black…MYstory

Can I get an “Amen”?

On Sunday, economist and professor Nouriel Roubini told Barron’s that:

“The regulators should investigate themselves for bailing out Fannie Mae and Freddie Mac, the creditors of Bear Stearns and the financial system with new lending facilities. They have swapped US Treasury bonds for toxic securities. It is privatising the gains and profits, and socializing the losses as usual. This is socialism for Wall Street and the rich.”

To a certain extent, I really have to agree with his assessment.

We have seen how some $200 billion was used to bail out Bear-Stearns and some $300 billion was used to bail out Fannie Mae and Freddie Mac.  So, in a span of about 6 months, tax payers have been put on the hook for another half-trillion dollars because of the greed and incompetence of the leadership of these institutions.

So, they were allowed to rake in the dough by providing subprime loans but, when those risky loans began seeing high default rates, these same institutions, with their CEOs still raking in millions, had us taxpayers foot the bill for their foolishness.

But, this is not the best part.  You see, this is just the tip of the iceberg.  Many financial institutions, happy play roulette in the mortgage market, did not keep reserves on hand to cover their consumer credit losses. So, what we are looking at is the collapse of even more banks.  For smaller banks, this could devastate the towns they serve as home and commercial lending go away.

What we see is what happens when nobody’s minding the store.  I’m a capitalist to my core but I don’t think rules are a bad thing.  Today, we are experiencing a convergence of unfettered greed and minimal oversight.  Good luck to whoever wins the presidency in the fall.

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