Asia Times: When you hear that there is no choice but a bailout, remember: it just ain't so.

[marmar]

Truth, lies and ticker tape
By Spengler

To bankers and politicians who insist that the world will come to an end if the US Congress does not approve the proposed US$700 billion bailout package, I wish to say: "It is not the end of the world. It is just the end of you." Sadly, it won't be. America's financier caste will live to fleece another day.

There are no atheists in the trenches, and no free-marketeers in Congress after a nearly 10% fall in stock prices. A chorus of erstwhile conservative voices led by the likes of Newt Gingrich, the Republican firebrand of the 1990s, now argues that the proposed $700 billion bailout package is flawed, but it is better to enact it than to do nothing. This simply is not true.

In the event of bank failures, the government will not "do nothing". Two of America's largest banks, Washington Mutual of Seattle, Washington, and Wachovia Bank of Charlotte, North Carolina, were forcibly merged or taken over by regulators during the past several days, without a ripple of disruption to depositors or borrowers.

When a bank runs into trouble, the American government takes it over via the Federal Deposit Insurance Corporation, an entity created during the Great Depression. Why doesn't Congress vote authority for the FDIC to add capital to stricken banks in order to continue their lending operations - after the existing shareholders have been wiped out?

The trouble is that the banking system is insolvent; that is, it lacks sufficient capital to hold its existing portfolio of assets, let alone to make new loans. Its capital is dissolving as loan losses mount. Banks have written off nearly $600 billion of mortgages or securities backed by mortgages during the past year. Against this, they have raised $350 billion in new capital from investors. But investors believe that losses will continue to rise in the mortgage market - and that is before other asset classes begin to decay, including credit cards, and corporate loans. ............(more)

The complete piece is at: http://www.atimes.com/atimes/Global_Economy/JJ02Dj02.html

[baldguy]

1. K&R

[scarletwoman]

2. Posting this article obviously means you're not fearful enough.

Why aren't you getting with the program? We HAVE to do this, or everything will, like, TOTALLY FALL APART! We'll be DOOMED!!!!!!! DOOMED, I tell you!!!!!

:)
sw

[TexasObserver]

3. The problem is much, much bigger than any bailout could be.

It's a 300 foot vessel taking water, and the bailout is a guy with a bucket and a sponge.

[scarletwoman]

4. kick (nt)

[scarletwoman]

5. One more thought. Anytime someone tells you "You have no choice!", they are railroading you.

There is ALWAYS another choice! Don't ever let anyone convince you otherwise!

sw

[ForeignSpectator]

6. EXACTLY! This actually deserves its own post.

That's one of the first lessons in street smarts : whenever someone presses you to make some kind of deal "cos time is running out", "this is your last chance" or "there is no time to think, yes NOW or miss it" there is something up. I've been told as kid to never let myself be pressed to any deals at the door or on the phone.

May sound silly but it's the same thing on a large scale. "Do it, now! No time to think! Everything will go down in a few days!"

Shock Doctrine at work.