Tuesday, September 23, 2008

Michele's Corporafornication

Could the media please interview someone with a brain? David Gregory, ex-White House reporter who participated in Bush's version of the Lincoln Bedroom, asked Michele Bachmann for her prescription for our nation's financial ills, in light of her support for John McCain.

I thought the Paulson/Bernake plan was already a tasty banquet for America's financial firms, but Michele rented out a whole Hooter's and invited corporations completely outside the banking realm. Here's what Rep. Bachmann added to the menu in her free market, capitalistic solution:

1. Incentivize the marketplace to put equity in
2. Drastically reduce income taxes
3. Suspension or elimination of capital gains taxes
4. Do away with Freddie and Fannie
5. Make the American business climate friendly to receive equity
6. Change the marketplace so we're more business friendly

Michele, you might want to give Senator Elizabeth Dole a call. My guess is she knows what happened, given her credit default swap question at today's Senate Banking Committee hearing.

A completely unregulated, as in totally free market went a kilter the last week or so. Credit derivatives, specifically credit default swaps are the "insurance" or peace of mind that moves corporate backed securities. In the case of Goldman Sachs, what cost $100,000 last summer roared to $900,000 last week. That's an eightfold increase in coverage for one year's worth of peace of mind on $10 million in Goldman debt.

For the free market buyer to make any money, interest rates need to shoot up drastically overnight. Or the paper needs to be discounted dramatically. The buyer won't purchase without some risk protection. Thus, nothing moves. Credit dries up in this totally free market. And why? Because the big money boys don't trust each other to make good on their bets.

Knock, knock, Michele! A ten year run of your totally free market solution failed miserably last week. The investment houses fled to safer, regulated waters to avoid shark-like risk.

So what does, Rep. Bachmann offer, other than the next page on the blueprint of disaster capitalism? Nothing. Welcome to corporafornication and the complete death of the American media as messenger of information.

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