What the hell is wrong with these people?

By BJ

We are in the midst of one of the worst financial crisis’s in modern history in large part because of a house of cards built on the prospect of lenders making lots and lots of bad loans and then packaging them together with a few good loans and pretending that the resultant “securities” were safe investments.  Lenders freed from the consequences of making bad loans started making ridiculously bad loans and selling them off as collateralized investments, and everyone was happy with the house of cards until the bills started to come due and it was realized that large piles of bad loans don’t actually make for good investments, but are actually toxic assets, the value of which nobody really knows, and that nobody really wants, and that everybody really hopes the government can take off their hands when they go south.

All of that is known already, and what does the brilliant mind of the Treasury Secretary come up with to help stimulate the sputtering economy?

Treasury Secretary Henry Paulson, seeking to ease strains in the consumer credit market, plans to announce Tuesday the formation of a program to increase the availability of auto loans, student loans and credit cards, according to people familiar with the matter.

The lending facility, which will be operated by the Federal Reserve, is expected to provide loans to investors who want to buy securities backed by credit cards, auto loans and student loans, these people said. Treasury will contribute between $25 billion to $100 billion to the facility from its $700 billion Troubled Asset Relief Program.

The program is aimed at making it easier for consumers to borrow money. Government officials, including Mr. Paulson, have grown concerned about "distress" in the consumer finance market, as the availability of household loans has ground to halt amid a broader credit crunch.

While the initial focus will be on consumer loans, the facility could eventually be expanded to cover all manner of assets, including mortgages.

Yep.  They’re going to give people loans to buy securities based on other people’s loans, in the hope that this will convince lenders to give more people loans, that they can sell off to those loaning money from the government, so that they can avoid the risk that in our trouble-plagued economy, people may not be able to pay off their newly acquired debts.  What could possibly go wrong?

If you required any further evidence that the problems facing the financial industry are in fact systemic, this should, I hope, lay them to rest.  A true house cleaning is in order.

And is it just me, or is there something really disturbing in the fact that they can blithely plan to piss away up to $100 billion more in yet another house-of-cards building scheme in the financial sector, but the mention of scraping together a quarter of that to help out the ailing auto sector is met by howls of outrage and endless debate?

The priorities here need a serious rethink.

Comments

[Kenneth Anderson]

It is now obvious that Paulson has no clue what he is doing. He is trying to operate the Fed and Treasury like he is still the CEO of Goldman Sachs. It was under his tutelage that Goldman become one of the instigators of those MBS turds, and he obviously thinks that securities are the solution to a collapse caused by securities.

And credit cards? Is he joking? Does the man not read the news? We have already been warned the credit card default is the next dropping shoe.

Forbes was right, this guy is the worst Treasury Secretary., certainly that we've ever seen. I've never seen anyone flounder around like this. If Bush had a clue or concern -- neither of which he obviously has -- he'd fire the guy and put Obama's man in charge right now.

[uticas]

next shoe to drop is student loans. yowza.

[Kat]

>>It was under his [Paulson's] tutelage that Goldman become one of the instigators of those MBS turds...

I was just telling someone this morning that I'm convinced we'll eventually find evidence that Paulson was one of the main ones who conceived, planned, and implemented this financial crisis -- for the further enrichment of the monied class, and the further decline of the middle class.

See Kevin Phillips' The Politics of Rich and Poor (http://www.amazon.com/Politics-Rich-Poor-Electorate-Aftermath/dp/006097396X/thedailygrail>Amazon US) for a history of these orchastrated financial crises every 40 to 60 years throughout US history. He calls them Republican Hey-days (when Republicans make hay from the rest of us going broke).

[Kenneth Anderson]

Kat,

I hear ya. These "crises" serve as conduits for public money going straight into the pockets of the monied classes. This particular one is audacious in the extreme: opaque and unaccountable. No one, except Bernake and Paulson, know where most of the money is going, and they won't tell anyone; recall the secret $2 trillion in loans the Fed refused to disclose.

Meanwhile, Congress is raking the automakers over the coals because they don't have a plan for an amount of money that now looks paltry compared to the trillions for which the American public is on the hook, saving Wall Street from itself.