CHESSNOID

I was reading Gary Conn’s last post Google better watch their back and made me remember how it was 5 years ago before they zoomed by all the other heavy hitters. Remember Yahoo, AOL, and MSN and how we use to search on those sites. Google took the internet by storm and has grown up to be the heavyweight champion search engine. I still like google but they seem to be off their game. I did check out Ask.com after Gary’s post and actually liked the way it look. Yes I looked up my own blog, which is what you are about to do. Competition is good and I hope Ask.com can make a comeback and help remind the search engines the little guys are just important as the big guys in the virtual world.

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Today, I read that our major banks and the federal reserve have been trying to make a new plan to avoid fall out from the credit crunch that we are going through. Right now our real estate market is bloated with overpriced prices. The bubble is huge because it took over 5 years to fill it up. Now that it is past capacity it has to pop and let some of that out excess out. Unfortunately, it won’t happen overnight. The big banks who report their earnings (in this case losses) are scrambling to avoid the consequences of making 5 years of bad decisions. The big banks screwed many people by making these subprime loans. Now the investors who have been buying these loans have dried up and their are no suckers left. The investors holding the bag are coming to the end of the quarter and end of the year. This is where they will decide to cut there losses. When they sell their structured investment vehicles (SIV) or junk bond, no one is going to want to buy it even at a discount. It’s only a deal if there is a chance the value will go back up on these investments, otherwise prices will plummet.

According to the New York Times:

…Citigroup, Bank of America and JPMorgan Chase, along with several other financial institutions, have been meeting to come up with a plan to create a fund that could prevent a sharp sell-off in securities owned by bank-affiliated investment vehicles. The meetings, which began three weeks ago, have been orchestrated by senior officials at the Treasury Department, and the discussions have intensified in the last few days.

….Analysts say that investors have all but stopped buying SIV-affiliated commercial paper, and the worry is that the 30 or so SIVs will unload billions of dollars of mortgage-related assets all at once. That would put intense pressure on prices. As Wall Street firms and hedge funds mark value of similar investments they held to their new lower values, they face potentially huge hits to their profits.

Still, the impact on the biggest banks is even more severe. In times of crisis, they are committed — either legally or to maintain their reputations — to stepping in to buy those securities. Banks have already been buying significant amounts of commercial paper in recent weeks, even though they did not have to. But if they are forced to bring those assets onto their balance sheets, they might be less willing to lend to businesses and consumers. That could set off a credit crunch and thrust the economy into a recession.

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I have been critical of these schemes by our federal government and big banks. It looks more like collusion from my vantage point. First, they are not identifying the true nature of the problem. The borrower of the subprime loan simply can not afford the monthly payments on their loan. That is what makes the security bad. These loans were set up to fail and blow up because the borrower never qualified. When these loans were originated, the banks were making a ton of money on them because of the terms of the loan were set up to screw the borrower. Now that everyone realizes that these loans are bad and banks are going to lose money, they seem to be trying to manipulate the natural course of the business cycle. We have an exuberant excess in the real estate market and now it is time for it to be squeezed out. This will in turn get houses back to normal prices where people will buy homes to live in and not to speculate on them for possible 100-200% returns in 3 months. Secondly, why cover up the losses. Not all the banks made bad loans. The ones that did will have to ride it out. They either make it, go out of business, or get bought out by a bank that didn’t mess up like it did. But to try to get a bailout plan and use tax money is unacceptable. They must be held accountable for their actions. It really is that easy.

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Another retired general from the Iraq war has decided to verbally tell us what we already know. I think he is the 7th or 8th general who wanted to clean his conscious and speak the truth. According to CNN:

Retired Lt. Gen. Ricardo Sanchez, coalition commander in 2003 and 2004, called the Iraq war “a nightmare with no end in sight,” for which he said the Bush administration, the State Department and Congress all share blame.

Sanchez told a group of military reporters in Arlington, Virginia, on Friday that such dereliction of duty by a military officer would mean immediate dismissal or court martial, but the politicians have not been held accountable.

He said the Iraq war plan from the start was “catastrophically flawed, unrealistically optimistic,” and the administration has not provided the resources necessary for victory, which he said the military could never achieve on its own.

Highlights from the article:

* Sanchez: U.S. political leaders’ “lust for power” has cost lives
* Bush administration, Congress, State Department share equal blame for war
* U.S. pullout would cause chaos with global implications, Sanchez said
* Partisan struggle for power in Washington needs to end to resolve war

During the last senate elections, a few incumbent replublicans in both houses were voted out. We can get over a 50% vote to get our troops withdrawn, but President Bush keeps saying it doesn’t matter and will just veto it like he did with the children’s healthcare plan. It just seems strange that when all the military leaders speak frankly about the war, Bush, Cheney, and the White House just ignore the truth. What is the real nature of the American invasion to Iraq? Again this is an invasion and not a war. Was it really for the money and oil?