I ran across this useless old post of mine written one year ago.  It’s useless for several reasons…mostly because it accomplished nothing and we ended up with the scenario I lampooned.

The Ultimate Government CDO Bailout  September 7, 2007

Raise the caps at Fannie and Freddie to unlimited, print a ton of money, lend it to Fannie and Freddie, who will be able to buy all CDO’s on the planet, have them repackage the products into REMICs (sounds better than CDO) and then resell them with a guarantee of the US government. That would solve it wouldn’t it?

OF COURSE I AM JOKING! Obviously, the effects of such a “plan” would be as devastating as the problem itself. But I have not yet heard any credible plans either. So I thought I would throw together a bunch of the stupid ideas that have been tossed around and point out the absurdity of the path we are on. As I see it, the path being presented most frequently revolves around the government throwing a ton of cheap money at the problem. A problem created by cheap and easy money being thrown around by the government and lenders. BRILLIANT!!

A month ago, I wrote a post called “Subprime Solutions” where I implored the government to set up a forum to develop ideas to address this crisis. Since then, the problems have spiraled out of control and as far as I can tell, there hasn’t been much brainstorming going on. In the “Subprime Solutions” post, I offered up the idea of breaking apart all the CDOs to identify the healthy components from the unhealthy ones. Gillian Tett of the Financial Times recently made a similar suggestion. Since I consider Gillian to be a superior financial journalist, I was happy to see her thought-provoking article. But until there is a coordinated effort to evaluate market-based solutions and not just read about them in papers and blogs, I suspect we are doomed to rely on a government bailout.

If you click on that link to Subprime Solutions in the last paragraph, you’ll run into some additional flashback hell (as I call it).  Maybe if that Blue Ribbon panel had been working on this for the past year, we wouldn’t need to throw together a plan over the weekend again and hurry up to turn it into law.

The bigger issue here is obvious.  The people in power do not like people like me and they do not listen to us either.  But they are great listeners!!!!  Apparently, they like to listen to each other at fancy conferences in Jackson Hole which as far as I can tell, all that groupthink did not help out much over the past few years of this crisis.  Apparently, they like to listen to Bill Gross and other investors with big interests in telling the government what it needs to do.  Apparently, they like to listen to overseas phone calls.  Apparently, they like to listen to execs from the financial firms that have created this mess.  Apparently, they like to listen to regulators who have failed to enforce existing regulations.  Indeed, they are great listeners!

Just a few friends, family and readers (even a few media outlets) have asked me for my solution and for me to stop bitching about the problems with the plans that have been offered in the past, the plans that are being proposed now, and potentially, the plans that will come in the near future.  To what end?  Is this a test?  Will I get a smiley face sticker on my test paper or maybe a red star or a “good job” comment from the graders?  I have no desire to convince anyone how smart or “dum” I am.  I don’t waste my time answering questions that will do nothing even if they are correct.

None of my friends, family and readers I have identified have a hand in crafting this policy or voting on it or signing it.  There are many great minds out there that could actually work together to build a constructive effort to resolve this mess.  What would be done with it?  Blog readers reading it…saying that is smart or that is stupid or that will work or that will not work.  No offense, but I suspect that kind of thing is about as much value as people get out of reading my crap, just like the post I wrote above.

If someone in power can convince me that anything I have or would say would have an impact, I would be willing to offer my assistance.