Thursday, September 18, 2008

An Open Letter to Barney Frank!

Dear Congressman Frank,

Today you were reported to say,

"It will be the power — it may not be a new entity. It will be the power to buy up illiquid assets," Frank said. "There is this concern that if you had to wait to set up an entity, it could take too long."

The illiquid assets you refer to are illiquid for good reason. They are worthless. There is no market where there is no value What, pray tell, do you propose to pay for these worthless assets with since the funds do not exist to pay for them? In any case why would you pay money for something the rest of the world treats as worthless? From the start this initiative reeks of a catastrophic boondoggle for all but Wall Street and the financial industry in general. From what coffer do you propose to shower enormous sums of money on Wall Street in exchange for the worthless paper? The funds aren’t there, which means you will have to endorse monetization for the purchase of worthless paper. This will have the purpose of cheapening the value of the U.S. dollar which will adversely effect hundreds of millions of people who are blameless in Wall Street’s self inflicted debacle. Finally you run the very great risk of imperiling the U.S. Bond Market as your proposed action almost guarantees a downgrade of U.S. Sovereign debt. Please reconsider your present course of action. It is neither fair, efficacious, or sound.

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