Bailouts?

How many? How far? No more? What's the limit? From the LA Times:

So far this year, the federal government has put upnearly $30 billion to avert a major financial default by the investment bank Bear Stearns Cos.; committed to investing as much as $200 billion in preferred stock of the loss-plagued finance giants Fannie Mae and Freddie Mac and at least $5 billion in their mortgage securities; and agreed to provide an emergency loan of $85 billion to American International Group Inc. in return for an ownership stake of as much as 80% in the stricken insurance giant.

My first thought is: no. Nothing. No more. The lenders and consumers -- the first wave of our current problems (involving primarily sub-prime loans) -- should have to personally pay for their greed and stupidity. Greed in terms of the lenders (who raked in the up-front fees) and the borrowers (who simply wanted the 3,000-square-foot new home right now and thought the details would simply work their way out later), and stupidity in terms of the borrowers. How can one not think a $5,000 per month mortgage hit will have little effect on their liquidity? Their bottom-line ability to pay?

Sarah Palin has already indicated she's disappointed with the federal government's need to bail out another financial institution. At first blush, I'm in that line of thinking.

And where does it end? The federal government, by way of President Carter and Congress already handed $1.2 billion in federal loan guarantees to Chrysler in the form of the Chrysler Loan Guarantee Act of 1979.

History tell us that, generally, bailouts are busts.

CBS News asks the very pointed and appropriate question: then who bails out Uncle Sam?

We all know that: you and me.

And in the meantime, everything affects everything else. This is one huge, horrible Chain of Consequences.

One consequence, from the Financial Times.com:

The panic in world credit markets reached historic intensity on Wednesday, prompting a flight to safety of the kind not seen since the second world war.

Barometers of financial stress hit record peaks across the world. Yields on short-term US Treasuries hit their lowest level since the London Blitz, while gold had its biggest one-day gain ever in dollar terms. Lending between banks, in effect, stopped.

In Russia:

Russia was facing one of the biggest tests of its market economy on Wednesday after it was forced to close its two main stock exchanges to halt a rout that has led to the steepest declines since the August 1998 crisis.

And this shall change, Dear Readers. Day to day.

Be prepared. As I have written, many times (to include the Pygmalion Effect), this can be a True Self-Fulfilling Prophecy.

The markets, I am convinced, are not about Reality but about Thought. What do people think will happen?

Further, do what I call The Logical Extension: combine these current economic times with an Obama Presidency, where this nation will return to the philosophy of Tax and Spend. And massive regulation. The government potentially running the American stock market.

And we have never, ever, taxed or spent ourselves out of economic woes.

Your thoughts?

BZ