Credit Crisis Out of Control- US Government Admission "No One Knows What to Do"
Stock-Markets / Credit Crisis 2008 Sep 18, 2008 - 04:19 AMBy: Mike_Shedlock
In the wake of Global Financial Seizures that has affected housing, the stock market, and bonds Reid Says `No One Knows What to Do' to Solve Crisis .
The U.S. Congress is unlikely to pass new legislation to overhaul financial regulations this year because "no one knows what to do,'' Senate Majority Leader Harry Reid said today.
"We are in new territory, this is a different game," Reid said at a briefing in Washington. Neither Federal Reserve Chairman Ben Bernanke nor Treasury Secretary Henry Paulson "know what to do but they are trying to come up with ideas," Reid said.
White House spokeswoman Dana Perino said today that the administration is willing to consider a suggestion in Congress to have the U.S. buy distressed mortgages, akin to the role the Resolution Trust Corp. played in disposing of bad debts of from savings and loan associations in the late 1980s and early 1990s.
Senate Banking Committee Chairman Christopher Dodd said the Federal Reserve has the authority to act as an "effective Resolution Trust Fund" to buy up and dispose of bad debt stemming from the subprime mortgage crisis.
"The Fed has the authority to move in this area," Dodd told reporters in Washington.
Resolution Trust Corp Proposal
Bloomberg is reporting Hoyer Says Bad Debt Proposal Won't Be Considered Soon
House Majority Leader Steny Hoyer said a proposal to have the U.S. create an agency to buy distressed debt won't be considered before Congress adjourns on Sept. 26, ahead of the Nov. 4 elections.
Creation of an agency like the Resolution Trust Corp., which took over the assets of failed savings and loan associations almost two decades ago, needs "discussion with the administration" Hoyer said. "I don't think it's going to happen in the next 14 days."
"Chairman Frank indicated he was interested in that, but we have not had any in-depth discussions," Hoyer said. Frank said today his panel will hold a hearing next week to examine his proposal.
"Have assets now been devalued, partly by psychology, to the point where if you could go in and buy and hold them three or four years you could expect to at least break even?" Frank told reporters in Washington. "The next step is to begin to consider that question" because "the private market won't even go to a fire sale."
House Speaker Nancy Pelosi, a California Democrat, agreed that Frank's idea should be studied.
Senator Richard Shelby of Alabama, ranking Republican on the Senate Banking Committee, said, "That might be an option we will look at."
Senator Charles Schumer, a New York Democrat and chairman of the congressional Joint Economic Committee, said today in an interview he also is "looking at the concept."
Federal Deposit Insurance Corp. Chairman Sheila Bair said commercial banks are safe and sound and "we can weather this without any additional government intervention."
The FDIC is "the RTC, that is what we do," Bair said today in an interview with Bloomberg Television in Washington. "When a bank fails, we take the distressed assets, market them and sell them."
Representative Paul Kanjorski, a Pennsylvania Democrat, said Congress should consider creating a "super trustee" to handle large companies that "may be allowed to fail," a day after Lehman Brothers Holdings Inc. filed the biggest bankruptcy in history.
Look at all the clowns on the bandwagon wanting to "do something" even though "No One Knows What to Do".
Clowns On The Bandwagon
- President Bush via White House spokeswoman Dana Perino
- Senate Banking Committee Chairman Christopher Dodd
- Senator Charles Schumer
- Representative Paul Kanjorski
- Senator Richard Shelby
- House Speaker Nancy Pelosi
- House Majority Leader Steny Hoyer
- House Financial Services Committee Chairman Barney Frank
The scariest proposals comes from Barney Frank and Representative Paul Kanjorski.
Paul Kanjorski wants to create a "super trustee" to handle large companies that "may be allowed to fail." Not only does this clown want to create a "super trustee", he wants to decide what companies "may be allowed to fail."
Barney Frank believes "The next step is to begin to consider that question [of what assets are worth]" because "the private market won't even go to a fire sale."
Hopefully the next step is to vote Barney Frank and Paul Kanjorski out of office for blatant stupidity.
Thank God We Ran Out Of Time!
Reuters is reporting US Sen. Dodd: no time now to set up RTC-type fund
There is not enough time left in the congressional session for U.S. lawmakers to consider setting up a Resolution Trust Corp-type fund to buy up toxic mortgage assets, Senate Banking Committee Chairman Chris Dodd said on Wednesday.
"That's not going to happen now anyway. We're here for another week. It's a nice debating point," Dodd, a Connecticut Democrat, told reporters on Capitol Hill.
"The Treasury performs that function right now, they have the authority to do that," he said, adding that he thought they should "absolutely" do it.
"The Obama Administration or the McCain administration will have to assess whether they want to propose such an idea. I'm willing to entertain one," Dodd said, referring to presidential candidates Democrat Barack Obama and Republican John McCain.
Dodd also said there were other shoes that could drop before the current crisis is over.
"Until you address the underlying cause of this problem, which is the (housing) foreclosure crisis, this problem is not going to go away," he said.
No time To Do Anything
Thank God time ran out. Otherwise Congress would be doing something even though "No One Knows What to Do". Besides, all Congress can do is make any problem it touches worse by trying to fix it.
The biggest problem is that Congress does not even know what the problem is. And unless you know what the problem is you sure as hell can't fix it. Dodd thinks the problem is the "housing foreclosure crisis".
What The Problem Really Is
- The Fed
- Fractional Reserve Lending
- Congressional Meddling In The Free Market
- Congressional Spending
- An Unsound Currency
- An Unsound Banking System
For more on the banking system, inquiring minds may wish to consider You Know The Banking System Is Unsound When.... and Don't Worry, The Banking System Is Sound .
It's no wonder the global markets are seizing up and gold is soaring given the above list of problems and that set of congressional leaders attempting to "fix" them.
By Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.
Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.
I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.
When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com .
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