The Bad Days are Back - A Short Comment

No this is not about Bernanke being reappointed Fed Chairman. That was enough to make any decent person vomit for a month. But really, it should never have been in doubt. According to a story by the French national newspaper Le Figaro < lefigaro.fr >, in March 2008, the Obama campaign machine did a deal with the financial industry, after it was assured they had won the Democratic Presidential nomination. In other words, large "campaign contributions" were exchanged for leaving things as usual.

Bernanke was one of these things as usual. Those stealth "campaign contributions" are also most likely the biggest "contribution" to Barrick's personal net worth, which now approaches nearly half a billion dollars < assuming he didn't loose much of that in the October 2008 market crash >. Not bad for a guy who had to borrow money to get back home during the 2004 Democratic Party convention, because his credit card had maxed out. See, Obama really is < or was > like many cash desperate Americans.

But this story is not about Bernanke and Obama. It's about the big banks returning to the same old lending practices.

Not being able to find any quality investors to take their loans  < which is not surprising, since anyone with money wants to hang onto it in this economy >, they have started making what a Bloomberg.com story calls "high yield, high risk loan sales".

Much of this entails financing for the leveraged buyouts of companies. Uusually when these buyouts occur, employees are fired to pay for that leverage, and the orginal company may be stripped of all it's productive assets to make those new leveraged owners a qucik profit. These deals are counterproductive for a society, causing economic contraction not to mention the lives destroyed of innocent workers. The trend all started in the Ronnie Regan days, when Mr. "Soft Touch" wanted government off people's backs, which translated, in fact, to taking the leash off  mad dog gamblers like Victor Posner < who preferred little, and I mean little, girls for his "companions" >, which ultimately led to the economic / financial mess we have today.

Bernanke is finally getting his way. Banks are starting to make loans again. The S&P  LSTA US Leveraged Loan 100 index is back up to it's November levels. But at best, this will be of no help to the economy, except for enriching a few sleazy speculators with banker connections. Most likely, it will be economically detrimental, and make the ordinary citizen's burden that much worse.

"The Worldly Hope men set their Hearts upon
Turns Ashes--or it prospers; and anon,
Like Snow upon the Desert's dusty Face,
Lighting a little hour or two--is gone."             

                                                                    -  Omar Khayyam