Sunday, September 21, 2008

Icing on the Financial Cake..Memphis Viewpoint

A serious faced President Bush acknowledged risks to all taxpayers in what will be the most sweeping government intervention in the rescue of failing financial institutions since the 1929 stock market crash. Bush declared though "The risk of not acting would be far higher."

The jaw dropping price tag of over half a trillion dollars is the projected cost to taxpayers to stave off financial catastrophe and takeover the bad debt created by worthless mortgages now held by numerous financial institutions. Relieved investors sent stocks soaring on Wall Street and around the globe when the news of the bailout was made public by the federal government.

The Feds stepped in to help save Bear Stearns from total collapse just last Spring and backstopped the purchase of Bear by JP Morgan. Then, in just the last month, the Feds took control of Fannie Mae and Freddie Mac, both reeling from bad loans and then of course they also saved the world's largest insurance company, AIG, from going under. The current move this week hopefully will prop up the economy from further collapse, as loans had been created and issued to current homeowners who had no way to pay their mortgages....even from the beginning...they had no way to pay. But greed had stepped in and the issuing mortgage companies really did not care if the loans could be paid as they knew they would be selling the loans off in packaged form, to Wall Street, thus passing the time bomb along to others to contend with down the road. Here we are now....down the road...and greed did in fact destroy the confidence and backbone of our economy. Any questions?

Other major steps being taken by the Feds include giving money market funds the same federal protection, at least temporarily, that now applies to savings and checking accounts and certificates of deposit at banks. Also, the securities and exchange commission acted separately to block short-selling of stocks in financial securities. This type of investing has been blamed for accelerating the plunge in stock prices of banks and other financial institutions. So again, you see, that investors are partially controlling both the markets ups, like oil prices, and downs, like stock prices. Greed has really sparked the flames that is taking our economy to its knees.

It looks like there will be allot of crawling before we can get up and walk again.