It was a terrible idea the moment it was hatched nearly one hundred years ago, and I have now had about a gut-full of the freaks at the Federal Reserve. After creating the financial atmosphere where a subprime mortgage meltdown could occur, the Fed now contemplates bailing out the big boys who took it in the shorts--while leaving you in the lurch.
The Mexican Peso Bailout of 1994 wasn't a bailout of the Mexican Peso. It was a bailout of the tycoons who loaned the money to Mexico knowing full well that they would have their spread covered if the deal went south. In a similarly elitist move, the Federal Reserve bailed out Bear Stearns a couple of weeks ago. Why? Because, said Ben Bernanke, we can't afford to let such a big company go under.
Given the exceptional pressures on the global economy and financial system, the damage caused by a default by Bear Stearns could have been severe and extremely difficult to contain," Bernanke told the Senate Banking Committee.So what's the solution? Put the US taxpayers on the hook.
The investment house was purchased by JP Morgan Chase & Co. with assistance from the Fed in the form of a loan backed by $30 billion of Bear Stearns assets. JP Morgan has agreed to absorb the first $1 billion of losses if the value of the assets declines, but taxpayers are at risk for the remaining $29 billion.Moral hazard is the art of making bad choices because you are reasonably sure that you will be protected from the consequences of those choices. I'm not sure what you call it when the fix is in in advance--moral turpitude?
Ellen Goodman thinks something is rotten in the American halls of financial power, and I agree.
On the Glenn Beck show yesterday, Peter Schiff explained what is afoot:
I grant you that moral hazard is not a myth. But most of the sermons railing against the harm of helping others are directed
The Federal Reserve is setting the stage for a global market meltdown almost infinitely greater than if there were a law against the elite bailing out their friends while pissing on you, the little guy.at the poorer pews.
We don't seem to worry about the moral hazard of, say, protecting a CEO from his failings. Need I remind you that Robert Nardelli got $210 million in severance after he hammered
Home Depot? Or that he now resides at the top of Chrysler?
This leads us right into the den of Bear Stearns. Last weekend, while its chief executive was off playing bridge, one of the most aggressive cowboy firms in the mortgage securities business collapsed. The government brokered a deal with
J.P. Morgan Chaseto buy the firm and guarantee its loans with your tax dollars.
It's really easy. It boils down to one word. Inflation. That's what they are contemplating, printing money and buying up mortgages. You know, we talk about, you know, the economic collapse. Our economy has to collapse because it was phony.Inflation is NOT inflation to the people who first get the extra money that the Fed prints. It is a windfall, and the elite always get that first crack at the new infusion of cash. Not until it gets down to you and me have all the prices gone up--and our buying power gone down. Think about that in conjunction with the fact that the rich keep getting richer and the poor keep getting poorer.
The Federal Reserve is worse than a waste of time. It is a corrupt cartel that plays fast and loose with your money. In the guise of attempting to correct the economy--which it most assuredly cannot do--it is setting the stage for a global market meltdown almost infinitely greater than if there were a law against the elite bailing out their friends while pissing on you, the little guy.
We can do just fine without you, Federal Reserve--thank you. Step aside and let the economy make its own course corrections, before there is no economy left.
And don't let the door hit you in the butt as you make your exit into the oblivion that you deserve.