The Senate is running scared. The House is peeing in its pants. Taxpayers are foaming at the mouth over the idea of a bank bailout, but no help for struggling homeowners. And one analyst says the economy’s going to come crashing down on our heads May, 2009.
In the last six months, banks have had a field day “finding creative ways the lesson the impact of shaky loans on their bottom lines, shifting them to subsidiaries of changing their definition of non-performing a legal, if not exactly confidence-inducing strategy.” (Wall Street Journal)
The Journal further notes that, “The hide-and-seek game, which helps profits—and may appease investors—in the near term could result in a wave of defaults that eventually will catch up with lenders, decimating earnings.” (6-19-08)
Well, the shell game has been uncovered; the house of cards has come crashing down and the world’s financial markets are twitching more than a cat in a room full of rocking chairs. Congress, in a effort to appease the banking fat cats who contributed to this scenario wants to bail the suckers out at the expense of taxpayers.
That’s at the expense of taxpayers who are struggling under the burden of lost jobs, high fuel and food prices, decreased home values, foreclosure, foreclosure-generated crime in repossession stricken neighborhoods, not to mention the great possibility that their pension and retirement investments may soon be worthless or greatly depreciated in value. And, to add insult to their misery, our elected officials are planning to spend billions of tax dollars, burdening this and the next few generations with a bail out for banks who dug the hole that all of us are about to fall in to.
Analysts say banks have been playing games with bad loans for a while, trying to hide the depth of their risk from bank regulators. “Some banks have shifted troubled loans to subsidiaries, allowing them to escape scrutiny of federal regulators. That, too, could cause pain if the subsidiary collapses.” (Ibid)
In short, “we got game—you lose.”
The first draft of an economic report to Congress and Federal Banking Regulators reads:
First and foremost, we urge members of Congress to disregard data based on the list of troubled banks maintained by the Federal Deposit Insurance Corporation (FDIC).
The FDIC's list has only 117 institutions with $78 billion in assets. But given the current proposal for a $700 billion bailout, it is clear that Administration officials tacitly recognize that the FDIC list understates the problem. There are many more financial institutions at risk or in need of assistance with their toxic paper. (Martin D. Weiss, PhD, “Partial First Draft of Weiss Research's Submission to Congress and Federal Banking Regulators”)
This may be why the Administration wants an open ended bail out plan. The problem is much bigger than they want to talk about, but apparently they want the wherewithal to be able to be in the position to bail out more institutions than they are letting the public know about.
Weiss believes Congress doesn’t know about, or hasn’t been told the extent of the problem. Let’s say it again: