A bad bailout is worse than no bailout

This is from Rebel Traders:

Need Another Reason for not Liking the TARP - JP Morgan Chase is one
Posted: October 26, 2008 at 3:39 pm by Chuck 

Hank Paulson is promising to write checks to banks, even if they don’t need it in order to ‘foster a lending environment’ as Paulson says.

For a very long time I have said that the bail out package would not ‘fix’ the markets, instead it only drains the federal balance sheet and puts the United States at risk of a severe economic dislocation (i.e. - debt default, bond market crash, etc).

The bail out bill (a.k.a. TARP, and now the ESSA) is turning into more of a disaster with every passing day.

One of the financial institutions to receive $25 Billion tax payer dollars is JP Morgan Chase (JPM). Recently a reporter for the New York Times accessed an employee only teleconference to discuss the TARP program and the money that Hank Paulson will be giving them. JP Morgan did not know that a reporter was listening in on their plans.

JP Morgan said in reference to the question on the Government provided money:

“Twenty-five billion dollars is obviously going to help the folks who are struggling more than Chase,— he began. “What we do think it will help us do is perhaps be a little bit more active on the acquisition side or opportunistic side for some banks who are still struggling. And I would not assume that we are done on the acquisition side just because of the Washington Mutual and Bear Stearns mergers. I think there are going to be some great opportunities for us to grow in this environment, and I think we have an opportunity to use that $25 billion in that way and obviously depending on whether recession turns into depression or what happens in the future, you know, we have that as a backstop.—

Yep.. that big emergency ‘package’ that had to be passed or the world was going to come to an end is being used to help big corporations grow and build their company. I thought companies were supposed to do that on their OWN dime.

My reaction:  Paulson is an idiot.  A bad bailout is worse than no bailout.  If the government had gotten voting rights and seats on the board of directors, the capital injections into the banking system might have done some good.  Unfortunately, the government handed banks a blank check with no strings attached, and no one believes banks will start lending.  As a result, investors are acting as if the bailout will fail, and even more confidence in the system is lost.

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2 Responses to A bad bailout is worse than no bailout

  1. Anonymous says:

    Paulson is not an idiot. And Paulson is NOT acting like a complete fool. Paulson, Bernanke, et. al., the agents of Fed = Goldman Sachs, JPmorgan, etc., are the ultimate, knowledgeable and extremely experienced insiders with ulterior motives and superb skills to manipulate and shape public opinion to their advantage.

    It is all a smoke screen behind which bankers are hiding. They (Paulson et. al. are extremely intelligent, experienced, focused,
    successful and mission oriented. Paulson is not a drunken sailor stumbling and bumping into things as most commentators believe. Paulson, Bernanke, Bolten,
    Zoellick, Corzine, Rubin et. al. are executing a step-by-step plan. These agents are no dummies. These people do NOT make mistakes!

    What we are seeing is the world financial elite at their best. The ultimate power and wealth transfer into the hands of few. This is harvest time for them.

    Not too many commentators noticed that what ever the Fed (Goldman Sachs, et al.) does doesn't work or solves the present crisis for us commoners.
    I don´t believe in coincidences. I don't believe this crisis is out of control.
    This crisis was predictable and long coming. Most knew; including and especially GS/JPmorgan agents. It was only a question of timing and pulling the trigger at the most suitable time. I believe this crisis was orchestrated
    and is managed to accomplish a well defined plan and strategy.

    Every economic depression had its wars, or two. This depression will be no different. Those versed in history of depressions, wars and how wars were financed and by whom will understand that the next war will be very expensive and the "we people" will not finance it. The banksters will. And they will
    profit handsomely; as they always did in the past:
    (America's Forgotten War Against the Central Banks By Mike Hewitt:

    That is the reason why so much wealth, power and capital is now being transferred to few select banks. This crisis is a huge transfer of power and wealth into GS/JPM's hands; at the expense of everybody else.
    Printing fiat currencies is one of the oldest ponzi schemes. Does anybody think that Mr. Charles Ponzi didn't know what he was doing?

    We may want to start connecting the dots between the most powerful lobby (AIPAC) in USA, JPM/Goldman Sachs' background, the way JPmorgan and GS run and manipulate the US congress and gov't and whether that has anything to do with tensions in mid-east and Israel itching to bomb Iran.

  2. I trust me. I am aware of everything you are saying.

    The reason I haven't talked about Wall Street's/Washington's hidden interventions and behind the scenes dealing is that I am trying to keep this blog simple so that it is easy to understand.

    Take for example, the enormous short positions taken by large commercial banks against precious metals:

    "In the past three weeks, the large commercials have increased their net short position by 175 million ounces, or 350%, to 225 million ounces net short. Last week alone, the large commercials sold net short over 90 million ounces of paper silver futures contracts. Large commercials now make up 80% of the entire futures short position. The price of silver would be materially higher, were it not for this manipulative and uneconomic naked short selling. The additional 175 million ounces sold short, in just three weeks, is more than any country can produce in two years or much longer. It is more than all known silver stockpiles in the entire world. It is not possible for the short selling of 175 million ounces of silver, in a three week period, not to manipulate the price."

    THE SIMPLE EXPLANATION: In another example of the monumental stupidity banking executives routinely display, large commercial banks sold short a quatity of silver that exeeds all known silver stockpiles (these are the same banks that gave us subprime CDOs squared). Since these large financials are insolvent, there is a high probability of default should investors request delivery. Investors should buy physical gold and stay away from COMEX gold.

    THE COMPLICATED EXPLANATION: As the above quote states, "It is not possible for the short selling of 175 million ounces of silver, in a three week period, not to manipulate the price." Large commercial banks are acting as intermediaries for central banks. They are doing this to protect fiat currencies and hide their massive money printing. The reason rising gold price threaten central banks is . Unfortunately for central banks, the manipulation of paper gold prices is reaching levels that are scaring investors out of the paper market. As the physical market, uncontrollable by central banks, gains control of gold prices, faith in paper currencies will be undermined. Investors should buy physical gold and stay away from COMEX gold.

    Bear in mind, there is no definite proof of government interventions in prescious metals, just overwhelming circomstancial evidence. All investors really need to know is that commercial banks have enormous short positions, the COMEX isn't a creditable market anymore, and they should buy physical gold. Going into conspiracy theories just confuses the issue. Government's interventions and behind the scenes dealings will be revealed after dollar collapses.

    So I am going to keep treating Bernanke and Pauson as though they are idiots, ignoring any pressure from foreign governments (ie: China) that may be forcing them to make bad decisions.

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