The Fed is Wrong and Paulson has Panicked

As I read each day how the Fed has subjugated it’s own rules to extend more and more “liquidity” to the failed credit markets, I get more furious that the Fed, SEC, Treasury and Congress continue to ignore the elephant in the room. Hedge Funds, unregulated financial institutions that control around $1.5 Trillion in liquid assets and over $30 Trillion indirectly through leverage, no longer have a role to play or a legitimate right to exist on Earth. These organizations sued the SEC to stay out of their books. The Fed and Treasury were recently saying to “regulated” banking institutions in the US, “I am going to lend you billions of short term money and I want you to extend this credit to non bank financial instructions, read unregulated Hedge Funds and Wall Street investment banks.” Now they are saying “I am going to lend directly to unregulated Wall Street investment banking institutions with the understanding they will extend credit to their unregulated clients, read “Hedge Funds” again.

Lets look at what the Fed has been doing with collateral. First they dumb down the collateral to allow AAA mortgage assets from banks, now they are allowing these same assets from unregulated investment banks. Where are they going next? Read, “The Fed is going to buy mortgage bonds directly!” So the Fed is going to take an industry that went awry and created worthless paper and worthless loans to keep their stream of easy money and profits going for approximately 30 months after the housing industry priced itself completely outside of the realm of sustainability and buy their junk? Commercial paper has not collapsed yet but the Fed will join in this party directly. I read this. “Yesterday, the Fed expanded collateral eligible for its auction of Treasuries to include bundled mortgage debt and securities linked to commercial-property loans.” According to Bloomberg, Fed by 21 March the Fed had lent $28 billion to securities firms and made $30 billion available for the Bear Sterns (read Bull Sh--) bail out by JP Morgan Chase.

I am furious to say the least. This line of thinking is crazy. We will bankrupt the Fed with this logic. Bush Jr. has already piled on $3.5 Trillion additional debt in his 7 destructive years raiding the Treasury under the noses of an impotent Legislative Body of Government. With $7 Trillion in debt on the books and a Baby Boomer generation about to retire and eat into the nations cash flow with unsustainable medical costs, (not to mention soon asking the Fed to bail out their 401k’s along with their imploding real estate as their depleted social security accounts prove worthless in an inflationary world with a weak dollar) this is not the time to think about buying worthless paper off the books of unregulated financial institutions.

I will repeat, “The Unregulated Hedge Fund Industry no longer has a constructive role to play in the world of finance or a legitimate right to exist on Earth”. With over 6 billion people and the technology in place to move trillions of “dollars” around daily, the global population has no need for a bunch of Ivy League 72 degree preppies banging away at computer programs trying to squeeze 30% annual returns out of any piece of paper, commodity or security they can manipulate using ever more exotic and esoteric products that are indecipherable beyond mathematicians with no respect for the underlying economic viability of their models nor for the destructive capacity of their speculation.

There is simply too much money in the unregulated financial world and this industry needs to be completely shut down and brought under the world of regulated finance.