Surprise, surprise... CNN lies about Paulson's FED proposal

See this and more good stuff at:

http://globaleconomicanalysis.blogspot.com/

And who is to blame? The Fed course, with help of Congress, and the SEC.

Congress passed legislation to create GSEs to foster affordable housing. Now the definition of "affordable" is over $700,000, and calls to reduce the role of the Fannie Mae are now calls to increase the role of Fannie Mae in the wake of the housing crisis. There were 300 some programs to create affordable housing and every program made the situation worse. All those programs really amounted to was handouts to the building industry and banks.

And if Congress would stop wasting money on needless programs the dollar would stop sinking. Of course the government is wasting trillions of dollars trying to be the world's policeman, a role we can no longer afford.

The SEC in its infinitely poor wisdom, decided to give government sponsorship to Moody's, Fitch, and the S&P and this led to extremely risky garbage being rated AAA. I talked about this problem in Time To Break Up The Credit Rating Cartel.

But the Fed deserves the brunt of the blame for micro-managing interest rates like some central planners from the Soviet Union. The Fed does not know how to set the correct price for money (interest rates) any more than it knows how to set the correct price for orange juice. Only free market forces can properly set prices so that economic distortions do not occur.

Unfortunately, every problem Greenspan faced was an excuse to cut interest rates. Even non-problems like the silly Y2K (year 2000) scare was an excuse to cut rates.

When the dotcom bubble collapsed, the Fed slashed interest rates to 1% to get the economy moving again. The housing bubble was the result. Greenspan added more fuel to the fire along the way by openly praising ARMs and derivatives.

Greenspan May 5th 2005: "Perhaps the clearest evidence of the perceived benefits that derivatives have provided is their continued spectacular growth."

I compared Greenspan to Buffett in Who's Holding The Bag?

Buffett in stark contrast to Greenspan called the explosive use of derivatives an "investment time bomb".

It's perfectly clear now who was right. For those who have not pieced the story together properly, it was fear of a dominoes style chain reaction collapse of Credit Default Swaps starting with Bear Stearns that caused Bernanke to force a shotgun wedding between Bear Stearns and JP Morgan.

So what does the Treasury Department propose? The Orwellian answer of course is to give the Fed still more power to wreak havoc.

Doesn't this decision have to go through Senate and Congress?

I painfully watched CNN about 12:00 EST becuase it was the only thing on in the restaurant I had chosen. It was stating that it will be the worst economic downturn since the great depression and that they finally came out publicly with this info friday. (Humm wonder which presidential candidate pointed this out before). The commentator went on to say that they are doing a complete overhaul to avert this crisis. Average american thinks oh good the FED is going to take care of everything. DP''ers realize it is one step closer toward total control for the International Banking elite. Excuse me while I go beat my head against a wall.

We can all say what needs to be done, but who here lead by example today?