According to today’s numbers, Congress has the lowest approval rating in history with over 80% of Americans disapproving. (President Bush isn’t much better with a staggering 70% disapproval rating, the highest in history.)

Every day the government delays, we lose another bank. Washington Mutual went down on Friday. Wachovia evaporated Monday. Over the weekend, three European banks vaporized as our financial pain is exported abroad.

When the housing bubble burst in 2007, our credit markets were critically wounded. In response to the largest financial crisis since the Great Depression, the U.S. Treasury Department in conjunction with the Federal Reserve Bank has devised a plan to extinguish the financial blaze. This plan is far from perfect and even farther from being a long-reaching solution to our nation’s housing crisis. It’ll be worse when both houses of Congress edit it.

Inside the bond pits, for the past fortnight, normal transactions seized-up awaiting resolution of government intervention. Traders feared unsettled trades and banks stopped lending to each other. Business is not getting done as usual. This is why we are anxious for the Congress to move quickly to empower the U.S. Treasury to BUY ASSETS, INVEST in MORTGAGES and RESTORE LIQUIDITY. It’s not a hand-out; it’s an investment in the purest sense, albeit an investment in troubled mortgages.

Many Americans are naïve when it comes to government intervention. They mold it together as if all intervention is alike: It’s OK to intervene to stop an airline strike but it is NOT OK to intervene to stop a run on the bank. Who decides GOOD versus BAD intervention? So far, it’s the politicians, but soon it may be the voters. Congress’ handling of this vital financial crunch has been sophomoric, ill-timed, inadequate, immature, unacceptable and at times embarrassing. Whew! You get the point.

• This is what the Congressional Bank Bail-out Bill should cover: Authorize brand new powers to the Treasury Department to BUY up to $700 Billion in non-performing mortgage assets in order to clean-up bank balance sheets allowing them to recommence normal lending operations
• Parcel out the $700 billion in 3 traunches (instead of all at once) to buy and invest in mortgages currently held by banks.
• Allow the Treasury to hire asset managers to direct the purchase of mortgage-backed securities and mortgages backed by residential properties. Bond guru Bill Gross has already volunteered to work for nothing to get this done.
• INVEST in MORTGAGES by negotiating investment “warrants” and/or take majority equity stake so the taxpayers may be paid-back when the assets become profitable
• Deny golden parachutes to executives of any company selling assets to the Treasury
• Require the SEC to study how to mark the troubled assets to REAL market values then report back to the Congress with recommendations in 90 days. Forcing troubled banks to mark DOWN their assets could only result in more failures so we expect this reform will be in the future.

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LIBOR Interest Rate Spikes

As you can see on the chart above, LIBOR* overnight interest rates went into orbit towards the end of September, running up from 2% to almost 7%. That’s a 250% rise. This unprecedented spike reflects GLOBAL concern over America’s bank crisis. It also caused floating-rate preferred stocks to rise dramatically too. *London Interbank Offered Rate.