> 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?
>

> 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