A Beacon of Light in the Darkness

Paulson's statement of not buying toxic mortgages was great to hear today, especially since I was opposed to the $700B bailout.  This move is in the direction that I am moving myself, away from debt.  The focus needs to be at the bottom, helping people refinance.

The market managed to stay above 8,000 which I use as a measurement stick for stability.  Another fact to note when you hear that this crisis is the worst since the depression is the employment numbers.  Keep in mind that unemployment is 6.5% and will get larger.  But in the early 1930s unemployment was 25.6%, and the early 1980s 10.8%.  It's true that the cause of this recession and unemployment is different than the past, but historically 'bubbles' do pop and we get to experience the downside.  I think since the world is now tied together in one financial web, it creates more fear and hysteria than before.  That is the unknown as far as what lies ahead.  How effective are we as a country in working with all the other countries who economies are tied into ours?  We are finding this out step-by-step.

I have been watching the insurers AIG, GNW, and MBI and can see that based on the stock price movement, more government action will be needed beyond The $145B loan to AIG.

And the big three automakers, GM, Ford, and Chrysler should NOT be bailed out without wholesale changes.  GM and Chrysler should be combined to save on overhead, management, and general and administrative costs.  All of them should reduce the price of their vehicles to recapture costs only for a defined period of time to keep the cash flowing.  Doing business the same way means more bailout money required.  There should be an accounting of what has been planned and accomplished according to this plan with the $25B they have already received from the government.  Rescuing without a comprehensive radical change in the way they do business is only delaying the inevitable.  With 1 in 10 jobs being at risk, it is even more critical to act in a manner that is decisive to stop the cash hemorrhaging.  

Another item of interest today was GE has been backed by the FDIC for $139B of their capital debt.  Look at how fast this $700B is being spent.  Do we really have an understanding of how much money has been loaned in total beyond the $700B approved by Congress?  It has to be in the trillions.