Monday, March 17, 2008

Does A Bear Shit in the Economy?

The bailout has begun:

Q: Why would the Fed [guarantee $30 billion worth of Bear Stearns' nearly worthless assets]?

A: Experts say the risks of inaction were far greater. With investors backing away from anything linked to the U.S. mortgage market, the Fed aims to prevent the value of those investments from plunging even further, which could cause widespread fallout among big banks. "The problem is that unless the major financial (companies) are kept solvent, the economy will suffer (so much) that everybody's livelihood will be affected," said Peter Walliston, a senior fellow at the American Enterprise Institute.

Q. Does this mean my tax dollars are being used to bail out Wall Street?

A. Not exactly. The Fed has vast resources on its own, thanks to its ability to sell Treasury securities that investors consider extremely safe. Still, some fear the mortgage crisis that engulfed Bear Stearns will soon spread to other companies and ultimately test the Fed's resources, especially after the central bank last week said it would lend up to $200 billion in exchange for mortgage investments.

Q. Might taxpayers ultimately be on the hook?

A. Potentially. The Federal Reserve's actions could augur much broader government action to stabilize the mortgage market. Calls are growing in Congress for government-funded efforts to help borrowers refinance out of troubled loans.

You know, there's a much shorter answer to all these questions: Because they can. What the fuck are you gonna do about it, bunky -- turn off Dancing with People Who Used to be Sorta Well-Known and register your disapproval somehow? Not bloody likely.

I don't know if it's a more standardized reference in financial circles, but I like the "shadow financial system" descriptive Roubini employs:

All these institutions look similar to banks because they are highly leveraged and borrow short and in liquid ways and invest or lend long and in illiquid ways. This shadow financial system is, like banks, subject not only to credit and market risk but also to rollover or liquidity risk, i.e. the risk deriving from having a large stock of short term liabilities (relative to liquid assets) that may not roll over if creditors decide to withdraw their credits to these institutions.

Unlike banks this shadow financial system does not have access to the lender of last resort support of the central bank as these are not depository institutions regulated by the central banks. What we are now observing – with the case of Bear Stearns and the recent disaster among SIVs, conduits, run on a number of hedge funds and money market funds is a generalized liquidity run on this shadow financial system.

Although "casino running on borrowed money" is also pretty accurate.

Finally, First Draft has an excellent takedown of the billionaire welfare queens.

Let me ask those questions, those questions we ask of every beneficiary of the smallest drop of government assistance. Let me ask why this is the ONLY scenario in which our parsimonious bullshit about personal responsibility, about choices and consequences, about "survival of the fittest" and other forms of sicko math, need not fucking apply.

Let me ask just how the unholy fuck it is that we can quibble every single day for hours over lunches that would feed a small village for a week about the ten dollars a year we give to some social program and how it's going to waste because somebody fed us an anecdote about somebody somewhere faking their need. Let me ask just how the bloody fucking blue hell we can get all worked up over how the homeless people downtown don't deserve our pennies because one of them said something rude to us on the way out of a store, and how they're just gonna spend our 65 cents on booze and then pee on the stoop. Let me ask how on earth we can take all the time it takes to think up all the ways we think up to sit in judgement on every individual case we hear about, about how that person just didn't work harder, didn't suffer enough, didn't earn "our" money, didn't deserve "our" charity, didn't bleed in front of us enough, and all the while, all the fucking while, we give it away by the millions and never ask where it goes. All the while.

And the minute the majority of rubes out there finally disabuse themselves of this notion that each of them will somehow get a cut of all this phantom finance and percentage-point diddling, maybe then we can cut these grifters loose once and for all. Not that waiting until we were $2 trillion deep into two endless wars wasn't bad enough. Maybe it does take going under to encourage fools to finally learn to swim, and let the weasels drown.

1 comment:

woodguy said...

Amen. I learned how to swim a long time ago, by necessity, lest I drown, so I have no fear. Time's come for those who've owned the beach front all these years to test the waters, as well.

Let the assholes keep plugging the dike until they run out of fingers; all the rest of us have been treading water for years.

Bring on the flood, baby, and we'll see who wins the battle for the last bit of flotsam remaining.