And WORST OF ALL...Bailout plan won't be end of Wall Street bailouts [View All]

[chill_wind]

Bailout plan won't be end of Wall Street bailouts
September 23, 2008

BY NOMI PRINS | Nomi Prins, a former investment banker at Goldman Sachs, Bear Stearns and Lehman Brothers, is a senior fellow at the public policy organization Demos and the author of "Other People's Money: The Corpo
September 23, 2008

Sunday night meetings in Washington produce startling announcements: In March, there was the Fed's $30- billion backing of Bear Stearns' bad assets, as it was given to JPMorgan Chase; last week we had Lehman Brothers' declaration of bankruptcy; this week it's Goldman Sachs and Morgan Stanley, changing their status to one equivalent to neighborhood banks, with all the emergency capital perks thrown in.

The shifting tides of Wall Street aren't over, and neither are the government bailouts. If Treasury Secretary Henry Paulson's request for a $700 billion bailout is approved, it will bring the total government tab for saving Wall Street from itself to $1.25 trillion.

But, reading the fine print, that huge chunk of cash is just for one-time purchases. If the government buys $700 billion worth of assets whose value goes to zero, we could be on the hook for another bailout round before you know it.

Paulson considers this latest plan, "decisive action to fundamentally and comprehensively address the root cause of our financial system."

But it does no such thing. That's because his persistent focus on illiquid mortgage assets and the "housing correction" is not the bigger problem. It's merely the catalyst that revealed the systemic rot of overleveraged and reckless activities that define our financial system.

Blaming irresponsible lending and borrowing is a slick way of avoiding the deeper need for regulation. If the entire industry (from small lenders through big trading firms) were more transparent and less leveraged, a correction in housing wouldn't have brought down three major investment banks. It wouldn't have triggered the decision of the remaining two to become commercial banks, to gain more access to desperately needed capital through citizens' deposits and the Fed's emergency window.

That Goldman Sachs and Morgan Stanley positioned their request like a plea for regulation is a joke - it was a plea for money.

read on: http://www.newsday.com/news/opinion/ny-oppri235854039sep23,0,2527116.story

$1.25 trillion. Time Congress and the Media to start telling the public the truth about this nightmare.