Really Pissed Off!

Secretary of the Treasury Henry Paulson and FED Chairman Ben Bernanke advised both the Congress and the nation on September 17th that an immediate Wall Street bailout is needed to avoid Wall Street from falling into a Black Hole and taking the Economy down with it! The arbitrary cost of this measure is $700 billion dollars and the cost of this would be placed on the back of the American taxpayer. The official name is the "Troubled Asset Relief Program," or in short TARP. In its initial form, Paulson would be anointed Czar, without any regulations and accountable to no one. The $700 billion dollars would purchase all of the “mortgage-related assets” that Wall Street and the Banks have sold off as investments without proper collateral. Congress and the American Public are told that only “Corporate Socialism” will save The Economy!

RPO has warned the Public on two occasions, the first on September 1, 2007 that we were heading towards disaster and warned in July that the Housing Bill was just the beginning of “Corporate Socialism!” Having been set up for the final punch, we are now told that TARP must be approved immediately, with a total on One Trillion Dollars, counting the cost of both bills, to save The Economy! That’s One Trillion Dollars of our taxes to reward bad behavior on Wall Street! Even if we deliver the money, there is no proof that it will do any good if the Market crashes, as no one has a clue as to the real amount of credit failure out there. The best that we can say about TARP is that it might cushion the crash if and when it happens, and we can take the “if” right out of that last remark.

The real problem….the gorilla in the room that no one is talking about, is that the Stock Market has to find its ‘bottom line” and the only way to find it is to let it happen. We continue to place band aids on the problem and hope it will solve the problem that’s been in the making for the past decade, as we removed regulations and allowed Wall Street to play Monopoly with out money! Wall Street has become a “Parker Brothers” playground, without any rules or oversight. They were finally stripped away in 1999 by removing the Glass-Steagall Act of 1933, which set up rules and regulations on commercial banking. We can thank former Fed Chairman Alan Greenspan with a slam-dunk by Sen. “foreclosure” Phil Gramm, former Chairman of the Banking Committee! The big question is what are we going to do now, that the damage has been done?

It appears that we have little choice but to allow Congress to come up with a version of TARP that “might” work. We’re not going to find out if it is or isn’t going to work unless we do it! Both candidates generally support TARP, as we heard during the debate on Thursday night. Sen. John McCain attempted a grandstand play, hoping it would pass while he had rushed back to Washington D.C. so he could appear to have an edge on the Debate. No such luck! Obama wisely stayed in Oxford, Mississippi and in touch by phone to Paulson, Harry Reed and Nancy Pelosi, ready to return if needed. Obama finally returned and met with the President, McCain, Paulson, Bernanke and members of the House and Senate. Of the two candidates, Barack Obama spoke, McCain did not. What the Hell was that all about? Whether you agree or disagree, that $700 billion is headed for a Wall Street bailout. Congress has taken the three page document of Paulson and now has appeared to have come to some form of consensus on this weekend and it may be a reality by the beginning of the week. Within those pages, they hope to continue to find common ground as they attempt to save Wall Street and the Economy at the expense of the American taxpayer. RPO has no economist on its staff, but one of several provisions should include that every mortgage bought by the Federal Government should allow for a refinance before foreclosure. These mortgages were negotiated by banks who knew well in advance that result would end in foreclosure, but the upfront money was too good to resist. For every refinanced mortgage, there is one less empty house on the market and there is home ownership, which will add to the tax base and contribute to the economy. We’re told that eventually the American taxpayer will recoup their money when and if the properties are ever sold. It would be a better investment if we could keep home ownership by renegotiating mortgages for those who could pay them under reasonable rates. If you want to end the housing and mortgage crisis, this is a good way to start!

Hear Princeton economist Paul Krugman on Real Time with Bill Maher discussing “The Bailout.”