Is your money safe? Or is it in a bank?

Today, the Federal Reserve launched another new facility aimed at purchasing certificates of deposit and commercial paper from troubled money market funds in an attempt to return liquidity to those markets. Another black hole to wheelbarrow our tax money into. Nice.

Please hold your applause until the end of the newsletter. And I say that with a great amount of sar¬casm. This move is just another IV of fresh blood going into a patient with a cannonball-sized hole in his chest. It might be prudent for us to point our cash at the underlying ailment as opposed to the resulting symptoms.

For the first time in our country’s history, our leaders are acting more like a bank than like a government. The only difference is, banks usually try to fleece whoever they’re doing business with by driving a hard bargain and reaping maximal returns. But, we can’t kick our ailing financial system while it’s down for the sake of taxpayer profits. So, through a tangled web of overly-rushed legislation, we have effectively privatized the banks’ profits and socialized their losses.

So, we’re acting like a badly run bank. Essentially, we’ve become a one-stop shop to dump any assets that had value, may have value in the future, and are currently valueless.

Another monumental failure is Hope for Homeowners, a program which heavily suggested that lenders be more flexible in writing down the principal balance of some troubled loans. This author is hardly surprised that banks didn’t want to absorb billions of dollars in forgiven debt just because we asked really nicely. Evidently, anything a republican administration does involving the word “hope” backfires. Which has led me to suggest the “Impending Doom for Homeowners Act” to capitalize on the apparent effectiveness of reverse psychology.

It’s a joke. Lighten up.

The fact is, trying to guess what the markets are going to do next is a futile effort. Half of the investment community are dialing 1-800-GET-ME-OUT-NOW every time the markets hiccup. Now is the time for a disciplined approach to our financial lives based on history, current market facts and sound professional advice. Divorce yourself from the temptation to succumb to volatile emotions. Capitalize on the opportunities this shake-out is creating. Ask questions. Be proactive. Be patient.

A 700,000,000 band-aid has been approved

Hooray! The bailout plan has made it through Senate and the House of Representatives and is now on its way to President Bush’s desk to be signed into law! We’re all saved! Champagne and cigars all around! Let the good times roll again!

Or is it slightly too early to celebrate?

Here’s what we know: the non-passage of this bill trashed the stock market on Monday (down 777 points on the Dow). Passage of the bill did very little to help equity markets and it is highly questionable whether 700 billion will be enough ammunition to un-jam the credit markets.

Also, you and I are now on the hook for 700 billion dollars. That’s an important little detail. One thing is for sure: the flight of our economic phoenix will have a lower trajectory for quite some time because of this contagion and the acts of desperation our leaders are employing to try and contain it.

So, now that we’re all angry, who do we throw our Molotov cocktails at in a fit of rage? Tough to say. A large cause of this collapse was the many derivative markets that manifested due to poor regulatory oversight and the general disconnect between the risk-taker and the risk-maker. For example, if I own a bank and I don’t have to hold on to the mortgages I originate, I’m not thrillingly concerned about their long-term performance. I can just sell them to investment banks and let them deal with the risk. That laissez-faire it-will-all-work-itself-out ideology, it seems, has bit us in the communal tail-end.

On the other hand, we can’t overly vilify Wall Street because, to a great extent, we wanted this. American homeownership is an institute you can’t disparage. So, in our frantic attempt to get every man, woman and child into a home of their very own, we overlooked things like “what if properties stop appreciating at this break-neck rate?” or “what if I don’t get a promotion by the time that my ad¬justable rate increases?” Remember, every time you point the finger at someone else, three other fin¬gers are pointing right back at you. There may be a lesson there.

The fact remains; this bill is on the fast-track to becoming law. Renewed confidence in stocks will draw money away from mortgage-backed securities in the short-run, inflating mortgage interest rates. However, the overall effect of this bill should be a smoothing out and a general decrease in interest rates, as the government will now start purchasing mortgage-backed securities en masse.

Hopefully, we will see this as a step towards reviving our ailing housing market and righting our economy.