The Plunge Protection Team Blog

Welcome to the USA, the land of the bailout. Sure, we believe in free markets, we believe in capitalism and goldilocks and all that good stuff. That is, until our stocks and our houses start declining in value. Why, then we need the government to rush in to the rescue... IMMEDIATELY.

We're so pathetic these days that we'll scream for a bailout all over national television, we'll send our largest banks to foreign countries to plead for their own bailouts, we'll send our president to saudia arabia to beg for a bailout by means of cheaper oil. We'll do anything, ANYTHING, to keep our stocks and our homes from dropping in value. Especially during an election year!

No politician can resist a good sob story about how some poor sop is getting foreclosed on because they didn't understand what an adjustable rate loan was. Why, these poor fools were just taken advantage of by mean old corporations. They couldn't have been expected to know any better now could they?

And speaking of those mean old corporations, why, they are just poor sops themselves aren't they? I mean, everyday one of them is writing off $10 billion or so. You think if they were so cruel and savvy, they could've made themselves some money in the process. Nope. Only the great orange one figured out a way to walk out with enough money to keep himself permanently tan for the next 20,000 years.

So, where do we stand? We've got so many bailouts in process that it's hard to keep them straight:

We've got Paulson who attempted a Super SIV that is now a super fizz.

We've got Bush who is busy writing everyone an $800 check in hopes that they'll go to Disneyworld and buy another iPod.

We've got Hillary who thinks freezing foreclosures and interest rates and giving poor people more food stamps is a good way to get the economy humming again.

We've got Bernanke lecturing congress on how to do a bailout correctly (like he knows) and announcing to the world at every chance that he stands ready to cut rates aggressively, yet he is still waiting (much to the markets chagrin).

We've got congress busily crafting bailout based legislation that they'll surely load down with more pork than your local Dennys.

Then we've got Romney, Obama, Huckabee, Edwards, and McCain all out there with their own attempt at attention grabbing bailout plans.

Since when did we become the nation of the government bailout? And why is this so generally accepted as a good idea and not questioned? Someday soon we'll reach for our national credit card and the card will be declined.

We all knew this was coming unfortunately. Once the DOW cracked 13,000 on the downside, the PPT had to act and act they have.

From the Wall Street Journal (subscription required):

The Bush administration and major financial institutions are close to agreeing on a plan that would temporarily freeze interest rates on certain troubled subprime home loans, according to people familiar with the negotiations.

Details of the plan, which could be announced as early as next week, are still being worked out. In general, the government and the coalition have largely agreed to extend the lower introductory rate on home loans for certain borrowers who will have trouble making payments once their mortgages increase.

I'm curious as to who is going to pay the difference between the now-locked teaser rate on these loans and the actual interest rate that the holders of these loans is expecting to receive. I have a bad feeling it's going to be paid by us.

Congratulations Ben. You've truly achieved infamy. Today you made the top story on Drudge Report. Are you sure you still want this job?

From the Drudge linked New York Times article:

Mr. Bernanke offered a rocky outlook for the months ahead. He said that the battered housing market had yet to hit bottom, that delinquencies and foreclosures were likely to rise and that the downturn in home building was “likely to intensify.” He predicted that personal spending would advance more slowly, because consumers are less confident and because of tighter credit conditions.

On top of all that, he said, “further sharp increases in crude oil prices have put renewed upward pressure on inflation and may impose further restraint on economic activity.” Oil traded above $95 a barrel today, but the price was down slightly from the day before but still near its recent record highs.

And to further prove that running for President is all about pandering, Senator Brownback came through with a classic begging for a rate cut based on the fact that there is too much inflation:

That did little to cheer lawmakers. In an early sign of the political pressure that the Fed is likely to face if the economy falters next year, Senator Brownback, who recently abandoned his Republican campaign for president, pleaded with Mr. Bernanke to cut interest rates in time for the Christmas shopping season.

“It seems to me that now is the time,” Mr. Brownback said. “When those gas prices get up to $3 a gallon, it seems to hit some sort of psychological point in consumer’s mind that ‘I have less to spend,’ and that’s a reality for them.”

Senator Brownback, cutting interest rates will not cause the price of gas to go down -- probably quite the opposite. Now stop making yourself look pathetic.

Well, well, well. The market opened down about 200 points today based on a few pieces of bad news that the feds easy money policies haven’t been able to solve yet. As has been typical in the last few months, we chopped around as traders waited for the huge late day burst to the upside that has been so common.

Unfortunately for them, the Plunge Protection Team didn’t show up today, and everyone who put that anticipation trade on midday was forced to cut their losses driving the Dow down even lower: