Economists Agree, Bailouts Suck Money From Taxpayers to Fed!

We have been saying that the major banks and AIG are insolvent, that the securities they carry on their books are wishfully overpriced, even if they have gotten the Accounting Standards Board to go along and ease up on the Mark to Market valuation requirements.

These banks and others like insurance companies and AIG, despite what Bernanke says (what would you expect the Fed to say?) are zombies, or more accurately, Parasites, Sucking up taxpayer dollars which are Graciously loaned to us by the FED to be paid to the banks that own the FED! Talk about double dipping.

In other words these Parasites are draining their host, the American taxpayer, while enriching their owners; the European bankers that own the Fed, the ones responsible for the coming 2nd Great Depression.

Here is what several prominent economists from Harvard and Princeton are saying:


April 9th 2009:

Many prominent economists--including such diverse types as Anna Schwartz and Paul Krugman--have taken with this official view, saying the government was mistaking a solvency crisis for a liquidity crisis. This latest paper effectively demolishes the "fire sale" view. It draws three important conclusions.

* Many banks are now insolvent. "...many major US banks are now legitimately insolvent. This insolvency can no longer be viewed as an artifact of bank assets being marked to artificially depressed prices coming out of an illiquid market. It means that bank assets are being fairly priced at valuations that sum to less than bank liabilities."

* Supporting markets in toxic assets has no purpose other than transferring money from taxpayers to banks. "...any taxpayer dollars allocated to supporting these markets will simply transfer wealth to the current owners of these securities." (the owners of the FED!)

* We're making it worse. "...policies that attempt to prevent a widespread mark-down in the value of credit-sensitive assets are likely to only delay – and perhaps even worsen – the day of reckoning."

You can read the whole paper by Harvard's Joshua Coval and Erik Stafford and Princeton's Jakub Jurek here: http://www.businessinsider.com/insolvent-banks-and-imaginary-fire-sales-2009-4 Warning, it is an Academic paper!

The striking conclusion is that the low prices of toxic assets actually reflect the fundamentals,In short, the government cannot save the banks by improving liquidity or changing mark to market rules because the problem isn't illiquidity or accounting.

The problem is that highly leveraged financial firms own assets that are worth far less than they thought they would be, and the firms are insolvent as a result.

This is why the latest bailout plans secretly give huge subsidies to banks--because the only way to keep the insolvent zombies afloat is to transfer billions of dollars to banks, bank stockholders, and bank creditors.

The alternative--allowing the insolvent banks to fail, seizing the assets, wiping our shareholders, giving bond holders a serious haircut--is still not on the official agenda. (And will never be, as long as the Fed can hold out!)

See also: http://silverpros.blogspot.com/2009/04/what-would-happen-if-your-life.html