Galt Stock

Independent Investment Research for IRA’s and 401K’s

Nov. 25, 2008

The FDIC says its list of problem banks shot up to 171 during the third quarter.  There were 117 banks on the problem list at the end of the second quarter.  Moral of the story, everything is fine, now that we have given Citi $20 billion, and a $300 billion backstop on their mortgages!  Evidently, Citi is not the only bank in trouble, according to the FDIC; banks experienced a 94% drop in third quarter profits from the same period last year.  The FDIC announced a new program to buy up to $600 billion of mortgage backed securities. 

What is the difference between the Treasury bailout plan to buy $700 billion mortgage backed securities and now the FDIC buying $600 billion of mortgage backed securities?  Could it be the source of money?  The FDIC does not have to sell treasury bonds to finance their latest promise.  They can have the FED make an entry in the BIG ledger book.  They do not even have to print the money, just enter it in the ledger and buy the securities with it and presto chango.  Instant relief, the kind that happened in Germany after WW I, this is the danger when governments can print money.  Now we do not even have to print it, make an entry in the computer, and you get to spend it. 

Yesterday GM announced that they were going to return two Gulfstream’s that were on lease.  This was supposedly decided before congress noticed they flew to Washington on private jets.  Where are the plumbers?  Probably right behind the homebuilders, they asked a few billion in loan guarantees to help. 

May you live in interesting times. 

WARNING:    The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it’s your money.  If you lose it, it’s your responsibility, not ours or your grandmothers!  The editor may or u amay not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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