Hughesair (Inflection Point)

Retired physician and air taxi operator, science writer and part time assistant professor, these editorials cover a wide range of topics. Mostly non political, mostly true, I write more from experience than from research and more from science than convention. Subjects cover medicine, Alaska aviation, economics, technology and an occasional book review. The Floatplane book is out there. I am currently working on Hippocrates a History of Medicine and Globalism. Enjoy!

My Photo
Name:
Location: Homer, Alaska, United States

Alaska Floatplane: AVAILABLE ON KINDLE

Sunday, September 28, 2008

Bailout

Look out below, well look carefully. With anger on the streets, the negotiators amazingly came together to avert a tragedy. It isn’t over though.

This thing is the result of decades of privatization and deregulation of public institutions. We might have gotten the hint from the HUD fiasco, later the Savings and Loan and now the Sub-prime Mortgage crisis. The three mortgage banking fiascos were clearly criminal in origin; people went to jail. There should be prosecutions with this one too, but the biggest crime is one of neglect, a neglect of oversight and regulation, and it was intentional. The “Daddy Warbucks” philosophy fails ultimately in greed. The trickledown theory works up to a point, but when it comes to public infrastructure, tight control and adequate funding are essential. Rather than a bail out we might think of this move as arresting control of a runaway mortgage banking scheme, a regulatory misadventure. Unfortunately it extended into derivatives, insured investments and thus investment banking.

The fact that there is an agreement and, hopefully, legislation, allowing Treasury to take control --- will indeed arrest the panic and stave off stock market disaster, but --- there is open consumer revolt on the streets. There is liquidity weakness and the banking crisis extends into foreign markets maybe not equipped for their own bailout.

“Please listen carefully as our options have changed,” about sums up the low point in consumer protection and support. A strong reaction is past due. I don’t think our government recognizes or appreciates the anger on the street or the consumer revolt that may be brewing. They are certainly aware of the market weakness and the overseas fallout from our problems. Some of this may be good. Consumers are getting the short end once again while the fat cats and perpetrators get off with their golden parachutes. If there is enough of a cry from the public, there may be prosecutions and limitation of management perks when government takes a majority position with these companies.

To the point of liquidity and the budget, Federal revenue trails last year, month to date by 9 and a half billion. The National debt has increased as of last Thursday 870 billion year-over to 9.784 trillion. (This is like having a 987,000 mortgage with a 221,700 income and a 1.14 million net worth.) That is a debt 4 1/2 times your annual income --- kind of like a sub-prime mortgage, eh.

As for the 700 billion -- that won’t come all at once and it will buy back what should have been privatized public assets, subsidized mortgages. These may with enough time grow in value negating their cost. No one but Treasury can afford that time, however. Some of the mortgages are good as gold. The trouble, though, is in the way they are packaged, no one knows which ones are good. Sounds like a shell game, doesn’t it.

Having said too much, I’ll watch the market in the morning and hope we make it through to November.

0 Comments:

Post a Comment

<< Home