Final Debate: No Sale

Last night was both sad and telling.

John McCain threw the election in the trash can.

On a night when the market was down 733 points, the worst (in points) drop in the Dow ever and coming from a level just over half of where it was a year ago, John McCain had an opportunity to grab the (dead) bull by the horns and throw it at Wall Street, scoring huge points with Main Street and Living Rooms all across America.

Instead, he got pissed off on national television, displaying all the "statesmanship" of a 2 year old who just had his candy taken away, while Senator Obama, who I wouldn't say had his best night last night as he was more talking point than initiative, nonetheless delivered the message like you'd expect from a lawyer - or professor.

Simply put, McCain is finished.  In terms of who came across as "Presidential", it was no contest. And this is coming from a guy who has been looking for some reason - any reason - to push the button for McCain.

Unfortunately, I must flush The John, and it appears that my viewpoint is shared by a huge number of people across America.

While you see lots of red there, the important part is this, at the top of the page:

Obama 352   McCain 171   Ties 15

McCain is ~100 EVs under what he needs to win.  That's the vote count that matters.  Due to how Presidential elections work a five percent popular vote margin results in a monster win from an electoral vote standpoint.

To change the outcome McCain needs to literally gain 100 electoral votes.  To put this deficit in perspective a combination of wins "against the box" such as Florida, Pennsylvania, Virginia, Ohio, and North Carolina still causes him to lose. 

The election is over unless Senator Obama is literally caught on video with a goat in the next three weeks.

As for the credit markets LIBOR eased a bit (5 basis points) this morning, but the OIS/LIBOR spread widened.  Call that one a draw.  The evidence from the field on credit freeze problems impacting shipping continues to roll in.  This damage to the system of international commerce that has been built up over nearly 100 years remains in critical care and threatens to rupture entirely.

PIMCO's Head Pimple was on CNBC this morning pimping The Government taking on risk because, well, he's not willing to.  Gee, where have seen this movie before?  Now its "we the people's" duty to involuntarily take on risk when private money is not willing to step into the breach? 

What's up with that?  And who pays off if that risk turns out to be imprudent - like, you know, the risk private firms took over the last eight years? 

Oh yeah, we know to that one already - the taxpayer.

A gent over on the forum ran a quick analysis on Hank's "capital injection" scheme into the banks - its pretty ugly.  In short, if this gent's assumptions are correct Hank is literally giving away taxpayer money, when one looks at any sort of "fair value" accounting.

No wonder the bankers were smiling when they left Treasury.

Was this reported on CNBC?  Of course not. 

Why not?  Probably because you'd raise hell with Congress (and CNBC's corporate sponsors) if you were told the truth.

UBS got a nearly $60 billion bailout, joining the ranks of the banks that have been "saved" by government intervention.

Here's a radical thought - why are we doing this at all?

Consider this - the usual bank leverage ratios (absent stupidity like we saw in the last few years) means that you can generate $10 in loans with $1 in Tier 1 Capital, roughly.

So if we are willing to commit $700 billion in taxpayer money, that means we could, absent other commitments, backstop and fund $7 trillion in lending, or about half of US GDP.

The obvious "smart move" would be to do exactly that through a process like this:

• Implement The Genesis Plan.
• For those firms that are insolvent after cramdown, let them burn.
• Establish 10 new commercial banks, staking them with $70 billion of taxpayer money via perpetual preferred stock.  IPO them to the public immediately, offsetting the initial investment with the proceeds.
• Reinstate Glass-Steagall in full.

Now the objection to this will be that a lot of people will get hurt via losses they might find difficult to absorb (if they can absorb them at all.)

And?

Folks, the risk of taking a loss is the only thing that seems to keep people in line with reality.  That, and real regulation with teeth - the risk of a 20 year date with Bubba. 

The truth of the matter is that the "regulation" part of the game was intentionally gamed and outright ignored by both The Bush Administration and the Clinton Administration over the last 20 years.

This is an intentional bipartisan failure fueled by campaign contributions and the idiotic premise that people will "self-regulate", but the fact remains that what is now being demanded is that The Taxpayer, directly via your 401ks and IRAs, and indirectly via Treasury issue of new debt for which you, your children and grandchildren will be liable, backstop and pay for the foibles of these bankers, including The Federal Reserve which was intentionally complicit in blowing this series of asset bubbles and covering up the insolvencies the excessive leverage produced in the first place!

There are many who claim that we should not have a Central Bank at all, and that Congress should directly regulate the money supply.  Those of you who ascribe to that belief (and there are a lot of people who think this would be a good idea) need to step back for a minute and consider what Congressional reaction would have been to the current crisis of confidence given unfettered access to the nation's printing press, and how ugly things would get should Congress decide to literally rain down money from helicopters.

In truth the fundamental fallacy at work here is a belief that you can put a fox in with a dozen chickens at night and wake up to both fox and the same dozen chickens in the morning.  Anyone with an IQ larger than their shoe size knows what the outcome of such an experiment will be in advance, but we continue to allow the foxes in with the chickens and then are surprised when we wake up to an empty pen and a stuffed fox.

This will only end when we, the voters, get tired of having our pockets picked.  The 1990s were a decade of fraud and greed fueled by companies who's prime feature was their "burn rate", and the 2000s were a decade of fraud and greed who's prime feature was the idea that consumers and bankers could flip both property and paper without adding any actual value, yet pocket hundreds of billions in "profits."

At the core this sort of fraud and stupidity is sustainable only because we permit it as citizens.  We continue to sit back and whine when our 401ks go in the toilet, but when it comes down to demanding real regulation and jail time for the geniuses, including those at Treasury who have just given away "capital" that we don't have, we won't get off our butts.  Instead we demand "stimulus" checks and other handouts, while refusing to instead demand that those who were responsible for this mess in the first place, including those who claim to be the "saviors" of us all, go straight to prison where they belong.

So long as we continue to act like chickens, we will continue to be eaten alive by the foxes, who's greatest weapon is the lie perpetrated upon us all.

You choose America; the fraud will only end when you insist that it does.