Even MORE Bailouts

by Larry Levin

After the Shitibank bailout over the weekend I was naive enough to think the insanity couldn't get worse, not at least for a week or two. Wrong! Today the government came out with another brazen plan to turn every single person in this country into a slave - a debt slave to China and our other lenders. If you had any hope that stocks would eventually resume their uptrend to last October's high any time soon, this should finally put an end to that hallucination. The government pledged ANOTHER $800-billion today, which comes to $1.1-trillion in just a few days. In addition to the prior pledges mentioned below we come to about $8.5-TRILLION, yet the market is still down 40%.

Yesterday I wrote Who's next? Probably credit card companies, then city and State governments. Who will be after that? My bet is the major retailers. After a poor Christmas season Macy's, Sears and others will warm up to the teat of government largesse. WOW, how prescient! For you see, a good portion of today's bailout is aimed at credit card debt.

The Federal Reserve announced what it called a term asset-backed securities loan facility, a plan under which it will lend up to $200 billion to support the issuance of debt backed by consumer and small-business debt like such as credit-card loans, student debt, auto loans and loans backed by the Small Business Administration. But $200 billion isn't where it will end. Hank Paulson said in a news conference this morning that this is just the beginning, the first of many $200 billion tranches if that's what it takes.

The government is also using this opportunity to claim that they are helping out the little guy with this latest bailout. They say it will lower interest rates on auto loans, credit cards and so forth. However, that's complete BS. The BANKS that have this garbage debt, which is backed by these failing auto loans and insanely large credit card debt, cannot sell it on the open market. The market for this putrid debt is gone - game over. So in steps the only entity dumb enough to backstop it: the Federal Government, with your tax dollars.

Let's be clear: it is a bailout for the banks and credit card companies like American Express and Capital One - nothing more!

So again we must ask - Where is the money coming from? This time it isn't from our foreign friends, it's from the Treasury Department. The Treasury is guaranteeing $20 billion in losses that could arise from this bailout.

But you say - Hold the phone Jack! This is a $200 billion bailout. What gives?

Ah yes, the government is now doing EXACTLY what arguably caused this mess: leverage. The Federal Reserve and Treasury are leveraging $20 billion to make $200 billion in loans, but remember what Hank Paulson said - This is just the beginning. Apparently if all goes well, the Feds will up the ante from 10x1 leverage to something that Paulson is more familiar with, 40x1 leverage. After all, it was Hank Paulson that got the limits removed so Wall Street could go bananas handing out loans to anyone who could fog a mirror.

So, where is the other $600 billion going? In a statement this morning the Federal Reserve said it will purchase up to $100 billion in direct debt of Fannie Mae, Freddie Mac and the Federal Home Loan Banks and up to $500 billion of mortgage-backed securities backed by Fannie, Freddie and Ginnie Mae.

Ah hem, anyone see a problem here? The government is now going to directly issue $100 billion from FNM and FRE - and the government is going to buy it. How the hell does that work you're wondering? Just print the money up out of thin air! Helicopter Ben is keeping his promise: he's running the printing presses overtime.

A recent Bloomberg article details all of the pledged money of the various alphabet soup bailouts (TARP, TALF, TLSF, etc) which comes to $7.4 trillion. This pledged capital, which was NEVER PUT TO A VOTE, is equivalent to $24,000 for every man, woman and child in the country. It's nine times what the U.S. has spent so far on wars in Iraq and Afghanistan, according to Congressional Budget Office figures, and could pay off more than half the country's mortgages.

However, that article does not include the Shitibank pledge of $300 billion or today's $800 billion pledges. So these unelected bastards at the Treasury and Federal Reserve have now promised (and delivered on a great deal of) an endless amount of money that today totals $8.5 TRILLION! And remember, they REFUSE to detail how even one cent of this money was lent.


Previous Day's Trading Room Results:

Trade Date: 11/25/08

E-Mini S&P Trades*
(before fees and commissions):


1) VA buy @ 9:40am at 851.50 = +2.00 (1 lot)

2) PP buy @ 10:05am at 840.50 = +1.75 (1 lot)

3) FT sell @ 10:45am at 855.25 = b/e (1 lot)

4) OTF sell @ 12:25pm at 848.75 = b/e (1 lot)

5) Algorithm positions (19)...combined daily total...+11.25

ZB (30 Year Bond) Trades*
(before fees and commissions):


1) No trades today.



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