Monday, March 24, 2008

The Economics of Bush's Fear

This whole Bear Stearns JPMorgan Fed bailout/buyout has the smell of manipulation rising like the stink from the carcass of a dead whale washed up on the beach and left to rot in the summer sun for about 2 weeks. Or like driving behind a full Honey Truck, i.e. Environmental Services truck, at the end of its daily run on an August day.

“Also, under the new terms
, JPMorgan will bear the risk of the first $1 billion of losses if any of Bear Stearns' assets go bad. The Federal Reserve will run the risk for the remaining $29 billion, instead of being on the hook for all of the first $30 billion in losses, as was originally announced March 16.”

Well, that’s reassuring! And a classic in understated reassurance as well. Instead of being on the hook for 100 percent of the $30 billion, we only need to worry about 97% of it! Woo freakin’ hoo!!!

I should’ve known to buy some shares when it didn’t stay at $2 but was up around $4-5 last week. Now what we need to figure out is what this new deal means within the framework of the original deal. Was that original deal just a pure PR move to manipulate the markets as a calming gesture, was JPM greenmailing the taxpayers by demanding that absurd $2 share price, or was that a patriotic move by JPM to help ease the troubled financial markets, and just incidentally almost bagged a billion dollar savings on the deal?

Or was it as good a demonstration as you will ever see of why the almighty Free Market is not infallible, not free, not the answer to our financial woes. Because what I see in this debacle is fear, pure unadulterated fear, manifested as cowardice, a fear that drives a $22 billion market cap corporation a year ago to $237 million a week ago.

The fear that somebody is selling so I better sell too, until that panic selling drives a company over the brink on nothing but that oh so wonderful sense of the Market. The Fed stampeded Bear Stearns to accept JPMs offer because the Bushies are terrified of what will happen if the stock market collapses under the weight of their laisse faire regulation, the greed and corruption of their Wall Street cronies and supporters.

If the American People really take a hit because of the failure of the scams and schemes they have allowed and encouraged, BushCo can forget about privatizing Social Security, they can forget about hegemony in the Middle East, they can forget about a Presidential Library, because all of their deeds will become exposed in the unraveling of the American Economy.

Of course we'll be screwed and all that, we can forget about healthcare for all Americans, and retirement, and ponies, and stuff, but we will all know the truth about Bush's economic plan, and the value of a Harvard MBA.

No comments: