A Bailout. For Everyone.
By Steven Pearlstein
Wednesday, March 12, 2008; D01
Last week, it was a $200 billion cash-for-bond swap for the banks.
This week, it was a $200 billion bond-for-bond swap for the big investment houses.
If they keep this up, pretty soon you’ll be able to walk into any Federal Reserve bank and hock that diamond brooch you inherited from Aunt Mildred.
Forget all that nonsense about the Bernanke Fed being too timid or behind the curve. In the face of what is turning into the most serious financial market crisis since the Great Depression, the Fed has been more aggressive and more creative in using its limitless balance sheet — in effect, its ability to print money — than at any time in history.
The Fed has now become a co-conspirator in this fraud, joining
- mortgage initiators (ex used-car salesmen),
- mortgage banks,
- investment banks,
- bond rating firms
- and hedge-funds.
The proper beating (the one upon which the integrity of markets depends) which is supposed to be taken by greedy and unwary investors when they are greedy and unwary–has now been shifted to the taxpayer.
Meanwhile, has anyone seen the international dollar lately? It has sunk so low, it’s now barely (just barely) peeking out from under the rug in various currency-trading offices around the world. But that is conveniently out of sight of the ordinary American, handily off-shore with most of the rest of our capital, and will not become evident until China gives up on our debt and buys our remaining assets.
Mr. Bush will be back on the ranch by then and smilingly blame it all on our failure to ‘stay the course.’
Is anyone surprised?