Tuesday, September 23, 2008

Bush's Disaster Capitalism Spreading Beyond Mortgage Credit Bailout?

CSPAN reported Bush wants the credit rescue to spread beyond “mortgage related securities”. The reporter said President Bush wants to include student loans, credit card debt and car loans. Hank Paulson called it the "troubled asset purchase program" in his Senate Banking Committee testimony. The Treasury Chief squirmed mightily on the now wider asset class under grilling from Senator Jim Bunning (R-KY).

More disaster capitalism! Guarantee the big boys' money. Recall last week’s precipitating event came because the fat cats charged payday loan rates to each other to move investment house credit.

Goldman Sachs' credit default swaps, the peace of mind for their unregulated credit products, ballooned from $100,000 in July 2007 to last week's eye popping $900,000. That's for one year's coverage on $10 million in credit.

President Bush talked about allowing banks to price risk on credit cards. Last week's risk pricing in credit default swaps seized up the credit markets overnight. I took the liberty of altering Bush's words to reflect the current bailout.

“It would constrain banks’ ability to price risk, until that risk became so great, the taxpayers would need to absorb it.”

Is it yet another disaster capitalism move, evidenced by the latest Bush bait and switch? The Carlyle Group is ready to benefit, and benefit mightily. The Bush years have been very good to that private equity underwriter, PEU.

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