English translation, or Kleptocracy Defined

Via CR, the Fed announcement this morning:

The Federal Reserve Board on Tuesday announced the creation of the Term Asset-Backed Securities Loan Facility (TALF), a facility that will help market participants meet the credit needs of households and small businesses by supporting the issuance of asset-backed securities (ABS) collateralized by student loans, auto loans, credit card loans, and loans guaranteed by the Small Business Administration (SBA).

Let’s go through this. The government is now insuring securities based on

  1. student loans,
  2. auto loans, and
  3. credit card loans*

Note that this is not support for schooling, the automobile industry, or credit card borrowers—just the people who buy (or bought) the paper.

In short, f**k the people who actually produced the underlying value of that financial asset. Save Wall Street with Main Street’s tax monies.

I give up. Yves Smith’s old description of Paulson’s “Mussolini-Style Corporatism in Action” seems so quaint by comparison to this abomination.

*SBA loans are omitted from discussion, since there is a reasonable argument that the government insuring SBA loans is has no net cash flow implications. (The argument will prove false when it is discovered that SBA loans are being made profligately to Bush Administration contributors, but that’s a side issue.)

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