Paulson's mixed signals destroy the financial system

Paulson's mixed signals, double talk and outright lies are destroying the financial system. Granted, it was broken to begin with, but he, along with Bernanke, are doing exactly what government's do best. They FUCK THINGS UP when they try to manipulate or manage the economy. Time after time during this crisis the Fed and Treasury have stepped in to try and manipulate or manage the market. Each time they cause even more confusion and hesitation on the part of the free market that actually has capital to invest.

Case in point, just a few months ago Paulson was urging, make that telling, the GSE's they had to go out and raise capital. He also leaned on banks to make those investments in the GSE's (let's hope not for a quid-pro-quo). So, the banks buy up billions in preferred shares of the GSE's. Seemed like a great deal at the time. Next Paulson, realizing that the GSE's were still undercapitalized, goes to congress to ask for federal funds. Of course he said he wouldn't need to use the funds. He called it his Bazooka. “If you’ve got a bazooka, and people know you’ve got it, you may not have to take it out.” The problem is, nobody was quite sure what Paulson would do, so he basically cut-off any possible capital infusion from private equity. Why would anybody invest if there was the possibility of government intervention. It wouldn't make sense. In essence, Paulson's uncertainty made certain that the GSE's would require a bailout.

So, now with this bailout, he basically wiped out the value of the preferred shares that the banks just invested in. What a great sign to send to banks and Wall Street. "If you invest, you may get whacked". If you don't, we will initiate a bail-out.

Confusion and lack of transparency in a broken market is one sure way to cease investment. For all intents and purposes, the very moves that Bernanke and Paulson are making are the very moves that are exacerbating the negative feedback loop. Governments are inefficient by nature and government's intervening in markets promote those same efficiencies.

I'm sick of hearing "if we don't bail XYZ out, then the entire financial system will collapse". That is horseshit. Smart money will always eventually work its way into viable business models if the market supports efficient, viable and sustainable models. By waving the magic "bail-out" wand around, Bernanke and Paulson are exacerbating the exact problem they are trying to solve...a lack of capital flowing efficiently in the system. The main reason, in my humble opinion, is they are trying to force capital into what is quickly being proven to be inneficient and unsustainable companies and business models. More specifically they want money flowing to insolvent banks and inflated housing debt, without those models being changed. Unfortunately their goals are at complete odds with what is best for the american people and the economy at large. Guess who they are trying to bailout....????