Tick Tock Tick Tock It's the Crock!

Today, the Fed gave the insiders another reprieve, and more access to the Fed bargain shoppers window so all the fat cats can keep on borrowing (Is it still borrowing when they don't expect to get repaid?) against their worthless paper securities.

Mr. Bernanke and the Fed crowd decided to extend the free money game to their friends until January 30, 2009. Interesting how this is only ten days after a new president gets to sit in the hot seat.

Without the Fed backing and the Security and Exchange Commission's temporary rule against naked short selling, there's no doubt that more banks and brokerages would be under fire.

Merrill Lynch yesterday may have produced enough bad news to create doubts about its future and the future of Wall Street. The unprecedented write-downs and fire sales, however, are necessary to repair its balance sheet and rebuild confidence before year end.

What really drives up my blood pressure on this gift is that just yesterday Merrill "sold" (A very loose term here.) $31 billion of mortgage-backed securities to Lonestar, that is essentially a collection agency operating as an investment company, for only 22 cents on the dollar with seller financing and a full recourse guarantee. Meaning, that the securities really have little if any value. See http://thebestmoneyguy.blogspot.com/2008/07/making-merry-at-merrill-little-guy-cant.html
My question to Mr. Bernanke is if the market is essentially valuing this paper at only 22 cents on the dollar, and requires seller financing and full recourse to buy it, why in blazes are you and the Fed lending against this collateral at close to 100% loan to value for six months, knowing that we will NEVER get repaid?

Isn't this the best "no documentation liar loan" program ever created?

Remember, yesterday here I suggested that the best solution was to simply restructure every mortgage that is backed by these securities down to 22 cents on the dollar and let the individual citizen, instead of the Wall Street fraudsters, get the break.

(IMO, the Fed gift program was the primary reason for the Dow to rally nearly 200 points even though oil is back at $125/barrel and gasoline is again well over $4/gallon.)

Please, somebody get the plank ready, because the crocodile is looming and Captain Hook needs to take a dip into reality.

With apologies to Peter Pan.

The Best Money Guy

For honest home mortgages at the lowest rates and costs go to http://www.bestmoneyguy.com/ Don't waste your time with low ball bogus quotes designed to lure you into a bad surprise at closing. We deliver what we quote and always show you the wholesale rates and costs.