29 September 2008 - 12:05Market Commentary 9/29/08

Even some members of Congress are this morning pointing to the problems which caused the current situation. Some are pointing out that the profits from the unscrupulous activities which lead to this crisis were privatized, meanwhile through Freddie Mac and Fanny Mae the losses were socialized. Secondly the SEC have rules in place that allow banks to lend 10 times the amount of money they actually have. Thirdly that the SEC is requiring the banks to mark-to-market those instruments that they were selling to each other and for which there is no market. Therefore since there is no market, the assets being declared worthless even if the debtors involved are paying on time. These same instruments which they banks are now eager to dump onto government books specifically because there is no market for them. So what was the solution offered to the American people? Dump theses assets onto the books of the Federal Government and in case they actually turn a profit in some future date buy them back.

Hopefully now the problem is clear for all those who have been kept in the dark purposely by those who count on the ignorance of Congress and the public to carry out their nefarious plots. It is not only the banking sector who is responsible for this debacle, but also the government’s failures in oversight of the banking industry and their allowance of unsafe banking practices. To think that now all of a sudden the government will reverse course and fix everything is very naive. The passage of this bill does nothing to resolve the flawed policies of the government or end the Federal Reserve which is what is really necessary for any meaningful reform. Now Congress is having the problem fostered by the executive branch and the banking cartel AKA The Federal Reserve dumped on them. The biggest tragedy is now Congress believes it is their job to manage the economy, if they manage it anywhere near as badly as they do the Federal Government’s finances they will be making things much worse.