Saturday, September 27, 2008


A number of "news" outlets have started calling the $700 Billion Dollar Bail-Out "The Rescue Package". Is it a Bail-Out, Rescue or Push-Out?

Commercial banks, savings and loans and insurance companies are being pushed out of business. The short answer to Al's question about bad bank management is that banks faced huge penalties and even criminal prosecution if they did not adhere to the Community Reinvestment Laws. The rating agencies and the banks were fooled into believing sliced and diced mortgage paper, being packaged and sold by the investment banks, was AAA credit. Now these big banks will buy up the smaller banks that have been duped.

There is a consolidation in progress. The $700 Billion will force this consolidation to move at a quicker pace. Forcing a bank to sell while the fire is burning down the town is not a Bail-Out or a Rescue, it is a Push-Out! The "big boys" stand ready to scoop up assets, like JPM scooped up WM a couple of days ago.

John Allison's letter to Congress was on the money. This crisis (as phony as the democrats hype about pending doom from global warming) could be solved by restoring sanity to the mark to market rules and by using only a portion of the $700 Billion to provide tax credits for home purchases. It is the dead housing market that is killing the banks. The Paulson Plan will simply allow the big banks to get bigger.