My take is we are heading straight into the political season of 2008. Millions of people going into foreclosure in an election year is jut too juicy for politicians not to grand stand on the issue. Bush threw this out there to give the GOP candidates cover. Hillary, Shumer and Dodd have been on the war path on this issue not so much out of the kindness of their hearts but they know a big club they can use when they see it. Fortunately most polls I have seen indicated that most Americans are against a large Government bailout……right now. That may change when people start losing their jobs as a result of this mess which is starting to happen right about now. We are going to have to face that the chance of a large Government bailout increase during an election year.

With that said I think we have to put into proper context that much of the rhetoric around the issue will equate to the “mouse that roared”. Much like the rhetoric around all of the other issues. All politicians want is to create the perception that they are “aware of your pain” and fighting for the cause. The same will hold true for the Fed Governors. You have a popping of a severe national bubble with the potential of severe consequences. Those in power are frantically mobilizing a “Manage the message” program. Who holds the power of this country are the stakes.

It is still my opinion that the FED and our fearless politicians cannot undo this mess. You have $5 to $10 Trillion of the CDO derivatives market that have been contaminated with toxic waste that no one knows how to find. These institutions can posture all they want but they cannot force banks to lend.