Last night Treasury Secretary Henry Paulson appeared on Charlie Rose regarding the current application of over $700 Billion dollars into the banking system….to extracate us from the on-going credit squeeze and liquidity shortage.
Saying this exchange between Hank and Charlie was less than satisfying would be a gross understatement. Don’t get us wrong…Charlie did a very good job of asking the right questions….but Hank continually backtracked and wanted to talk about all the “old news”….like Bear-Stearns, Lehman Bros. and JP Morgan! Wachovia and Wells Fargo? Paulson was using the typical “Halley’s Comet” argument to get everyone “off track” from what was going to happen…..TODAY!
During the one hour exchange….Paulson by mistake perhaps, dropped a few nuggets worth considering. The first thing he said was that after the cash infusion into the “Good Banks”….(whoever they are!)…..they would be buying up Toxic, Under-funded Securities! Credit Default Swaps perhaps? Credit Leveraged Buy-outs perhaps? Negative Hedge Funds….perhaps? Worn out worthless Derivatives…..perhaps?
Most telling in Paulson’s discourse was his more than passing reference to the engagement of European and World Banks….into these worthless investment vehicles. “We found out…that European Banks had the same problems that we did!” said Paulson. Charlie Rose to his credit kept probing and asking the right questions…but Paulson kept pushing the “Confidence in the Market” routine!
Paulson continually dodged the prime issue of Real Estate re-valuation and foreclousure restitutions! Seems no one has a good answer to how to evaluate the current values in the Commercial and Residential Real Estate Markets to any accurate degree. What no one is talking about is the Real Estate crash in European and Asian locations. This affects world markets and deminishes the chances for quick turn-a-rounds in the US.
So, what did Hank say really? Well, he said…that it may be too complicated to do much to save Homeowners that are going belly up! The worse the side effect of Home Foreclosure is that those involved immediately take a huge hit to their FICO scores! What does that mean? It means that once your FICO score hits the skids….you can’t even qualify to RENT any property.
Let us just say…that we are still “Digging to China” as far as getting out of our present Global Financial predicament. The return to profitability and the return to major growth could take a few years! In the meantime, holding on to State and Federal Pensions, Retirement programs and IRA’s and 401K money is going to be challenging. This is one time in our lives that being individually responsible for ourselves and our families will be more important than expecting anyone: Government or Private Industry to do much to actually save our cookies! Thank goodness for Google!
Hank Paulson should be spending more time on Google and less time talking to Ben Bernanke….in our opinion!
It’s funny how these free market types now have pushed all the blame off on the government – who forced them to make bad decisions. Bad decisions and failures are the hall mark of a free market system – only a few good products and ideas survive.