The Absurd Report

I confess to being no economic genius or guru but after watching the Senate’s Banking Committee hearings, I wonder who is? Certainly none where present.

I am beginning to have some reservations about the proposed bailout plan because what I am hearing is two conflicting points of view from the same people.

First of all Treasury Sec, Paulson and Fed Chairman Bernanke have expressed an urgency in having legislation passed overnight and giving government a blank check in the amount of $700 Billon to buy “worthless toxic paper” aka subprime mortgages. (Their words no mine)

In the true tradition of our trained monkeys in the media they have promoted our financial crisis with exalted headline promoting “Fear Mongering and the Sky is Falling” to sell their version of tomorrow’s fish wrap.

On the other side of the coin I am hearing that this worthless paper is not so worthless at all and not only will the taxpayers’ get paid back but also in line to make a huge profit.

So which is it? I don’t know for sure but I do know when I hear people talking out of both sides of their mouth.

But here is what I do Know

The surest way for government to expand its power is by invoking “Fear” into the public sector whereby the people will willingly surrender their rights and freedoms in exchange for security.

As I have expressed before behind this worthless paper is an asset called a house and the fire-sale of this asset at 20 cents on the dollars does allow for future liquidation of this asset at a much higher price is a distinct possibility and will allow for the taxpayers to recoup their money. But therein in lies several problems.

Right off the bat Congress intends to lard-up the bailout bill with another $25 billion in with non discretionary spending. Oink, Oink, Oink! They are totally out of control.

The Democratic majority’s line of logic appears to work something like this:

If taxpayers can afford to spend $700 billion to bailout out the battered financial markets, then they can surely afford to spend $25 billion to bailout the auto industry, $61 billion on bogus “emergencies,” $24 billion for disaster aid, and $16 billion on 2,627 more earmarks.

Putting excess dollars in the hands of government is like giving a book of matches to arsonists. What is more likely to happen is Congress will figure out another vote buying scheme as they all clamor that they want to help the poor people on main street.

I haven’t been able to verify these numbers yet but I will continue digging. This comes from a very good source:

Almost 1 out 5 foreclosures that have been filed have come about from people who bought a house and never made one single mortgage payment. This includes a lot of illegal immigrants who used stolen identities and social security numbers. These kinds of statistics are being hidden from the general public.

These people have learned how to scam the system and are very well aware of what they are doing, are they entitled to mortgage relief? Congress thinks so. But why?

Let me summarize the Contradictions

• Credit is drying up but the Saint Louis Federal Reserve reports Commercial and industrial loans of all commercial banks, which are reported monthly, have grown rapidly. The most recent report, for August 2008, shows outstanding loans of $1,514 billion, an all-time high. This loan volume is 15.5 percent greater
than it was a year earlier, and 30.8 percent greater than it was two years earlier. Frozen credit?

• Mortgage Lending Institution took advantage of poor unknowing borrowers, yet 1 in 5 poor borrowers are smart enough to scam the system.

• Who ‘schooled’ the poor borrowers? Community Organization groups like ACORN who the Democrats want to get a large portion (20%) of the profits from the so called sale of the worthless paper. (Democratic pork add on to bailout bill )

• Who is affiliated with Acorn? Barack Obama who represented them as an attorney in legal matters regarding voter fraud.

• Congressional Democrats are wrangling over the need for aid to homeowners in the Wall Street bailout plan, have they forgotten that Congress approved a $300 billion mortgage rescue package in late July.

Mark to Market Mayhem.

Excerpt:
We must remember that behind every mortgage is a house, and even if 100% of subprime mortgages were foreclosed on, these bonds would still be worth at least 40 cents on the dollar. As a result, everyone knows that mark-to-market prices of less than this are not realistic. Yet, the accounting rules we have today are forcing companies to price to these insanely low prices. It is true that the root of this crisis is bad mortgage loans, but probably 70% of the real crisis that we face today is caused by mark-to-market accounting in an illiquid market. What’s most fascinating is that the Treasury is selling its plan as a way to put a bottom in mortgage pool prices, tipping its hat to the problem of mark-to-market accounting without acknowledging it. It is a real shame that there is so little discussion of this reality.