Confidence
According to the BBC: Bernanke demands bail-out action
The chairman of the US Federal Reserve has urged politicians to “act quickly” to support the proposed $700bn (£378bn) bail-out of the financial markets.
The US economy risked “very serious consequences” if measures were not taken, Ben Bernanke added.
Mr Bernanke said Congress must “address the grave threats to financial stability” which were being faced.
On Marketwatch we learn that Buffett says risk of financial meltdown has declined.
Update: Mea culpa, they have had so many “meltdowns” I should have checked. This was the Spring Meltdown.
Reuters tells us that in the bond market TREASURIES-Yields rise after Buffet’s investment in Goldman.
So while the Chairman of the Fed and the Secretary of the Treasury are demanding $700 billion with no strings attached immediately, Warren Buffet invests $5 billion in preferred stock at Goldman Sachs and Wall Street calms down. The difference is that people trust and believe Warren Buffet.
MSNBC’s article, Buffett’s Berkshire bets $5 billion on Goldman, contains a video link to Buffet discussing the bailout with talking heads at CNBC. He thinks the bailout is a good idea, but you need to understand what he thinks the format is going to be. If Buffet is right, then the bailout makes sense, and won’t be the disaster I think it would be. But if Buffet is right, why didn’t they tell people that this is what they are going to do?
According to Buffet they are going to set up buyer for companies who want to deleverage, dump all of their mortgage-based paper, but the paper has to be purchased at market rates. Buffet says that if they want to sell $10 billion, first they have to sell 5-10% on the open market to determine the price, and the government will buy the rest at that market price. That price should have a profit built in for the buyer, so there should be a profit built in for the government.
Doing what Buffet describes will work and makes sense, so if that is the plan, why not say it?
6 comments
The first sentence in the snippet you quote from Auntie Beeb says it all, really. Just look at the difference in the figure when it’s expressed in dollars and pounds sterling and you’ll know precisely how bad the economy is. If I remember rightly, when I went to Britain in January 2005, the pound was worth about $1.56. The exchange rate was bad enough that instead of exchanging some of my leftover dollars (I’d only arrived in Europe the day before I went to Britain) for pounds, I chose to change euros instead. The pound is now worth about $1.86, from the way the Beeb rounded.
The $1.86 is an improvement. When oil was spiking it was to $2.00. The Brits are also experiencing their own collapsing housing bubble. The bad practices of Wall Street con artists are contagious.
I’m so annoyed with this bail-out plan that I wrote emails to my representatives and told them what I think. Apparently they are getting swamped with email, phone calls and faxes. Good. Maybe they will do their job and devise a workable plan instead of writing a blank check. I don’t know if it will do any good, but it made me feel better.
Links to your representative here:
Contacting the Congress
I’ve called and e-mailed, but the only response I expect is from my Republican junior Senator, and he will put me on his e-mail list. I’m not sure my Representative can actually read, much less deal with e-mail, and my Democratic senior Senator apparently believes that he can ignore constituents.
BTW, all I got on the phone was voice mail at one office and busy signals at the other two, so I think they are getting the message that people don’t like it. The housing bubble started and burst in South and Central Florida, so there are a lot of angry people in this state.
yep, jam all their communication channels, fax, phone, email, whatever you can find. rattle them with the sheer volume of booooo! hisssss! whether or not they’ve got the cognitive equipment to recognize a good or bad plan, they’ve all got hyper-reactive lizard brains.
Based on what they are now saying about the “plan that isn’t”, the House Republicans are in revolt and there is no one to bring them in line. I think they got the message.