"Panic!!!! Panic!!!! Panic!!!! We have to act now!!! Now!!! Now!!! No time to think or try to understand!!!!! And, even if you did try to understand, it's all sooooooo very, very complicated!!!!! So just trust us!!!!! Trust us!!!! And panic!!!! Now!!! Now!!! Now!!!!"
Is this messaging causing anyone to take a step back and wonder just who is profiting from this crisis?
It should.
Because the reality is that some people are actually profiting from this crisis. And I don't mean John McCain's transparent attempt to use the situation to try to stop the shift in the momentum of the campaign toward Obama. I mean actual financial profit in the billions of dollars.
Let's take a look at just one - relatively small - example. Keep in mind that this example is only on the scale of $30 billion - rather than the $700 billion or even trillions of dollars that the proposed "bail out" is reportedly going to cost.
In July of this year, Merrill Lynch began its unraveling by selling its inventory of collateralized debt obligations (or CDOs) to Lone Star Funds. Lone Star Funds bought $30.6 billion of these mortgage securities for just $6.7 billion - that's 22 cents on the dollar.
What that means is that if Lone Star liquidates the collateral underlying these securities (read - in simplified terms - foreclosing on homes and reselling them at a portion of their stated value) and is able to recover just 27 cents on the dollar or more (which means selling the properties at 1/3 their stated value or above) then they will make at least $1.5 billion in profit.
I'll say that again: they foreclose on the homes, resell the properties, and stand to make at least $1.5 billion in profit.
Unlike a government regulatory agency, there is no incentive for a privately held equity firm like Lone Star to renegotiate these mortgages and try to keep people in their homes. No, their goal is short-term profit for their investors. Liquidate the "toxic assets" = foreclose on mortgages and sell the properties.
According to published reports, John Grayken, CEO and founder of Lone Star Funds, told the Oregon Investment Council during a fundraising pitch in January, "This is as good a distressed environment as we've seen in a long time."
Yes, you read correctly. John Grayken described the current economic situation as, "as good a distressed environment as we've seen..."
Significantly, there is - at most - only one degree of separation between Mr. Graken and President George W. Bush.
As BusinessWeek described him, John Graken is a "protégé of Texas billionaire Robert Bass" who "cut his teeth on deals for bad loans stemming from the U.S. savings and loan crisis before setting up Lone Star in the mid-1990's."
Does the name Bass ring any bells? Robert Bass is one of four brothers in the Bass family - a family that has longstanding personal, political, business and financial relationships with the Bush family.
The Bass family is reportedly one of George W. Bush's five largest financial supporters and has contributed hundreds of thousands of dollars - both personally and through political action committees - to George W. Bush's campaigns for Governor of Texas and for the Presidency. The Bass brothers were involved in bailing out George W. during a number of his early failed business endeavors, including Harken Oil in the 1980's and the Texas Rangers. In addition, Bass family members were major contributing and fundraising supporters of George W's father, President George H. W. Bush.
Now, since Lone Star Funds are privately held partnerships rather than publicly traded corporations, they are not required to make public the identity of their investors.
Nevertheless, the closeness of the relationships among the Bush and Bass families and Mr. Grayken begs the question: How much Bush family money - if any - is invested in Lone Star Funds and to what degree - if any - are our current President and his family or his friends profiting from the current crisis?
And, even more importantly, how much of the structure of this much larger bailout will also profit the uber-rich at the expense of the other 99.5% of us?
I'll write more on that later.