31 March 2009

Buyouts are better than bailouts.

Well here we are again in another crazy week of the 'How Shall We Waste Our Money' game. I have a real problem with the abject idiocy being practiced on both sides of the aisle and in the West Wing. We have prime examples of how recovery from these meltdowns does and does not work. What we are doing follows the Japanese model of recovery from the nineties, which left them in dire straights for better that twelve years. Do you want to live with this until 2021? I certainly do not.

The Swedes, on the other hand, projected ten years in the nineties and got out of their mess in just four with the government reaping a tidy profit in the process! How did they do that? They did it by buying the banks rather than bailing out their leak ridden boats.

Right now, depending upon the day, the US government could buy Citi outright for six to fifteen billion dollars cash on the barrelhead. Then we could properly scour the books, unwind the CMOs and other bundled loan based securities, and slowly by slowly market the salable assets back to the private sector at a 100% to 1500% profit! This is not pie in the sky; this is how it really works!

To do things this way we must shackle or fire Little Timmy Geithner, who is just another Wall Street hack who is looking out for his club-mates, just as he did while head of the New York Fed. Why a guy as seemingly bright as Barry Obama would choose the Fed Governor who let the banks screw up as badly as they did while he did his best imitation of Nero is beyond my reckoning. It is as though the guy has a few too many favours to repay.

Let's get real and treat the banks the same as we are treating the Auto Industry.

The Boards of Directors need to be cleansed and the executive staffs must be replaced.

The money must stop flowing freely with zero oversight.

We must seize control of every failing and faltering institution.

If a company or institution is "too big to fail" then it is too big to exist and must be statutorily dismantled.

If we do not do these simple yet difficult things and pull our heads out of the holes within which they now rest, we will indeed be in an even worse condition in five years and we may, by then, suffer violent revolution at the hands of hungry people wielding lawn tools and handguns. I do not believe any of us want to see that.

RM! Aggregate