The very low interest rates we experienced in the early to mid 2000's as well as the trend of throwing caution to the wind has left the financial world at risk. This care free attitude was spread by Alan Greenspan; a major Wall Street player who was bailed out of trouble with borrowed funds, has led us down a dangerous path.



The derivatives speculated by Wall Street players do not have near the value they led us to believe they had. Now we are left in a frantic pursuit to de-leverage in spite of the cost. Unsurprisingly the buyers have thinned out and institutional investors do not want to add to the already puffed up package in their portfolio; particularly now that the real value is evident. So now we are finding ourselves in a liquidity emergency to the extent of which we have not experienced since pre World War II.

Commercial as well as investment banks are stuck with puffed up assets such as mortgages and private equity loans they cannot sell because they are packaged with derivatives of exceptionally questionable value. This is a kind way of saying that Wall Street fat cats lied about the value and has overpriced them by billions of dollars putting us in peril. Basically this means that banks do not have the cash to make new loans and this is destroying our credit based economy. For banks and brokers to be able to make their balance sheets stronger by de-leveraging, the banks will have to reduce the number of loans they have on their books. This, unfortunately, would devastate the economy and turn a bad recession into a long-term depression.

Hence the bailout by the Fed, in the form of longer-term financing at the discount window. What else can they do? Let the entire financial structure of the world completely freeze up? The Federal Reserve is lending cash to financial institutions while taking as collateral the subprime mortgages and related securities of highly questionable value that cannot be sold in the open market. The Federal Reserve is becoming the buyer of last resort. This is highly inflationary. The financial middlemen are supposed to take the cash borrowed from the Fed and lend it back out again, this time to higher-quality borrowers, but this is not happening. In theory, the way this would work would be a trickle-down effect.

So why don't we try a trickle-up effect? The bailout will cost at least $1,000,000,000,000. Not sure of that number? That would be one trillion dollars! Instead of giving one trillion dollars of newly created money to the Wall Street players to continue the financial problems we already are facing, why not give that money to the people of America? It will then trickle-up to the Wall Street by stimulating the economy. By giving around $3,200 to every individual in America we may be able to get the money flow back in the right direction. This would mean a family of five would receive $16,000.

Commercial as well as investment banks are stuck with puffed up assets such as mortgages and private equity loans they cannot sell because they are packaged with derivatives of exceptionally questionable value. This is a kind way of saying that Wall Street fat cats lied about the value and has overpriced them by billions of dollars putting