Bush’s Bane – What the Prez did not tell you…

By Anthony M. Freed

What the Prez did not tell you, he did not have to; you could see it in his eyes.  After watching President George Bush’s 37th televised address to the Nation regarding the financial crisis the World is facing at present, it occurred to me that we are totally screwed either way – that is to say, either way we will pay.

President George W. Bush on Wednesday warned Americans and legislators reluctant to pass a historic financial rescue plan that failing to act fast risks wiping out retirement savings, rising foreclosures, lost jobs, closed business and “a long and painful recession.”

“Without immediate action by Congress, America could slip into a financial panic and a distressing scenario would unfold,” Mr. Bush said in a prime-time address from the White House East Room that he hoped would help rescue his tough-sell bailout package.”

“It should be enacted as soon as possible,” the president said.

He spoke just after inviting Democrat Sen. Barack Obama and Republican Sen. John McCain, one of whom will inherit the mess in four months, and key congressional leaders to an extraordinary White House meeting Thursday to hammer out a compromise.

We will pay sums that probably will reach several Trillion dollars when all is said and done.  Don’t let that $750 Billion number throw you off.  You know as well as I do they came up with that figure because they thought it would get through Congress more easily than the figure, which approaches the tens of thousands dollars per every Woman, Child and Man in the country.

$750 Billion was a low ball.  Just like everything the Government gets hold of, considering the Government’s tendency to hide their failures with jargon and accounting tricks, we can easily expect the true cost to be a multiple of that quaint figure.  By the time they are through with us, 3/4 of a Trillion Dollars will look like a bargain.

I must compliment the Prez for spending what must have been an agonizing hour or two nailing down those remedial facts about Mortgage Backed Securities and the lack of market for the little buggers.  I am completely reassured that he has as much of an understanding of the issues at hand as I could ever expect of the man.

At least he is not completely in the dark.

Then again, I don’t think the President achieved what he set out to accomplish with his impromptu pep talk.  Accordingto the talking-head pundits on TV, the mission of the President’s speechifying was meant to reassure both the markets and the masses alike, and on those fronts I think he failed completely.

For the masses, Bush failed to articulate the urgency expressed by Treasury Secretary Hank Paulson, who came across in his testimony before Congress yesterday and today as quite arrogant and combative.  Paulson seemed to address the panel of Democratically Elected Officials with an air of omniscience that bordered on the narcissistic.  Paulson remained me of Nicholson’s character in “A Few Good Men,” displaying the indignance of want-to-be nobility.

Bush on the other hand, who usually comes across to me that way all the time, this occaision simply did not.  Bush was subdued, and even seemed to have a level of unease I am unaccustomed to in the Connecticut Cowboy.

Bush looked scared.

Bush looked just like he did the first day or two after he realized he blew Katrina, and he did not exude his usual condescending and dismissive bravado.  There were moments, when the President was explaning the finer points of the liquidity influx of the late 1990’s that he almost looked approachable, even a bit vulnerable.

Now I am scared.

I am now inclined to think that Bush has just figured out exactly how deep the doo is in which we now find ourselves.  That makes me think it might be even worse than I have imagined, and if you have read some of my stuff before, you will know I am already a Mostly Clowdy with a Chance of Showers guy on this whole calamity to begin with. 

I might have to adjust that forcast to a Flash Flood Warning now.

As far as what we learned from the Prez that would be considered new in any way – outside of the fact that ‘W’ is in a major pucker – we learned nothing. 

As far as the MBS and other as-yet-to-be-defined waste Paulson wants to collect on our behalf, there is a market for all of these, just not at the price that the holders of those securities want to be paid for them.  At the peak of the housing bubble, these holders leveraged the inflated value of the securities to the max, and now that the values are getting back to reasonable, they believe they should get a Mulligan.

Paulson’s plan, which is now officially the President’s plan, provides for buying the MBS at the inflated value of a few years ago.  Then, as Pauslon maintains, when the holdings “mature” the Taxpayers will get their money back.  Paulson and his cronies even maintain that we would make a tidy little profit on them.  I was surprised they did not go so far as to propose they put all the Social Security and Veterans Trust Funds in the kitty, they made it sound like such a good idea.

Well, if it’s such a good and potentially profitable venture, why are the Wealthiest Banks and Brokerages in the World scrambling to get them off their hands, and on to our backs?

Simple, they will never, ever, ever reach the inflation and depreciation adjusted value they had at the peak of the housing bubble.  Period.  It is just not possible, especially with the specter of stagflation and devaluation growing by the day.

They just want to stick us with the whole mess.

I felt the speech overall was quite dismal, and I feel the markets will react the same way tomorrow and through the rest of the week as Congress mulls over the issues – of all the Inept Institutions in the World, it has to be our Congress that will decide our fate.

Watch for a major sell-off to continue until the Government sticks a multi-trillion dollar pacifier in Wall Street’s screaming pie-hole.

One thing is for sure, we will either pay now or pay later.

(also check out Lee Adler, Russ Winter, and Aaron Krowne discuss the government bailout package along with what to look for in the weeks and months ahead, and discuss strategies for the short, intermediate and long term.