Congress has a model to deal with the indigestible US$700 billion bailout for irresponsible Wall Street Ban
ks, the semi-private Fannie Mae and Freddie Mac, and the greedy AIG.
The Chrysler bailout in the late 1970s at the time cost the taxpayer billions, but then President Jimmy Carter insisted that Chrysler issue equity warrants to the government, which guaranteed government supervision and control and ensured the automobile maker paid off its debt to the American people. Chrysler's Lee Iacocca announced that he would clean up his company's mess and pay himself but a single US dollar a year in salary. The company did return to solvency, and what's more, the government made a profit to the tune of $400 mllion.
Today, George W Bush, the less than forthright Hank Paulson at the Treasury, and Ben Bernanke at the Fed do not show such public spiritedness. They choose to bail out friends in high finance and on Wall Street.
Congress should take control, reimpose regulation, and cleanse the system of toxic bonds and mortgages.
We hear much about lack of liquidity, but that is not true, look at Warren Buffet's $5 billion purchase of Goldman Sachs preferred stock. There is a lot of money out there, but the money has no confidence in Wall Street, so these wealthy companies are sticking it to the American people to bail out the financial markets.
The collapse of the financial system is not an unfortunate by-product of deregulation; it was a cold and calculated criminal enterprise.
The conspirators had a dry run in Chicago in 2001. Close to 1,500 people lost much of their life savings when Superior Bank of Chicago went bankrupt with a billion dollars in deposits. The bank sold bonds secured by subprime mortgages. The plan was to sell loans, collect commissions, and then walk away when the loans defaulted and let the bank fail. (The mafia calls this technique a "bust out.") In 2002 when this scheme was rolled out nationally, all 50 attorneys general pleaded with the George W Bush administration to stop the predatory lending practices they knew would lead to the collapse we see today. Instead of helping, in 2003 Bush invoked a clause from the 1863 National Bank Act nullifying all state predatory lending laws. The Office of the Comptroller of the Currency ( OCC) also created new rules that prevented states from enforcing any of their own consumer protection laws against national banks.
Following the money, Henry Paulson resigned as CEO of Goldman Sachs to become Treasury Secretary in 2006, having amassed a personal net worth of US$700 million during his tenure . Goldman Sachs appears to be the only financial company to profit from the subprime crises. Kate Kelly's Wall Street Journal article of December 14, 2007 explains how while Goldman Sachs was trading collateralized debt obligations ( CDOs), they were also betting so heavily against them that when they failed, the profit they made more than offset the losses .
Treasury Secretary Paulson's game is to put taxpayers on the hook for this theft. This is NOT a $700 billion bailout. Globally there are $600 trillion in world liabilities, plus more than $400 trillion derivatives. We should let Wall Street fend for itself - and Congress should investigate the activities of the people behind this "bust out" of our treasury.
Bloomberg reported,
"More than 150 prominent U.S. economists, including three Nobel Prize winners, urged Congress to hold off on passing a $700 billion financial market rescue plan until it can be studied more closely.
In a letter yesterday to congressional leaders, 166 academic economists said they oppose Treasury Secretary Henry Paulson's plan because it's a 'subsidy' for business, it's ambiguous and it may have adverse market consequences in the long term. They also expressed alarm at the haste of lawmakers and the Bush administration to pass legislation.
David I. Levine, a professor of economics at University of California-Berkeley, says the current plan being discussed has the wrong structure.
Erik Brynjolfsson, of the Massachusetts Institute of Technology's Sloan School, said his main objection "is the breathtaking amount of unchecked discretion it gives to the Secretary of the Treasury. It is unprecedented in a modern democracy."
"I suspect that part of what we're seeing in the freezing up of lending markets is strategic behavior on the part of big financial players who stand to benefit from the bailout," said David K. Levine, an economist at Washington University in St. Louis, who studies liquidity constraints and game theory. "
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Comments: 40
This may be a case where a form of congressional gridlock does more good than harm. Let the conservatives howl like stuck pigs (with or without lipstick), let Bushco attempt to disguise this thing as a non-bailout bailout, let the Democrats insert every form of oversight provision and taxpayer protection. And let them fight and wrangle over this and pass nothing. And let's just see what happens.
One thing for sure: if I have $100 in my wallet and a robber walks up and says, "Give me $100 and I won't rob you" I'm not going to consider it a good deal.
My addition to this discussion is that given the gloom and doom economic scenario "facing us unless we approve the $700 billion course of action" message that has been disseminated — by NOT approving such action (of course, with better oversight and some added items to the original proposal) don't we make it a self-fulfilling prophecy just as the media ratings-boosting scare verbiage hastened (or caused) the demise of IndyMac and WaMU.
A healthy economy is part reality and part confidence. I am currently more scared of the media's need for hype than I am of the bankers. Greed in another form.
I'm not good at following financial processes, but there was no mistaking the "rush" pressure, especially at a time when folks could easily bet the US public would be distracted by other matters -- weather, campaigns, and so forth. There is no way the experts didn't see this coming, and no way to believe they haven't allowed this to reach this point for some reason. This fits.
We must all write and call our Representatives and Senators and be clear that they are ending their own cushie careers with this hurried and poorly vetted action.
This is indeed, the setting for dastardly deeds. When GW said "this is my real base--the haves and have mores..." He wasn't just clacking his teeth.
We need an overhaul of more than our financial markets. The concept of "growth forever" is fatally flawed. See this expose' of consumerism run amok. www.storyofstuff.com/
what a piece, thanks for putting it out there and Gerry for letting us know.
Does anyone else see trending of a lot of bad things all coming during a pretty short time (not all economic)? It is harder and harder to get away from the possibility of deliberate manipulation.
Gerry, it's a good thing you added your energy to this production.
Our government is an addict, face it. Either we enable it again - pay the bail, pick the drunk up from the front yard, lie to the cops - OR we quit enabling and call a drunk a drunk, and get us all into recovery - work on those character defects, get those 12 Steps down, you know?
How many times are We The People going to make excuses for our husband-the-wife-beater?
Thanks, Clarke, for the Mafia comparison.
Mafia plus Armageddon-pushers - what a combination. With any luck it'll self-destruct in some way that frees We-The-People to go ahead and do things better.
Thank you for your assessments. I can't disagree, but I can add another perspective or two (1) Arrogance of very imperfect leaderships, and (2) Stupidities compounding without the benefits of knowing about chaos, complexity, and conspiracy theories in actions. The PAST determining the FUTURE -- causally and in depth. .
A great need is to have our PRESS wake up to the notion that they are -- for the most part -- deliberately or not, -- not looking deeply for causative factors as they explore the domains of 'facts and opinions' and then try to inform us -- the bodies politic.. WE THE PEOPLE need to be continually educated, and your materials contribute immeasurably. Theirs do less so as I see them currently. We need agencies like our Library of Congress and qualified expert opinions (like yours) to provide the light we need for wisdom and proper understanding.
Using 'tetrad logic:
HOPE : DESPAIR :: OPENNESS : SECRECY. There's a lot of repairing to be done Nationally and Internationally -- and we should note (under 'despair') that it may be impossible now to bring about effective corrections to the massive ERRORS of the PAST. But lets keep 'hoping AND making efforts to repair'. Is it the human-spiritual call thats now in the making? The apocalypse?
Dick
In an article published in the Spectator magazine, Williams wrote: "It is no use pretending that the financial world can maintain indefinitely the degree of exemption from scrutiny and regulation that it has got used to. This crisis exposes the basic level of unreality in the situation — the truth that almost unimaginable wealth has been generated by equally unimaginable levels of fiction, paper transactions with no concrete outcome beyond profit for traders. Marx long ago observed the way in which unbridled capitalism became a kind of mythology, ascribing reality, power and agency to things that had no life in themselves; he was right about that, if about little else."
The Archbishop of York, Dr John Sentamu, said the market took its rules of trade "from Alice in Wonderland":
"We find ourselves in a market system which seems to have taken its rules of trade from Alice in Wonderland. Our country has built its financial strength historically on the manufacturing of goods, where money was the medium of exchange. In the last week, we have seen its systems come close to ruin because now money is no longer being the medium of exchange for goods, but rather is the very item that is being traded."
He also spoke about today's talks at the UN in New York about the 15-year millennium development goals project to reduce global poverty. The initiative's target of halving the number of people who live on less than a dollar a day by 2015 was unlikely to be met in sub-Saharan Africa, he said.
"Without a solid global economic base to work from, the eradication of world poverty would be an even greater task," he added. One of the ironies about this financial crisis is that it makes action on poverty look utterly achievable. It would cost $5bn (£2.7bn) to save six million children's lives. World leaders could find 140 times that amount for the banking system in a week. How can they tell us that action for the poorest is too expensive?"
What most people are still not seeing clearly is the strength of that OTHER fantasy cult system, Dominionism/Joel's Army/Latter Rain - all the pseudo-christian Armageddon instigators. Most people do not understand the Hitlerian level group hypnosis and theocratic fascism mind-bending and training that's going on--------Most people are not seeing the connection between these groups' end-times global warfare agenda and the trashing of the Constitution / trashing of Katrina victims / trashing of the economy: this is a philosophy accompanied by massive will-bending efforts using group prayer to force this agenda's leadership into place as a theocracy.
We can talk all the economic and social ethics we want - I certainly love to do that -
But the reality is, we've got some serious danger-recognition to do, so that we can use our hearts and minds appropriately to counter the runaway end-timers' fantasy, clear it out of the groupmind, and get on with the business of rebirthing ourselves as a nation.
My addition to this discussion is that given the gloom and doom economic scenario "facing us unless we approve the $700 billion course of action" message that has been disseminated — by NOT approving such action (of course, with better oversight and some added items to the original proposal) don't we make it a self-fulfilling prophecy just as the media ratings-boosting scare verbiage hastened (or caused) the demise of IndyMac and WaMU.
A healthy economy is part reality and part confidence. I am currently more scared of the media's need for hype than I am of the bankers. Greed in another form. "
- John Philipp, Sep 27, 2008, 10:22am EDT
>>>>
John,
Your points are taken. My view is that the roots of this bubble and our debt was supported by the policies of the government in the name of "market capitalism." Certainly both parties were complicit. I have written of this elsewhere in some detail. Why are we so addicted to oil today, when other nations are working to recreate their economies?
The technology we need to develop was often started here, as in the 70's, but then developed elsewhere : the US government was against it. We know what needs to be done. There is a sensible proposal by J K Galbraith I suggest you look into :
"A bailout we don't need"
http://www.washingtonpost.com/wp-dyn/content/article/2008/09/24/AR2008092403033_pf.html
"If the 1960s were about raising baby boomers and the '90s about technology, what should the '10s and '20s be about? It's obvious: energy and climate change. That's where the present great unmet needs are.
So, let's use the next few years to plan, mapping out a program of energy conservation, reconstruction and renewable power. Let's get the public sector and the universities working on it. And let's prepare the private sector so that when the credit crunch finally ends, we'll have the firms, the labs, the standards and the talent in place, ready to go.
Some will ask if we can afford it. To see the answer, don't look at budget projections. Just look at interest rates. Last week, in the panic, the federal government could fund itself, short term, for free. It could have raised money for 30 years and paid less than 4 percent. That's far less than it cost back in 2000.
No country in this situation is broke, or insolvent, or even in much trouble. For once, Wall Street's own markets speak the truth. The financially challenged customer isn't Uncle Sam. He's up on Wall Street, where deregulation, greed and fraud ran wild."
Clarke I believe you are right on! You'd think, after the past eight years, most people would "Just Say No" to anything George Bush and the Republicans want to do. Oh, but if we do this, we will be able to continue to borrow more money. Asking for a blank check to bail out the wealthy, so that the American people can go farther into debt is a real opener for me. Heck with folks falling for this sort of plan, why would they need shackles in trains. Oh wait, that's just in case people actually wake up from this nighmare.
Clarke you really do need to join Gather Broadcasting and send this to EVERYONE, because you know the media is not going to report it. We need more people like you on the cable news channels, another part of our country that has gone down the drain.
What is Gather Broadcasting?
The $612 billion Pentagon budget was approved by the US Congress, as negotiators in Washington were seeking a similar sum to deal with financial meltdown. Chalmers Johnson notes," Congress has been corrupted by the military-industrial complex into believing that, by voting for more defense spending, they are supplying 'jobs'. In fact, they are diverting scarce resources from the desperately needed rebuilding of the American infrastructure."
"Without a Bailout Plan, What Will the Cost Be?"
JUSTIN FOX - TIME
(This piece captures the reality: bailout or no bailout we are going to pay. The market lost $1.5 trillion today, twice the bill. Once credit contractions start they gather momentum, and have dire consequences. )
By voting down the proposed $700 billion financial bailout package - and causing a spectacular stock market rout - a majority of members in the House of Representatives made a clear statement that they didn't want to put taxpayers on the hook for the failures of financial institutions.
But there's a catch: taxpayers are already on the hook for the failures of financial institutions, and it's possible that the bill will actually be larger without bailout legislation than with it. That's because the regulators who mind the financial industry - the Federal Reserve, Treasury and FDIC - will keep doing what they've been doing: stepping in to prevent the chaotic failure of banks and other large financial institutions. This means continuing to put hundreds of billions of taxpayer dollars at risk, but in a way that adheres to no clear plan of action and doesn't require members of Congress to explicitly approve their actions.
On Monday afternoon, Wall Street basically stopped trading to watch TV - mainly CNBC - to see how the House of Representatives would vote on the $700 billion bailout package. When it first started looking like the bill would fail, the Dow plummeted 389 points, or 3.6%, in just seven minutes. If it had continued at that pace for much longer, this would have been perhaps the most harrowing day in stock market history. It didn't, but things were still really, really bad. The Dow ended the day down 778 points, or 7%, and the S&P 500 - a better measure of the overall market - was down 107 points, or 8.8%, its worst performance since the 1987 market crash. And markets for bonds and short-term loans were, for the most part, nonexistent.
So what happens now? On Capitol Hill, House leaders said they'll try again soon. Treasury Secretary Henry Paulson practically begged for a revised deal in his brief appearance after the market carnage. "Our tool kit is substantial but insufficient," he said. The market's traumatized reaction today may change some minds and some votes.
In asking Congress 11 days ago for the authority to spend up to $700 billion to buy troubled assets, Paulson and Fed Chairman Ben Bernanke were hoping to share some of the responsibility and the blame - and get the freedom to boost companies that weren't already on the brink of failure. Instead, they're back to being crisis managers for the moment - and maybe for the duration of the crisis.
That's not all bad, especially now that most of the endangered financial institutions are commercial banks. The Federal Government has clearly defined that authorities take them over, merge them out of existence or shut them down - whereas it had to make things up as it went along with investment banks Bear Stearns and Lehman Brothers and insurer AIG. That's why the demise of giant banks Washington Mutual and Wachovia, arranged over the past week by the FDIC, occurred in a far more orderly fashion than the non-bank meltdowns.
But orderly isn't the same as cheap. To get Citigroup to absorb Wachovia, the FDIC agreed to share the risk on a $312 billion portfolio of loans (Citi has to eat the first $42 billion in potential losses; anything above that hits the FDIC fund).
Also, the fact that every big FDIC deal so far in this crisis has been different - IndyMac was allowed to fail, with only insured deposits safe; WaMu was seized, but all depositors were protected; and Wachovia was sold in a deal that protected both depositors and owners of the company's bonds but left shareholders with very little - has left investors guessing about the fate of the rest of the banking world. Hardest hit in today's market sell-off were regional banks like Sovereign Bancorp and National City, perhaps because they seem too small to get special FDIC treatment.
Federal authorities are going to keep doing whatever they can to keep the financial system from collapsing. Taxpayers will bear the risks and the costs of that, whether Congress votes to put them there or not. And it's possible - although nobody can know for sure - that this ad hoc approach will end up costing more than an up-front $700 billion bailout.
http://www.time.com/time/nation/article/0,8599,1845609,00.html?cnn=yes
Our MSM is complicit in this whole nefarious fiasco ... they are owned and controlled by the very interests causing the problems (read Jeff's stuff) ... the media has been crying that "NO ACTION was taken" ... BS ... the voting down of the give-away WAS the NEEDED ACTION for a starter at least to get more teeth into anything done so that the folks receiving the largess have to pay it back with interest ! ... at least !!!
The entire system disgusts me no end ... and it is all about engineering the One World Order a step at a time ... the North American Union (NAU) is in our near future ... and as per plan, things will be so bad that we will be the ones that actually ask for it by then ... IMnsHO.
There is so far little hard evidence of systemic risk to US commercial banks at large (the large investment banks have disappeared). Only speculative loans face problems. Loans invested in real and economic-generating activities in agriculture, industry and commerce remain sound. The non-financial sector continues to have access to credit at low interest rates.
True, but when businesses can't obtain bridge loans to meet payroll obligations, which unfortunately is the way that many companies operate, people lose jobs. There is no way that this bailout plan can prevent that. People are going to lose their jobs either way.
Clarke...I agree with 99% of what you are saying, however I highlighted the above comment because it appears to me that you were attempting to mask a much larger problem with that comment. If I'm wrong in my assement, then I will bow my head and stand corrected.
Jeff..I predict that Martial Law will be declared by Bush before the elections. Recent events are evident that everything is in place for him to be able to pull it off.
This is not a "$700 billion bailout." Globally there are $600 trillion in world liabilities, plus more than $400 trillion derivatives. Paulson's proposal asked for absolute authority to bailout whom he chooses - which could include not only Wall Street but foreign banks as well.
Some sort of bailout bill will be passed to get us through November but not address the inevitable reordering of the global monetary system. The Fed ,Treasury and Congress already had the power to supply liguidity to the economy: : to insure money market funds, to increase insurance of bank deposits, cut interest rates and so on. Congress can enact legislation for banks and lenders to rewrite people's mortgages to avoid foreclosures. The national banks need a trillion dollars or so of new capital. There is ample wealth ready to supply it, in the sovereign wealth funds and in private equity funds around the world. If American banks are permitted to fail, and their operations maintained intact by the FDIC, new investors are there to take them over. The central banks are managing this OK - except for just one of the 12 Federal Reserve banks, the NYC one. There are several hundred economists who have questioned the validity of Paulson's statements about the freezing up of credit.
If the government wants to save dying banks before they take others down with them, it should choose the direct path: Inject capital into them. Take ownership stakes in return. And, where that's not feasible, seize them and sell their assets in an orderly way, just as the Resolution Trust Corp. did after the 1980s savings-and-loan crisis.
Only after a company's shareholders and debt holders have been dealt with should taxpayers take a hit. For 700 billion , the government could buy 23 of the 24 banks in the KBW Bank Index, including Bank of America Corp. and Wells Fargo & Co. and still would have money left to buy a stake in JPMorgan Chase & Co., the largest company in the index. Instead of asking Congress to let Treasury recapitalize needy banks, he proposed buying some of their troubled assets at above-market prices. This would have let other banks create phony capital by writing up the values of similar assets on their own balance sheets, using Treasury's prices as their guide. Paulson proposed to save the financial system from the evils of structured finance was through more structured finance.
Paulson wants to save the financial system from the evils of "structured finance" through more structured finance. Congress is going to let him get away it, it seems: they are part of the game and their "loyalty" is to the system not to the people