Ya, Fix This!

We've all had a chance to think a bit about the liquidity crisis and the government fix. The only thing that we can all agree on however, is that it's awfully expensive. I don't have to go into my lotto analogy to explain just how much one trillion dollars is. We all know that it's a lot of money - $50,000 a year for 20 million years.

The blurb about Wachovia's third quarter loss of $26 billion caught my eye this morning. The press release said that the loss is related to a portfolio of loans that they got in the acquisition of a California lender in 2006. The loans have some goofy name, but they are of the negative amortization variety and are adjustable rate and they have a very low start or teaser rate. Now, how could any reasonable person NOT figure out that these loans, secured by over-valued property and made to people who could barely qualify at an interest-only teaser rate, were going to default? I'm not particularly bright, and I figured it out long before the fall. There can be only two explanations; 1. the companies involved - from mortgage originators all the way up to the end security buyers - are staffed by idiots or 2. the companies involved knew that the whole mess was going to blow up and did nothing about it. So, you have to ask yourself, just how much malfeasance has there been and who is going to pay for it?

I know that the present circumstances can not be tolerated, and that the Fed and the Treasury had to step in. A big part of the reasons though, are owing to the knee jerk reaction on the part of banking institutions when they stopped making credit available. Hopefully, this will ease soon and the funds market will recover. The alternative is not very pretty.

It's really a shame, that the voters in this country stopped thinking. With a bit of luck, reason will return to the November fourth election.

Hope so.