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“Dang it! you anti-bailout people are making TOO MUCH SENSE! Still rethinking my position...”

It’s a terrible idea, (bailout v 1.0) just awful. You know and I know, that the final bill will be minimally 3 times this $700 bil figure. That’s providing it doesn’t turn into the world’s longest pig feeding trough, which it already looks to become. Tranche #1 will only serve to justify traches #2, 3, and 4, because “we can’t stop now”. Feh. Once these spigots have been opened there will be no possibility of turning them off, but there is really no way to gauge whether this will work or not. WaMu alone took $233 billion out of FDIC, that’s 1/3rd of $700 bil in a frickin day. The sum total of other bad loans out there are probably at least twice this number, spread out over a hundred or more cruddy little banks. BUT YOU SEE, it is going to be a race to get a spot at the piggy trough, and you better know it will be the Wall St bankers who are going to have the inside track. So in essence, the guiltiest parties will have the first dibs on the glory pile.

And it’s a terrible idea because it is in the end a ratification of the financial shenanigans that produced the condition that led to the need for the bailout!! It doesn’t mean the next piece of paper you buy from GS rated by Moody’s as “AAA” will be materially different from dog turds. No. Those guys are still in biz and pumping paper and rating debt like nothing happened. Oh sure, maybe you, the debtholder, get your money back, thanks to the gullibility of the US taxpayer, but is this a road you’re eager to traipse down again? You’re OK being lied to, even conspired against (the sum of the bad paper PLUS knowing the ratings agys were either complicit or asleep) as long as SOMEBODY saves your butt? I don’t see it.

One time, in a former career as an engineer, I spec’ed two pieces of electronic measuring gear that went into a rack of other gear. Those pieces of gear were built using power transformers that were from a bad batch (and they weren’t built by the product mfr-—they were bought as parts) which later caught fire and burned up or threw gunky smoke on everything in the rack and the room the gear was in. The test gear manufacturer rapidly replaced ALL the gear in the rack, the rack itself, paid to clean up my client’s room, even compensated him some for lost studio time, and apologized profusely. The mfr paid $30K for his $3K wholesale worth of gear. Did I EVER EVER spec in that gear again? What do you think?

The issue, I say again, is trust. Transparency. Integrity. That includes culpability for having violated existing rules. The way to do that is to show that the purveyors were punished, to show that new regs and safeguards are in place, and to have those purveyors, if they are still in business, take serious hits to their balance sheets, and to ask nicely from that much less arrogant position for new business. Otherwise, you can expect capital flight from our markets, and my FRiend, that will not be pretty. THAT will be collapse. Stocks dropping 10-15-20% isn’t spit compared to they type of scenario we could see if there is global capital flight.

The bailout does not address trust. It sabotages trust. It ratifies the buddy-buddy network that got us here. It is furthermore a violent change of rules mid-game. IMO, it has every possibility of making things significantly worse.