The Liberal Lie, The Conservative Truth

Exposing the Liberal Lie through current events and history. “Republicans believe every day is the Fourth of July, but the democrats believe every day is April 15.” ****** "We will always remember. We will always be proud. We will always be prepared, so we may always be free." RONALD REAGAN

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Two Reagan conservatives who believe that the left has it wrong and just doesn't get it!

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HISTORICAL QUOTE OF THE WEEK - "Always bear in mind that your own resolution to succeed is more important than any other." ABRAHAM LINCOLN

Tuesday, March 24, 2009

BARACK OBAMA, THE TRILLION DOLLAR MAN

Crank up the government printing presses again because The Trillion Dollar man, Barack Obama has introduced yet another spending program that hovers around his favorite number, one trillion dollars. Wall Street greeted the news of the toxic asset buyout with a rally that has become scarce since Obama took office.

The Wall Street reaction was due to the fact that this particular trillion dollar program does at least address the root cause of the financial collapse that has crippled our economy, worthless mortgages whose true value is well below the value being absorbed by the bank or lending institution which carries the paper on these sour mortgages.

The Obama administration trying to place a new spin on these toxic properties are now referring to them as, "legacy assets." But call them what you will they are the root cause of the financial debacle and as such are a tremendous drag on financial institutions and credit which has all but frozen the credit market since the collapse last year.

The program depends on a combination of private investment and government money to purchase the toxic assets. Private investment is planned to take up about seven dollars matching the governments seven dollars for every $100 dollars of paper value of the toxic assets. The rest of the purchase is to come from loans from the FDIC and the Federal Reserve, a combined loan of about $500 billion dollars.

The governments initial seven dollar purchase will come form TARP money. Now here is the sleazy part of the program. The $500 billion dollar , "loan," from the Fed and FDIC will come from the printing of more money, devaluing the dollar once again, that the FED will then loan to the Treasury to purchase the assets. Either way the money comes from tax payers and further devalued currency.

Relieving the drag on the credit market of these toxic asset could free up lending once again but it all comes way to late in light of the trillions of new spending that Obama has introduced since taking office. This priority was obviously not a priority with Obama and as such one has to wonder whether he is actually truly interested in the struggling economy or just his expansion of government and socialistic programs and this particular trillion dollar plan was a desperate answer to sagging numbers and an angered public.

The market jump came because some program to relieve the credit crunch has been anticipated since Obama took office but Obama's policy priorities in spending came well before addressing the root cause of the financial trouble. A trillion here , a trillion there, what does it matter as long as liberal spending is passed.

The Congressional Budget Office projections are showing that Obama's figures in his budget fall far short of actually budget deficits and that he is leading this country down the path of unsustainable deficits and national bankruptcy. Yet he still continues to spend, print money and expand deficits more than every President in history combined.

The dollar whose value is well below the value of the denomination now, will soon become just a piece of paper whose only true value will be the historical picture of George Washington. The purchasing power of American currency will be as weak as any third world country and we have a President who is not concerned and is hastening the day when that devaluation becomes a reality. The people are angry, the government is in chaos and Obama laughs at the problem calling it gallows humor. Yes my friends, change is in the air and it is bringing destruction with it!

Ken Taylor

9 Comments:

Blogger Gayle said...

When will the people get angry enough about all this crap to march on Washington, Ken? We've got people boarding busses to harass AIG employees. Their anger is misplaced! They should be angry at Congress and at Obama, not at AIG employees. Not that I agree with what the CEO's did, but the problem didn't start with them.

To say I am frustrated and mad as hell is an understatement!

6:44 PM, March 24, 2009  
Blogger moog8008 said...

"Starving the beast" probably won't work this time around since no one wants to give up anything (political seats, government benefits, etc.). Do I like Obama spending us into trillions - heck no. We'll never get that money back. To note - I benefited from the Bush tax cuts, when I sold some stocks, but that was a few grand and I make 40+k/yr. How many in or below my bracket own stocks? They would have been happy about it too.

As temporary tactic to keep me happy. The good feeling as worn off with the economic collapse.

Our irresponsibility as citizens, acting as spoiled children, not keeping the government honest. We just want everything and pay nothing to get it. Small government, yes. Deregulation, no - big business and politicians can't be trusted.

We all believe in America - and I love this country, like you both. We definitely agree on. Maddow, Limbaugh, MSNBC or FOX News won't save this country - they will profit on the controversy and fear.

I don't believe for a second when the new administration says in 2010 we'll bounce back. It will be a long time - meanwhile the Chinese are buying our debt, setting themselves up to pounce.

If you pine for Reagan and better times - this is what we should look for: stay away from the big box stores, find your local butcher, baker and grocer. Support your local businesses (many family owned). Drive better cars (I like Ford and GM), save 25% of your income. Use less electricity.

We have to get all of this straight. All of us, left and right.

BTW - I'd rather have a President who uses a teleprompter than the last one (who I did vote for) who says things like, "Its your money, you paid for it!"

10:09 AM, March 25, 2009  
Blogger Rob said...

Ken, let me correct one part of your description of the Obama/Geithner plan. The government (Fed/FDIC/Treasury) is not going to provide the actual investment capital/financing for the deal. That is left to the investors who bid on the toxic assets. The FDIC will insure a significant portion of the deal, but there is very little upfront cost to taxpayers.

Let me give an example. Let's say a bank has a $100 toxic asset that it wants to purge from its balance sheet. They submit it for auction by the Treasury Dept.

The highest bid comes in at $70. The private investor sets the price and now has to come up with $65. TARP funds will pay the other $5 up front.

To entice private investment, the FDIC will insure $60 of the $65 the investor pays the bank for the toxic asset. But they still have to come up with $65 in capital.

These are savvy investors who only make money if the asset rises above the purchase price they set. They are not going to bid unless they have a clear path to profit. If the asset loses value, then they lose.

If the asset rises in value to $100 again, then the investor will profit $30 and half of that would be due to the government (there is a 50-50 equity partnership). So, the $5 TARP investment will turn into $15 for taxpayers (less some management fees, but it will be very close to this).

In the end some will still "fail" and require FDIC to pay out. But, FDIC will collect fees up front to cover the assets and the reality is that no asset will ever completely fail and fall to $0. The reason is simple - there is real estate that backs up these assets. In a worst case scenario the FDIC may have to pay out 33% ($20 to investors as part of a claim).

It is good, effective public policy that allows the private sector to price the toxic assets. It can bring certainty to a highly volatile and uncertain environment for banks, which will allow them to remove toxic assets, raise new capital and get credit flows working again.

10:30 AM, March 25, 2009  
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