The United States of Bailouts

Dear Dazed and Confused,

Why not declare to the Federal Reserve that you and your family now face "unusual and exigent circumstances" and that you would now like to register with the government as "Home Sweet Home Bank"?

You deserve a break, you deserve some government money just like every other sector now holding out a tin cup to the government, right? 

Why not, as the government's bailout keeps "evolving", as the government's economic rescue squad seems to now be careening around worse than the Jamaican Olympic bobsled team?

The part of the $700 bn bailout plan, the Troubled Asset Relief Program, the part of TARP that would buy Kryptonite mortgages and real estate bonds from banks, has just been TARP-edoed.

Instead, the name of the game is to become a bank to get a government capital infusion. So why not you, given that Social Security and Medicare reform are so far on the back burner, they're off the stove?

As TARP has slipped free of its sponsoring facts, as its once resounding authority has dwindled into so many solemn doodles on a government yellow pad, why not join in and become a bank?

Why not do it now, since the government's escape hatch is going to splinter into smithereens soon, as the government is now inviting a traffic jam with an expansion of its TARP rescue to include other nonbank financial institutions, such as life insurers like Hartford Financial Services and Lincoln National, even Prudential, and specialty-finance companies like CIT Group? They, too, will get a bailout, my sources tell me, under the watery terms of the government's $250 bn capital purchase program.

So why not become a bank too, and join other insurers like Allstate and MetLife, which own thrifts, on the TARP bailout line?

Why, and how can they get at money thought to be reserved for banks? Because the insurers, are getting in through the back door by quickly buying savings and loans, turning themselves into, effectively, bank holding companies.

Sure, you'd be running through a very crowded door here, joining in a fellowship of juvenilia with the likes of GMAC, Chrysler Finance, Morgan Stanley, Goldman Sachs and American Express, who are also now hanging out a bank shingle to put an extra snap in their wilted yellow suspenders with taxpayer money because didn't you know that Amex and GMAC pose a systemic risk to the U.S. economy?

And once you become a bank, you would get to pal around with the truly big cheeses on Wall Street, you'd be running with the wolves just like you have always wanted. Like KKR Financial, the finance arm of leveraged buyout vultures Kohlberg Kravis Roberts, which reportedly has said that the "changing environment" was leading it to consider transforming itself into a bank to get at deposits.

And who knows, you may soon be joining everyone's favorite store, Wal Mart, which could one day realize its dream of buying a bank just to declare that it, too, faces "unusual and exigent"  circumstances as consumers clap their wallets shut. Wal Mart too could declare that a big unit of itself is now the Wal Mart Savings & Loan, so it, too, can get its day in the sun, all in the World According to Tarp.

You would have lots of fun because you may soon be joined on the Federal Tin Cup Line by very colorful companies who could one day soon also call themselves banks because they own, just like Goldman, Morgan and Amex, industrial loan outfits, otherwise called industrial banks. They include Target Corp, Nordstrom, Harley-Davidson, First Data, UnitedHealth Group, BMW, and Sallie Mae, documents indicate.

And you may also soon be joined by the Blue Cross and Blue Shield Association, Ceridian Corp., and Home Depot, all of which at one time wanted their very own industrial loan company, too.

Like I said, the TARP line is growing, TARP creep is here. So far, 52 financial institutions have reportedly received preliminary or final approval for about $172 bn of the $250 bn available under the government's capital-infusion program, according to Keefe, Bruyette & Woods, with another 23 companies that have submitted applications for an additional $4.6 bn.

Again, why shouldn't you get government help too? Why not dive through that widening loophole of an "exigent" escape hatch defined by the Federal Reserve?

Perhaps just like the banks, you haven't saved a nickel, thinking like all of Wall Street that the asset inflation of your house and stocks counted as savings.

And just like the banks, your debt has wormed through your cash. But alas, unlike them, you were responsible and good and more even keel, your debt to income ratio is at 37%, not so eye-watering, however, too low to qualify for a bank loan workout.

But, hey, why should you be held to higher standards when Wall Street isn't?

Why shouldn't you be allowed to cry "victim" just like the major perpetrators of the credit crisis?

All of Wall Street, along with Fannie Mae (FNM), Freddie Mac (FRE) and American International Group (AIG), all sluiced their bad credit through the vomitoria portals of the credit markets. All of these publicly traded companies placed bad bets on a government-distorted housing market that is now getting a government bailout.  

They built rickety mortgage bonds based on zero history of market downturns, derivatives built on quicksand. And now these companies are no longer run for profit, they are run as government policy shops to prop up the housing and banking sector.

All happening now as the US economy continues to lope right into the rear rotary blades of an Apache helicopter as 8.5 mn homeowners are expected to default on their mortgages from now until 2010 and as the bailout grows to $2 tn.

So go tell the Federal Reserve that your daughter Sally's toothache poses a systemic risk to your personal housing system, as Bear Stearns bellyached last March.

Tell the central bank that your son Billy's constant tuba playing is pounding out so much noise pollution that his disruption risks sowing "mayhem in your global financial housing system," as AIG did when it threatened collapse.

Go tell the Fed that your deafness from all this ruckus won't make for good income streams and ensuing federal tax payments, because for God's sakes, you want taxpayers to profit from your Home Sweet Home Bank.

Heck, Amex CEO Kenneth Chenault gave you a template you can use to harrumph as your official statement, when he explained Amex's move to hold out a bank shingle on Monday:

"We want to be best positioned to take advantage of the various programs the federal government has introduced or may introduce to support US financial institutions. We will continue to build a larger deposit base to broaden our funding sources. With Federal Reserve oversight we should gain greater access to the capital on offer under the current and any future government-sponsored programs."

So you'd tell the Fed:

"My family and I want to be best positioned to take advantage of the various programs the federal government has introduced or may introduce to support US families as we turn blue holding our breath."

You'd then say:

"We will continue to build a larger piggybank deposit base to broaden our funding sources to pay for Sally's and Billy's bicuspids and for things like rising college tuition costs to support the economy and fat cat academics sitting on gigantic honeypot endowments moldering in bank accounts. With Federal Reserve oversight we should gain greater access to the capital on offer under the current and any future government-sponsored programs."

Then sign off with: "God Bless the United States of Bailouts. Amen."

And once you do that, you can next stand in line for what economist Edward Yardeni dubs CARP, the Car Rescue Program, in which the government may nationalize the auto industry. You should then try to nationalize your automobile loan right there along with GM, Ford, and Chrysler.

Maybe one day soon you could sell your car loan payment into an off-balance sheet special vehicle (pun intended) at the Fed, which already has special purpose vehicles to warehouse bad paper in the form of rotten mortgage-backed securities from Bear Stearns ($29 bn now dropped to $27 bn) and clunkers related to AIG ($52.5 bn).  

But be warned, you will have to keep your cakehole shut and not lobby for gimmes, like Fannie and Freddie were supposedly ordered to do when they got their $200 bn.

Even though no one in Congress is talking about stopping GM, Ford and Chrysler from lobbying after they get their $50 bn plus in taxpayer loans to cover union retirees' medical costs and retool plants to build more-efficient vehicles--something they should have done decades ago.

Even though the car makers' lobbying machine, with the help of their elected officials, over the last four decades has gotten the government to not impose on them things like the Clean Air act, fuel efficiency standards, alternative fuel cars, cars that get at least 90 miles to the gallon, you name it. 

Become a bank now. Why not?

Because anyway, you can expect to hear this soon from the Democrats in government, much like FDR said when he took office, that you have a right to everything. And anything. Period.

That means you should have the right to not let a stock market bottom rear-end you. You should have the right to make sure Congress measures out your tax dollars like a stingy pharmacist.

And when it doesn't, then you should have the right to be an active participant in the United States of Bailouts.

Sincerely, EMac aka Elizabeth MacDonald, Concerned Citizen and US Taxpayer