Wednesday, September 24, 2008

Bernanke and Paulson are lying!!!

This bailout plan is outrageous. It cannot be allowed to go through for a myriad of reasons. It is obviously incredibly expensive, but more importantly: the taxpayers and the politicians are being lied to repeatedly by the Treasury and the Federal Reserve as these people try to secure a trillion dollar blank check!

Bernanke and Paulson are presently trying to create the illusion that the government will buy all the troubled assets that banks and Wall Street firms have, and that this will stabilize the American economy and get everything back on track. They are trying to say that the government will buy the assets at a market price, and hence the risk to taxpayers should be low, because they can be sold later and the taxpayers can get their money back. Bernanke said yesterday in the Senate hearing that the buying process, by the government, would be like an auction at Sotheby’s, and that no one could know the price of an art piece before it is sold. This is an outrageously misleading comment that, unfortunately, the politicians in the Senate don’t understand. THERE CAN BE NO MARKET PRICE IF THERE IS NO MARKET.

 If I were to paint a horse, a house and a tree on a piece of paper and try to sell it at Sotheby’s, I don’t think anyone would buy my painting. It is worthless because there is no market for my paintings. It is the same thing with these bad assets that Bernanke and Paulson are trying to get the American taxpayers to buy. They know it, but they don’t say it!

Furthermore, the idea of selling these assets at a market price is ridiculous simply because of this fact: if there were a market for these assets, someone would have bought them already. In order for the banks and Wall Street firms to go along with this plan, the taxpayers will not only have to pay what the companies themselves say is the market price (which in reality is zero), but the taxpayers are going to have to pay A PREMIUM for these so called assets in addition to the fictitious price given to the Treasury by the companies themselves.

On another note, but one that strengthens the case against Bernanke and Paulson, the bailout of AIG was arguably illegal. Legally, the Fed can only bail out institutions that it oversees. It does not oversee AIG. It can, however, bail out institutions like AIG under extraordinary circumstances, provided that there are no private bids on the table. I’m not going to argue that there were no extraordinary circumstances, but there were other private bids on the table. These bidders wanted to change the management of AIG, and for that reason the bids were rejected. They could not legally do this AND be bailed out by the Fed, so we can add blatantly illegal actions to the list of recent accomplishments by Bernanke and Paulson.  

1 comment:

A.reader said...

"If there were a market for these assets, someone would have bought them already."

Agreed. If there were money to be made from this “rescue plan”, I don’t believe the Masters of the Universe would have allowed that opportunity to pass to the taxpayers