[SGVLUG] OT Bear Stearns & Housing Bubble (was: This is at least tangentially Linux related)

[David Lawyer]

On Wed, Apr 02, 2008 at 10:20:43AM -0700, matti wrote:
> [snip]
> What's next!?!? Bears Stearns back to $150 a share??

I wrote a critical review of James Kunstler's book: The Long Emergency.
See http://www.lafn.org/~dave/energy/long_emergency.html
But I can't seem to get any response from him.  He writes an
interesting blog about current economic and energy conditions.  Here's
what he had to say about the housing bubble and Bear Stearns when it
fell:

        Now, apparently, we'll also opt for a bail-out of all those who
   tried to become rich by getting something for nothing at both ends of
   the Ponzi scheme called the housing bubble -- the "little guys" who
   signed mortgage contracts they could never hope to pay off, and the
   Wall Street playerz who bundled these hopeless contracts into
   fraudulent securities (and their enablers in the ratings agencies, plus
   the hedge fund smoothies who tried to cash in by using recondite
   algorithms to dissolve the risk associated with imprudent lending.) The
   bail-out is likely to accomplish nothing except the more rapid
   bankruptcy of government at all levels and a second Great Depression at
   ground level (worse than the first one).
        Over the weekend, the Federal Reserve engineered a $30-billion
   dollar Saint Paddy's day present for the JP Morgan bank by handing them
   the corpse of Bear Stearns. The object of the game is to prevent the
   "assets" of Bear Stearns from going to the auction block, on which they
   would be discovered to be nearly worthless, which would instantly
   render all similar assets held by the other big banks to be similarly
   worthless, and would result in a universal margin call that would
   pretty much unwind the hallucinated "wealth" acquired the past ten
   years.
         Despite the heroics around the fate of Bear Stearns, it looks
   like the financial system is tottering anyway. Perhaps the last trick
   left in the rescue bag will be the 100-basis-point drop in the Fed rate
   rumored to be announced tomorrow. It won't help any of the big banks,
   since their problem is holding liabilities in excess of assets. Almost
   certainly it would crater the US Dollar.

In my review I accuse him of hyperbole, and the above certainly is an
example of this.  But if things are even half as bad as he states (and
I think they are), we're in very deep trouble.  I got a laugh out of
his describing what's left of Bear Stearns as a "corpse".

			David Lawyer