Monday, September 29, 2008
Down The Rat Hole
If enough Americans understood what has happened in this country economically and to the financial system with Congress’s approval, there would be a revolt in the streets of Washington. Thank God for Major League Baseball, college and professional football and NASCAR racing. Sports keeps nearly everyone inside glued to their TV or in a stadium cheering for their team. The Romans did not have a thing on us. We have our own circuses. The only problem down the road will be the price of bread, but may be congress can bailout the bakeries too.
The country will get the $700 billion dollar bailout, but nothing is going to change because regulation, oversight and auditing are not going to change. Standards should be taken over by the Federal Reserve Bank. By that I mean the rating of debt instruments should be permanently lifted from the likes of Moody's, S&P and Fitch. It would be safer to give them responsibility for garbage pick up, they know garbage. Without removing the rating of debt instruments from the hands of these three private companies with a profit motive, this same disaster will take place again. This is not the first time the rating companies failed to do their job. The New York city default in the mid 1970’s was another time they failed to do their job.
Yes, I know we had a housing bubble, but how do you think the housing industry creates a bubble without financing. The securitization of mortgages and the placement of AAA ratings on mortgage debt not worthy of the AAA rating produced the housing bubble and eventually the mortgage bond market meltdown. You can not have a bubble without air, and giving out AAA ratings on mortgage bonds that should have never received this high rating was the air that formed the bubble. Unless some very fundamental changes are made in the securitization of asset backed bonds, we are just extending the period of time before the next financial crisis.
The reason for the gridlock in the financial and banking industry is because of one word, trust. Trust is the key component of any working financial system. Without trust, borrowing does not take place, loans do not get made. Financing of business grinds to a halt. That is what this is all about. To take trust to a higher level, a system needs to be built that will do for the investment and banking business what the division of weights and measures does for commerce.
This move along with bringing back the Glass Steagall Act and securities enforcement as it was meant to be enforced may get this economy rolling again. As I have said many many times in my postings before, this is not rocket science or brain surgery. Much of this is simple common sense. What is missing is the will of the congress to make the situation right. That means in part the end to shooting fish in a barrel and taking the old and unknowing to the cleaners. As long as congress believes that everyone is a mark until proven otherwise, this shit will continue to go on. The fat cats want their fresh meat, but our congress has to protect the individual consumer from putting poison in their portfolio or their financing of a home. This must stop. It is time for a level playing field.
Now for a word about the debate Friday night. Obama clearly demonstrated that he has foreign policy knowledge and can be the commander-in-chief just as well as McCain and perhaps even better. But it was McCain's appearance on THIS WEEK with George Stephanopoulos that was interesting to me. McCain, in my opinion, doesn’t care about whether his campaign ads are truthful because Obama would not do the town hall meetings with McCain as McCain wanted him to. That's McCain's logic and reason. Furthermore, McCain’s attitude was that he doesn’t care about those of us watching a news program at 9am on a Sunday morning, that the people that will vote for him don’t need the truth. I sure hope the American electorate is watching and learning as we have just over a month to go before election day. I think Obama-Biden is the stronger ticket and would serve most Americans better than another four more years from a Republican administration. I hope everyone will join me and vote for Obama-Biden come election day.