On Sep 17, 6:16 pm, Fred Weiss
papertig.com> wrote:> On Sep 17, 4:52 pm, Immortalist
yahoo.com> wrote:
>>>
http://www.democracynow.org/2008/9/17/us_seizes_control_of_aig_withht...
>> MICHAEL HUDSON: ...
>>....And the question that Wall Street has,
>> if you’re going to take a gamble on bad debts that can’t be paid, how
>> are you going to come out a winner? And there’s only one way of coming
>> out a winner, and that’s to make the government bail you out.
>
> Umm...how have they come out a winner?
>
> IndyMac stockholders were wiped out. Lehman Bros. stockholders were
> wiped out. Fannie and Freddie stockholders were wiped out. BearStearns
> and Countrywide stockholders got a pittance, the equivalent of 10cents
> on a dollar. Roughly the same will likely now happen to Washington
> Mutual and Wachovia in the coming days. The best parts of MerrillLynch
> will be salvaged, but it will now be absorbed into Bank of America.
>
> At least one venerable money market fund just did the unthinkable and
> was forced to "break the buck" (primarily, as I understand it because
> of investments in Lehman Bros securities). They put a 7-day halt on
> depositors getting access to their funds but that's very likely just
> staving off the inevitable run for the exists as soon as trading
> resumes. It will be very difficult for this firm to survive.
>
> So tell me how they came out winners.
>
I think the speakers was saying that by bailing them out—Wall Street
was "coming to terms with the bad debts" and when Bear Stearns went
under and when Lehman Brothers went under, this began to wipe away the
bad debts but when the debts began to exceed the ability to pay, there
was only one thing any economy can do, and that was wipe them out, put
em out of business, make em extinct in the sense of "fair trading
practices" but instead, the government is trying to keep the fiction
alive which the speaker thinks was an attempt to lock in whoever is
the next president not only to further bailouts of Wall Street,
ostensibly to protect the public money, but to make it impossible to
write down the debts of the four million homeowners that are expected
to default this year, impossible to write down the debts of companies
that have issued junk bonds, impossible for the country to get rid of
this excess of debts that can’t be repaid.
These are people who’ve gambled, derivative trades, billions of
dollars of bets on which way interest rates will go, billions of
dollars of bad loans beyond the ability of debtors to
pay and the speaker asks why on earth would you want to bail out these
creditors?
Then you would prepare the ground for writing down the debts of the
homeowners that have no way of repaying the exploding mortgages. Those
interest rates are going to be jumping up this year. You would be able
to bring the debts down to the ability of the economy to pay, and you
would save these four million homeowners from defaulting and being
kicked out of their houses. Now they’re going to be kicked out of the
houses. The houses will be vacant. The cities are going to now say,
“Gee, we’re going to have to cut the property taxes to enable the
debts to be paid to save the financial system.” So, if they cut the
property taxes, they’re going to have to cut back local expenditures,
local infrastructure. The economy is being sacrificed to pay the
gamblers and a war between creditors against debtors begins, people
lose their houses but someone profits from the coming to terms with
the bad debts which you the taxpayer have paid in full. Neat huh.
> Fred Weiss
