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Tuesday, February 10, 2009


Bank Bailout, Stimulus and the Market

So I listened to Tim Geithner, Obama's Treasury Sec'y, and I still have no idea what the bank bailout plan will do. And later today the administration put out a release claiming the devils details will be in the soup in a few more weeks. All I can say is that one gets the idea in her head that things with the banks are far more serious than we are being told, like uh, banks are insolvent, period! And we don't know what to do, but we gotta do something. Paul Krugman on the News Hour with Jim Lehrer says, "let us look at the books". I say, you're crazy and the image of me running down the road screaming with my hair onfire is keeping me up at night. The truth is twofold:
a) yes banks are insolvent due to derivatives that have no value whatsoever and there is so much more that we don't even know about cause they don't even know what they don't know; and
b) banks who issued mortgages for $500,000, are now stuck with no one making mortgage payments on a house thats now worth $300,000 (if that) cause they lost their job and what the heck anyway.

The system is broken alright, it literally cannot withstand anymore writedowns/losses because any lower is in China. That nationalization is starting to look, CLOSER...
Read this It Is Time to Nationalize Insolvent Banking Systems
Nouriel Roubini | Feb 10, 2009

The stimulus passed in the senate and now goes to conference. Republicans claim their plan creates more jobs, (if RNC chair Steele's Sunday This Week interview on what a job isn't is any indication then I ask,"whats in a job," and please, thanks but no thanks.) Go here to watch...
Alot of good things have been taken out and other great things were not put in at all. Obama needs to just walk all over Congress, where's Bush when you need em? David Leonhardt's article in the New York Times Magazine called The Big Fix, is a must read for Obama and any economist with half a brain. Oh yeah, I forgot. Economists have no brains, which is why we are here in the first place, but thats another story.

So essentially, we are stuck in limbo and Mr. Market, who is not only efficient, but fair (hence Bear Stearns $2 share price), will have another two weeks to redeem himself in the midst of all this inefficiency. Can't a trader get a break you ask? Well yes. Opportunities abound on every pullback, provided you have the stomach for the ride.


  1. I'm afraid I have to agree with you. Especially about Obama not insisting on more in the stimulus package. But there's a fair chance those three Republicans would have pulled out and it wouldn't have gotten through at all. I think he's thinking that a start is better than nothing, and if it works at all he'll be in a much better position to insist on his way or the highway. The real solution would have been if the voters had only gone a bit further and given the Democrats a majority in the Senate that could not be filibustered. Then Obama could restrain and discipline his own party and ignore the rightwing Republicans' party line opposition and hypocritical denouncing of actions they praise when taken by their own leaders or themselves. And as for Geithner, he does seem overwhelmed by the responsibility and I suspect you're right, that it is because he knows the horrible truth that it's even worse than they're saying.

  2. I know Prez has to get something better than nothing. At least Obama has Executive Order power. So much for bi partisans understanding the larger issue for plain americans

  3. I listened to a podcast interview today with economist Peter K. Galbraith.

    He made the point that all of the recovery / stimulus plans put forward by economists assume a baseline derived from the performance of the US economy since 1945. (The worse "downturn" up to now was in '81-'82 and lasted 2 years.)

    Galbraith says that our current problems have no precedents and the solutions offered, based on this historical perspective, are inadequate.

    I'm pretty pessimistic that our political system can do the things that need to be done.



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