Since When is "Bankruptcy" a Four Letter Word?

Memo to: Freddie, Fannie, GM, Ford, Chrysler, Ambac, Citi et al.

If it is right to save Fannie and Freddie and other financial institutions from Chapter 11, why isn't it right to save every other company? For that matter, why even bother with bankruptcy laws?

A little short on cash and and a little long on liabilities? Call the FED. Paid your lying, thieving management team big bonuses and stuck "investors" (lol...sorry, this word in this context always makes me laugh) with worthless debt? Call the FED. Too big to fail? Call the FED. Raped and pillaged your pension plan? Call the government.

This is the old saying about telling the same lie often enough it becomes the truth. Tell everyone you are too big to fail...seek the bail.

If we put aside the massive wave of hysteria, talk of financial pandemonium and world economic collapse and every other financial PR hack's message, you still have poorly managed companies that lost billions of dollars and have billions more to loose. Actually, they never really "made" the money in the first place; but that is another story. They lobbied relentlessly for this solution and they won.

Haven't companies entered and emerged from bankruptcy in the past? Sure, the equity is wiped out...AND IT SHOULD BE. If the company is too far gone, then the bond holders are wiped out and the company goes room temp and the last will is read, Chapter 7.

But there is no one to step in and save the equity holders. That is why equity returns a higher amount than debt does...specifically because equity is the first to go in a troubled company and the higher return is the higher reward for the additional risk.

By allowing Fannie and Freddie to continue status quo and for the FED to be allowed to actually buy into the equity is a crime, a felony of the highest magnitude. It is the the theft of tax payer dollars to support the FED (and, yes, this is exactly what it is, no matter what you may hear to the "contrary") to buy equity in bankrupt companies. Absolutely anyone else would have been indicted by now. Add to this the now explicit guarantee of the "full faith and credit" (what is left of it) of the US Government.

Did anybody ever hear of Delta Airlines? 2007? How about the $2.5B in post-bankruptcy financing provided by...wait...JP Morgan, Goldman, Merrill, Lehman, UBS and Barclays. What a cast of characters! Basically the same team borrowing hundreds of billions from the FED right now. THEY apparently heard of post-bankruptcy financing because they would not provide the financing without taking a first priority collateral in the debtor-in-possession facility.

So why exactly are we in such a rush to sweep under the rug bad management, let the equity stand (and, apparently now prosper) and stand behind the debt? Just why couldn't the FED or the US Government take a senior position or own the company? Why provide guarantees and equity?

We are re-writing all of the rules anyway. Why not just write a rule that says that Freddie, Fannie, Sallie, Merrill et al CAN operate with $0 equity AND the backing of the FED or the US Government? Why not replace the management with new management (it is done all of the time)? Why leave the exact same regulators in place and call them something different and give them "expanded" powers? They had all of the power they needed, They just heeded to exercise that power and not bend to the massive lobbying efforts.

When a bank fails, new management is installed by the FDIC over the weekend and the bank re-opens Monday under a new name, government guarantees in place and it is transparent to the depositors. Why can't an investment bank failure work like this?

Where are the consequences for bad performance? You and I face consequences every day for every act and choice we make.

How do you learn a lesson if you can't fail?

Why would you improve?

Why train a dog?

Why no just pass every student?

Why have jails?

Why have immigration laws?

Why wars?

Why have rules?

I guess this is just the ultimate result of a society with an unbridled sense of entitlement and with a complete loss of a moral compass.

This isn't good fiscal governance. This isn't world financial salvation. In our every day lives, this is just a thief and "selective"prosecution.

It makes no sense at all to justify these actions based upon saying "Well, we can't worry about why we got here, we just need to save it." It is precisely this logic that continues to nurture this bad behavior. Politicians, captains of financial industry, indulgent parents, lazy educators all may lay claim to this "cranial-anal inversion" of financial logic.

I just want to say the the next police officer that hands me a speeding ticket "Let's not worry about why we are here. I promise to do better." Let's say to the next murderer on death row Let's forgive and forget. Go home." Tell your children when you find them experimenting with drugs "Don't worry, just don't do it again." Pet your dog when he tears up the house.

Re-elect the same politicians that allow this theft.