Against the bailout

Over the last three days, Michelle Malkin has been posting one entry after another expressing total opposition to the administration’s proposed bailout. Go to this page and scroll down to the articles listed under “previous.”

As of tonight, House Republicans have apparently blocked a bailout agreement that had been supported by the administration, Senate Democrats, House Democrats, and Senate Republicans. The House Democratic leadership is on C-SPAN now, talking about how shocked and disappointed they are by what they describe as the House Republicans’ unexpected opposition. Could this be a return of the great days of 2006, when the House Republicans stood like a stone wall against the comprehensive immigration bill that had been pushed by the Republican president and passed by the Republican Senate?

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Geoffrey in Connecticut writes:

The Bailout, or “How are the mighty fallen and the providers of credit perished!”

It’s a scam.

Forget the liar loans to drywallers from Tijuana. Forget the “mortgage backed securities’ derivatives. Forget Bawny Fwank and Chris Dudd. Forget the greed of the Great Men of Wall Street.

Here’s what really happened.

Companies holding mortgages over-rated them in order to make their bottom lines look good and have everyone qualify for their bonuses. The housing values hiccoughed and these mortgages lost some of their value, so the companies looked less stable and had (effectively) less money to lend. Day to day credit—the lifeblood of the “industry”—was affected because companies’ ability to lend (and therefore borrow) was somewhat curtailed. Like all complex machinery it only takes one single yet significant problem to bring the whole thing to a halt.

Now this is where it gets interesting.

The key to the scam is Warren Buffett buying seven percent of Goldman Sachs for $5 billion.

The basic upshot of this debacle is that previously fine and healthy companies have become temporarily cash-strapped and lost large amounts of stock value. Predators are now picking the wounded off. That’s how WaMu can go from fine and dandy to bankrupt to owned by J P Morgan in 48 hours.

This brings us to Fannie and Freddie.

These quasi-governmental agencies owned the vast majority of the dodgy mortgages because they were created and run by socialists for the benefit of their constituencies.

Now they have no money—all gone! Loaned to lazy and improvident minorities and handed out in bonuses to the various bosses (two of whom are now advisors to The One).

Like all minorities down on their luck they turn to The Man and hold out their hand—“give me a dollah.”

So in come Paulson and Bernanke.

Their constituencies are the previously mentioned Great Men of Wall Street.

They want to free up this credit problem before any of their guys lose their bonuses. So in a classic stick and carrot move they go to the dumbest group of folk who actually have the money to spend: the Congress. They say: Let us take your money (the people’s money) and buy these toxic mortgages from anyone who wants to sell. Since we don’t really know how much they are worth we will buy them at the lowest possible amount. The seller will be happy to get rid of them and get his creditworthiness back. Then we will look them all over and work out how much they are really worth (the vast majority won’t go into foreclosure so the collateral is still the underlying property). Once we have determined their real value we will sell them back to The Great Men of Wall Street at a profit, but still at a percentage of their real worth. Win win! Credit is restored (so you can buy some smaller companies cheap) Government makes more money to spend on social engineering. Wall Street gets its mortgages back and still makes money on them.

The stick? Oh yeah if Congress doesn’t go through with this the sky will fall. And Paulson and Bernanke can guarantee that they will make sure the sky falls.

Oh yeah. The money donated from Freddie and Fannie to political candidates comes from bundling. One professional bundler gets small donations from “employees” that amount to a large amount. It’s a way for a company to give money to a candidate legally.

Posted by Lawrence Auster at September 25, 2008 10:47 PM | Send