Market Update
September 22nd 2008 19:10
Cagles Cartoons
Investors do not like Treasury Secretary's RTC-like bailout plan. Gold is having another big day, breaking out over $900 and up $33.90. The USD has fallen from 79 to almost 76, and OIl has rocketed to $130, up $25. Some say it's the biggest day ever for oil. Investors are fleeing the market and the currency for safety.
The Bailout Plan would have Congress approve funding an agency with $700 Billion to purchase mortgage securities from banks, allowing them to free up capital to loan anew. It is not clear what price the RTC-like agency would pay for the paper or even how price would be determined. The wrong price could start another round of mark to market by banks and wcould involver more massive writoffs requiring more capital. Meanwhile, the tax payer would be saddled with this sludge, these WMDs of financial destruction on tiop of the nearly $1 Trillion, the FED has used to bail out Fannie Mae, Freddie Mac, Bear Sterns, et al.
Our debt ceiling has been raised to over $10 Trillion and now with this RTC-like agency, Congress will have to raise it again by $700 Billion.
This risky scheme is a giant step down the road to Socialism! On top of the bail-out plan, the government wants to insure all money market funds. Talk about unintended consequences: The FDIC insures deposits up to $100,000, but your money market funds could be many, many times more than $100,000. Why would anyone deposit money in a bank and have only $100,000 protected?
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