All,
Seems Bernake and Paulson can't leave well enough alone. The problem with the idea of US taxpayers assuming the bad debt held by these various banks, brokerage/banks, and other entities for pennies on the dollar is that it still won't solve the problem. If the US sets up another SIPC-like entity, its purpose will be to assume the bad debt of once-mighty institutions. These bad debts they have are from the fact that the many bad mortgages they approved over the past 10 years are not getting paid, so they themselves can't make good on their promises to pay other creditors and holders of mortgage-backed bonds that they issued. To lose this bad debt, they will pay the new proposed gov't agency a few pennies on the dollar and the agency will then assume the bad debt. Those owed the money will now have to go to that agency to get payment, and since it will be a gov't agency, they can simply say "No." (Try suing the gov't to get money it owes you. Good luck.) So what is planned here is simply a huge fraud against not just the taxpayers who will be on the hook for literally TRILLIONS of dollars (not the few billions of the S&L bailout days, but *trillions*-- the total debt is $26 trillion. Consider the US GDP in 2006 was $16 trillion, and that puts it in perspective for you). Not that all the debt these entities have is bad, but a substantial amount of it is, with more to be added as on-the-edge mortgagees will think they can forego paying their mortgages and just stop trying to. So while the big institutions like Morgan Stanley and AIG, etc., will somehow magically survive and not be held accountable for their insanity of the past 15 years, everyone else who is owed money by them will in effect get the shaft-- who knows, they might be lucky to get 5 cents on each dollar owed them, and that will require taxpayer largesse (at gunpint of course) the likes hasn't been seen in decades, perhaps ever in the history of modern finance. And who are these other institutions? Smaller banks, other corporations, international institutions, foreign governments, basically, everyone else. It is these other entities that we the people are in closest contact with and rely on for our economic solvency.
So it is easy to see that they, the institutions in trouble AND the gov't, would be acting contrary to fiduciary trust and malfeasantly. In short, what they are suggesting is criminal. But since they make the law, well, guess it isn't. But they don't make the law-- Congress does. To create this new "agency", they need to get Congress to pass a law permitting it. If they are allowed to do this, we the taxpayer will be saddled with a degree of debt and a general economic burden that will be hard to come out from under in the lifetimes of anyone able to read this. In addition, America's financial reliability will be seriously downgraded all over the world, negatively affecting our ability to conduct business on a national and international corp-to-corp level for decades to come. In effect, our collective credit rating in the context of the world will be downgraded badly-- worse than what happened to AIG, I can assure you. We will be blowing the "full faith and credit" part of the deal that fiat money systems require.
A new agency is not the solution. What is? Let the chips fall. Because guess what, they are going to fall anyway. This new plan will postpone the day of reckoning maybe by a few months (coincidentally *after* the Nov general elections) and the debt will only get worse, as the instruments that embody the debt are all time-based.
Contact your Congressoid and let him or her know that if they vote for this kind of solution, you will vote for their opponent in the upcoming general election. But you must act fast-- they plan on voting next week as early as possible on hastily-crafted week-end marathon legislation that will create this new agency and stick it to us yet again. Do NOT let them do this to us! Go to http://www.house.gov/ and find your Congressoid's email, phone, fax, whatever information and let them hear you say "No! Not on my watch!" I suggest not just contacting their office in Washington DC but also their regional offices where they are sure to pay a bit more attention to you.
Seems Bernake and Paulson can't leave well enough alone. The problem with the idea of US taxpayers assuming the bad debt held by these various banks, brokerage/banks, and other entities for pennies on the dollar is that it still won't solve the problem. If the US sets up another SIPC-like entity, its purpose will be to assume the bad debt of once-mighty institutions. These bad debts they have are from the fact that the many bad mortgages they approved over the past 10 years are not getting paid, so they themselves can't make good on their promises to pay other creditors and holders of mortgage-backed bonds that they issued. To lose this bad debt, they will pay the new proposed gov't agency a few pennies on the dollar and the agency will then assume the bad debt. Those owed the money will now have to go to that agency to get payment, and since it will be a gov't agency, they can simply say "No." (Try suing the gov't to get money it owes you. Good luck.) So what is planned here is simply a huge fraud against not just the taxpayers who will be on the hook for literally TRILLIONS of dollars (not the few billions of the S&L bailout days, but *trillions*-- the total debt is $26 trillion. Consider the US GDP in 2006 was $16 trillion, and that puts it in perspective for you). Not that all the debt these entities have is bad, but a substantial amount of it is, with more to be added as on-the-edge mortgagees will think they can forego paying their mortgages and just stop trying to. So while the big institutions like Morgan Stanley and AIG, etc., will somehow magically survive and not be held accountable for their insanity of the past 15 years, everyone else who is owed money by them will in effect get the shaft-- who knows, they might be lucky to get 5 cents on each dollar owed them, and that will require taxpayer largesse (at gunpint of course) the likes hasn't been seen in decades, perhaps ever in the history of modern finance. And who are these other institutions? Smaller banks, other corporations, international institutions, foreign governments, basically, everyone else. It is these other entities that we the people are in closest contact with and rely on for our economic solvency.
So it is easy to see that they, the institutions in trouble AND the gov't, would be acting contrary to fiduciary trust and malfeasantly. In short, what they are suggesting is criminal. But since they make the law, well, guess it isn't. But they don't make the law-- Congress does. To create this new "agency", they need to get Congress to pass a law permitting it. If they are allowed to do this, we the taxpayer will be saddled with a degree of debt and a general economic burden that will be hard to come out from under in the lifetimes of anyone able to read this. In addition, America's financial reliability will be seriously downgraded all over the world, negatively affecting our ability to conduct business on a national and international corp-to-corp level for decades to come. In effect, our collective credit rating in the context of the world will be downgraded badly-- worse than what happened to AIG, I can assure you. We will be blowing the "full faith and credit" part of the deal that fiat money systems require.
A new agency is not the solution. What is? Let the chips fall. Because guess what, they are going to fall anyway. This new plan will postpone the day of reckoning maybe by a few months (coincidentally *after* the Nov general elections) and the debt will only get worse, as the instruments that embody the debt are all time-based.
Contact your Congressoid and let him or her know that if they vote for this kind of solution, you will vote for their opponent in the upcoming general election. But you must act fast-- they plan on voting next week as early as possible on hastily-crafted week-end marathon legislation that will create this new agency and stick it to us yet again. Do NOT let them do this to us! Go to http://www.house.gov/ and find your Congressoid's email, phone, fax, whatever information and let them hear you say "No! Not on my watch!" I suggest not just contacting their office in Washington DC but also their regional offices where they are sure to pay a bit more attention to you.
posted by Matt Campbell at 11:36 AM
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