Thursday, September 18, 2008

Where is Robin Hood?

Good Morning!

This was my thought this morning as I watched Paulson speak about his new Treasury plan. What we are witnessing if this bailout passes is taking money from the poor and giving it to the rich.

Where is Robin Hood? We need him now more than ever. It's obvious no one else in DC or on Wall St. is here to look out for our interests. Paulson says that this plan will bring confidence back to Wall St. and allow the banks to start lending again.

HA! Yeah Right. Who is ever going to trust Wall St. again after this mess? I have lost all confidence in the banking system. Why would I sit down and try to do business with banks that know they can commit fraud and then have the taxpayer pay for it? What incentive do they have to be ethical and conduct good business when they hold a "get out of jail free" card at my expense?

What's ironic is I think the banks will end up losing confidence in the financial system as well. What if the Treasury decides that the trust will pay no more than .30 on the dollar and forces the banks to sell the securities at a 70% loss? How are they going to feel after getting shafted like this?

Do you think they will be ready to run out and start throwing money out of helicopter's again and create another housing bubble after taking such huge losses?

The government plan is a short term fix and does nothing to resolve the long term problems of the economy. This is simply another delaying of the pain. Housing is still be at a level where no one can afford them, and the government seems hell bent at preventing housing from dropping to affordable levels.

Mr. Paulson needs to recognize that freeing up the banks books by buying their garbage will not guarantee that the banks will start lending agin at healthy levels. Hank cannot FORCE people to buy and he also can't FORCE banks to lend. In my eyes, banks and consumers will have very little desire to do business with each other.

The banks will be hesitant to lend if this legislation passes because their balance sheets will be a mess. Anyone buying a home will be hesitant to pull the trigger because their confidence and trust in the banking system will have been destroyed. The consumer will also be furious as their taxes go through the roof to pay for this whole mess. This trust could creat chaos instead of confidence.

My last point here is also what about all of the millions that bought houses at inflated levels? How are they not completely screwed by this bailout? What is going to prevent them from sending their keys back to the bank and saying the hell with this? If I was one of these buyers I would walk. Why pay double what you need to on a huge asset like a house?

Bottom Line:

I see this as nothing more than a big bailout of Wall St. This plan is very short sighted, and the government seems to be ignoring all of the blatant negative ramifications from pulling this trigger.

The economic ramifications here are also huge. The dollar will get killed on a trillion plus dollar bailout. This will lead to spikes in inflation, and our swelling balance sheet puts the credit rating of the United States of America in jeopardy.

Without a stellar balance sheet, our treasuries will be much less appealing foreign countries. Keep in mind, if this bailout goes through, we will have added close to $7 trillion dollars to our balance sheet. This is more than double what it was only a few weeks ago!

The series of events that have taken place in the last few weeks are unprecedented. Something has to be done to stem the tide of this, but I believe it should be at the expense of Wall St. instead of the taxpayer. We both will take losses here, but we all know who got the better end of this deal.

Wall St. has found their own sick version Robin Hood who steals from the poor and gives to the rich. His nickname should be Rob.

What I want to know is where is the real Robin Hood?

13 comments:

Minton Mckarkquey said...

"I feel like I'm taking freakin' crazy pills." How is this happening and nobody reacts? Doesn't anyone in the media understand basic economics?

Whichever way you cook this, the RTC is an unethical, dishonest, opaque, devious, unpleasant and doubtful dreadful idea. Since when did the nuts take over the nuthouse?

John Maynes said...

In Sherwood Forest. :-)

Art said...

Lawl, I doubt it's a coincidence:

"James Lockhart, director of the Federal Housing Finance Agency, said as part of a federal financial rescue plan unveiled on Friday, the government-sponsored housing finance companies were asked to "provide additional funding to mortgage markets through the purchase of mortgage-backed securities."

More and more it looks like a well planned contained "disaster". FED controls Fannie and Freddie, and now they will buy out CDOs from struggling banks. Pennies on the dollar, great move by the banks that control FED.

Jeff said...

Minton

I have no frickin clue. Its so frustrating, and it shows you how clueless J6P is.

As long as their 401k is going up everything is ok. Everyone is piling into stocks, and will all get slaughtered once again like every other bear market rally.

Art

This is a huge disaster. Paulson and his cronies don't put together legislation this comprehensive in one weekend unless the crap is really hitting the fan.

From what I hear, when people were flying out of money market funds is when the Fed sh*t a brick.

I was not all that impressed with this rally. We never got above where we opened

I am not impressed and it looks tired. Black Monday? :)

John Maynes said...

The action today was really disappointing for the bulls - gap up and then no action at all. The bears were still in hibernation after yesterday's rally and the bulls did everything to keep the market in the target window on an option expiration day. Monday and Tuesday will be crucial. If the market can hold it's gain we will see another leg up. If the market fizzles you can expect the worst. No ammunition left for Ben & Hank.

Jeff said...

Hey John

I agree. How about that? We found some common ground :)

Minton Mckarkquey said...

John - that's not true. Robin Hood's been smoked out since there was a rumor that he lives in trees and is friends with Osama. :-)

John Maynes said...

Jeff,

I am reading your blog everyday for months now and most of the time I fully agree. Bear markets are very hard to trade esp. when politicians interfere and tamper. In a bull market you just buy AAPL and that's it. Every week you will tell yourself: "Great, another week were I made some money." or "Doesn't matter that I lost this week, next week I'll make it up." Bear markets kill you in a split second.

Jeff said...

John

Yup

Glad you are enjoying the blog.

Many have told me that the bears and the bulls lose money in these types of markets.

I would love to get back to the old days where you just go "all in" long and make 15% a year.

Jeff said...

Maybe one of us needs to become Robin Hood!

Anyone have a horse and a pair of green tights?

Art said...

Sorry Jeff, but there is not much anyone could do, this world is ruled by greed, and people with money will always find the way to get what they want.

Look around the government is robbing people and giving, just giving money away to few special interests, and 99% of population doesn't give a daem, why? Because of effective PR that is feeded to them thru their big screen TVs.

A Robin Hood today would probably be arrested by NSA and lucky to go to Guantanomo, most likely will end up in Pakistan's torture chamber.

Just take care of yourself and your family and treat others with respect, there is not much else you could do to change the way the world works for money.

jeff said...

Art

Well said.

Minton Mckarkquey said...

I'm disturbed by a few comments here...

GET A GODDAMNED GRIP.

Jesus, people, some of you are so far gone. How can you possibly believe this crap? Jeff has been providing honesty for months and you're just killing everyone.