The stupidity of the lefty trolls is beyond comprehension. Would you have preferred a complete collapse of the economy? A 1932 style depression is that what you want? I had lunch yesterday with an investment banker from a very large bank and believe me, they were terrified. They saw the Angel of Death pass over them. W has a pair the likes I never seen. He did the right thing at the right time and without hesitation. Like or hate him, the man is decisive. A real leader. Congress was an irrelevant and foolish spectator. I have no doubt the Schumer & Co. were really glad it was W in command and not Gore, never mind Obama. A lot of the democrats have substantial amounts of wealth, wealth that was about to nearly evaporate completely. They too saw the Angel of Death on the verge of bankrupting them personally. The last couple weeks will be in the history books.
What Paulson has done (and Bush is the one who is ultimately responsible and gave the go ahead, it helps having an MBA in the White house instead of a lawyer) is awe inspiring. In less than a couple of days, the government came up with and implemented a multi-hundred billion dollar deal. A deal that not only kept us from falling into the abyss, but in the long run will net the government a colossal fortune. The government bought the crap loans from the banks and by doing so cleared their books enabling them to provide the credit without with the economy collapsing.
The loans were pickup at about 30% of face value. The purchase is being financed by one year T bills (that can be rolled over) at the interest rate of 0.65% The default rate would have to equal the loan value for the government to really lose money. More likely, the default rate under a very conservative estimate would not be more than 30%.
At worst the government would recoup a 40% return on its investment (less carrying costs, add those in and the worst return is 35%). The more probable default rate maximum would be 15%. Add back in the vig and Uncle Sam will in all probability net back $200 billion. The alternative in not acting is incalculable.
The seeds of this cancer were planted during the Clinton Administration. The rules and policies were implemented then. I am not going rant at Clinton over this. There are no virgins in this debacle. However lets not kid ourselves who set us on this course.
If one looks at the 90's as replay of the 20's it makes the picture clearer. A period of post war (Cold War) "normalcy" (like the period after WW1), a stock market boom, a general military reduction world wide ( like the 20's) and heady sense the party would never end. The Clinton people knew that stock market was going to collapse from its bubble and their solution was to create another bubble. Real Estate. Like I said, on this I don't hate Clinton because frankly given the temper of the times, there really was no other course of action except to kick the can down the road to his successor. Lets be honest, who wants to leave a great party, where the music is sublime, the food exquisite,the woman gorgeous, the vibe fantastic and the booze top shelf? While one is in the state of joy and enjoyment, just drunk enough to be having a blast but as yet so drunk as to start puking,who wants to leave and sober up? No, in that respect I don't blame Clinton because frankly if I were in his shoes at the time and under the circumstances I would have done the same. But unfortunately very few us can walk away at the perfect moment and thus we over do it and find ourselves retching over the toilet bowel in the morning swearing we will never do it again.
And after 9/11, the great shock that occurred, who would have honestly would wanted to administer the medicine and risk a deep, deep recession? Not me. So I don't blame the Bush Administration either. What makes the difference is when the moment of truth arrived, Bush did not flinch and acted correctly. The party is over and its time to sober up. Now if Congress and any sense and some guts, it would make the tax cuts permanent and kill the death tax. The quicker the better and the more confidence the shell shocked investors will have to take risks again. Obama's tax scheme right now will be fatal for the country. You can b.s yourselves all you want about tax cuts for the people and only raising taxes on the rich. But when the rich are less rich, they cut back on spending. Small business will have to cut back their expenses. if you are one of those 75% of the workforce who are employed by small business, be realistic about which is the easiest, fastest expense reduction the boss can make: here is a hint, look in the mirror. Manicurist, personal trainers, decorators, hair stylists and so on look in the mirror: who are your customers and what happens when they have less to spend and have to cut back on non essentials? Civil servants, you live off other peoples taxes so when you are employed by the city, county or state and Obama raises taxes at the federal level on the rich, what happens to the local economy and the tax revenues you depend on for your job? So for those voting on Obama with the intention of sticking to the rich, you will enjoy your tax cut while standing in the unemployment line humming brother can you spare a dime.
There is no limit to the stupidity of people who don't know how close they came to death.
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