Comrades Bush, Paulson and Bernanke Welcome You to the USSRA (United Socialist State Republic of America)

Now that the markets are getting a little bit more sober, after the crazy and irrational binge of yesterday, all of the sudden, Mr Market understood suddenly that wiping out the shares of Fannie and Freddie wasn't such a great idea after all. With approximately $15 billion of market cap for the common stocks (combined market cap of Fannie and Freddie) and more importantly, $40 billion of preferred shares held by major investment banks and financial institutions in the US, this other unintended consequence has wiped out the last remaining capital cushion of some major financial institutions, such a Lehman Brothers (which shares collapse by about 49% today after having fallen 15% the previous day) and Washington Mutual (down about 20% today). They are probably going to collapse in the next week or two. The other consequence is the deficit of the federal government which hit $407 billion (estimation, excluding the Freddie and Fannie bailout! source).

Given all these bad news in the US and the bailout which will increase the US debt by immediately by $200 billion (and probably many times that amount during the next few years), the rally in the US dollar seems more and more irrational or being the result of central bank intervention as the guys from SeekingApha believe.

Comrades Bush, Paulson and Bernanke Welcome You to the USSRA (United Socialist State Republic of America)

This is the title Nouriel Roubini gave to his latest post today, where he really doesn't try to be politically correct with the events of the several past months:

Today instead the US has performed the greatest nationalization in the history of humanity. By nationalizing Fannie and Freddie the US has increased its public assets by almost $6 trillion and has increased its public debt/liabilities by another $6 trillion. The US has also turned itself into the largest government-owned hedge fund in the world: by injecting a likely $200 billion of capital into Fannie and Freddie and taking on almost $6 trillion of liabilities of such GSEs the US has also undertaken the biggest and most levered LBO (“leveraged buy-out”) in human history that has a debt to equity ratio of 30 ($6,000 billion of debt against $200 billion of equity).

So now Comrades Bush, Paulson and Bernanke (as originally nicknamed by Willem Buiter) have now turned the USA into the USSRA (the United Socialist State Republic of America). Socialism is indeed alive and well in America; but this is socialism for the rich, the well connected and Wall Street. A socialism where profits are privatized and losses are socialized with the US tax-payer being charged the bill of $300 billion.


This is the biggest and most socialist government intervention in economic affairs since the formation of the Soviet Union and Communist China. So foreign investors are now welcome to the USSRA (the United Socialist State Republic of America) where they can earn fat spreads relative to Treasuries on agency debt and never face any credit risks [...]

So Comrades Bush and Paulson and Bernanke will rightly pass to the history books as a troika of Bolsheviks who turned the USA into the USSRA. Fanatic zealots of any religion are always pests that cause havoc and destruction with their inflexible fanaticism; but they usually don’t run the biggest economy in the world. But these laissez faire voodoo-economics zealots in charge of the USA have now caused the biggest financial crisis since the Great Depression and the nastiest economic crisis in decades. So let them be shamed in public for their hypocrisy and zealotry that has caused so much financial and economic damage.

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