DAVID WEIDNER'S WRITING ON THE WALL: The Fed Bailout Wasn't Just For Fat Cats
You might also want to mention that the recent boost to your 401(k) portfolio is appreciated as well.
Though it may not be obvious, anyone who participates in the credit world --
and that's most of us -- owes the Fed a debt of gratitude for stepping in and
helping to prevent the collapse of
Populist class wars are convenient for politicians such Senate Majority Leader
Sure, the Fed is taking it on the chin. Taxpayers will buy a boatload of
sketchy securities from Bear and hope that they produce any kind of return.
The move is unprecedented. The Fed on rare occasions has backed up banks, but it's never backed up investment banks. The idea that investment banks get bank protection is what should be debated, but no, everyone wants to know if the little guy is getting screwed.
On the surface, it sure seems that way, but the reality is Bear and the
executives who run it are going to disappear. At best, Bear's biggest investors
are getting about
Call it a bailout or call it corporate welfare, Timothy Geithner, the New York
Federal Reserve president, had something else in mind when he forced Bear into
the arms of its rival and took responsibility for
"Main Street, directly or indirectly, by holding mutual funds, by having a
pension in mutual funds or insurance invested in securities -- all of these are
ways the person on the street has an interest in a stable financial system,"
"The ability of an individual to get credit also" comes from Wall Street, White said.
The campaign trail
It's those kinds of truths that get lost in the rhetoric in Congress or on the
campaign trail. The latest to chime in, Republican
"Any assistance must be temporary and must not reward people who were irresponsible at the expense of those who weren't," McCain said according to a transcript of his remarks.
Sorry John, but an economic collapse wouldn't be limited to those who made bad bets or mistakes.
On the Democratic side, Barack Obama, the
Obama has said he'd like to create incentives for lenders to refinance mortgages and he wants crack down on irresponsible lenders. Most of the candidate's policies are tougher standards for lenders not borrowers.
"When there's a run on mortgage-backed securities and the bottom falls out for investment banks, the bottom falls out for families who see the value of their homes -- their greatest source of wealth -- decline.
"When our credit markets freeze up, that doesn't just cause panic on our trading floors, but in small businesses that can't get the capital they need to survive, and on college campuses, like this one, when the student loan for next semester falls through," Clinton said.
Though she stopped short of endorsing the Fed's bailout of
It's that chain reaction Clinton is referencing that Geithner and the Fed were
"It was not a bailout of
So, if the Fed is backing up investment banks like it does commercial banks, then shouldn't investment banks be under tighter controls? Isn't this intervention the equivalent of creditor insurance for those complex loan agreements between Wall Street banks?
If so, then there are bigger questions at stake than whether or not some fat cats got bailed out. Wall Street has been living a life of freewheeling risk, built around the fact the industry was doing it on its own dime. Backed by taxpayers, brokers may be subject to capital requirements, managerial competency standards and restrictions on what kinds of business it can do.
In other words, they'd be just like regular banks.
Taxpayer bailouts are the means, but regulation is the price of survival -- for the fat cats and all of us.
(END) Dow Jones Newswires