House Eats Pork

Well, they did it!

Yesterday Congress passed the $700,000,000,000 bail out plan and President Bush signed it. Did you count those zeros? That’s seven hundred BILLION dollars.

On top of that, just to sweeten the deal to get the House to go for it, additional BILLIONS in incentives were added. Can you smell it? That’s pork fat, baby. Tasty pork fat oozing and dripping out of the mouths of your government representatives.

The bill would not, could not, did not pass without this added pork.

Now we all know America needs to get over this crisis, but I fear we will have to crawl through a field of broken glass just to recover from this cash-infusion-cure. Could the cure be worst than the disease?

Look, we already spent billions in tax rebates earlier this year followed by more billions thrown to Fannie Mae and Freddy Mac. Add the new monies just approved and it adds up to over a trillion dollars to pump up the economy. Where is all this money going to come from? May be we should borrow from China. Seems they have all our cash over the years.

Just to be clear, realize that the regular Joe on the street may not see any improvement…directly. And that’s if the plan works. At best, Joe…and Jane, may be able to keep their job…and maybe their home too.

What a day!

Around noon today I walked into the deli located on the first floor of our building. A great place, really. Serving gourmet sandwiches, salads, drinks and a variety of other wonderful items. Today, though, they served a bit of news that was hard to swallow.

Located above the refrigeration unit at the corner of the room sits a small television which is always tuned to a financial cable channel. You know the one––it has the running ticker symbols scrolling along the bottom of the screen.

Squinting at the small print from a distance did not hide the fact that today made history. To say the least, it was an unwelcomed surprise to see the DOW drop over 500 points. By day’s end, the DOW made a record drop of 777 points!

In Vegas, if you got three sevens in a row on the one armed bandit, you’d have a pretty big smile on your face. On Wall Street, that’s another matter.

So what happened?

Unless you’ve had your head in the sand this past year you would know that the subprime mortgage market has been in full melt down resulting from an untold number of home forclosures, the likes of which this country has never seen. This in turn has resulted in mondo problems for large financial institutions such as Wachovia, Washington Mutual, AIG, Fannie Mae and Freddie Mac.

Well, the big boys in government, not wanting the free market to take care of itself, decided to try and avoid a worse case scenario by injecting SEVEN HUNDRED BILLION DOLLARS to buy up all those bad notes. The thinking is that this would allow the major institutions to stay afloat.

Interestingly, the stock market was poised to accept this plan as a good idea. This was evidenced by the rapid decline of the markets after news today of failure to pass this legislation.

In the House, two-thirds of Republicans and forty percent of Democrats rejected this plan. When was the last time this many on both sides of the isle voted no together? I guess it shows that the legislative branch of government can work together.

In spite of the market downturn, many will probably see the negative vote as a blessing in disguise. After all, to spend $700 billion of tax payer’s money on a problem of this magnitude, without any guarantee of success, is betting Lady Luck would look in your favor. And what a gamble this is.

We simply don’t have any experience dealing with a problem of this magnitude. The closest was the formation of the Resolution Trust Corp twenty years ago which took in less than a hundred billion, and that lost money when all was said and done. Who’s to say that this time around will be any different?

Let us hope that a better more thought out plan comes to fruition. Like they say, “Haste makes waste.”

What a day!