The Absurd Report

Note: Over this past weekend I had the opportunity to speak with two very astute market analysis about what happened last week to financial markets. Both asked to remain anonymous but I can share with you their thoughts and comments about what happened.

The Week That Was

One said that we came very close to a financial Armageddon and other expressed some similar type views. By Wednesday night there was utter panic in Washington that the whole financial system could crash and as the American economy goes so goes the world economy.

How bad was it? United States Treasury Certificates have long considered the safest place in the world for people to put their dollars in; they were selling at negative interest rates. (To clarify – People accepted the idea of taking an interest rate loss in exchange for security.)

The money market which has long been considered a safe and secure place to invest dollars was facing a run on funds and redemption of funds had to be suspended for seven days.

Both agreed that the root cause of this financial mess started with the failure of Fannie Mae and Freddie Mac and the trillions of dollars held in subprime mortgages held. This in turn had an adverse affect on the balance sheets of many financial institutions because an accounting procedure called “mark to market” reduced values of these mortgages below what should have been actual. In some cases the value of these mortgages had been marked down to 20 cents on the dollar.

(Note: “mark to market” is a regulation that the SEC put in because of what happened at Enron who over valued their assets. The regulators corrected one flaw in the system and the correction has now become a bigger flaw in the system.)

Treasury Secretary Henry Paulson can go down as the hero of the decade or the goat of the century but for the moment both agreed he had no choice. Paulson is former CEO of Goldman Sacks and is probably the most qualified person in the administration to handle this crisis.

SideBear: The plus here is that we have sidestepped a meltdown and the minus here is we have just seen the government take over of our financial markets, the insurance industry and the mortgage lending business. Our free market economy that made America great is no longer that free anymore.

I do see something here that is very puzzling and may be a ray of sunshine in a very gloomy outlook.

Holders of these subprime loans are under valuing the asset because of accounting rules, behind the paper that panic selling is marking down to 20 cents on the dollar is a fixed asset called a house. I can not accept the idea that house is only worth 20% of the value it was originally mortgaged for.

MY Bottom Line – My financial buddies above described “The Root Causes” of this mega crisis in terms of the failure of capital markets as they should from their prospective but the real cause that lies behind the scenes is LIBERALISM.

This was one giant experiment in the liberals’ grand idea of SOCIAL ENGINEERING and it failed miserably. You can not defy the laws of gravity anymore than the laws of economics. You can’t make mortgage loans to people WHO DO NOT have the ability to make their payments.

Did I just say something that is politically incorrect or socially unacceptable? Let me repeat it for you liberal nut-jobs. You can’t make mortgage loans to people WHO DO NOT have the ability to make their payments.

The grand Social Engineering experiment was conceived in 1977 under the Carter Administration and was written into law by a Democratic Congress come to be known as the Community Reinvestment Act. The Act was implemented to correct an imbalanced amount of homeownership by white America as vs. under-privileged people and minorities.

The mortgage lending banking community was firmly against this law by under penalty of the law they complied.

Later on in 1995 at the behest of President Clinton with threats of criminal prosecution against lending institutions the Democratic Congress opened the floodgates to subprime loans disaster that we have today by rewriting the laws surrounding borrowers’ credit worthiness.

This insane type of risk-taking was concocted by the Democrats and defies all laws of “Common Sense” but then when using common sense in the same sentence with liberal Democrats it becomes more moron than oxy.

The Bush Administration warned in 2003 that oversight of Fannie Mae and Freddie Mac — which together have issued more than $1.5 trillion in outstanding debt — “is broken.”

And Barney Franks, the ranking Democrat on Financial Services Committee. responded by saying, “Fannie Mae and Freddie Mac — are not facing any kind of financial crisis.”

Bush’s proposal for reform was defeated in a Republican Congress by the Democrats with the help of a bunch weak-kneed spineless self indulgent Republican RINOS.

(Note: John McCain supported the Bush plan while Obama was sitting in the Illinois Senate voting “present”.)

(If you would like to listen to an excellent history of this insanity and how it come about listen to this podcast by Mark Levin. Go here and listen to the Sept. 19th show.)

What’s Next?

Probably the most honest thing I have ever heard Harry Reid say was when uttered these words, “We don’t know what to do?”

Harry is absolutely right because what we have in Congress is a collection of morons and incompetent idiots who will take to the streets like trained monkeys and blame this on anyone and everyone they can think of but themselves including your local kindergarten class.

Congress writes the laws in this country and this financial crisis can be directly attributed to 30 years of Congressional actions. On the blame scale I would attribute 80% Democratic and 20% Republican. The is a Democratic Scandal cut and dried.

And when you heard Nancy Pelosi respond “NO” to whether the Democrats “deserve some responsibility” regarding the economic crisis, remember you hearing that from a trained monkey with an I.Q. of a grapefruit. With her it is always monkey see, monkey does.

SideBear: If you sense a tone on my part of disgust in my writing above, you are absolutely correct. Not only am I disgusted, I am irate over what has happened because in reality all this is, is another vote buying scheme by the liberal left that may cost the public upwards to a TRILLION dollars.

The American People did not create this problem and yet they are the ones who are expected to pay for it. Nobody really knows how much this going to cost the people but the number is going to be a mindboggling amount.

And if we don’t learn from this crisis and return politics as usual we will have another one of these meltdowns in the future when Social Security and Medicare go bust-O.

The problem with liberals and liberalism is they come up with these grandiose ideas and they feel all warm and fuzzy about themselves but they never consider the long ramifications of what will happen. Then they walk away from their actions and leave up to the rest of us to clean up their mess.

Your Liability for the Bailout: $2,000 - Your Debt: $37,000

According to Cato’s Jim Harper, the $700 billion bailout will cost you $2000, or $6500 per household.

Fannie and Freddie: and “The Silence of the Rats”

Explosive Video, Fannie Mae CEO calling Obama and the Dems the “Family” and “Conscience” of Fannie Mae

http://www.youtube.com/watch?v=usvG-s_Ssb0

WATCH THIS VIDEO TO THE END!!!

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