Who is the Rube?

Mike Shedlock possesses little belief in the Bailout, and even less in the manner in which it is implemented. I will only say that I basically agree with him. Nine out of Ten Government economic initiatives adversely affect Market structure in ways more detrimental than the original Problems. His Comment that it is unusual for People to complain about the Money they are given, though, is inherently wrong. People almost continuously harp on the fact they did not get enough to fulfill their desires, or that Others got more than they themselves. Bankers, being Bankers, forward another gripe: they are not collecting Interest on the Gift, which the Government should supply. Gifts should always supply all desires, or be standardized with an inbred ‘Screw You’.

My Readers may wonder why Treasury made no movement towards the endangered mortgage paper, as the funds provisioned by Congress were directed, and I thought to provide some Answer. Mortgages are composed of two types: those taken by debtors with sufficient Capital and/or Income to pay the mortgage payments; or those taken where mortgage payments are a magnificent feat which must be replicated repeatedly month after month–a ravenous child who is permanently hungry. The former type of mortgage has the Social Graces of a normal Business loan, and does well in polite company, the later is a Manic-Depressive who ruins every Party with outrageous outbursts at inopportune times. The first Type receives payment, the second Type will, at best, hold until renegotiation to a first Type mortgage.

It should clearly be understood what happened to the Paulson Expenditure pattern. He grabbed the Money, then looked around for good Buys. He finds only Type 2 mortgages for Sale everywhere, not hopeful or helpful, when Type 2 mortgages require renegotiation or endure an 88% failure rate. A closer Look tells him that derivatives forestall renegotiation of mortgage terms. Hank Paulson is not stupid, and decides buying Banks is more fun, than being known as the Treasury Secretary who bought $700 billion worth of scratchy Toilet Paper. Bankers, on the other hand, grew up dealing with Horse Traders; and can design beneficial Accounting methods faster than Congress can say, "Accounting Rules." Paulson is trying to play 3-Card Monte with Bankers, who designed the original Computer model for Card Games. I wonder that the Bankers haven’t stuck Paulson with a monthly ante to play! lgl