Who'll loan us the money?

Our president who comes from a party that advocates a balanced budget, but has not delivered one for decades, is now merrily proposing $700 billion to buy up all those bad mortgages held by banks and others, $50 billion to shore up our money market mutual funds, $200 billion to save Freddie and Fannie Mac, $29 billion to settle up Bear Stearns, $85 billion to keep AIG afloat, and soon $25 billion to keep our auto industry from going under. (This is in addition to the $20 billion a month for this stupid war--most of which is borrowed.) Soon we are going to be talking about some serious money. Also between now and 2011, the buyers of $1 trillion of interest-only mortgages(Alt-A) will have to start paying on the principal. Checks were not made on many, many of these customers to see what their income was. Will they be able to pay the payments--on houses that have lost much of their value?
Who in the heck is going to loan us all this money? Who is crazy enough to do this? If China and Russia are going to help, shouldn't they be investing in new schools, roads, industries, etc., etc., in their own country? Do we look like a good credit risk?
Our president and his economic people have been asleep at the wheel while all these major parts of our economy have been taking enormous risks and been going down the tubes. Their philosophy has been that there was no need to regulate these groups to protect from their own greed and stupidity. Short selling has abounded, where you borrow stock from someone and promise to give it back later. You sell the stock betting that it will go down and you can buy it back cheaper later. This is a great risk and drives the market down. Even riskier is "naked short selling" where the player does not own or borrow anything but promises to sell stock at a certain price on a certain date. Leveraging has also abounded, this is where you have borrowed far above your assets and when someone calls a loan, you may not have anyway to pay it off. These types of market games are not played just by small day traders but by employees of large banks and investment firms who are managing hundreds of millions of dollars invested in our IRAs, nest eggs, insurances, and banks. The risky mortgages mentioned in an earlier blog abounded too.

Some examples of leveraging: Freddie Mac and Fannie Mae were leveraged 50 to one, $50 in loans to $1 of assets. Lehman Bros. and Merrill Lynch were at over 30 to 1. Conservative investment firms try to stay below 15 to one. Many wise firms in these troubled times have built up cash reserves.

It is said that China is the largest manufacturer and we are the largest consumer. How can we continue to be the biggest customer when we produce very little that can be sold to help pay for all our toys? Will China continue to shore us up to keep her factories humming? Christian financial advisers recommend that individuals not live on borrowed money because we are then at the mercy of the holders of our mortgages, etc. We are not free. When will cash rich China, OPEC, and Russia begin to call in our debts or pull our strings and we are going to have to jump? It used to be that our banks owned much of the national debt, but they are not in shape to buy this new over $1 trillion debt. It is great that the federal government wants to help, but they are going to have to borrow to do it.