Posted by NJDave on September 29, 2008 at 08:27:46:
From the E-Mail bag:
Q. Dave, I had a question: Mc Cain said [& so far I've not seen anyone challenge the statement] that 'the vast majority of these troubled mortgages , [that are sub prime] will be fully paid off....' is this a BS statement? Kevin.
A. On its face, the statement sounds great, especially from a man who recently stated, publicly, "Economics is not my strong suit," and "fundamentally, our economy is sound." His statement is partly BS, and partly true.
Kevin, first and foremost, this is a Wall Street Bailout, NOT a Main Street bailout. To understand how McCain's statement could be politically true albeit misleading We, The People, it is important to know the real purpose of the Bailout package.... and see more than the pretty wrapping it comes in.
We, The People are mislead more often than not.
* IraQ is not so much about spreading democracy as it is about imperialistic expansion into new markets, and, oh yeah, oil.
* The War Between the States (US Civil War) was thought to be over the issue of slavery.... which was the handy little device used to garner public support (both North and South) for war. But the Civil War wasn't fought over a moral issue. It was fought over commerce.
When the Southern (cotton producing) states seceded from the Union, it was more about trade policy imposed by the Northern polititians upon the South in the form of tarifs in support of the Northern fabric manufacturing plants...... They seceded so they could deal directly without taxation or restrictions with their overseas business partners.
The moral issue of slavery was introduced as the pretty package used to gain public support over a trade dispute. But that's not what was being reported in the papers.
2008 - The overwhelming majority of subprime mortgages have been bundled up into large pools of mortgages and sold by Wall Street to its investors as securities. For the sake of argument, I'll refer to the owners of these securities as "Wall Street" and the new public agency as The Fed"
Most of the now failing securities had been given safe ratings by the (complicit) bond rating agencies. Bond Performance Insurance providers (AIG?) never had enough cash reserves to payoff on unanticipated claims... Long story short "Wall Street" is stuck for cash.
The seven hundred billion dollar, revolving line of credit will be used by the "Fed" to purchase the non performing securities from Wall Street. How much The Fed will pay Wall Street for the mortgage backed securities is anyone's guess.... but McCain's statement to me suggests it will be Wall Street who is paid in full. The Fed, however, will have to collect on the mortgages of which at least two or three million of them are now in some stage of delinquency, default, or foreclosure.
Though huge sums of money will be changing hands (TARP IS IS THE LARGEST SINGLEMOST TRANSFER OF PUBLIC MONIES INTO PRIVATE POCKETS), in the forseeable future, the "vast majority" of subprime mortgages won't be "paid in full" as "Keating Five" McCain suggests.
Here is my question to you: What do you use to cover over a pile of unsightly rubbish?
The answer? A TARP. (Troubled Asset Relief Program)