Suckers!

Earthside Comments: Do you think you could get this deal?

Dear Mr. Bernanke, Chairman of the Federal Reserve,

I loaned my no-good brother-in-law $5000 a couple of years ago so that he could buy a mushroom farm. Well, the fungus business hasn't been very good and now he says he might not be able to pay me back.

Not having him pay me back is starting to get me in financial trouble because I need payments from him so that I can keep buying gasoline for my Hummer.

So, could I exchange my no-good brother-in-law's IOU for a U.S. Treasury bond? I may not be a very smart businessman, but after all, you don't want me to go bankrupt, do you?

Sincerely yours,

Elmer Huckmeister

Of course, that is not going to happen for you, but that is essentially what happened yesterday for big corporate lending institutions.

The gamblers operating on the stock exchanges took this infusion of free money as a bail-out for the geniuses of the subprime mortgage racket -- which is what it is meant to be. But, the money isn't free ... YOU and your children and great-grandchildren will have to pay back those government bonds. And since this is just more debt-created dollars injected into the economy, you will pay now in more inflation and higher prices for everything moved by $4.00+ a gallon gasoline.

What the Federal Reserve did in reality yesterday was simply add another piece of paste board to the nation's economic house of cards and the stock market casino operators are trying to sell it to you as a solid building renovation project.

So, once again, you are being played for suckers while the transnational corporate elitists operating in New York, Washington, Dubai and the Cayman Islands get another opportunity to save their sorry butts from any accountability whatsoever.

Link: Dollar Declines on Speculation Fed Rescue Package Won't Succeed | Bloomberg

The dollar fell against the euro and the yen on speculation the Federal Reserve's plan to provide funds to banks won't be enough to break the gridlock in money- market lending and stem credit losses.

"Read the need for such new measures as being a symptom of what ails the world and not a panacea for its problems," said David Simmonds, the London-based global head of currency research at Royal Bank of Scotland Plc, the world's fourth-biggest foreign-exchange trader. "Stay short dollars."

Some analysis.

Link: The Fed's Latest Give-Away | Blog/Angry Bear

In the late 90s, I bought (thankfully only a couple thousand dollars) of Nortel stock. Needless to say, I took a bath on it. So I read this story by Tom Petruno and Maura Reynolds in the LA Times with interest:

In a surprise, the Fed said it would begin to temporarily lend major banks and brokerages as much as $200 billion in U.S. Treasury securities it owns, in exchange for mortgage-backed securities that in many cases have slumped in value because of market anxiety over soaring loan defaults.

With rock-solid Treasury bonds in hand, Fed officials hope, financial firms will return to something closer to normal investing and lending practices. That could ease the credit crunch that took hold with the housing market's plunge last summer but since has spread to many unrelated corners of the banking system and economy. ...

... Now, by agreeing to exchange Treasury bonds for mortgage bonds in temporary swaps with financial institutions -- including brokerages such as Bear Stearns -- the central bank is hoping to halt or even reverse the decline in the value of high-quality mortgage securities, analysts said.

Temporary... right. Because the bank and everybody else is going to ignore the hard fact that the carriage is turning back into a pumpkin in a few hours. The only way this is a "credible" plan is if the Fed makes the exchange permanent - in effect giving them money by exchanging Treasury bonds that have value for now worthless securities at the price the banks paid for those securities when they thought they had value. Put another way... it would be like reimbursing me for my losses in Nortel. Which is to say, a ridiculous thing to do, and one the Fed would never consider.

But it seems with banks its different. The magnitude of the Fed's proposed help (i.e., give-away) has been slowly increasing, and these temporary swaps are merely the step before making them permanent. Everyone knows the swaps will become permanent because they can't have an effect if they're only temporary. And it won't be enough, so more and more money will be pushed down that particular hole.

Whether in the end the Fed will ever put forth a give-away big enough to help keep the banks afloat, I don't know. But they certainly won't stop before ensuring that this guy's retirement package is secure.