The bailout III

What got us into this mess is the cheap easy credit. It caused people and business to gorge, pumping up the economy. What is the Fed's solution to get us out of the mess? Why... more easy credit of course! Mr Obama, Mr Geithner, Mr Bernanke what are you doing? This solution is like pouring gasoline on a fire to put it out. The financial system is at a stop not because of a supply and demand issue, but a transparency issue. These banks have unvetted securities in their portfolios. Other banks will not lend to them because they do not trust them, not because of lack of money supply. That's why the other banks are just sitting on the bailout money.

We need to move to setup an agency to go through these mortgage based securities and catalog them. That way all banks will understand the risk in the system. Then and only then banks will operate correctly.

Think about this... if rate is commensurate with risk, and we have suceeded in injecting risk into the financial system, why is the Fed trying to make easy credit easier? Interest rates should be going up.

I believe healthy banks and investors understand the potential default rate of these securities and are willing to purchase them from the dying investement banks. But then you get the government sticking its nose where it shouldn't by announcing all kinds of programs to prop the securities and mortgages. This stops the market from healing itself. Our free market has the mechanisims to allow it to come back into balance. But it can't when the government puts artificial restrictions on it.

These are smart people, why are they making such poor decisions?