While I don't necessarily agree with it, I see the logic in the strategy.

 

It would be selling the Chinese something that is weak and fragile right now, but has an illustrious past and a strong future potential.

 

The Chinese would see the obvious:  It only has value if it is kept secure and stable. 

 

And the Chinese would recognize the theme:  Co-opt the opposition.  If you can't beat them, employ them. 

 

But the potential payoff is great, so they'd go along with it, knowing all along it co-opts them, forces on Beijing a strong self-interest in Wall Street.  A minor panic on Wall Street in 2010 would cause Chinese investors to lose billions, and they'll know it. 

 

It's one of those things that is either stupid, or masterful geopolitical kung fu;  hard to tell.

 

And the Chinese would appreciate that, too, considering that a stock character of the shlock standard kung fu movie churned out by the thousand in  China is the old master who seems to be a clownish buffoon, whose moves look clumsy, silly, and oafish, but somehow block the attacks of the nimble young bad guys.

 

SGTObvious

 

 

By the way, Morgan is a publicly-traded company, whose management wants to save their jobs. Bush has nothing to do with Morgan's decision to offer the Chinese the mother of all concrete overshoes - given its dire financial situation - an equity stake.

They are a publicly traded company and the upper ranks will get nice golden parachutes regardless of what happens.  It would have been someone like Paulson to make the overture to China to buy into MS but make no mistake the PRC was demanding 49% control for its 49% stake.  And MS is part of the US's financial infrastructure.

 

The only defense I would have for Bush is that everyone including Paulson lined up in front of him and told him everything was OK.  But Paulson would have known about these potential troubles (and the troubles we have yet to hear about at GS with their 30 to 1 debt to equity ratio) and is working quickly to bail out his executive buddies with our and our great grandkids money.

 

The referees were removed from the field by the White House in the name of "free markets".  Now where are free market principles when thieves and liars have to pay for their bad decisions? Not too big to fail, just too well connected.

 

At least Bush could issue an executive order seizing all executive compensation and maybe even putting liens against executives' existing assets as part of this bailout. That would certainly remove at least $100-$200 million from the bottom  line of this travesty of so-called "free market principles". 

The new Wall St. philosophy: "Don't regulate me or make sure I am not breaking the law, just bail me out with other peoples' money."

 

BTW, when are lenders going to be punished for giving out loans to people they knew couldn't afford them?

 

Potentially including banks under the control of hostile governments like China (through the BOC, who has branches in NYC and LA).

 

"http://www.politico.com/news/stories/0908/13690.html"

Knew is a strong word. I think they believed, as in every other financial mania (tulips, internet, et al), those fatal words - "This time, it's different". This is why a lot of CEO's rode their stock losses into the ground, and even bought more stock as their share prices fell. Everyone, from home buyers to mortgage securities investors, believed that home value to income ratios in America would start to approach the high levels of Europe and the rest of the developed world. They were wrong. 

A potential borrower walks in with no down payment, stated income and no documentation and probably average credit. 

 Can the banks and mortgage companies really play stupid just because they decided not to do proper due diligence, which in most cases would involve nothing more than a credit and background check?

 

The lenders didn't care because they knew they could package the loans and sell them.

 

I still wonder how much Bush was kept in the dark, but I have no doubt Paulson and to a lesser extent Bernanke had a pretty good idea of how bad things were, are and will be.

 

"http://www.denverpost.com/business/ci_10513985"

"In the past two weeks, Roubini has been lashing out at the Bush administration on his blog. He calls the president, Treasury secretary and Fed chairman "comrades Bush, Paulson and Bernanke" and brands them as "laissez faire voodoo-economics zealots."

He says the United States has turned into the "United Socialist State Republic of America," bringing "socialism for the rich, the well-connected and Wall Street" and making sure "profits are privatized and losses are socialized.""

Well, I admit I know nothing about the details of his charges, but it doesn't help his case with at least me to so obviously demonstrate that he clearly doesn't know the definitions of the terms he uses:  Laissez faire economics and things like government bail-outs are mutually exclusive ideas.