The Unquantifiable Bailout

We are definitely living at a time of great change mirrored in the financial arena of the world.  The citizens of the U.S. are going to assume more debt, collectively, to rescue the financial sector due to dire consequences of what would happen if we don't.  When congressional leaders, the president, and the Fed got together last night and listened to what lies ahead, there was a stunned silence of 5-10 seconds.  When politicians have no words for that period of time, there is a landscape portrayed that none of them have experienced before.  The total liability is not measurable as this time, but 'hundreds of billions' means closer to two to three trillion.  I worked in the defense industry for 20 years and no contract met its original estimate, especially those funded for new design and technology.  We are dealing with the same here.  The ones deciding what to implement to save the U.S. financial system are having to be creative.  

This 'Plan' covers toxic mortgage-backed securities that banks hold.  The government would take these off their hands, hold them, and try to sell them again at a later date after they figure out the maze of who owes who. 

Today, the SEC put out a list of 799 financial companies that are excluded from the short selling list.  I think they should have excluded all companies like Britain did under pressure from us.  

Has anyone started talking about the bond insurers yet?  They are a new wrinkle in this financial fabric that is being sown.  Today ABK dropped 42% and it was on the excluded short sale list.   Our system has evolved to be so expansive and intricate that no one person or group understands the total ramifications of our actions.  Keep looking for the red flags like ABK.  There is a blind path here that takes a special dance.  We are only learning what the steps are.

We are only 11 days away from October, the month that has historically reflected major changes for the market.  What does October 2008 bring?

Haven for Bad Debt

What a surprise on Wall Street today.  Look at the power of words from the right person to change the emotional collective in a flash.  If this entity is set up by the Fed, I would ask 'who' gets to put their bad debt there?  What is the criteria to qualify?  Do you have to be 'too big' to fail, have too much 'influence in the world markets?'  To save the group i.e. us, bad decisions and greed are being rewarded at the top levels.  I have heard all the reasons why we had to save Freddie, Fannie, and AIG, but as history shows, when there is a bubble in some sector of our economy, the latest being the housing market and mortgage downfall, there is an underlying correction required before the solid foundation is felt again.  What we are doing here is trying to buy time because of the fear that the foundation will crumble too.  Destruction, construction, and renewal are the cycles of life, at the individual and collective level.  I am enjoying the creative energy on the part of the Fed and SEC in trying to prevent what is normal.  

A major change today was Britain banning 'all shorting of stocks.'  Does that mean the U.S. is headed in that direction too as one of the tools in our basket to try and stem the downward spiral?  It looks like anything goes here.  That statement is what created the problem with the mortgage market.  We are repeating ourselves under the disguise of doing in a different way.