This should sting. On CNN an interview: Dodd: ‘I have a lot of reservations’ about bailout plan

[“American Morning’s” Kiran] Chetry: You yourself said this is not a natural disaster, and a lot of people have been asking, “Why didn’t Congress see this coming?” In fact, this is a quote from Henry Paulson, the treasury secretary, back in July. This was during the time of the Fannie Mae and Freddie Mac bailout. People thought that was the beginning and the end of this.

He writes: “Remember our economy has got very strong long-term fundamentals, solid fundamentals. Your policymakers are here; regulators were being very vigilant.” How can the argument be made that they were vigilant when we see the bottom fall out of the market?

[Read more →]

Even MSNBC is not amused: First fear, then loathing, toward Wall Street

As Americans digest a dizzying series of events that has left Wall Street shaken to its core, the mood on Main Street is shifting from fear to loathing. They are angry that government regulators did not do enough to prevent this — and protect them — in the first place. They are upset the government is proposing billions of dollars in bailouts for Wall Street, even as many regular Americans are struggling to hang onto their homes and pay their bills.

They also are livid that massive financial firms in which they trusted took wild risks and made incredibly bad decisions, in turn impacting their personal finances. Some wonder why, in the face of such a massive financial crisis, so few of these executives have stepped up to apologize for, or even try to explain, their actions.

[Read more →]

I saw this AP story, Bernanke: Recession more likely without bailout, at the Miami Herald.

So, who is going to tell the Chairman of the Federal Reserve System that we have been in a recession since at least November of 2007? I realize that the official announcement hasn’t been made, but I have also noticed that people are playing with the numbers to make it seem like it hasn’t happened.

The surest test of a recession is the Christmas stocking index. It has nothing to do with feet, it deals with the preparations that retailers make for their largest sales period in the year. You watch when they start stocking for Christmas and how much stock they put out. Then you factor in the timing of the sales.

In 2006 you could barely get through the aisles, but there was no problem at all in 2007. In 2007 some of the earlybird special sale merchandise for the first people into the store on the Friday after Thanksgiving were still available on Sunday. It was a grim season indeed.

Fewer people still have jobs, and those that do are not keeping up with inflation. That is a big factor in the public reaction to this bailout – Main Street is hurting, but they want to help Wall Street.  The real people are not amused.

If you are going to create a solution, you have to define the problem. Paulson and Bernacki want to throw money at Wall Street, but they don’t explain why, or what the money is going to do to solve “the problem”, because no one has defined in clear, unambiguous terms what precisely the problem is.

There has been talk about a “liquidity crisis” and a “credit crunch”, and that this is all part of the “housing bubble”, but how does buying up bonds and derivatives, rather than the mortgages, do anything other than save fools from incautious investments?

When you read an article about large tech companies borrowing billions to finance stock buybacks and to pay higher dividends, you have to ask how can they do it if there is no money in the system [liquidity crisis] and no one is willing to make loans [credit crunch]?

You might think that only some people are having problems because they wasted their money and are a bad credit risk. I don’t think raising their “credit card limit” is going to help these people.