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January 12, 2009

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Kimballcorson

Is it true that the Obama Administration does not want to take stock back for bailout funds, but instead simply wants to buy toxic assets at "fair value" and stick them in a holding trash can like a resolution trust vehicle for possible later work outs, if possible? What about the subsequent required write downs or offs? Why the big adversion to buy troubled assets at face value and taking preferred stock back? Is it the claim of stockholders that doing so is socialism or nationalism? Should we even listen to rich little piggies that don´t want to be gored for their misdeeds? What a mess.

Kimballcorson

My quick summary on the government's $800 plus billion financial system bailout plan is that it is failing for these reasons: too little, too late and too misdirected.

The U.S. financial system is awash in loan losses and needed write downs. The current figure on both is estimated to be $3.6 trillion. We cannot handle that sum.

Worse, the Obama Administration's $850 billion recovery and reinvestment plan is going to fail and basically for the same reasons: too little, too late and too much misdirected.

The program is basically the Democratic social agenda in thin disguise, instead of being what is really needed, an infrastructure rebuilding and employment program to reduce unemployment (actual and prospective) and increase aggregate demand.

We should all prepare to hang on.

Kimball Corson

I should add that the American Society of Civil Engineers estimates about $2 trillion is needed to refurbish America’s infrastructure. The recovery and reinvestment program is not supposed to be the Democratic social agenda. It is supposed to be a program to generate employment and increase aggregate demand.

However, we have only about $850 billion allotted for so called "recovery and reinvestment" and we are going to fritter that all over the place, improve too little, totally fix nothing and fail to gain the employment and increased aggregate demand we are going to need, which only the infrastructure program squarely and strongly provides. We will not even come close to the needed $2 trillion necessary to repair that infrastructure. The tax cuts are throw aways, with only about 22% getting spent.

The Democratic agenda about to be passed is NOT going save us from a worse recession or now perhaps a depression, when we learn that both the financial bailout and the recovery and reinvestment programs have failed.

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