The Dodgy Asset behind the U.S. Dollar

Last Friday, after the market had closed, the FDIC shut down two more banks, First Heritage Bank and First National Bank. (The FDIC now operates like a stealth paramilitary unit, deploying its shock troops on the weekends.)

The new Fannie Mae and Freddie Mac bailout package that was passed into law on Saturday provides Paulson with $300 billion of taxpayer dollars to shore up the faltering mortgage behemoths.

In order to accomplish this, Congress increased the national debt by a whopping $800 billion sending it over the $10 trillion mark for the first time in history! (Naturally, Congress buried this little tidbit of information deep in the 600 pages of legislation.)

The Fed has already spent more than $300 billion to prop up the teetering banking system in the last year alone, plus buying the toxic bonds from Bear Stearns in the JP Morgan acquisition.

Now, the Treasury has been authorized by Congress to buy an "unlimited amount" of Fannie and Freddie shares at their own discretion. They are presently exchanging Fannie and Freddie securities for US Treasury's, which means that the dollar is now backed by dodgy mortgage-backed sludge (MBS) for which there is no market. According to Rep Ron Paul, "This is the asset (MBS) which now backs up our currency. An asset that no one else wants. If they were to dump these securities on the market today, the value of these stocks would go straight to 0. But that is literally the asset that is behind our currency. It is a very serious situation."

[Excerpts of an article by Mike Whitney]