Big Financial Woes

The big news to start off this week is another financial crisis, or rather the deepening of the one we've been struggling through for the past few months.  From Fox Business:

The Dow plunged about 300 points Monday morning after Lehman Brothers failed to find a white knight during an historic weekend. Instead, the investment bank was forced to file for bankruptcy protection, causing further stress to the nation's newly reshaped financial system. 

At the same time, Wall Street was also coming to grips with the unexpected end of financial giant Merrill Lynch's independence and a $6 plunge in crude oil prices, which could close below $100 a barrel for the first time since March.

On a side note, you'll likely see a temporary spike in gas prices due to oil platform shutdowns in the Gulf of Mexico because of Hurricane Ike, but expect prices to continue going down after the spike fades away.  This is driving the oil barons in the Middle East nuts, of course, so they're doing everything they can to stop the slide.  But, that's another story...

John Derbyshire posts this from a friend (in the hedge fund business) of his that explains the problem of the Fed doing all these bailouts:

The moral hazard of letting the Fed use tax money to protect financial players against loss will not go away because there is no real incentive for it to. It's an issue we'll be facing for a long time after the current crisis is resolved. From now on "too big to fail" will become a goal of many financial institutions, and it will be treated as an escape clause for imprudent investment management. Like most government actions, it actually makes the next crisis more likely not less likely.

It's like I (and many other conservative types) have been saying for months - these bailouts are bad, bad news, and nothing is going to stop our spend-happy Congress except a catastrophic meltdown or the American people finally demanding accountability from Congress.  Neither has happened yet, so it's likely to continue.  Derbyshire adds the following information:

[T]here are economic entrepreneurs (get rich by building a better mousetrap) and there are political entrepreneurs (game the system by being smarter than the time-serving bureaucrats who write gummint rules — not usually all that difficult). When an economic entrepreneur screws up, his shareholders and employees lose out; when political entrepreneurs screw up, taxpayers lose out, since the whole art of political entrepreneurship is getting the gummint to backstop your losses.

The individual entrepreneurs themselves usually get away with their mansions and yachts pretty much intact. The general public, those employees and shareholders aside, don't mind this in the case of a true economic entrepreneur. It's just part of the game. With political entrepreneurs there is much more widespread grumbling...

It seems that we're going to have to go through some more pain before things get better, especially if Congress (both parties) doesn't get their collective act together.

When are we going to learn that if Congress creates the problem, there is zero possibility of them fixing the problem?  Call your reps and tell them to stop spending your money on bailouts, and start forcing accountability on these private industries.

There's my two cents.