What the “Treasury Talk” is Saying

A reluctant Henry Paulson announced this morning what the Department of the Treasury is prepared to do, if smaller banks request the help. There’s nothing in this plan for direct help to homeowners – no capping home loan interest rates, no moratorium on foreclosures – it’s directed at the smaller banks, who have no real options right now. And what’s worse, in a market with tight credit, Paulson’s preferred stock purchase (buying preferred stock, bearing interest, that gets paid back ahead of the shareholders’ common equity) plan is making the little banks pay a 5% return (rising to 9% in five years) on the government’s investment. That rate is a significant multiple of the rate that the Federal Reserve has set for its highest-rated bank-borrowers.

So this “interest generating” string pretty much assures that the small business and individual customers of those local banks who get federal aid will get socked with a higher rates and tighter requirements than the big boys and their customers (read: jobs and payrolls are still at risk if companies cannot reasonably bank their receivables). These higher rates make any qualified lender who accepts these terms much less competitive than any bank or savings & loan that does not.

Unlike the European governments, who simply guaranteed that on a temporary basis, they will support their banks from failure, the U.S. plan places an expensive layer, a financial burden on the cash-strapped, already-fearful local lenders. For those who want specifics, George White at thedeal.com summarized the government’s Capital Purchase Program (my notes are in brackets):

• The senior preferred shares will pay a cumulative dividend rate of 5% annually for the first five years that will reset to a rate of 9% annually after that.
• The government's shares will be non-voting.
• The maximum amount the government will invest is $25 billion or 3% of risk-weighted assets.
• The minimum amount the government will take is 1% of risk-weighted assets.
• Treasury will buy the senior preferred shares by year-end 2008.
• The government's senior preferred shares will qualify as Tier 1 capital and will rank equally with existing preferred shares and be senior to common stock. [Read: the government is a better position than the bank shareholders]
• The program is available to qualifying U.S. controlled banks, savings associations, and certain bank and savings and loan holding companies. The Treasury will determine eligibility and allocations for interested parties after consultation with the appropriate federal banking agency.
• Treasury may transfer the shares to a third party at any time.
• Treasury will receive warrants to purchase common stock with an aggregate market price equal to 15% of its investment.
• Participating banks must adopt Treasury's standards for executive compensation. [A retroactive clawback and a ban of any golden parachutes – a good idea – but the big parachutes are not likely going to be in these little banks in desperate need of federal assistance. It looks better on paper than what it really means to taxpayers.]

The markets rose mildly on the news – this was hardly the U.S. government reassurance they were looking for – but since the burden is on the smaller banks to “ask,” no one really knows if this structure has a chance of working. And think of the legal and advisory fees this exceptionally complex structure will generate – money to those who helped create this problem, a transaction tax that siphons off a chunk of the value of the $700 billion rescue package.

With nothing in direct aid to consumers, still looking at institutions before people, this plan lacks the transparency and simplicity of the European action. Don't expect the stock market to stay up. Don't expect the worries to vaporize. And don't expect this to help consumers or homeowners with any significant relief anytime soon.

I'm Peter Dekom, and I approve this message.

The Psychology of Panic

If there is a lesson in the soaring stock prices, it’s about just how much of the market is psychological. The traders were looking for a sign that responsible government action would guarantee the financial viability of the credit markets – an excuse to take advantage of overly discounted stocks, to take the first steps that launched a stampede. They didn’t get that reassurance from the American government. Instead, they got their comfort overseas this past weekend, as European countries (both the pound sterling-based British markets and the Euro-based European markets) guaranteed, at least on a temporary basis, that their banks would not fail, and that the European governments would be the guarantors.

Look at the results, even as the U.S. seemed caught like a deer in the headlights! The markets sky-rocketed on Monday, a process that might even continue on Tuesday… but without American solutions to our localized credit freeze on small businesses and with nothing to stop the free fall of mortgage foreclosures from subprime mortgages (and the continued imploding of housing values as a result), Americans could find themselves back at the bottom of the feeding pile in the very near term.

That there are great buys out there, with stocks trading well below their normal average 12-13 times earnings, is without any doubt. But if trust and confidence are not rebuilt quickly in the hearts and minds of homeowners and those holding down the basic jobs that support our economy, that market surge will, at least from an American perspective, be short-lived as the markets vacillate up and down searching to find the bottom again. We really need more than Europeans' solving the problems; we actually need some American action!

We know that the Federal Reserve has joined a number of international central banks to help insure that there is more “liquidity” in the market, but inter-bank lending rates are still rising around the world. If the central bank efforts were working, that trend should be reversing (rising inter-bank rates are an indicator of lending banks’ fears, of a basic distrust in the solidity of the credit markets in general). And Mr. Paulson’s folks have said that they intend to use over 1/3 of the $700 billion to fund local banks and unfreeze local credit markets. Stop talking about it, and “get her done”! And please don’t forget about the homeowners themselves!

If our government addresses those foreclosures at a consumer level (a moratorium on foreclosures, as I have repeatedly noted, would be a great step pending sorting out the good from the bad and resetting viable home ownership with livable interest rates) and recharges the small business credit market sooner rather than later, I believe that we have already seen the bottom, and while I do not expect a spectacular recovery in the near term, I also think we can keep from falling through the floor. But if trust and confidence do not return and stay with the basic American consumer/homeowner groups, well… we’ve already seen where that can lead.

Maybe, before it really takes action, the government has to make sure that Treasury’s cronies are on board with fat retainers for the big law firms and major financial advisory fees for the bankers – all for a group of folks who found and exploited the loopholes that got us here in the first place. Come on… the middle class and those at the bottom of the economic ladder need some representation too. Trickle down seems to mean trickle up into the pockets at the top.

We’re not out of the woods by any means… we just found a clearing – let’s not mistake that for “mission accomplished.”

I’m Peter Dekom, and I approve this message.

While Rome Burns

As G7 financial leaders continued to meet to provide a concerted government action against the global financial crisis, European countries – who use the Euro as their currency (this would exclude England that still uses the pound sterling) – agreed temporarily to guarantee refinancing between and among their nations’ banks to ease the credit crunch – they basically told the world that Europe would not let its banks collapse. They were solving the problem. They were stemming the obvious global “panic” that needed a psychological boost… quickly.

The World Bank and the International Monetary Fund pledged not to let particularly vulnerable, poorer, nations slide into oblivion as the richer nations struggled for answers. Meanwhile, $700 billion were transferred into the Department of the Treasury based on the rescue package passed by Congress and signed into law October 3rd.

Funny, in what was a financial crisis born in the U.S. lending markets, as the American government was instead engaged in hiring private “consultants” to help them decide how to “fix” our economy (many “consultants” were those had enabled the very problem that the Treasury Department was directed to repair!), European leaders acting without such expensive “special interest" expertise, just guaranteed the immediate and continued operation of their banks – at all levels. European banks could lend, and people knew that their governments would stand behind them. Their nations’ payrolls would be met. Their small businesses would have capital flow.

The Asian and European markets staged a rally at the news. The U.S. stock markets, seeing that someone had taken reassuring action, also opened and flew upwards. There is a “bounce bank,” but can it hold – will the panic really subside – without immediate U.S. follow-up in support?

Surely, with the U.S. markets looking for a sign – human beings trying to see that their leaders “were handling” the crisis with a firm hand – and with the Europeans and international agencies having acted, the Americans would add an instantaneous deployment of cash and guarantees based on this huge infusion. Grassroots local lending markets had to get a shot of federal antifreeze, right? The fall in home values had to be stopped, correct?

In a move that seemed to track European strategy, Treasury Secretary Paulson had strongly hinted that the government would actually step in, place equity into smaller, weaker banks – maybe even take them over entirely – as a way to get money down into the system where it could begin to unthaw the credit markets, getting payrolls funded and working capital flowing back to the small businesses who did not have the advantage that mega-billion dollar, publicly-traded companies had by selling their promissory notes (“commercial paper”) in the non-bank, open marketplace (which the Federal Reserve helped by buying such paper recently – thus guaranteeing a market).

The economy was clearly the primary focus of governments everywhere; the President of the United States addressed the issue 22 times in the last 26 days, according to the Associated Press. Yet he spent Sunday biking in a Maryland state park and remained in seclusion for the rest of the day. The U.S. government seemed paralyzed and indecisive. Lots of talk, lots of opportunity, lots of plans…

Congress is mumbling at the inactivity; there’s even a bipartisan effort towards getting a vote on a new stimulus package before or shortly after the November 4 election… tax cuts and small checks to taxpayers (like the last “stimulus package” worked?!) – a truly dumb idea – with some decent ones mixed in to help get the bill passed – like injecting federal money immediately into getting local and national infrastructure projects (already budgeted and planned – just delayed because of the economy). Americans need jobs and to be able to keep their homes, not spending money for Christmas! The aspirin of financial issues – send small checks to taxpayers or give them tax breaks (on money they may never have a chance to earn) and call it a stimulus package – does not cure a patient who is bleeding to death; aspirin even thins out the blood and makes it worse.

America needs a sign from its government that will prove that those of us who aren't mega-corporations or powerful special interests will get the relief in the credit markets that is essential for us to keep our jobs and our homes. It’s that basic.

So with all this opportunity and all this activity around the globe, with markets screaming for a sign that a “plan” was being rolled out, how did Treasury Secretary spend the first allocation of the $700 billion bailout?! We don't know. The entire $700 billion still sits in the Treasury Department accounts. The expensive outside financial “experts” aren't on board yet.

I’m Peter Dekom, and I approve this message.

Trust & Value

Focusing on job growth and stemming the tide of deteriorating home values is part of a bigger, overall strategy, that we as individuals (prodding our elected representatives as needed) can help implement. Let’s look at the second installment of this two-part blog.

Trust – Right now, people aren't seeing anything happening other than rich institutions gorging themselves on cheap money. They hear words, see world leaders conferring, but do not see results. They watch as big companies gobble up smaller defaulting ones – clearly consolidating a lot of power and wealth in fewer and fewer fat cats. A stock market (the little baby that doesn't lie about how Americans “feel” about economic security) can't grow if people do not trust the system or the leaders that run it. The markets are screaming that distrust. I've already noted one major component of trust-building: start solving the problem with the people (they're the ones that have to trust).

Consolidation of power into the hands of a few also requires increased regulation as competitive market forces are obviously reduced. Transactions for fee-generating, non-value-creating “moving money around” deals should be either regulated or taxed out of existence. The derivatives/hedge fund marketplace needs to be retooled from the ground up. And the special interests whose campaign contributions – to both sides of the aisle – convinced our state and federal governments’ regulators, legislators and top leaders to look the other way as they championed “selective regulation” (don't kid yourself, this is not “free market” any more than we are becoming “socialist”) have to be reigned in.

Value – President John Kennedy once said, “Ask not what your country can do for you; ask what you can do for your country.” Aside from the obvious spirit of volunteerism that seems to rise in the hearts of Americans in times of crises, there are a whole lot of individual efforts out there that aggregate to make a real difference. When the candidates were blind-sided by a recent debate question, which in my opinion neither answered particularly effectively, what sacrifices they thought Americans should make in the near term, I believe that aside from the obvious – reduce your energy consumption consciously and immediately – there was one more big ask that slipped by.

So much of the wealth in this country came from people packaging and reselling financial instruments, merging, buying and reselling (“flipping”) companies (occasionally making them more efficient, but always generating investment banking and legal fees) or creating transactions for the pure sake of generating financial fee income such that value creators often got left behind in the vacuum of capital. So here’s the biggie, where you and I can make a difference to this mess.

Ask yourself every day, what “value” did I create for my country today – mostly in my work, but maybe in my education or free time activities? It doesn't matter that you are paid for it (but not overpaid for it) or that creating values can make you rich. Rich from creating value is a terrific reward under the American version of “capitalism.” And then ask what value you removed or reduced from the system that day. If we all just add a little bit more than we take out, the aggregation of that effort is called GROWTH, and there isn't a recession that can stop that form of concerted effort. We are Americans; we work hard, come up with great ideas, and are the world’s greatest fountain of innovation. All we have to do to recover is just return to those fundamental American values.

A final word about final words. Putting a simple label on complicated issues tells people how they should feel about something without actually explaining what is going on. In a modern society, some words are almost archaic, rendered meaningless because no society on earth actually embraces anything like the “pure form” of any particular social structure. There really is no pure “socialism” or “free market capitalism.” When people tell you that’s were we are going or that’s what we should become with such labels – run! Instead, just ask yourself what you think you want a society to give you in your daily life (describe the results without the label); skip the simplistic and often emotionally charged label and go to the substance.

I’m Peter Dekom, and I hope someone out there is listening to this message.

Jobs & Homes

Funny how simple the solution to the issues seems – until you try to apply tangible steps. Lots of folks are telling you for sure what is going to happen and when. Government leaders. Columnists. Some project total doom. Others see corrections and near-term growth. Bottom line, no one knows, and add a monkey wrench from left field, a global catastrophe, and the rules change.

That said, what can be done? I’ve been screaming that you start at the bottom before you address the top, because if your people don’t trust the solution, neither will the rest of the world. This is the first part in a two-blog presentation today. Later, I’ll speak about trust and value-building, but let’s start with the obvious:

Jobs – Make sure people get paid for the work they have, that they do not lose their jobs and that there are new opportunities – sponsored by government research, government-sponsored work and government-incented private sector jobs. Make sure employers have receivable credit to meet their payrolls, provide federal funding today to begin scheduled (fully planned) but deferred infrastructure maintenance and repair (we can begin to build the new stuff later) from local to state to federal projects (jobs now!), and accelerate spending on all government programs that provide “investment” opportunities in growth (energy research, education, better infrastructure, health care, etc.) that make us more valuable and productive – features we need to rebuild this country. That’s the real “stimulus package” we need.

Homes – It’s not about buying up bad mortgages from the institutions who stupidly bought the piles of subprime loans or under-analyzed CDS paper. Maybe the government can help those institutions – later after the bleeding stops – if they have other values to the taxpayers. But it is about stopping the foreclosures that devastate the values of every other home in this country, capping what started out as teaser rate mortgages (like 1 percent for a year or two, and then we “make up for lost ground” later… resulting in some folks paying 11+% today!!!!) to a more realistic 6% and then letting the originating banks (for a small piece of the interest flow) sort out those who lied on their applications from those who were misled later in this cycle, and rebuilding the home loan market so real estate can be bought and sold again. Make sure the money is deployed locally!

Since this is really a two-part blog, I’m going to add the second level of the Jobs, Homes, Trust & Value scenario in my next effort. Just know that these four issues literally will decide how, when, how fast and if we fully recover our economic power, our stability and growth. My personal opinion is that if each American chooses to make it work, a strong recovery is inevitable.

I’m Peter Dekom, and I approve this message.

Global Negotiations & Silver Linings

As banks fail around the world (15 in the U.S. so far, but there will be more, and many more around the world), as Russia had to bail out the financial system of an entire nation (Iceland, which is still teetering), as leaders from the “G7 countries” (U.S., Japan, Germany, Britain, France, Italy and Canada) meet and pledge to take "decisive action and use all available tools” but are really short on specifics, and as those credit default swap (CDS) instruments hit the $62 trillion mark, where is the silver lining? There are many.

First, we are finally getting rid of all those “too good to be true” financial instruments and the idiots (fraud-meisters) who created them. Back to fundamentals.

Second, the huge number of CDS instruments (default insurance paper) are 1. going to be standardized and uniformly rated, and placed into a regulated clearing house, 2. they are mostly in the hands of financial institutions or super-rich people (OK there are a few mutual funds and pension plans in this mix, the bad part) and not common in individual “average” portfolios, 3. the institutions that created them and profited heavily are just that, institutions – not people – we can live without, and 4. if the market bottoms out and stabilizes, the CDS default rate will track the market.

Third, the investment markets now have to focus on true value growth companies as opposed to companies that like to generate “financial transactions” solely for the purpose of generating fees. When you think that in normal times, U.S. companies trade somewhere at 12-13 times earnings, if there are solid bets trading at less than that number and you can hold on to the stocks long enough… there are real bargains out there. Just expect a bumpy market for a while. And short term, companies that focus on the middle class – the group hit the hardest by this mess – are going to suffer more than those aimed at the top or bottom level consumers.

But there are fundamental differences from what foreign governments and financial institutions might want from what is best for America . After all, the triggering market anomaly for this meltdown was the accelerating default rate on subprime mortgages (which does not mean “borrowing at below the bank prime rates” – it means that the borrowers’ creditworthiness was well below the standards of fully qualified borrowers) based on American residential real estate. And this blossomed out into the world of overall U.S. real estate values and even to fully performing mortgages, again, primarily based on U.S. residential real estate. Not real estate or subprime borrowings outside the U.S.

The American economic upper class, except for the exceptionally greedy who deserve to tank in a payback for profiting from this overextended economy, are insulated from the big pain by raw wealth, even if the mass of richness may be diluted. The bottom of the economic ladder will suffer from even leaner times, but they have lower to fall. The middle class will absorb the brunt of the pain, and our own drastic focus, at least initially, has to be on restoring the values – jobs and home values – that are the basics of all but the lucky few at the top of the wealth curve.

Foreign companies were hurt as they took on stupid investments based on under-qualified borrowers and over valued American real estate. Foreign governments want their companies bailed out; it wasn’t their residential real estate market that caused the problem. While Americans have concerns for their financial institutions, our government should be focused first on bailing out individuals.

This interplay between emphasizing individual versus corporate solutions will be the test of our economic leaders’ mettle; and Paulson seems to be succumbing to global pressure to start with institutions. That continues to be a big mistake for us, and in the end, a big mistake even for the foreign governments who really need a sound platform upon which to rebuild credibility in the global economic structures.

I’m Peter Dekom, and I approve this message.

If You’re Confused, Think About the NYSE

Liquidity, liquidity, liquidity! Yeah, the Dow had its worst week in its entire history. Yeah, we have not seen a market decline like this since 1929. Friday started off really horrifically and ended just plain “bad.” But we can bottom this out if stubborn Henry Paulson and a few other government leaders will simply address the fundamental problem of businesses being able to function, fund payrolls with receivable financing and move on - maybe even stop the mortgage debacle.

This morning’s New York Times underscored the problem: “In the credit markets, conditions went from bad to worse. Borrowing costs for banks and companies jumped once again as investors sought safety in Treasury bills despite earlier signs that the government might take equity stakes in troubled companies to try to halt the credit crisis. It was the worst single day for junk bonds ever, and the cost of borrowing shot up for even blue-chip companies: I.B.M. agreed to pay 8 percent interest on $4 billion of 30-year bonds, about twice the rate at which the federal government borrows money.”

Okay, Wall Street, if it’s tough for you, think about the small businessmen and women who can't even borrow at 10%!! Hey Henry, when is your trickle coming down to the people? When are you going to get the point that the hoarders, the big financial institutions that suckled at the breast of the Federal Reserve, ain’t doin’ no tricklin’?! They're borrowing from you (the Fed - the government) at a low rate and then lending you (the government) that money by using their borrowings to buy Treasuries? If you want small business and homeowners to have local access for basic funds, guess what?! You actually have to get down and get local. End of broken record. Please end the broken credit market with the obvious solution.

I’m Peter Dekom, and I approve this message.

The Incredible Bottomless Pit or Are We Searching for the Bottom Now?

As the big financial institutions gorge themselves on cheap Federal Reserve loans, smaller local banks are cash-dry as a bone. Even after a $25 billion auto industry bailout, GM is mulling whether to shut down plants and implement massive lay-offs, because people don’t buy big ticket items in unstable times, and its gets worse where there are no car loans to be had anyway. It’s the big example of what’s happening everywhere. Is this a “slow motion crash” as the Wall Street Journal states or have we hit the point where it is obvious that we are “throwing the baby out with the bathwater”? Are we at or near the “bottom”?

As the Treasury Department (the Administration in general) still fights direct consumer assistance, is still unwilling to freeze foreclosures so that mortgage rates can be reset in a sensible time frame, won’t guarantee grassroots receivable financing… what else can they do that does not involve this direct individual, consumer-targeted relief? If we have to play by their “work through the institutions only” rules, can the government still make a difference? While the efforts outlined below most certainly are not the best and most immediate solutions, the answer is “yes, there are steps they can take” that will help.

The Treasury is considering trading equity stakes in smaller banks in exchange for cash infusions; that policy should carry the string of immediate available small business cash to support payrolls. The government can also guarantee inter-bank loans, from the big cash-rich banks to the grassroots local banks that are best suited to distribute capital to local borrowers. Finally, federal officials can start setting mortgage rate caps where teaser rates and ARMs (adjustable rate mortgages) have dramatically increased monthly mortgage costs. Under the terms of the bailout plan, and where banks and financial institutions accept government loans or insurance (virtually every lending institution in this country), the government has rule-making power to implement these strategies very quickly. Not the best solutions, but at least the kind of movement the market needs to see quickly.

And here’s where I am sticking my neck way, way out… If the government takes these steps now (as the beginning of a litany of many more steps), I honestly believe that the market is looking for a bottom. If it happens, a GM reorganization won’t help stop the fall, but we can survive that as well. It shouldn’t take that much to convince Americans that the stock market – a leading psychological indicator of positive growth – is not going to crash much farther. The market will begin to vacillate instead of dropping day after day… and with the right government support… stabilize. But the market “sheep” need some market leaders to change their attitudes.

I’m Peter Dekom, and I approve this message.

RICO Ain’t a Copier

Its real name is Racketeer Influenced and Corrupt Organizations Act passed by Congress in 1970 to keep organized crime from profiting from their ill-gotten enterprises, thus negatively impacting our economy. The law has since been interpreted to apply to criminal or wrongful civil acts of persons acting in concert to engage in unlawful acts, and while many have attempted to misuse the statute for other forms of civil wrongs, like a mere breach of contract, the law provides a very useful tool for the clever plaintiffs’ attorney or a prosecutor in search of justice for major wrongdoers.

In civil law terms, the winner gets triple their damages; in criminal law, they pay huge fines, have to make restitution and go to prison, often for a long time. So what happens when a run-of-the-mill financial institution encourages its managers and employees to create false numbers, or numbers they know are unsustainable, to sell securities that they really know are bogus? To convince mortgage applicants to lie on their loan forms? And what happens if financial institutions act in concert to hoard money that is vital to the nation’s survival, money that was in fact borrowed at very favorable rates from the government (that set lower rates seeking to create payroll-saving liquidity), waiting for a financial collapse so that they can bottom feed on the wasteland they helped create? Is this the “conscious parallelism” of the seldom-enforced antitrust laws or just a down-and-dirty RICO violation? Perhaps we may also find violations of stock manipulation and other laws.

The stock market opened this morning, plunging by more than 600 points. The automatic “buy stock if it is cheap enough” triggers set at 8,000 triggered a small recovery, but the overall impression of the U.S. economy, in particular, and the global economy, in general, is still strongly negative. We need some major risk-takers to begin to lead with confidence. No major investors, no confidence, no recovery. But there are some potential investors out there – using cheap money from the Fed – who aren't playing by the rules.

If this debacle unfurls so the we do in fact step into a depression or even a deep recession, and if the banks and other financial institutions who benefited by the lower Fed rates and the bailout potential – and their profit-sharing managers – wind up getting rich and fat on the carcasses of the unemployed and those whose homes are stacked in the rubble of real estate hell… if they profit from our misery from money they borrowed from us (the Fed) and hoarded… might I suggest that in lieu of riot and revolution, we strongly consider naming a lot of defendants in a lot of civil and criminal RICO actions and get that money back (times three!) to the taxpayers?

The President spoke this morning, and besides verbal palliatives and a small allusion to prosecuting people planting false rumors to impact stock prices, I didn't hear anything other than a summary of the recent policies. He even suggested that the same banks who just refilled their coffers with massive cheap loans from the Fed didn't “have the capital” to create the lending environment the government intended.

The Dow dropped well over 100 points immediately after that speech, so we can see how the market feels about his words. Today, the Administration needs to send a less-than-subtle message to those institutions – that federal civil and criminal prosecutions are hanging in the air – to shake some money down to the grassroots who need that credit and foreclosure relief now. If they don't, I guess it’s pretty clear whose side they're on… This is about our jobs and our homes!

A word of caution to the number crunchers and opportunity seekers, the young analysts trying to make an impression… there’s a lot more to take into calculation than the projected profits! Your office hours could be replaced with visiting hours! There is a political election taking place with angry voters sending you a clear signal, no matter who wins. Somewhere out there, a Grand Jury might just be holding a chair for just for you. We don't need any more economic villains out there; we need new heroes.

I’m Peter Dekom, and I approve this message.

Has the Economy Fallen to a Level Where the Fall Cannot be Stopped?

Maybe. We’ve had the government struggling with building an operating room as the patient lies bleeding to death on the floor. Foreclosures have accelerated. Credit lines have been pulled and substitutes are not available. As assets drop in value, some companies that do business with a single bank (often a requirement of getting a credit line) have watched (sometimes without any notice) as their banks drained the company checking accounts under the complex contracts that cover dropped values with all of that company’s cash at that bank. Let the checks bounce. No matter that this money was earmarked for payroll. Layoffs have begun, and without workers to create new values and receivable financing to collect old ones, well, expect a lot of companies to close their doors permanently.

The markets are like very little children, except for the myths that sustain them (like Santa Claus and “they can’t all be bad loans”), they don’t really lie. One year ago today, the Dow was at 14,164. This morning, it was over 9,100. At the end of the day, reflecting a depression-level trend line, the market closed at 8,579 – a 679 point one day drop, the seventh consecutive down day on the market - $8.3 trillion worth of value destruction in this year. The Dow has lost 5,585 points, or 39.4 percent, since closing Oct. 9, 2007. General Motors stock hit a 58-year low. The markets are bawling like a baby! They are screaming that whatever the U.S. government has done just isn’t what needs to be done, is way too slow and way too little.

And every day that the government does not do the obvious – 1. stop foreclosures dead in their tracks (with a moratorium of reasonable duration to deal with the parts that need fixing) and 2. restore the credit liquidity (mostly based on lending against sales that have already been made but not collected – receivables) to fund payrolls – the problem will rise exponentially. You can’t operate on this patient without stopping the hemorrhaging first. The scalpel comes later. How many different ways do I have to repeat the obvious before someone of responsible power actual does it? I’m not alone. I hear a lot of voices joining in this obvious chorus.

People without jobs don’t buy products, pay rent, buy homes (which they can’t get loans for anyway), create value or pay taxes. Foreclosed houses flooding a market with no buyers just make all the good homes less valuable. And since banks and savings & loan lenders have to declare mortgage and loan defaults as part of the regulatory process and the reporting and disclosure rules, without a moratorium and some relief from the government, they can’t really stop. When a dam cracks, you either plug the hole or watch it widen until the dam falls.

Sorry Ben, the markets have all but laughed your rate cut into oblivion. Sure the banks and financial institutions are borrowing from the Fed at your pretty new rates, in record-breaking amounts. But they are hoarding the cash! Sorry Henry, all that Goldman Sachs training still doesn’t make the trickle down bailout (from the institutions being bailed out to the homeowners and small businesses) a viable alternative at this point. You waited too long to use the tools you were given, and nothing is forcing the banks to push the money they are hoarding down to the level where it’s needed. Why are the hoarding that cash, Henry? To benefit from the fire sale of our misery? And the President will address this issue tomorrow morning. Maybe he has the answer. Let’s see. We’re at strike two in the bottom of the ninth… and it sure doesn’t look like we’re winning.

So read my lips! Go to the bleeding… the wound itself, and apply a tourniquet! Now! Not words, plans and theories. Action! Stop building an operating room for a patient that might need a coroner!

I’m Peter Dekom, and I wish this message weren’t necessary.