"A government big enough to give you everything you want, is big enough to take away everything you have"
Thomas Jefferson

Thursday, September 25, 2008

It Is All About Liquidity

The financial issue is about liquidity; yours, the government's and Wall Street's liquidity. You want to keep your liquidity or be able obtain it, you want safe investments, Wall Street firms do not have any liquidity and the government is the only entity who has the liquidity to assist Wall St.

Many will say let the free market enterprise system run its course and the wheat will be separated from the chaff. The President said it best last night, "to step in with dramatic government action, or to stand back and allow the irresponsible actions of some to undermine the financial security of all."  This sums up the necessity of government action for the greater good.

The housing market was a house of cards with large amounts of capital from firms to invest in mortgages, cheap money for borrowers, demand for houses outstripping supply, and the public willing to take on personal debt without regard of ability to pay. This was all supported by politicians, like Chuck Schumer, who were clamoring that everyone should own their own home again without regard to ability and lender's willingness to participate, but, eventually the situation overheated and tumbled.

Supply of housing is up, prices are down, major investment firms have no liquidity, homeowners are upside down and over extended in mortgages, and now the politicians who championed home ownership are struggling with a bail out package.  The government is the only entity at this point who can invest in bad paper with time to wait out the storm for an increase in the value of mortgage backed securities as mortgages are paid off. 

President Bush was wise to invite Obama and McCain back to be included in the solution; this must be a bi-partisan effort for the greater good, politics aside.

Government will likely succeed with pulling us out of this mess by restoring liquidity which will restore lending to consumers with the ability to borrow, but, on the back side of the bail out there will be the price we all will pay; consumers, lending and investment firms will be subjected to more stringent regulations.

23 comments:

RWiley said...

The only reason why the government has a supply of money (liquidty) is because they require you and I to pay taxes and they still have a few foreign countries who are still willing to lend us money and increase our debt.

The bad paper that we taxpayers just purchased is worth 17 cents to 20 cents on the dollar at its best and it will take decades for that to reach a whole dollar. And that will be a result of inflation.

You are showing your ass, PVI !

Political IV said...

You are showing your ass

No, you were just looking in the mirror.

So, no $hit RWiley, you must be a brain surgeon with all your knowledge.

And if you are paying attention the bad paper is worth around 0.10 on the dollar and perhaps will be sold at somewhere around 0.30

Oh and Warren Buffet is buying some of that bad paper also.

Anonymous said...

Bring on the Republican ATV riding yahoos. We are anxious to see how they will help PVI defend buying $hit for far less than what it is worth.

Anonymous said...

Warren Buffet's generous offer to back Bush by being so "willing" to purchase bad paper is most likely the fact that he will broker it for the taxpayers. He will cherry pick the paper and pass the worse on to PVI and wiley and the rest of us. We are all showing our ass here.

Anonymous said...

Buffett is buying preferred stock. Are we? Because there's a big difference, isn't there?

Anonymous said...

on this same topic today, Sarah Palin showed her ass, too. And frankly guys I could not pay attention to one word she said.

Seriously, she had no idea what the bailout meant.
You can check it out on Couric's site.

You are right, PVI, someone will get rich but it won't be the taxpayers.
You can try to explain it away with all your liquid mumbo, jumbo, PVI, but we have been screwed.

Anonymous said...

"she had no idea what the bailout meant."

I am home sick, and I say the Sarah Palin-Couric interview. It was painful. This is the John McCain VP choice that John McHugh said was a stroke of genius.

Watch it if you dare.

Anonymous said...

John McCain arrived late in Washington, after the bailout agreement was made. The proposal was agreed to yesterday, delayed so it could look like he took part, but he still didn't make it.

McCain Stops at Senate en Route to White House

Anonymous said...

Warren Buffet is not buying any bad paper, PVI. He is buying direct preferred shares of the failing Goldman on the speculation that after the taxpayers cleanse the company of it's worthless junk, the value of the company stock will increase and he will add to his fortunes.

This was explained in the Wall Street Journal and has been all over the financial networks.

I know we are all looking for a hero in all this, but it sure as hell isn't Warren Buffet.

Anonymous said...

No! No! No! I have a 786 credit score, yet I carry a mortgage principal less than I earn in a year! What do I get for making all of the RIGHT decisions? Penalized to bailout those who made all the wrong decisions motivated, no less, by plain and simple GREED. It's wrong! Wrong! Wrong!

Anonymous said...

Did PIV write this post or did Sarah Palin? It sounds just like Sarah Palin again showing her lack of knowledge about anything.

Anonymous said...

That was from Forbs.com

Anonymous said...

I love the fact that PIV has all the democrats here. They need to get a life.

Anonymous said...

You know IV, you don't even see Aubertine's fingers moving when Wiley types.

Anonymous said...

Wrong....

Warren Buffet is not buying the same crap that would have become ours by the Paulson Plan which by the way is on hold and may not even be adopted.

RWiley said...

To anon above, the name is rwiley. I prefer not to hide behind anonymity, use my real name, keyboard for myself, and I am not ashamed to support Darrel even though his decisions do not always go my way.

To PVI: I simply disagree with your article for many reasons. i.e. The government is the only entity at this point who can invest in bad paper with time to wait out the storm for an increase in the value of mortgage backed securities as mortgages are paid off."


It is not the job of the Government to reward corporations for their failures. That is like giving a stray dog a hot dog and then telling him to go home.

That type of assistance will be never-ending as was proven by last night's failure of WaMu.


bush's friend, a capitalist, named dale
said, no way, to a minimum wage scale,
no regulating occurrence
or government interference
unless i should happen to fail

Political IV said...

Rwiley,

I can appreciate that you disagree with me.

The last line "you are showing your ass, PVI" is what I took issue with.

You like to correct people and let them know it is rwiley, ok, it is PIV not PVI

RWiley said...

You are right PIV. I should have been more careful keyboarding your name. It was careless of me.

Back to the bailout:

John McHugh, who up to this point, has given George Bush a blank check on everything, is now not so sure that he will give him the same with the bailout. It does not take a brain surgeon to figure out it was no bump on the head that caused his most recent political re-birth.

It is sad that it had to get to this point before John caught on. If Mr. McHugh had paid attention, he could have been a more effective Rep.

Especially since he represents the Solid North. Being so assured of the Republican vote here, and his job security, he could have had great influence and worked to prevent the horrible mistakes of the Bush Administration which led to this financial conundrum.

But, he will most likely be elected again and we will continue to wallow in his debris.

Anonymous said...

This problem started at the top and filters right down to the over extended home owner. Buying a $300,000.00 on a family income of 65,000./year will catch up with you sooner or later. Shame on legislator and banks for losing up lending rules creating an increase demand for housing. This increase in demand was met with insufficient supply which leads to inflated prices. The assessors continued to inflate prices, banks continued to increase lending, but we must of seen the crash coming. Why look ahead when the money is roling in wheel barrows.
Do I have a deal for you buy that house for $350 K on a $65 K budget, pay only interest (because we all know you could not afford to pay on the principle), sell it in 3 years and make $200 K. It worked for awhile and all of a sudden 1 house did not re-sell, then another and another, and another. I now have a $350 K house worth $100. K.
Now the rich will clean-up again; they will by that cheap dollar or that cheap house and turn over when the government bails out the private sector. We will just keep scratching by. We need to be responsible buyers. Remember if it sounds to good to be true, it is!
It time to vote again, register, and get out there. Influence the future choice and be active.
Thank you,
Poly Info Mation

Anonymous said...

What's the big yank about "liquidity"? Does anyone remember the early 1980's? 18%-19% interest rates; you couldn't beg, borrow or steal a mortgage to go to Hell for. Yet, we came through that O.K.

RWiley said...

"What's the big yank about "liquidity"?"

The big yank about liquidity is that George Bush's computers have discovered that a few of us Americans still have a few bucks in their savings account and they want to have at it and find a way to blame the Democrats. However, I don't want to give them mine. Unless, of course, they render me.

RWiley said...

Oh Oh. You know we are in deep financial $hit when John Boenner comes on the tube and declares that the Republicans are only interested in the American taxpayer.

Anonymous said...

This is nothing short of GWBush & Co. making an eleventh hour raid on the Federal Treasury for the benefit of his cronies on Wall Street.

Did the Wall Streeters include us laymen in their annual Bonus Bash? Distributing Billion$ of OUR MONEY upon themselves in stolen profits from YOUR 401k. Did you know that Lehman Bros, in the throes of their bankruptcy, protected 2.5 Billion dollars to be paid in annual bonuses to their executives? True. And the Fed agreed to this.

Bullshit on them. There should be numerous CEO's who should go to jail for their inept handling of the public's money.

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