Wednesday, October 08, 2008

Equity Injection

Paulson just now is saying that the monetary injections will not necessarily save all firms. Gee, that's news, and who wants them all saved? Trust the government to save those firms that donated the most to the affected Congressperson's campaign.

In my blog "Mark to Market" I said that you save the ones who show promise to have the greatest market value after this economic shakeup is over. Part of my position, no original, is better described by James H. Stock, Chairman of the Department of Economics at Harvard commenting on "How the Government Stoked the Mania" WSJ, 10/3.

I partially quote, "This like saying the market for apples fails because consumers can see that some of the apples are damaged. Wrong. You pay more for the good apples and less for the damaged apples, or an average, if they are packaged together.

The problem mortgages were packed together and sold as mortgage-backed securities and collateralized debt obligations. That moment of resale is when the risks of those bundled-mortgages, whether Community Reinvestment Act sub-prime mortgages, should have been properly priced. If all had done their homework, MBS prices would have have properly reflected the nondiversiable risk of declining national housing values. If risk managers and regulators (we have the regulations, we don't need more; we need to enforce the ones already on the books) had been on their toes, those risks would have been managed appropriately. Markets fail when information is incomplete or manipulated, but everybody in the market knew or should have known about the CRA." (The Democrats in Washington sure did.)

We must demand transparency. We would not be in the housing mess right now if those in charge were doing their jobs and reporting it to the right people. We expect the "right people" to report it to us, the taxpayers.

The longer Paulson talked, the more the market fell. Same with Bernanke. The Street, the investor and the consumer have lost confidence of anyone knowing what has the greatest value and whose figures they can trust, in the most critical time of need.

As I close this blog, the market is down for the sixth straight day.

No wonder people are panicking. Personally, I want a Palin, or a Palin type, as president. I'm convinced she could do better than Bush, Obama or McCain. She is flawed like all of us, but she appears to be at least, real.

I and a lot of us, are weary of people who once elected turn out to be the hacks of special interests and not their real selves. When I left teaching and went into sales, my Chicago Branch manager, Charlie Morse, a Jew, told me to "just be yourself". Best advice I may have ever received as I was the leading salesperson in Peoria and Kansas City before moved to higher management in Dallas, Texas.

I mentioned Mr. Morse was a Jew only because I wanted my reader to know that at that time and the culture in Sperry Rand, he had reached the "glass ceiling" in the company hierarchy... Glass ceilings are not what they used to be. But lack of promotion today is many times falsely blamed on that magical "glass ceiling".

I am no economist, but I do know numbers and I do know when someone is talking about something they know little about. ( I can generally tell who is lying, even if only to self) We have a lot of these "talented" people who got us in this hole, now "trying" to get us out.

Doesn't seem to be working to well.

1 comment:

Merle Widmer said...

Congress, admistration and bureaucrats, do not save the bad apples. (bad mortgages, poory managed companies, the crooked, the too greedy, etc.). We have too many of them now. We need leadership who can weed them out and clean house.

I'm dreaming, it doesn't appear we have the leadership to figure it out. The house has gotten so big and convoluted that these elected, appointed, staff and lobbyists can't even find the kitchen.

Which reminds me that Harry Truman, my kind of Democrat, is susposedly to have said "if you can't stand the heat, say out of the kitchen".

I propose that's why congresspeople are staying out of the "kitchen" or is it we have too many cooks"?

It's the latter. We are a massive Capitalist country sliding into Socialism at a faster pace then sane people realize.