READ: 2 Good Reads on the Bailout

Shortage of free time the last few days prevents me from a more profound polemization on the bailout (though I did get a chance to see a decent chunk of hearings with Paulson, Bernanke and the third wheel Cox and it was horrifying to see how much of this is a work in progress at best and a complete experiment at worst), so in the meantime, 2 good reads on the crisis - one funny and one scary one.  The funny one can be found here and the scary one is here:

"Peter Boockvar [equity strategic at Miller Tabak] wrote a note that had some some very interesting insight on "bailout city" --  The Paulson bailout plan is a government bailout of the previously failed government bailout which was a bailout of the previously failed government bailout etc… Each bailout had its own unintended consequences which the next bailout tried to address. Greenspan bailed out the economy after the stock market bubble popped with 1% interest rates which sowed the seeds for the credit bubble. In order to bail us out, Bernanke slashed interest rates to 2% and a dramatic rise in commodity prices ensued. When that bailout didn’t work, he instituted a bailout of the investment banks with the initiation of the TSLF and PDCF credit facilities for investment banks. That slowed down the deleveraging process as it gave the investment banks a false sense of security. I highlight Dick Fuld’s comments soon after it began where he said it takes the liquidity issue off the table. The lack of dramatic deleveraging brought us to last week’s panic in GS and MS, a failed LEH and a shotgun wedding for MER which led us to the Paulson bailout. The unintended consequence of this bailout will be a much lower US$ and selloff in the US bond market which will leave us with higher interest rates and higher mortgage rates throw’s the intentions of the Paulson plan out the window. Who will bailout this bailout?"