What can ordinary people do to protect themselves financially and physically? I mean, I’m worried about my job, the economy, my savings, my retirement savings, all of it. I know there’s nothing I can do electorally. What can I do personally? What are YOU doing? I think everyone here is wondering.

spend time reading this:

”First note that the public sector as a whole (Treasury plus FDIC) is at risk for $78 out of a total investment of $84. The public sector has the same upside as the private sector (through its $6 worth of equity). However, the private sector gets this upside by putting only $6 at risk, against the public sector’s $84 at risk. Small wonder the stock markets loved this. If there were a stock market for taxpayer equity, it would have tanked by a commensurate amount.”

http://blogs.ft.com/maverecon/…..ad-legacy-
assets-programs-of-the-us-treasury-surreptiously-
squeezing-the-tax-payer-and-the-fed-until-the-ppips-squeek/

The other important point in the essay is that the bulk of the funding is supposed to come from the FDIC, which has very little money right now. FDIC has a proposal in front of Congress allowing it to borrow $500 billion from Treasury. So in essence, what’s disguised as ”FDIC leverage” is really taxpayer funding. The biggest issue in the whole Geithner steal-from-taxpayers-give-to-banks plan is what will be the price paid for these toxic assets. Goldman Sachs put out a study last night showing most banks are still substantially marked way too high on their books (I didn’t need the GS study, I’ve looked at many balance sheets and concluded the banks are over marked by at least 50% on most assets). If true market prices are paid, the banks still have massive mark-downs and losses coming. If phoney prices are paid because it’s just the stupid taxpayer’s money, then this is wholesale theft by Geithner/Bernanke/Obama and Wall Street.

1. The exact nature and extent of the credit blockage that banks are supposedly suffering from. I understand that to the extent a bank’s capital is decreased, its loan capacity is decreased, but this reduction has not been quantified and according to the story being told, this is not the basis of the “credit freeze, especially among banks. Supposedly banks aren’t lending to each other because of fear of not being repaid because the borrowing banks may be insolvent and can’t repay their loans. No examples of this are being given. What is the real extent of this?

2. The plans also assume that buying the bad assets from some banks will cause credit to flow. What is the mechanism by which this is supposed to happen? What if, as most seem to acknowledge, businesses aren’t borrowing because they don’t see a current, profitable opportunity to use borrowed funds, i.e. if, like the drop in GDP, this is demand driven, not supply driven?

3. What is the empirical support for not allowing the banks and larger firms to enter a bankruptcy reorganization or insovency proceeding — and have the Govt give aid inside of those processes, where concessions can be mandated of all parties? I believe using these time tested vehicles will show how serious the govt is, not the opposite.

4. Why not have the govt do directly what it wants to do, versus taking a two or multi-step approach? E.g., it want to get banks to lend to each other directly, well guarantee a certain amount of overnight lending — don’t buy assets (step 1) so the banks will lend themselves (step 2). This is a cover to help bail out the shareholders and management of the banks. This is but one example of how, in these sorts of circumstances, an individual or individual firm’s best interests don’t match the best interests of the country as a whole.

These are not questions that are too complicated to be answered — it’s just that no one seems to have demanded answers, rather we’ve just be accepting as valid the assertions of those demanding the bailout or dire consequences will prevail. Note: I’m not advocating not taking action — only that there be a clear and complete explanation of the basis for the action.

Using 1-3 above, and taking our time, would give us time to discover the real facts about the assets, let those who should bear the loss do so without unnecessary taxpayer expense, and send a message that the govt will be honest and transparent in what it does.

I know some of these actions may need to tempered sometimes to account for mass psychology, but the underlying questions must be answered.

Ron Feinman
Lynchburg, VA

Profit in real terms, or even payback in real terms… less likely but not impossible. But I wouldn’t bet on it.