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Minyan Mailbag: Frustrated By Inaction


Continue at this rate, and history will forget Bush but will forever remember Bernanke.

Minyanville Profs,

I simply am sideways about the deer in the headlight reaction that is coming from everywhere with regard to the credit crunch. I do not know if I am being naive, cynical, pragmatic, or unrealistic, but it seems that there needs to be some effort by the financial system to salvage something from the bad mess this is. In my simplistic analysis, it was greed, manipulation, and ignoring of the risk got us into this, so it seems logical that a solution spurred by fear, manipulation and recognizing the risk of failure might help minimize the damage.

No one seemed to mind how great things were when the real estate markets artificially pumped things up. So I find it strange, seeing as we all benefited, that some are truly incensed by "saving" the system. We all need to to some degree, regardless of size. So we save some greedy people and entities. Darn. Sometimes that happens when acting for the greater good. It isn't a black and white world we live in, despite what neo-conservatives think.

It seems like the prime directive of the Fed is to help maintain a stable financial market. What I keep hearing is they think they are inflation fighters. Well, there are volumes of books written about fighting inflation, and relatively little on how to pull out of a deflation scenario. So, it would seem that inflation should be given a low priority right now. It seems getting rates to a point where we can get the maximum number of reset mortgages shifted to fixed mortgages would be a good goal. That certainly wouldn't be all of the problem for it is clear that some people weren't qualified in the first place, but maybe, it gets the number to a manageable level. Perhaps seeing the Fed taking action other than jawboning, the bond market and all of its Frankenstein products will find some liquidity again.

It all goes back to your "assets versus dollar" argument. I say "inflate the sucka." When 9/11 happened, the government took more action to save the airlines than I've seen taken for the financials. Bush gave us all tax checks and told us to "spend it." $800. That is what I got. I thought, "Big deal, what is $800 going to do?" Just enough to get things going again. Over and over there have been times when manipulation has stepped in to keep up out of the abyss. Is it right or wrong? I don't know. I don't care. What I care about is the effectiveness of the action. Does it solve everything? No. But we can't look to solve everything: just prevent the worst outcomes. There will still be too much debt. People will still slow their spending. But hopefully the worst would be avoided.

I don't want a bail out, just some help. A nudge. Favorable terms for those who truly qualify. I don't want absolution of the banking system, but we've got time after stabilization to correct the poor practices. Some will get rich. Some will be saved. Some will fail. So not too much will have changed.

Right now, there seems to be very little actions and a lot of watching. Continue at this rate, and history will forget Bush but will forever remember Bernanke. I have seen good people, not sub-prime people who are now being ensnared in bad financial positions. Like the executive who's been transferred, now carrying two mortgages, when they thought they'd only be in that position for a month or two. Stretching their budgets, invading their nest eggs, putting on a brave face. Real people, not trying to "game the system", but caught nonetheless.

Unnatural circumstances have created this mess, so it does not make sense to let it correct itself naturally. The results would be devastating and leave us wishing it had only been a recession.

-Minyan A
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