The Crisis is Ideological not Financial

I'm working on a fouro-style daisycutter on why the bailout is more about forgiving stupid moves by still-solvent companies before the election and new agendas take hold. And how easy credit was easily seen as a poison steroid pill, enabled by unreasonable expectations of corporate growth. Later on that.

It's obvious already via Paulson on Capitol Hill that the rush-job is just a copy of the Patriot Act and Homeland Security 'gotta do it' power grabs that have little to do with democracy or actual problem solving-- so let's hope the Congress-critters keep their new-found spines.

The nut of where things are: As Sam Zell noted just now (4:19) on CNBC: " in many cases the borrowers shouldn't have borrowed and the lenders shouldn't have lent." Good--no, excellent--point. And yeah, this isn't about liquidity but rather, about the reality of reality itself catching up to the mark-to-model methods of financial services of the last few decades. Look at it this way: if you've been selling smoke and confusing ponzi schemes for years you start to worry that too many others are doing the same and suddenly if only types like you are available to deal with--in a market ostensibly reliant on trust and sentiment--well, then, maybe nobody's trustworthy and the best thing to do is reset and take a mulligan. And by god, do it before some new Democrat president gets to commit that available money elsewhere to useless stuff like, say, infrastructure rebuilding or Apollo-style energy R&D plans.

A 700 billion to 2 trillion mulligan. Easily. Except if you're a homeowner who's been watching too much Flip This House instead of the other, similarly, fantastical shows like Squawk Box.

It's about deleveraging real values from pretend booked asset values, not about liquidity or some unforeseen calamity.

Fratto insisted that the plan was not slapped together and had been drawn up as a contingency over previous months and weeks by administration officials. He acknowledged lawmakers were getting only days to peruse it, but he said this should be enough. [bold mine]

A simple phrase that needs to be heard more from one candidate is "no pay, no relief for non-performance" and that applies to CEOs or Shareholders. And, yes, to the truly greedy home-equity-as-ATM mortgagees, too.

But let's remember to differentiate the greedy from the truly dumb/unfortunate in the majority of troubled mortagages--the ones who did what most of us do--"It's the usual paperwork legalese, just sign next to these 12 red paste-on plastic tabs and here's your bottle of champagne!"

Right now, Maria Bartiromo is trying, loudly and stridently, again on CNBC to sell that this is a liquidity problem, that firms can't raise capital. WRONG. The money is there, it's access to capital that's choked due to the glut of lies. Trust is broken and 700 billion won't miraculously make saints out of sinners. The saying is "It's only a principle if it costs you something." These companies want to preserve/recover their asset values and their balance sheets without admitting that their principals and staff abandoned, or never had, sustainable principles.

The market is choking "liquidity"--cashflow and credit flow--as a symptom of its overdue diagnosis: too much play, too many lies, too little seriousness. The problem is limbic and fundamental. Stop lying, stop avoiding responsibility, stop hiding behind the cleverness; it's over. Admit the failure you knew was coming long ago, and that which is still half under the rug. Take your medicine like a real frontiersman not a kid in a Roy Rogers outfit from WalMart.

The lower half of Manhattan is now discussing the "awful" impact of losing several 10s of thousands of Financial Services jobs. Guess what? Job losses are what Wall Street has viewed as prudent responses for failed business plans and models for years. And for good models too: They happily make companies like Costco suffer for viewing quality pay and job security as weaknesses.

The fans of deregulation and dismissers of government suddenly want it to make the booboos not hurt so much and for us to play cop and arrest and fine the market that bit them so badly. In the face of all evidence, they want us to call a self inflicted wound some kind of mugging. And to refashion reality and call their dramatically failed ideological war on spadework, physical worth, and accountability just a failure of financial markets.

Bullshit. Grow up.