Emergency Fed Measures Delay Stock Meltdown
by Jeff Davis
The Federal Reserve has temporarily averted a financial meltdown by violating 80 years worth of policy by starting up its printing presses to inject billions more dollars into Wall Street to stop major bank failures. How long this band-aid will hold is anyone’s guess.
The New York Times is celebrating this shaky short-term patch job: “Stocks started the second quarter with a soaring rally on Tuesday that sent the Dow Jones industrial average up nearly 400 points, its best performance in two weeks, as investors found reasons to take heart in a fresh round of mortgage-related write-offs at UBS and Deutsche Bank and a capital infusion at Lehman Brothers, the brokerage firm.”
Those are the latest financial institutions, once thought of as rock-solid, which are now swirling around the bowl and will probably require Bear Stearns-style bailouts. Historians who are sufficiently cynical and unkind might point out that there were a number of spectacular “rallies” in the stock market during the weeks after October 1929, as well.
The Times article continues “Adding to the good feelings, Lehman said private investors had snapped up a $4 billion offering of preferred stock ‘far more than expected’ in a move to dispel a swirl of rumors about its stability. Shares of Lehman jumped 17 percent. UBS said it would try a similar move with $15 billion in additional funds; its shares rose 15 percent.”
None of this does anything to stop the subprime mortgage crisis, which a recent report said would involve losses 400% greater than early predictions. These corporate bail outs do nothing to help the poor working class slob who is about to lose his home. Hopefully he can find a double-wide that’s not taken over by Mexican illegals or formerly upper class Whites whose jobs got outsourced. The sky high fuel prices and soaring food costs are not helping as retailers jack up their prices to allow for inflation. Too bad Joe Sixpack can’t adjust his pay check or bank account balance accordingly. Virtually everything we buy is moved by 18 wheelers and they must pay $4.00 per gallon for diesel fuel which can’t help but drive up prices further. The filthy rich politicians in $5,000 suits tell us there’s nothing that can be done while the ordinary guys in blue jeans and work shirts have been screwed, again.