The American Dream: Bankers take hundreds of billions in pay for making reckless decisions, then let the Fed bail them out when it all blows up.

Stop what you're doing and take one minute to sign the Taxpayers Against a Wall Street and Mortgage Bailout online petition

8,200 signatures so far today. Come on folks - and fellow bubble bloggers - let's get that to 80,000

Sign here. It's easy.

To: President Bush, Senator Hillary Clinton, Senator Christopher Dodd, Senator Charles Schumer and members of Congress

Please do not support the efforts to bail out mortgage holders and mortgage lenders with my tax dollars.

As a responsible citizen, I do not believe it is right for you to ask me to pay for other peoples’ financial excesses, especially since a bailout encourages lenders to continue making predatory loans, with the assumption that taxpayers are on the hook. Further, we believe that the liability of the mortgage mess should NOT be shifted to GSE’s Freddie and Fannie.

I appreciate the goal of helping people to have access to housing, but any proposed bailout will only reward lenders and borrowers who acted irresponsibly, and it will punish people who work hard and diligently manage their finances by not buying houses which they cannot afford.

The housing market has begun a process of correction. This is necessary in order to keep housing affordable in the long-term. Let the market correct so we can achieve stability again, and people are able to save and afford the house of their dreams over time. That really is the true American Dream.

Sincerely,

The Undersigned

So now we know how close we came to a complete and total meltdown of the global financial system as Ben Bernanke spills the beans. So, who's next?

"Too Big to Fail"

You'll be hearing a lot of that in the next weeks, months and years.

Fannie. Freddie. Lehman. Washington Mutual. Countrywide. IndyMac. Ambac. Sallie Mae. FHLB. Pulte. BofA. Wells Fargo. Merrill Lynch. Goldman Sachs. Hell even Home Depot. Too big to fail. Big Daddy Government will be there for you, dishing out trillions to keep the Big Lie alive.

Here's Helicopter Ben today, telling the world what we already knew. The US government will be bailing out stupid companies who made stupid decisions that were run by stupid and corrupt managers because the stupid taxpayers and stupid media do nothing to stop them. Northern Rock and Bear Stearns were nothing. Just wait.

On March 13, Bear Stearns advised the Federal Reserve and other government agencies that its liquidity position had significantly deteriorated and that it would have to file for Chapter 11 bankruptcy the next day unless alternative sources of funds became available.

This news raised difficult questions of public policy. Normally, the market sorts out which companies survive and which fail, and that is as it should be. However, the issues raised here extended well beyond the fate of one company. Our financial system is extremely complex and interconnected, and Bear Stearns participated extensively in a range of critical markets.

With financial conditions fragile, the sudden failure of Bear Stearns likely would have led to a chaotic unwinding of positions in those markets and could have severely shaken confidence. The companys failure could also have cast doubt on the financial positions of some of Bear Stearns thousands of counterparties and perhaps of companies with similar businesses.

Given the current exceptional pressures on the global economy and financial system, the damage caused by a default by Bear Stearns could have been severe and extremely difficult to contain. Moreover, the adverse effects would not have been confined to the financial system but would have been felt broadly in the real economy through its effects on asset values and credit availability.

To prevent a disorderly failure of Bear Stearns and the unpredictable but likely severe consequences of such a failure for market functioning and the broader economy, the Federal Reserve, in close consultation with the Treasury Department, agreed to provide funding to Bear Stearns through JPMorgan Chase. Over the following weekend, JPMorgan Chase agreed to purchase Bear Stearns and assumed Bears financial obligations.

HousingPANIC Quote of the Day

"Our job is not to bail out imprudent decisionmakers or errant bankers, nor is it to directly support the stock market or to somehow make whole those money managers, financial engineers and real estate speculators who got it wrong. And it most definitely is not to err on the side of Wall Street at the expense of Main Street."

- Richard Fisher, head of the Reserve Bank of Dallas in January 2008, who must be enraged that the other corrupt and clueless monkeys he hangs out with on the Fed are indeed intent on doing EXACTLY what he says the Fed's job is NOT.

Is Ben Bernanke trying to create a new stock market bubble, to replace the housing bubble, which replaced the stock market bubble?

And will he succeed?

We've lost our manufacturing base, incomes are flat, the spending of the past six years was done on home equity, consumer debt is now the only new way to bring new money into the system, and if we don't get a new asset bubble soon to create wealth and drive spending, we're screwed.

Consider these great quotes, from Bubbles Ben Bernanke, speaking right when the housing bubble was inflating in 2002. You owe it to yourself to read his whole reckless speech. You'll better understand what may be coming next.

And my take - don't be a bull, don't be a bear. Be open minded, be prepared to react to new data, and when they change the rules to the game, remember they control the game.

"Aggressive bubble-poppers would like to see the Fed raise interest rates vigorously and proactively to eliminate potential bubbles in asset prices. To be frank, this recommendation concerns me greatly, and I hope to persuade you that it is antithetical to time-tested principles and sound practices of central banking."

"The Fed cannot reliably identify bubbles in asset prices. Second, even if it could identify bubbles, monetary policy is far too blunt a tool for effective use against them."

MORAL F*CKING HAZARD

Paulson, Bernanke, Clinton, Bush, bankers, lenders and anyone involved in the stupidest free market intervention idea I've seen in my lifetime need to pull their heads out of their as*es long enough to read this definition of moral hazard.

We aren't run by monkeys. We're run by dangerously incompetent and corrupt people who need to HEAR THE OUTRAGE of the public (and the lawyers) on this issue.

Moral hazard is the prospect that a party insulated from risk may behave differently, for example, that an insured party's behaviour will be more risky than it would without the insurance.

Moral hazard arises because an individual or institution does not bear the full consequences of its actions, and therefore has a tendency to act less carefully than it otherwise would, leaving another party to bear some responsibility for the consequences of those actions.

Failed housing gamblers planning march on Wall Street on December 10th. What's next, slavery reparations and craps player bailouts?

[screw it - I'm posting tonight - there's just WAY too much going on with the housing crash to leave you all hanging...]

__________________


I'm hoping the "I lost at craps in Vegas" movement gathers some steam. I could use a bailout after my last trip to Nevada.

Anyone ever hear of contracts? Anyone ever hear of laws? Anyone ever hear of personal responsibility?

This is just sickening. Yet watch our bought-and-paid-for-politicians lap it up in an election year. Hillary is already on the case, calling for a hilarious freeze on foreclosures. If she's elected president (she won't be), I'm not coming home.

Did the US Fed and Bank of England just sink into a housing crash moral hazard abyss?

Have the recent moves of the US Fed and Bank of England to bail out failed mortgage gambler banks at taxpayer expense left you with a sickening feeling in the pit of your stomach that nobody competent is minding the store?

Here's the word on the street from the UK, where moral hazard is raging and a great collapse is now assured.

The first thing to remember about the collapse and de facto nationalisation of Northern Rock is that it was essentially about house prices. Since ministers have done so much to inflate those prices, it is understandable that they should feel obliged to relieve Northern Rock's depositors of any risk.

I repeat, this all began with houses. For half a century home ownership in Britain - termed a "right" by Brown - has been indulged beyond economic reason. It has sucked savings out of the productive sector. It has tied up pension money that should be helping the economy in the stock market. Its tax reliefs have immobilised young people who, in most countries, remain in the more fluid rented sector until later in life. It has led to mass hysteria with every price rise or fall. Housing sees the British, their rulers and their newspapers, at their most innumerate and irrational.

HousingPANIC Stupid Question of the Day

Regarding the "cash is king" mantra, as written about in Manias, Panics and Crashes:

The final phase is a self-feeding panic, where the bubble bursts. People of wealth and credit scramble to unload whatever they have bought at greater and greater losses, and cash becomes king.

Is "cash is king" still relevant today (especially non-US$ cash)? Or, because of an incompetent, negligent and corrupted Fed, is it truly gonna be "different this time",

The Bank of England, understanding it's not their role to bail out mortgage gamblers, holds tight [UPDATE - BofE DOES 180, BAILS OUT NORTHERN ROCK]

[FLASH - UPDATE - 180 DEGREE REVERSAL FROM EARLIER POST: MERVYN KING AND THE BofE JUST HAD TO BAIL OUT A FAILING BANK HERE IN ENGLAND - YES, IT'S THAT BAD. THIS IS WHY BANKS AREN'T LENDING TO EACH OTHER RIGHT NOW - THEY DON'T KNOW WHO'S ABOUT TO GO UNDER. NOW WE'RE FINDING OUT, AND NOW ALL CENTRAL BANKS ARE IN PANIC MODE]

[UPDATE #2 - BANK RUN NOW UNDERWAY ON NORTHERN ROCK LOCATIONS IN ENGLAND... NEW PHOTO ABOVE]

The amateur-hour ECB and we-love-bubbles-US Fed are lending could-fail-soon banks hundreds of billions of dollars and Euros on demand, with (get this) toxic mortgage CDO's serving as collateral. Oh, man, is this gonna end badly. But cheers to Marvin King at the BofE for holding tight thus far, and here's hoping Ben Bernanke doesn't have his head up his ass on Monday and cut rates. Discount window, OK, mess with rates, Moral Hazard.

As one observer said about King and the BofE:

"The Bank is right in taking this position and the other central banks are wrong in apparently encouraging moral hazard."

Never have truer words been spoken. [UPDATE - NEVER HAVE SUCH BALD-FACE LIES BEEN TOLD]

And never have the risks of Moral Hazard been greater than they will be on Monday. If Ben cuts, gamblers and bubble-blowers will know that the Fed will always be there if things go wrong, so the next bubble will be even bigger. And even more hurtful. Just look what happened when Greenspan f*cked up and bailed out the dot-com gamblers. The housing bubble was the worst bubble in human history.

Here's more on the Bank of England holding rates tight, although give him a few English bank failures (they'll come) and we'll see if he can stand the heat from No. 10. [UPDATE - MERVYN KING COULDN'T STAND THE HEAT FROM NO. 10, AND KNOWS THAT IF HE DIDN'T DO A 180 TODAY, NORTHERN ROCK WOULD HAVE FAILED. MEANWHILE MERVYN KING LOOKS LIKE A LIAR, HYPOCRITE AND A JACKASS WHOSE WORD IS WORTHLESS]

No time for drastic measures, says King

Bailing out commercial banks would “sow the seeds of a future financial crisis”, Mervyn King, Bank of England governor said on Wednesday.

In making clear that the Bank of England had no intention of following in the steps of the European Central Bank in lending billions to financial institutions for three months, Mr King pointedly distinguished the Bank’s strategy from that of its central bank peers.

In a letter to the Treasury select committee, the famously unflappable Mr King acknowledged that the path ahead was “uncertain”, but made clear this was no time for drastic measures.

HousingPANIC Stupid Question of the Day (and loud and clear message to Congress and The Fed)

Does the government or Fed have the moral obligation to bail out failed housing gamblers and foreclosure "victims"?

Open Thread: HP'ers let Ben Bernanke and the Fed know what's on your mind

And advice for Ben for Monday?

Cut 1/2?
Cut 1/4?
Hold?
Raise 1/4?
Quit?

HP's advice: Hold steady, and send this message to failed flippers, housing gamblers, reckless lenders, stupid builders, ramen eating realtors, immoral mortgage brokers and brain-dead bankers: We're done with bubbles. You made your bed, now sleep in it.

Fed Treads Moral Hazard

Wall Street has a dream: that the Federal Reserve will rescue financial markets with a sharp cut in interest rates.

Behind that dream lurks a problem, something financial people call moral hazard.

Moral hazard is an old economic concept with its roots in the insurance business. The idea goes like this: If you protect someone too well against an unwanted outcome, that person may behave recklessly. Someone who buys extensive liability insurance for his car may drive too fast because he feels financially protected.

FLASH: Bernanke having closed-door meeting with homebuilders who f*cked America. So when does he meet Americans f*cked by the homebuilders?

If Bernanke and the Fed cut rates (when they should be raising) to bail out the hedge funds, banks, housing gamblers and homebuilders who made poor decisions these past few years, then all bets are off, especially when it comes to the US dollar, which will immediately and irreversibly melt down.

If the Fed cuts to bail out the bad decisions of homebuilders, housing gamblers and hedge funds, even after Bernanke expressly ruled this out, the moral hazard implications will be off the charts. Kinda like giving in to hostage takers - it only causes more hostage taking in the future.

What will Ben do? Moment of truth HP'ers.

I think he's a puss, run by the bankers and Bush, and cuts 1/4. He'll say he's cutting because of the downturn in the economy due to the housing crash, and softening of the "official" government inflation reading, but we'll all know he'll be cutting to bail out the builders, hedge funds and banks.

But even a cut, and as the economy melts down there'll be cut after cut after cut (see Japan), it won't matter. Housing prices will continue to fall, demand will continue to shrink, the dollar will plummet, and this Ponzi Scheme will come to its rightful and natural end.

It hath been foretold.

Builders Meet With Fed to Discuss Mortgage Crisis - Industry officials are likely to lobby for an interest-rate cut and assistance for struggling homeowners.

Some of the same builders whose companies created the excess inventory that helped push the housing industry into its current downturn are reportedly meeting today behind closed doors with Federal Reserve chairman Ben Bernanke to discuss what can be done to prevent owners from losing their homes to foreclosure.

The actual agenda of the meeting, however, is not completely clear, as NAHB - which arranged this meeting through its High-Production Homebuilders Council - and spokespeople for several large home builders declined to answer questions about it.