people were thinking that Unemployment would hit 6% this year when the year started.
I don’t know about you people, but I think we might need a 21st century “New Deal” before all is said and done. I hope the market and economy can get along without that level of government intervening, but with The Government buyout, of Fannie mae and freddie mac, and the job market just plain falling apart, with the mortgage mess, and credit crunch, and the whole mess, we need something. I don’t know exactly what. I don’t have the prerequisite knowledge or degree in advanced economics to give a detailed answer to the question. I just know things are a hairy fucking mess and we need help.
With the amount of time this and energy and space this has taken, I don’t think I’ll be taking Gov. Palin to task for her inability to face the press. Maybe I’ll hit that in the video. Ya Know, I will!
A little love from Countdown W/Rachel Maddow:
The Blog Started with Dick dale, and ends with Metallica “…And Justice for all” live on XM. XLNT.
That’s it for me. Later!
Today’s Nuggets, courtesy of Newspeak: The colonies would have gladly born a little tax on tea, & other matters, had it not been that the Bank of England took away from the colonies their money, which created unemployment and dissatisfaction. Benjamin Franklin
Inflation is the one form of taxation that can be imposed without legislation. Milton Friedman
America is at that awkward stage. It’s too late to work within the system, but too early to shoot the bastards. Claire Wolfe