ARC's 1st Law: As a "progressive" online discussion grows longer, the probability of a nefarious reference to Karl Rove approaches one

Monday, March 17, 2008

Bear Stearns, Loon Democrats and Other Morning Musings

However much I want to say, "I told you so," I'll restrain myself.

I'll just think it really loudly.

I do not take any satisfaction in being right about the impact of the housing bubble bursting. The issue is a serious one. If housing prices continue to drop at a double digit rate, there are going to be a lot of banks with serious balance sheet problems.

I saw something this weekend that I have never seen before in my 60 years. Outside a bank here in Salinas there was a sign that read: "Home Tour of Bank Owned Houses." This an not be a good sign of things to come, at least not in the near term.

Having said that, that brings us to folks like Senator Shumer (D-NY) and his fellow travelers who are running around saying that this is the worst crisis since the Great Depression.

Oh puh-lease! 5% unemployment? Nobody flinging themselves out of windows from twenty stories up? Put a sock in it Senator! Besides, I thought that was the Bush I economy. Wasn't that Carville's rant for Clinton, Inc.? "It's the economy, stupid!"

No matter, assuming these idiots do not start a run on banks, it would be well if someone began to speak and act in a way that would get the financial ship righted.

We have at least two serious issues in the economy right now, the credit problem and the problem of the falling dollar. The solution for one compounds the other. To stop the shrinking dollar, interest rates must come up. To ease the credit problem, interest rates have to go down. Now that is a conundrum of the first order.

Watching what happened to Bear Stearns this weekend, a 30 billion dollar company instantly became a 250 million dollar company and vanished, one has to take this as a warning shot if not a near miss.

There is an interesting irony here, JP Morgan bought Bear. The namesake Morgan, JP Morgan, was a major character. He was the embodiment of the robber baron from financing the North in the Civil War through financing White Star Lines, the owners of the Titanic. Through it all he was a brutal and ruthless excuse for a human being. What happened this weekend would have brought a smile to the lips of his corpse.

Historical trivia aside, it is time to get our financial house in order. I suggest this means putting a lid on such stupid ideas as "stimulus packages," and finding a balance in righting the the credit markets and at the very least stabilizing the dollar. One can only hope that there is the political will and intellect available to get the job done before things really go down the drain and we do slide into serious trouble.



Your Co-Conspirator,
ARC:MontereyJohn

Comments (1)
Brian said...

Excellent post!

And re-reading your previous post, you were right about everything, except basically your last sentence (the wheelbarrow of money problem)...

I agree the dollar falling is a problem, but its a longer term problem. The credit liquidity problem is a short term problem. Which is why the Fed will cut rates again. And why they in effect "bailed out" BSC.

BSC's problem isn't an asset problem it was a liquidity problem. And there was essentially a run at the bank. Schumer's comments are the absolute WORST thing to do, as it will only prolong/exacerbate the problem.

BSC failing is probably not going to be an isolated event, but some banks failing will help signal the end of this crisis, not the beginning. There are banks/investment houses with sound balance sheets. JP Morgan will come out of this deal smelling like a rose (heck the BSC BUILDING is worth $8/share)...

We're not in a depression. We won't be as long as we don't take the protectionist over-regulation of the economy that some are advocating.