Hey Look, Another Bailout Program

The Treasury is tossing another $800 billion at the financial sector this morning. What's 12 figures between friends?

The U.S. Federal Reserve, in another massive life-support intervention for the U.S. financial system, Tuesday announced a $600 billion program to buy mortgage-related debt and securities and a $200 billion facility to buy consumer debt securities.

The U.S. central bank said it would buy up to $100 billion in debt issued by Fannie Mae, Freddie Mac, and the Federal Home Loan Banks, the government-sponsored mortgage finance enterprises.

The Fed also said it would buy up to $500 billion in mortgage-backed securities backed by Fannie Mae, Freddie Mac, and Ginnie Mae.

The move is intended to strike at the heart of U.S. economic woes, the collapsed housing market.

Another $600 billion to take near worthless securitized debt off the books of banks. Of course the program is "intended to strike" at the housing depression. The real beneficiaries will continue to be banks with these toxic derivatives on the books.

And after the money comes in, they'll continue to sit on it, or use it to fund mergers and acquisitions. What they won't do is lend money to businesses and consumers, because the housing market and the accompanying collapse in the commercial real estate market is making lending that money out right now too much of a risk.

Besides, the banks know they have trillions and trillions more in bad derivatives lurking just off their balance sheets. $600 billion is just pissing on a skyscraper fire.

The $200 billion for securitized consumer loan products? A nice little gift to credit card companies this holiday season. The consumer is tapped out, and millions of defaults on credit card payments are going to be coming. Credit outfits aren't going to make effort one to use this to loan to new customers. They're going to need it just to stay alive. In this consumer-driven recession, with retail sales falling off a cliff and auto sales stalled out, credit card companies are on the front lines right now. They're in tremendous amounts of trouble.

If Americans walk away from their credit card payments, or even worse, pay off their debts and then cut up their cards in order to get their own financial houses in order, the credit card companies are screwed. This recession is going to put many of them out of business, and those that survive will have to do so by charging usurious rates, exorbinate fees and maximum penalties for cardholders who miss even one payment by one day.

The next couple of years will only be worse, no matter what Obama does.