Bail Out Whom?

Reading the business newspapers over the past two weeks, all we see are headlines about the stock market crisis. What stock market crisis, I ask?

The Dow Jones Industrial Average has been advancing to a new record high throughout the year. The most widely followed stock market has gone up 135% over the past 10 years, not including dividends. What’s the big deal about the five-percent correction we just had?

If you follow my column, you are aware of my concern about the softening U.S. economy and how I believe the stock market has generally been overpriced. You also know I had predicted the subprime fallout would be a bigger problem than Wall Street had told us it would be.

And that’s exactly what is happening right now: Investors are getting worried about the economy, they see the credit market tightening (thanks to the subprime mess), and they are dumping overpriced stocks as they get nervous. The audacity: Wall Street wants the Fed to drop interest rates to bail it out.


Bail Wall Street out of what? When the average American consumer was qualifying for more mortgages they should not have been able to get, did Wall Street complain to the Fed? When the Dow Jones hit the unbelievable 14,000 level, did Wall Street tell the Fed to raise interest rates?

That’s how Wall Street works. When things are too good, they load up investors to churn commissions. I don’t care if its stock commissions or bond commission… they load consumers as much as the market will bear, even if speculation begs crisis ahead. But get hurt just a little, as the big financial institutions have been over the past month, and they are crying to the Fed for help.

Wall Street now cries: lower interest rates to help the crisis. But what about all those billions Wall Street made during the boom times? Where did they go?

Wall Street will soon discover Ben Bernanke is no Alan Greenspan — the Fed may not bail out Wall Street that fast this time.