Like kids in a candy store, our Federal Reserve has done everything it can to consume and steal its way through as much product as possible before heading home. They (Paulson & Bernanke) originally told congress that the total for the TARP bailout would be 700 billion dollars. They then turned toe and loaned out over 2 trillion dollars. Now they're pledging a sum total of over 7 trillion dollars, 24,000 dollars for every man, woman and child in the U.S., or roughly half of the GDP for 2007. In legal parlance, that's known as a “bait and switch,” something the government has passed laws against.
So now, in what appears as a soon-to-be-tragic abuse of power, we're getting to see first hand the truly fragile nature of our marketplace when it's up against such massive manipulations. Fear is creeping in faster than before, not just because of publicly perceived doom and gloom, but also because of the interventions themselves. So in their heavy-handed efforts to alleviate fear and create stability, they have succeeded in doing exactly the opposite. But ultimately that's just the status quo in intervention history. One would think that Ben Bernanke already understands this fact, since he's an economist and Depression Era historian. But apparently not.
These amounts are staggering. And so is Bernanke's attitude. In testimony on November 18th, he stated: “We take collateral; we haircut it; it is a short-term loan; it is very safe; we have never lost a penny in these various lending programs.” He's referring to lending out less money than the current market value of whatever collateral was accepted by The Fed. But so far, only they can say what that collateral is worth, since no one has been allowed to inspect their books. And I have a couple of nagging questions. Correct me if I'm wrong. These banks were over extended with bad assets in the first place. That's why they're in trouble. So what assets (collateral) are left? Their buildings? Their computers? Do those add up to several trillion dollars? Or are they offering as “collateral” the same SPV's that have wreaked so much havoc in the first place? What else do they have to offer? Their “good” loans? Which ones? How about their stocks? How much are they worth now? And when creditors collect, is it first-to-loan, first-to-get-paid-back? Essentially, the oldest loans come first. Right? So that leaves the American taxpayers last in line. If they've “never lost a penny” on these kinds of loans, which I doubt, then they had better be extraordinarily sure that the monies going out now will indeed be repaid. I know a poker face when I see one. And Bernanke seems far too dismissive about the size of these loans for my comfort. I feel like I'm watching a poker player with two pairs bluffing his way through to the end of the pot. Or maybe, to use another metaphor, like a policeman telling a crowd “don't worry; nothing to see here.”
Henry Paulson leaves me feeling the same way. In his testimony, he stated: “I think it would be extraordinarily unusual if the government did not get that money back and more.” Hey, Hank. Isn't this entire “credit crisis” an “extraordinarily unusual” situation? Isn't it, what most journalists, pundits and government watch dogs are calling “unprecedented”? That is, nearly by definition, extraordinarily unusual. His poker face isn't good either.
All of this adds up to a sum total of “what the bejabbers is going on?” We're shaking our heads at the size and scope of it. And we're shaking in our shoes over its implications.
We can't trust these guys anymore. They say one thing, and do something else. Then they change their minds, and tell us, in Paulson's own words, “you should thank me.” They've been binging on greenbacks, and it's time to cut them off. I would like to suggest a myopia intervention. You've had enough boys. Now back away from the printing press.
But I need to take a moment here, to digress, and smile smugly over what Congressman Scott Garrett (R) from New Jersey said recently regarding The Federal Reserve. He said:
“Whether it’s lending or spending, it’s tax dollars that are going out the window, and we end up holding collateral we don’t know anything about. The time has come that we consider what sort of limitations we should be placing on the Fed so that authority returns to elected officials as opposed to appointed ones.”
This is, in my humble opinion, the very first rumbling of a call to nationalize The Federal Reserve, which is step two in my “Top 30 Watch List For Economic Armageddon.” It's another one of my “I told you so” moments. To my surprise, they've skipped a couple of steps. But I guess that shouldn't surprise me. It is government after all.
Remember, once they call for step one, “A State of Emergency,” our “crisis” will be seen as totally “out of control,” and the only remedy a bureaucrat understands is more control. That's the very definition of governance - to restrict, to control. And just one sidebar-style question: does this seem like a “representative” government to you?
My “Top 30 Watch List For Economic Armageddon”
U.S. Pledges Top 7.7 Trillion to Ease Frozen Credit
Another Day, Another $800B: 'Staggering Size of Bailout Necessary,' Economist Says
Bail-Outrage: Misuse of Funds, Lack of Transparency a National Disgrace
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