Evening Thread: The Economy

by Alex Thurston :: Filed Under Daily Briefing :: March 19th, 2008 @ 9:14 pm EST

Stirling on Bear Sterns and Bernanke.

The buyout of Bear Stearns means that in the space of two weeks, with the CEO telling everyone that there was no problem, the investors in Bear Stearns have seen 99% of their equity destroyed, and 90% over the space of the weekend. They went to sleep at 30 dollars a share, and woke up with 2 dollars a share. Every sorry reality of the financial mismanagement and fraud of the last decade were on display. We are assured that there are no other banks in as much trouble as Bear Stearns, and that everything is fine. We’ve been assured this repeatedly since August on the financial system. After all, we were assured while this was going on that nothing was wrong.

In effect in the last week Ben Bernanke has become the co-President of the United States, taking actions which under normal circumstances are reserved for the elected branches of government. In effect he and others defrauded investors, knowing that a bail out was being reached. While Bear Stearns was the most aggressive dealer in Mortgage Back Securities, every Wall Street Bank, to quote Roubini, as been in the job of repackaging mortgages for foreign sale.

EJ Dionne on ~~socialism~~ welfare for the rich.

Never do I want to hear again from my conservative friends about how brilliant capitalists are, how much they deserve their seven-figure salaries and how government should keep its hands off the private economy.

The Wall Street titans have turned into a bunch of welfare clients. They are desperate to be bailed out by government from their own incompetence, and from the deregulatory regime for which they lobbied so hard. They have lost “confidence” in each other, you see, because none of these oh-so-wise captains of the universe have any idea what kinds of devalued securities sit in one another’s portfolios.

So they have stopped investing. The biggest, most respected investment firms threaten to come crashing down. You can’t have that. It’s just fine to make it harder for the average Joe to file for bankruptcy, as did that wretched bankruptcy bill passed by Congress in 2005 at the request of the credit card industry. But the big guys are “too big to fail,” because they could bring us all down with them.

And Bonddad: “Gas Prices Starting to Hit Employment Numbers.”

Feel better yet?