The Senate today took the Socialism Bill (aka Wall Street Bailout Bill) padded it with even more socialism and passed it easily.
250k limit on FDIC insurance? So now commercial banks get 2.5x more insured money to gamble with on subprime loans, credit swaps, CDOs and Auction Rate Securities. This is the same stuff that the S&Ls made the government do in 1980 before making taxpayers bail them out. This doesn't bring confidence into the system. Having the federal govt (aka taxpayers) subsidize the gambling of wall street doesn't give me any new confidence!
Paulsen and company forced our hands. Don't pass a bill and we face a Dow under 10k, pass it and we go into socialism. Just look at the stocks that rallied today. JPMorgan Chase, Bank of America, PNC Financial, Comerica, Wells Fargo, BB&T and other regional banks ripping higher and even setting new all time highs. Again this bailout is a blank check handing it to these large megacap banks and asking them to write in the numbers. These same banks will become the new kings of Wall Street after the investment banks were dethroned this year. They will create a new bubble, and in a few years we'll be bailing them out once again, while their execs collect gazillions of more dollars. These greedy bastards will continue to pad their pockets at the expense of the taxpayers and we can't do anything about it because they have all of congress in their pockets.
JPMorgan acquired WaMu for free. Citigroup acquired Wachova Bank for free. Bank of America acquired Merill Lynch and Countrywide for a pittance. They will dump all of their bad loans at a fat premium to the taxpayers and keep all the deposits, branches and servicing assets. If this isn't a heist....I don't know what is. This is socialism at its extreme. Government determines who wins, who loses, who gets rich and who goes broke. This makes China and Russia feel jealous.
Jaime Dimon, Vikram Pandit and Ken Lewis will collect fat bonuses this year for executing the thievery and the taxpayers will be paying that bonus. I don't like it one bit. In any case...I still think the traders are getting ahead of themselves. The bailout should be a negative for the dollar...but they are bidding up the dollar to a new YTD high. They are selling off oil service stocks, ag stocks and commodity stocks that are minting money still in order to bid up the JPM, C, BAC and others which are up 30-100% from the lows set 2 weeks ago. These banks now carry a forward p/e of 15 or more, while stocks like Mosaic, Agrium, Freeport McMoran have a forward p/e of 5-7.
This is complete nonsense but you can't fight the tape. The bottom line is that all of the 700 billion dollars in taxpayer money will be stuffed in the pockets of Ken Lewis, Jaime Dimon and Vikram Pandit and their shareholders will ultimately win. If you take 700 billion dollars and add that to the market caps of financial stocks across the board...maybe we could put a price target on Citi of $60, JPM of $100, BAC of $80 and PNC of $120.
Don't believe the senators, Jim Cramer and other idiot pundits. Taxpayers WILL NOT make a profit on this bailout. We'll be buying all the mortgage papers that are indeed worthless. Homes thrashed by illegal aliens in Riverside County. Incomplete condos in Miami, Florida. Half demolished homes in Cleveland. Cardboard Boxes in Detroit. Beachfront mortgages that have 5 million dollar par but the home being worth only 2 million. $500,000 apartments in Fargo, North Dakota. That's the kind of mortgages that Bank of America will be selling to the Treasury. You think they will be selling the Prime Loan backed by a 700 FICO, physician who put 30% down payment in Dallas, Texas? Ha.
I've lost faith in our financial system. Drunken gamblers once again rewarded at the expense of taxpayers and shareholders who unfortunately bought the wrong stocks (like Wamu, Wachovia, AIG and Freddie Mac).
Why aren't we seeing any new regulation in credit default swaps? Why aren't we seeing the outlaw of subprime loans? Why hasn't a single mortgage cook or accounting chef gone to jail? So we just decided to give the banks 700 billion dollars and say go cook up the next bubble?
On the bright side the SEC chairman will be replaced soon. He presided over the most crooked and manipulated stock market since the 1920s. Stocks making intraday moves of 50% or more on rumors, false manipulative trading, naked short selling and other illegal activities and he continues to look the other way. And all he could do is just ban short selling outright which simply created far more volatility and manipulation.
So in closing...if we are going to indeed have a form of socialism...let's do it right. Let's nationalize the banks outright (like what the Scandinavian Countries did before), hire up everyone who is unemployed, seize all the oil from oil companies and spend massive amounts of money on infrastructure (build homes, freeways, bridges and more). This redistribution of wealth from Main Street => Wall Street Execs is ludricrous and is an obscene form of socialism that really hasn't ever been tested before.
