$50 Billion Bail Out for Short Sales?

Connecticut Senator Christopher Dodd, Chairman of the Banking Committee introduced his own Financial Reform Bill recent however, it didn’t have bipartisan support and died on arrival however, the White House bill that is likely to be brought to the floor on Monday has a very similar outline.

What specifically got my attention was the $50 billion fund, that will be raised out of fees charged to banks. This fund is suppose to be used to liquidate failing banks. Now, it doesn’t say anything in particular about using that money to liquidate bank nonperforming assets in the form of short sale however, follow me down the rabbit hole for a while.

This is an election year and, the last thing a politician wants is to be seen as is someone who is pro business and, pro Wall street, however the financial crisis has gotten worse than anyone will admit and therefore, the government realized their folly with the philosophy, “everyone gets to stay in their home.” So, now….here we are, elections in November, the Country is PISSED OFF at incumbent politicians and the banking crisis is worsening due to the enormous debt and weakening dollar so, what can a politician do?

They find an enemy, in this case, big banks and they find a victim, in this case, defaulting homeowners. Now, regardless of how you feel personally about who is really responsible for this calamity, let me assure you, the media is going to spin this as if it’s all the banks fault so, just a bit further down the rabbit hole, come on……you know reading my blog is like watching a naughty movie on your company laptop, you may not ever say you do it but, we know, oh trust me, we know.

Ok, I digress.

What these politicians need to do is get rid of these toxic assets on these bank portfolios now, under a capitalist system, the banks would be left to deal with the problem on their own however, that isn’t the reality of the situation. So, these politicians in control of these banks tell them that they need to do more short sales however, the banks say, we can’t take the loss.

Well, the Government can’t give them a direct bail out because, it’s not popular at the moment so, the Government decides to charge the banks fee which is essentially tax payer money anyways because the bank is Government owned. The Government then “banks” these fees at the Fed and makes the fees available to banks they determine need to liquidate some non performing assets. So, in essence, it’s a Government bailout with taxpayer dollars however, it’s hidden in the guise of bank fees.

So, how did I make the stretch that these fees would be used to create an influx of short sales? Well, I can’t tell you my source but, let’s just say, no politician in their right mind wants to be charged with kicking homeowners out of their home, no matter if the homeowner can afford the home or not. This is especially true with Progressive politicians because, keep in mind, they are following the Franklin Roosevelt 2nd Bill of Rights that says everyone gets a home.

Ok, now that I took you on a trip to Wonderland, let’s come back to reality.

America’s debt spending is weakening our dollar in foreign markets. This is why we are seeing gold prices rise. This is important to understand because, we don’t want to end up like Greece in the next 24-36 months, if not sooner. A continued weakening dollar, increased fuel prices, lower home prices, lack of real job growth, more defaults, more upside down homeowners, a tightening credit market, lack of industrial production in the country, higher taxes for everyone and we are gearing up for a perfect storm for hyper inflation.

The Government has to do something, right?

I got an idea.......JUST STOP DEBT SPENDING!

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  • Jesse, you are spot on as the British would say. The first thing I learned in my business class was "businesses don't pay taxes (fees), they are passed on to the consumer". It always amazes me how the general public doesn't understand that. Our politicans want to downplay their role in this fiasco and the banks are the convienent target.
  • But Jesse, where is their incentive to stop the spending? They have a bottomless bucket from which to grab all their freshly printed money from! And since there are no limitations in how much they can spend, it's a free for all intil the world crashes...again! Right now, congress has a "get it while we still can" attitude! Laying all politics aside, regardless how you feel about anyone in office, everyone has to remember this come election time! If its not too late.
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