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“Pass the bailout or the market will tumble 3000 points!” It tumbled anyway…what does that mean?

October 11th, 2008 by admin | Filed under Daily News, Global Credit Crisis.

This was the threat that Henry Paulson and Ben Bernanke delivered to congress to try and squeeze the bailout through the tightest of holes…and they failed the first time. With a little elbow grease, some palm grease and a noose to scare people with, they got it through the second time. Phew bill passed, the market won’t fall 3000 points. Wrong again!

What does it mean that the markets caved in anyway? 

It means that the markets don’t like the bill, and more money from the US taxpayers will be needed to throw at this problem…but that won’t work either. Ben Bernanke and Hank Paulson were surprised by the problem when it came up. It was on their watch that these banks ran up the huge exposures to subprime. The allowed it to happen. The market basically has zero confidence in them. The public has even less confidence in them. Why the American Public is sitting by and allowing the very people who allowed this to happen in the first place try to fix the problem is beyond me. Why don’t the Congress and the Executive get put these idiots out to pasture?

Look this is the problem. The markets are working fine! Lots of companies made lots of mistakes…they go out of business….why is that a problem? Strong companies, who didn’t do lots of stupid things, come in a buy up any parts of the failed businesses that are worth money. It’s quite simple really…it’s a survival of the fittest. You mess up, you go broke. Simple. The market decides who messed up by sending their stock prices lower. It’s called price discovery. If no one is prepared to pay $10 for an asset….guess what? It’s not worth $10! Do you see how that works? But the toxic debt that the US tax payer has just been saddled with couldn’t be sold on the open market for the prices that the banks wanted to sell it for. Why? Because it’s not worth what they are asking! The market says it’s worthless. Listen, I have an old pair of socks….I want to sell them for $1m. Will anyone pay that? No…they aren’t worth that much money.

Let the banks go bust…let capitalism do it’s job…sure it will be rough for a while, but it will be faster and less painful if we let people and companies who made mistakes pay for them by standing up and answering to the market instead of crawling to the taxpayers.

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