I know I told you Treasury Secretary Geithner was coming TODAY with his hat in hand, but because the Senate is still wrangling over Porkulus, he’s postponed his speech until tomorrow. Because, you know, it would look unseemly to ask the American taxpayers for $1.3 trillion MORE dollars for financial institutions on the same day the Senate may vote in the $800 billion dollar Porkulus.
So tomorrow, Goldman Sachs’ tax-cheat Geithner will try to make his case for shoveling another incredible sum of money into the black hole of the toxic banks. The $350 billion left in the TARP fund isn’t gonna cut it, so here comes TARP 2. Don’t forget, out of the first $350 billion Congress gave the banks, $78 billion went for overpaying for “assets”. Truthfully, we overpayed by $350 billion dollars. Exactly how will this work any better if we add another trillion dollars?
Right Soupers, we’ve talked a lot about the derivative securities insanity that has decimated our financial institutions. The amount of toxic derivative asset exposure held by these banks is approximately $600 trillion dollars. Please let that sink in for a moment. What in the hell will a trillion do, except put us into more debt for LITERALLY nothing. Let me explain.
Do not be fooled when Geithner tries to tell you that these toxic assets are home mortgages gone bad. They are not. Individual bad mortgages themselves are a tiny part of the problem. No, it’s what Wall Street DID with those mortgages…pooled them, then sliced them up, then put them into a myriad of tranches, sold them all over the globe, and the institutional buyers leveraged the holy crap out of them. At a 90%-10% ratio. The banks also bet your farm on other derivative “collateralized debt obligations” of every type you could possibly conceive. Enron thought up many of these. You see how that worked out for them, and we are still experiencing Enron’s fallout. Enron literally would create a derivative for anything you wanted. The banks got the bonus of AIG or MBIA insuring their “investment”. Here’s a great story about a high-level, but typical trader…picked for his gambling skills. Great insight into the derivatives games and arbitrages which are played out every day.
Our financial institutions played the derivatives game, (probably still are) and many of these toxic trades have yet to be unwound, ergo the $600 trillion dollar black hole of exposure. The derivatives are trash…worthless, kaput. What’s more, these extremely complex trades are SO beyond the Securities and Exchange commission’s ability to understand (ahem, Madoff), and bank regulators are dumber than the SEC. Trust me. Do you really think that Congress has a clue?!
Soooo, it’s time to clog the voicemails and crash the email servers again. Think of it as trying to kill two birds with one stone today…Porkulus AND Geithner’s grand grab. Our country will look like a third-world nation if our legislators put this debt on us. Economists are saying if we do nothing, this recession could be over within 6-9 months. If, however, our Congress and our President act in this incredibly dangerous manner, our economy will have a very, very hard time EVER recovering.
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