October 21, 2007

Bush Treasury Secretary (ex-CEO of Goldman Sachs) looks out for his cronies and proposes we pay for the losses of greedy bankers and speculators

So the people who were responsible and are renting because they couldn't afford the insane housing prices are supposed to pay to bail out the greedy fools, the banks and McMansion "owners", who are responsible for the mess? From Ceri Shepherd at Financial Sense:

The Borrowers SHOULD LOSE THEIR HOUSES and the banks should LOSE MONEY - that’s the discipline; any bailout simply provides MORAL HAZARD. The biggest speculators of all were Wall Street including Goldman Sachs your old firm Mr Paulson, nobody said anything when the big fat fees were rolling in... By definition if you are going to help the "homeowners", many of whom were acting like speculators, you are also by default helping the lenders - THE REAL MOTIVATION. ...Anybody taking a mortgage should look at the affordability of the payments and not what the house is worth or is going to be worth, otherwise they are a speculator, pure and simple.

Mr. Henry Paulson the Treasury Secretary and ex CEO of Goldman Sachs said the following today, and I quote

"Let me be clear, despite strong economic fundamentals, the housing decline is still unfolding and I view it as the most significant current risk to our economy," Paulson said in a speech delivered at Georgetown University's law school. "The longer housing prices remain stagnant or fall, the greater the penalty to our future economic growth." In his most somber assessment of the crisis to date, Paulson said that the housing correction is "not ending as quickly" as it had appeared it would and that "it now looks like it will continue to adversely impact our economy, our capital markets and many homeowners for some time yet."

Alan Greenspan 2 years ago was extolling the virtue of adjustable rate ARM mortgages to anyone who would listen. These ticking time bombs have now inevitably gone off and the big Wall Street firms are getting hurt including Goldman Sachs. Notice that Citigroup wrote off $3 billion last quarter, a lot of money. Wall Street has no interest in the homeowner, they have ridden the boom and they are now trying to minimize fallout from the bust. As Gary North recently commented anybody who honestly believes that Wall Street has the interests of the lower and middle classes at heart is terminally naïve.

Mr Paulson is clearly stating that American house price inflation is now the dominant force of the American economy. This sounds to me as if the only future for the American economy is perpetual house price rises and perpetual debt to fuel it, what a great future.

He goes on to say "We must help as many able homeowners as possible stay in their homes," Paulson said. "Foreclosures are costly and painful for homeowners." But Paulson also stated, "When investors are relieved of the cost of bad decisions, they are more likely to repeat their mistakes. I have no interest in bailing out lenders or property speculators."

In a free market Mr Paulson when you make a mistake, when you get it wrong the market punishes you. The Borrowers SHOULD LOSE THEIR HOUSES and the banks should LOSE MONEY that’s the discipline; any bailout simply provides MORAL HAZARD. The biggest speculators of all were Wall Street including Goldman Sachs your old firm Mr Paulson, nobody said anything when the big fat fees were rolling in, now Wall Street is acting like the very best Soviet Ministries and demanding state handouts for the “homeowners” how very touching. By definition if you are going to help the homeowners many of who were acting like speculators you are also by default helping the lenders THE REAL MOTIVATION. Questions should be asked Mr Paulson of Goldman Sachs you were the CEO throughout much of this period, and the other Wall Street banks as to how this situation has developed that now presents a “significant current risk to our economy” .

The greatest Stock market speculator of all time Jesse Livermore stated

“There is nothing like losing all you have in the world for teaching you what not to do. And when you know what not to do in order not to lose money, you begin to learn what to do in order to win. Did you get that? You begin to learn!”

“Speculation is a hard and trying business, and a speculator must be on the job all the time or he’ll soon have no job to be on.”

“The game taught me the game. And it didn’t spare the rod while teaching.”

What about the young people Mr. Paulson? I am a late baby boomer, wonderfully easy for me like all boomers, property was very cheap in my time and good paying jobs with real opportunities were everywhere I COULD EASILY AFFORD A BASIC HUMAN RIGHT A HOME, These were before the days that banks such as Goldman Sachs had come up with all these ingenious devices to ram credit into the market, which has now driven property prices into the stratosphere all in the name of good old fashioned greed and profit.

Not so easy for my two sons who have been trying to save a deposit to afford even the most basic accommodation, as the prices have risen over the last few years at a faster pace than they can save a deposit. Why should they now suffer? The dreaded deflation or FALLING PRICES is only a dread to the bankers who are worried that the value of the collateral they hold will suddenly become lower than the outstanding debt. To Speculators deflation is a dread because it means a margin call! Deflation is no dread to my two sons Mr. Paulson, or anyone else who wants a home at a fair and reasonable price.

The market is correcting as it should do. Now Wall Street are desperately trying to stop this natural process. Wall Street are very Laissez Faire during the boom and real socialist during the bust. "Foreclosures are costly and painful for homeowners." AND BANKERS, all you want Mr Paulson is prices not to stagnate or fall to save Wall Street and people who have either made huge windfall profits in housing or should never have bought a house in the first place, and were only able to do so because of all the “creative” financing used by companies such as Goldman Sachs. Anybody taking a mortgage should look at the affordability of the payments and not what the house is worth or is going to be worth. If you do look at this value, or if this value influenced your decision then you are a speculator pure and simple as your speculation is hopefully a rising house price...



"I've always thought that where I am is where the party is." ~ Sophia Loren

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