Sunday, September 28, 2008

Ta ta Wamu

So my bank was recently vaporized. I mean just a few months ago, WaMU was the bank of my state, and now.... Poof, gone in a Wall Street land grab.

How did we get here?

To be fair I started writing this sitting in a dark house watching V for vendetta, and reading about the fed bailing out wall street I came to two conclusions 1 the worlds gone mad, and 2 Natalie Portman is hot. Even with no hair, still hot and she has had at least one good quote that I find myself applying to the economy.

[I] laugh. I’m not saying I don’t cry but in between I laugh and I realize how silly it is to take anything too seriously.

Wamu was seized and JP Morgan gained for $1.9 billion assets that were worth over $310 billion based on Government estimates. I fail to see how the private auction that ensued can be construed as anything other than cronyism, I realize that several companies had passed on a public buyout/merger/investment but most of that was likely fueled by the continuous talks of a potential bailout from the Feds. Everyone was waiting to make sure that the most toxic of the loans would not be picked up in whatever deal they made, and let Wamu wither as a result.

Writers note the rest of this piece is mental masturbation:
Not productive, but it passes the time and feels good.

I wonder if the same courtesy bailout have been made available to Enron had the bailout minions known it was coming? Given the previous hedge fund bailout in 1998 I am kind of surprised that it didn't happen. The parallels are fairly easy to draw as Enron tried to paint itself as a market provider, it happened to be energy rather than Money it was a market for so maybe in that sense FDIC and Greenspan didn't have it on their radar to save.

As the bailout winds it way through Congress I feel bad, as the ones that needed the bailout in the long run will never feel the benefit of the $700 Billion that Congress is asking us to foot the bill for. Rather than helping people afford houses that have upside down equity, and getting into the messy business of helping real people that will be loosing their houses by forgiving the value of the loan that they are upside down on allowing them to keep paying what they can and keep living in the house. People that raked in huge sales and salaries of bad mortgages will walk away with out the sting of failure on their careers. The architects (The Clinton administration and Fannie Mae) will never see direct fall out, while real people that took great pain to look for an affordable, and attractive purchase in an overheated market. To say that these architects raised the cost of owning for me in real dollar terms of nearly $50-$100k had the available loans not been extended. No doubt, I would have waited an additional 2-3 years from deciding to buy. It is hard to say 100% but here is an interesting link to historic home values in the US. Pay particular attention to the unadjusted media home price acceleration from 1990 to 2000 versus 1980 to 1990.

So now that we are on our 3rd bailout in a decade, I think it is time for some serious thinking about what went wrong. It seems the biggest veering off the path was done in the spirit of progress through deregulation (under a democrat of all people). This administration had been beating the deregulation drum for sometime now perhaps some of our leaders could take the long view and examine the realistic potential fallout of all the deregulation that we have done in publishing and a few other markets, and consider as we slip along toward the Marxist future of socialism or its uglier sibling Fascism. Given that at least one of the contenders for the American presidency and their co-runner have very serious fascist tendencies in their party...

Just say that V was right:
People shouldn't fear their governments, governments should fear their people.

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