TruthSavvy.

There has been a terrible amount of crookedness, and financial institutions should not be let off the hook. Let them live miserably with their bad loans and hold their damaged securities to maturity, thus crimping their ability to grow their businesses (as transparency requirements deter new clientele). Let new competition rise in their place. Don’t let these institutions use Chapter 11 blackmail as a means of off-loading their junk into “bad bank”surrogates or the balance sheets of taxpayers.

Marketing the impaired securities to market in this environment rewards short-side speculators for creating their own fantasy world where the books of share value are cooked by the self-fulfilling prophesy of fear, downward momentum, downgrades, and trend trading by hedge funds, (a reverse direction experience of what we lived through on the upside). Share value is a reflection of confidence, as demonstrated by markets that soared after FDR said that the moneychangers had been driven from the temples of finance.

Mark-to-market in the current environment “cooks the books and the value” of these companies, destroying their reasonable worth in a neutral environment. It is a game just like the upside game, and wealth is being further concentrated in the hands of a few as a result (i.e., those who hope for plutocratic democracy). Merrill Lynch was expected to open at $10 a share on Monday as a reflection of this, but was purchased by BAC at $29 equivalent (up from $17) when its value in a stock-for-stock deal was estimated independent of the market’s pricing of panic.

If we have any hope of replacing our devious model of laissez faire growth capitalism with prudent capitalism, we must resist allowing the FED to socialize the leverage of Wall Street. This very week the FED is in the process of making taxpayers the prey by upping the money supply on Wall Street so as to facilitate the expansion of the war between mega-longs and mega-shorts — both sides getting more fight money, and taxpayers getting stuck with the case-by-case messes when longs lose a battle where the corporate structure is ‘too important to fail.’ This is the wrong approach! Money supply inflation for Wall Street must be checked strongly, while the supply of money is kept open for productivity innovation and business efficiency — but not for speculation, as in current FED policy, or for consumption, as in another mindless and inflationary government rebate!

Let’s hope that the titans of leverage on Wall Street remain stuck with their problems, unable to off-load bad real estate securities while newcomers bearing fresh capital take hold. Let’s further hope that newcomers are not allowed to use much leverage, and that worldwide economic growth reverses, forcing politicians to come to terms with their own recklessness regarding sustainability issues. This approach to the problem is benevolent toward the common good! It stands in contradistinction to the vengeance of shorts who want to bust banking institutions for the sake of their own financial party — indifferent to taxpayers who will get hurt as the federal government tries to sustain the Union.