Like Alice in Wonderland the saga just gets stranger by the week. Now one of the bailout victims is filing suit against the FDIC. It’s not who you might think.
The shareholders of Wamu’s parent company apparently feel they could have received a better payout in the open market. Who knows. It’s going to be difficult to establish a fair value for the assets while the government is doing everything it can to prop up home values.
Unfortunately all this comes at a pretty stiff price. Debasing the currency isn’t a good long-term or short-term strategy for dealing with overvalued assets. It’s analogous to the factory owner who builds excess inventory to keep his people busy during a recession “hoping” that demand will quickly return to previous levels. The cash runs out and the people loose their jobs anyway. The additional inventory causes excess supply, lower prices, lower margins and possibly kills the company. In the end, nobody has a job, including the owner.
Governor Mark Sanford of South Carolina provided a pretty sobering piece in the Wall Street Journal. Mr. Sanford explains when you start programs based on temporary federal aid, your likely to have difficulty paying for it at the state level in a couple of years when the federal funding goes away.
I think we need more people in government who embrace the free market and also consider the consequences of current actions on future generations. Blaming greedy “Wall Street” for this big mess is the worst kind of populist tripe.
The Federal Government and the Federal Reserve created many of the conditions that caused this mess through manipulation of the interest rates in an attempt to prevent the last financial “crisis” following 9/11.
Everything being done to stimulate the economy and deal with the troubled assets is wrong-headed. We’re putting a huge fiscal burden on our children and its just not right.