Fed Bailout

I think I understand the rationale for the Fed bailout of Freddie and Fannie; AIG and Bear Stearns, and the butt stab to Lehman. So, this is how it works from the viewpoint of Paulson at Treasury, Bernanke at the Fed and the White House: We will allow the market to work and companies can fail if they have no significant holdings in the hands of sovereign funds and foreign central banks.

It is imperative that we continue to have buyers for our public and private debt instruments. If we can't borrow money from the people who have money (increasingly that money is in the hands of Arab, Russian and Chinese funds and banks)then we can't bankroll our deficit spending government. So, we have to protect the foreign investors or suffer great peril.

Freddie and Fannie sold mortgage paper to many foreign central banks. If Freddie and Fannie failed, several foreign governments may have gone bankrupt. Not a pretty picture. Foreign countries bankrupt due to bogus US paper!

Similar with AIG. If AIG tanked due to lending their AAA status through insuring shit paper then the insured paper turns to shit and foreign central banks and sovereign funds suffer. If they suffer they won't buy more of our shit paper.

So, we survive to live another day. More banks will tank, but we will be able to continue to sell our debt abroad and bankroll an out of control Bush administration foreign policy and a domestic budget that knows no limits. Why, for example, did Bush NEVER veto a spending bill until his last year in office. Bush is a fucking disengaged idiot, that's why. And, by the way, McCain is clueless about the economy and Palin is clueless about everything.

Enough ranting. It is late and I am turning on CNBC to watch the Asian markets crash overnight.