Wednesday, January 28, 2009

Hundreds of billions of dollars more aren't enough - the feds have to use accounting trickery too

Obama's administration is looking to spend blow through hundreds of billions of dollars more than TARP's original $700 billion.

Who's surprised? Under the various guises of "ensuring liquidity," "unfreezing credit markets," "restoring confidence," "saving banks," "saving jobs" and "for the children," this is the ultimate giveaway. Everybody from union workers to preservationists to state governments is lining up with their hands out, and never forget that you are the main course.

In addition to more money, the feds' plan is to set up a bank specifically to hold bad assets, essentially a shadow holding company. This was already done with AIG. This actually wouldn't be necessary if the feds didn't impose mark-to-market accounting rules in the first place: some of a bank's assets plunge at current market prices, the bank's net assets fall below zero, and the FDIC forbids the bank from lending a penny. After all, government needs to create problems it says only it can fix, otherwise it would be out of business once people realize we can fix things our own damn selves.

Now, has it already been so long that most of us have forgotten that Enron and WorldCom engaged in the same practice of hiding liabilities on other ledgers? When they did it and were caught, no one trusted them afterward, and they went bankrupt.

When the federal government does it, few seem to bat an eye, and it's all perfectly legal. And why shouldn't it be as far as government is concerned? It wields its power purely by force, so it can make anything "legal" that it wants. When Nute Gunray asked whether something was legal, Palpatine merely replied, "I will make it legal."

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