Sunday, March 15, 2009

Commercial Debt

Collateralized Loan Obligations, the third leg of the sub-prime/credit fiasco are now starting to come home to roost according to Bloomberg's news service.

CLOs, a type of collateralized debt obligation, pool below investment-grade loans and slice them into securities of varying risk and return. The leveraged loans are rated below BBB- by Standard & Poor’s and less than Baa3 at Moody’s and are defaulting at a 4.5 percent rate, the fastest since November 2002, according to data from S&P’s LCD.

Our surviving investment banksters want the Federal Governent to back these failed pieces of paper before they support consumer loan failures which are supposed to be next on the list. The desire is accompanied by a threat of course; we are getting used to the threats of financial Armageddon from the cretins and thieves that got us into this mess- and they say that if the government doesn't bail out Collateralized Loan Obligations bankruptcies will sweep the land as business will find it harder and more expensive to get loans. The problem as always is presented as a book keeping difficulty.
The common sense approach to this problem is that if companies can't stay solvent they need to go bust. If we support them with public money we turn the entire nation into a zombie, a 21st century version of the Soviet State, where the workers pretended to work and the government pretended to pay them. This crisis is more than just an accounting glitch, it's serving as notice that our system has failed and we need to start again. We can start again by getting together as nation as and people and discussing the future civilly or we can go nuts one more time and start lobbing bombs at each other. But first we all have to admit the awful truth- our system has failed.
I am one of those that feels that lack of oversight allowed the failure to occur, others say it was poor people taking out loans they couldn't pay (which gives the poor the greatest power they've never had throughout history!) and while I'm all for revenge as I watch people's lives become a torment to them, the first thing I want is an acknowledgement that we are screwed. Then the rebuilding, and the Nurnberg Trials can begin.
Banks themselves claim profits after receiving billions in taxpayer hand outs and then protest if we demand pay cuts and firings! Corporations who have made their managers wealthy on the free market principles of yesterday claim the right to wealth on today's brave new socialist principles. They are crazy and we are crazy to let them think that one penny of our money will go to saving their backsides without we get a say in their management. You want free markets? Take the ups with the downs, no more n o less.

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