The 'clean bill' proposed by the head of the FEC reads like an economic version of the Patriot act. The 700 billion ain't going anywhere any time soon. It's important this nation doesn't rush into a bad deal.

After watching CNN for a couple hours I'm concerned the malfeasance and institutional incompetence will be channel into anger at CEOs. Even if we take ever penny from those responsible for this mess we will be 675 billion short. The sickness lies in the deregulation of banks. This is an institutional problem that goes to the core of monetary police. Focusing on the illegal actions of a few thousand will allow the Republicans to hang this disaster on a handful of bad actors and not the steps needed to prevent this from happening again.

This crisis is an opportunity to discuss the fundamentals of our banking system. It  cannot be allowed to disappear in righteous anger.  For once I think Bert and I are on the same song sheeet. 

via email:

From: Jacqui Brown Miller

Subject: CALL YOUR REPRESENTATIVE NOW AND PROTEST: The Treasury's Bail Out Plan - The Full Text of Paulson' sProposal (You'd Better Sit Down First)
To: "'AFD SPS News & Action'"

Date: Monday, September 22, 2008, 11:43 PM

Hello-

 

Please call your representatives early this week to protest the proposed Wall Street bail out and state the conditions you demand if this is going to happen.  Here is information that will help you. 

 

This bail out is likely going to go down this week, … so please make your protests known right now to your representatives.  Fannie and Freddie Mac and AIG were one thing… but this newest idea is obscene. 

 

There are three things in this e-mail for you to read:

1.         A description from the Backbone Campaign of the bailout and proposed conditions to the bailout we should be demanding
( http://tpmcafe.talkingpointsmemo.com/2008/09/20/progressive_conditions_for_a_b/index.php ). 

2.         Second, an article from the Nation giving a good analysis of it… beginning with
“ If Wall Street gets away with this, it will represent an historic swindle of the American public.”

3.         Three, a note from our friend Steve in Seattle who sent the text of the proposed bill for the bail out plan. 

 

Thanks. 

 

Jacqui

 

____________________________________________________________

 

Backbone Campaign Take. 

 

This week a 700 billion bailout will likely occur. Is this Grover Norquist's wet dream of shrinking government until it can be drowned in a bathtub, eliminating all hope of serving We the People with health care, education, etc. -OR- is it our opportunity to demand those services? Either way - this week might be the time to grind business as usual to a hault - And remind Congress that they represent main street, NOT Wall Street !

Dean Baker is co-director of the Center for Economic and Policy Research in Washington , DC . He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University . His blog, Beat the Press, features commentary on economic reporting. His recent post on Talking Points Memo, Progressive Conditions for a Bailout
( http://tpmcafe.talkingpointsmemo.com/2008/09/20/progressive_conditions_for_a_b/index.php ) he outlines Principles to Guide the Bailout, Principles for Restructuring the Financial System, Principles to Guide the Bailout, and Principles for Restructuring the Financial System. This is a good thing for progressives to begin rallying around. 

Proposed alternative to the bail out by Economist

 

_____________________________________________

Wall Street Is Licking Its Chops at the Bush Team's Multi-Hundred Billion Dollar Giveaway Plan

By William Greider, TheNation.com. Posted September 21, 2008.

If Wall Street gets away with this, it will represent an historic swindle of the American public.

Financial-market wise guys, who had been seized with fear, are suddenly drunk with hope. They are rallying explosively because they think they have successfully stampeded Washington into accepting the Wall Street Journal solution to the crisis: Dump it all on the taxpayers. That is the meaning of the massive bailout Treasury Secretary Henry Paulson has shopped around Congress. It would relieve the major banks and investment firms of their mountainous rotten assets and make the public swallow their losses -- many hundreds of billions, maybe much more. What's not to like if you are a financial titan threatened with extinction?

If Wall Street gets away with this, it will represent an historic swindle of the American public -- all sugar for the villains, lasting pain and damage for the victims. My advice to Washington politicians: Stop, take a deep breath and examine what you are being told to do by so-called "responsible opinion." If this deal succeeds, I predict it will become a transforming event in American politics -- exposing the deep deformities in our democracy and launching a tidal wave of righteous anger and popular rebellion. As I have been saying for several months, this crisis has the potential to bring down one or both political parties, take your choice.

Christopher Whalen of Institutional Risk Analytics, a brave conservative critic, put it plainly: "The joyous reception from Congressional Democrats to Paulson's latest massive bailout proposal smells an awful lot like yet another corporatist lovefest between Washington 's one-party government and the Sell Side investment banks."

A kindred critic, Josh Rosner of Graham Fisher in New York , defined the sponsors of this stampede to action: "Let us be clear, it is not citizen groups, private investors, equity investors or institutional investors broadly who are calling for this government purchase fund. It is almost exclusively being lobbied for by precisely those institutions that believed they were 'smarter than the rest of us,' institutions who need to get those assets off their balance sheet at an inflated value lest they be at risk of large losses or worse."

Let me be clear. The scandal is not that government is acting. The scandal is that government is not acting forcefully enough -- using its ultimate emergency powers to take full control of the financial system and impose order on banks, firms and markets. Stop the music, so to speak, instead of allowing individual financiers and traders to take opportunistic moves to save themselves at the expense of the system. The step-by-step rescues that the Federal Reserve and Treasury have executed to date have failed utterly to reverse the flight of investors and banks worldwide from lending or buying in doubtful times. There is no obvious reason to assume this bailout proposal will change their minds, though it will certainly feel good to the financial houses that get to dump their bad paper on the government.

A serious intervention in which Washington takes charge would, first, require a new central authority to supervise the financial institutions and compel them to support the government's actions to stabilize the system. Government can apply killer leverage to the financial players: Accept our objectives and follow our instructions or you are left on your own -- cut off from government lending spigots and ineligible for any direct assistance. If they decline to cooperate, the money guys are stuck with their own mess. If they resist the government's orders to keep lending to the real economy of producers and consumers, banks and brokers will be effectively isolated, therefore doomed.

Only with these conditions, and some others, should the federal government be willing to take ownership -- temporarily -- of the rotten financial assets that are dragging down funds, banks and brokerages. Paulson and the Federal Reserve are trying to replay the bailout approach used in the 1980s for the savings and loan crisis, but this situation is utterly different. The failed S&Ls held real assets -- property, houses, shopping centers -- that could be readily resold by the Resolution Trust Corporation at bargain prices. This crisis involves ethereal financial instruments of unknowable value -- not just the notorious mortgage securities but various derivative contracts and other esoteric deals that may be virtually worthless.

Despite what the pols in Washington think, the RTC bailout was also a Wall Street scandal. Many of the financial firms that had financed the S&L industry's reckless lending got to buy back the same properties for pennies from the RTC -- profiting on the upside, then again on the downside. Guess who picked up the tab? I suspect Wall Street is envisioning a similar bonanza -- the chance to harvest new profit from their own fraud and criminal irresponsibility.

If government acts responsibly, it will impose some other conditions on any broad rescue for the bankers. First, take due bills from any financial firms that get to hand off their spoiled assets, that is, a hard contract that repays government from any future profits once the crisis is over. Second, when the politicians get around to reforming financial regulations and dismantling the gimmicks and "too big to fail" institutions, Wall Street firms must be prohibited from exercising their usual manipulations of the political system. Call off their lobbyists, bar them from the bribery disguised as campaign contributions. Any contact or conversations between the assisted bankers and financial houses with government agencies or elected politicians must be promptly reported to the public, just as regulated industries are required to do when they call on government regulars.

More important, if the taxpayers are compelled to refinance the villains in this drama, then Americans at large are entitled to equivalent treatment in their crisis. That means the suspension of home foreclosures and personal bankruptcies for debt-soaked families during the duration of this crisis. The debtors will not escape injury and loss -- their situation is too dire -- but they deserve equal protection from government, the chance to work out things gradually over some years on reasonable terms.

The government, meanwhile, may have to create another emergency agency, something like the New Deal, that lends directly to the real economy -- businesses, solvent banks, buyers and sellers in consumer markets. We don't know how much damage has been done to economic growth or how long the cold spell will last, but I don't trust the bankers in the meantime to provide investment capital and credit. If necessary, Washington has to fill that role, too.

Finally, the crisis is global, obviously, and requires concerted global action. Robert A. Johnson, a veteran of global finance now working with the Campaign for America 's Future, suggests that our global trading partners may recognize the need for self-interested cooperation and can negotiate temporary -- maybe permanent -- reforms to balance the trading system and keep it functioning, while leading nations work to put the global financial system back in business.

The agenda is staggering. The United States is ill equipped to deal with it smartly, not to mention wisely. We have a brain-dead lame duck in the White House. The two presidential candidates are trapped by events, trying to say something relevant without getting blamed for the disaster. The people should make themselves heard in Washington , even if only to share their outrage.

 

---

From: Steven  

Sent: Sunday, September 21, 2008 10:22 PM
Subject: The Treasury's Bail Out Plan - The Full Text of Paulson' sProposal (You'd Better Sit Down First)

 

Hey, folks, this is far more important than anything else happening right now and if the Bush administration has its way, they will ram another $&^*((&$&^#  piece of "emergency legislation" down your throats (with the Democrats usual meek acquiescence, of course).  The last piece of legislation that was passed during an "emergency" at breakneck speed: the oxymoronically named "Patriot Act" right after 9/11.

The press keeps yakking about the 700 billion dollar bail out of Wall Street, but very few are letting you actually read the proposal itself.  It's short and... bitter.  Even non-lawyers can read it quickly.   Read it and weep.  Comments follow after the full text.  Set your format to HTML - I've bolded certain sections of special concern:

Treasury’s Financial-Bailout Proposal to Congress
The following is the legislative proposal from Treasury Department for authority to buy mortgage-related assets:

Section 1. Short Title.

This Act may be cited as ____________________.

Sec. 2. Purchases of Mortgage-Related Assets.

(a) Authority to Purchase.–The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States .

(b) Necessary Actions.–The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation:

(1) appointing such employees as may be required to carry out the authorities in this Act and defining their duties;

(2) entering into contracts, including contracts for services authorized by section 3109 of title 5, United States Code, without regard to any other provision of law regarding public contracts;

(3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them;

(4) establishing vehicles that are authorized, subject to supervision by the Secretary, to purchase mortgage-related assets and issue obligations; and

(5) issuing such regulations and other guidance as may be necessary or appropriate to define terms or carry out the authorities of this Act.

Sec. 3. Considerations.

In exercising the authorities granted in this Act, the Secretary shall take into consideration means for–

(1) providing stability or preventing disruption to the financial markets or banking system; and

(2) protecting the taxpayer.

Sec. 4. Reports to Congress.

Within three months of the first exercise of the authority granted in section 2(a), and semiannually thereafter, the Secretary shall report to the Committees on the Budget, Financial Services, and Ways and Means of the House of Representatives and the Committees on the Budget, Finance, and Banking, Housing, and Urban Affairs of the Senate with respect to the authorities exercised under this Act and the considerations required by section 3.

Sec. 5. Rights; Management; Sale of Mortgage-Related Assets.

(a) Exercise of Rights.–The Secretary may, at any time, exercise any rights received in connection with mortgage-related assets purchased under this Act.

(b) Management of Mortgage-Related Assets.–The Secretary shall have authority to manage mortgage-related assets purchased under this Act, including revenues and portfolio risks therefrom.

(c) Sale of Mortgage-Related Assets.–The Secretary may, at any time, upon terms and conditions and at prices determined by the Secretary, sell, or enter into securities loans, repurchase transactions or other financial transactions in regard to, any mortgage-related asset purchased under this Act.

(d) Application of Sunset to Mortgage-Related Assets.–The authority of the Secretary to hold any mortgage-related asset purchased under this Act before the termination date in section 9, or to purchase or fund the purchase of a mortgage-related asset under a commitment entered into before the termination date in section 9, is not subject to the provisions of section 9.

Sec. 6. Maximum Amount of Authorized Purchases.

The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time

Sec. 7. Funding.

For the purpose of the authorities granted in this Act, and for the costs of administering those authorities, the Secretary may use the proceeds of the sale of any securities issued under chapter 31 of title 31, United States Code, and the purposes for which securities may be issued under chapter 31 of title 31, United States Code, are extended to include actions authorized by this Act, including the payment of administrative expenses. Any funds expended for actions authorized by this Act, including the payment of administrative expenses, shall be deemed appropriated at the time of such expenditure.

Sec. 8. Review.

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

Sec. 9. Termination of Authority.

The authorities under this Act, with the exception of authorities granted in sections 2(b)(5), 5 and 7, shall terminate two years from the date of enactment of this Act.

Sec. 10. Increase in Statutory Limit on the Public Debt.

Subsection (b) of section 3101 of title 31, United States Code, is amended by striking out the dollar limitation contained in such subsection and inserting in lieu thereof $11,315,000,000,000. [That's 11 Trillion 315 Billion dollars]

Sec. 11. Credit Reform.

The costs of purchases of mortgage-related assets made under section 2(a) of this Act shall be determined as provided under the Federal Credit Reform Act of 1990, as applicable.

Sec. 12. Definitions.

For purposes of this section, the following definitions shall apply:

(1) Mortgage-Related Assets.–The term “mortgage-related assets” means residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before September 17, 2008.

(2) Secretary.–The term “Secretary” means the Secretary of the Treasury.

(3) United States.–The term “ United States ” means the States, territories, and possessions of the United States and the District of Columbia .

********

ANALYSIS

Citizens of the United States :  You have about 24 hours to contact your Congress Critters and DEMAND that this piece of legislative CRAP not be enacted in ANY FORM WHATSOEVER.  If you are active in any presidential candidates' campaign, you need to contact their spineless representatives and tell them that you demand they oppose this garbage.

The salient points:
1. This is a blank check to the Treasury Department to bailout Wall Street at ANY PRICE whatsoever.  IT IS NOT limited to $700 billion dollars because it reads that the limit is $700 billion "AT ANY ONE TIME".  That means, the Treasury can suck up $700 billion time after time after time, so long as it is only doing it $700 billion at a time.

2. YOU are paying for this.  The legislation makes it an automatic right of the Treasury to do this buyout by appropriating your taxpayer money WITHOUT even going through Congress for spending authority (THIS IS UNCONSTITUTIONAL).  Note that the federal money to pay for all this (that is YOUR money) is "appropriated" when Treasury spends the money!!! No need for a budget or for a Congressional appropriation!  They spend the money and it is automatically charged to the government accounts and YOU get stuck with the bill. You have no right of redress, no one to complain to, no oversight, no input, just the obligation to pay pay pay.  In 1776 folks revolted against the British empire for less than this.

3. The proposal states that nothing that Treasury does to bail out Wall Street will be reviewable in the courts!! What!! They get to do whatever they freaking want to do and there will be absolutely no checks or balances whatsoever, except...

4. Treasury has to report every three months to a couple of friendly banking committees in Congress (right... the same a-holes who gave us this mess), and the Secretary of the Treasury has to "take into consideration" effects on the taxpayers.  Thanks, Hank, I'm sure you will take all of us "into consideration"... for about a split second... as you bail out your buds on the Street.

5. The Government has told you they didn't have the money for SOCIAL SECURITY or for NATIONAL HEALTH CARE or for EDUCATION or for LIBRARIES or for FORESTS or NATIONAL PARKS or ENVIRONMENTAL PROTECTION or for PROTECTING the QUALITY of our FOOD or for the JUSTICE SYSTEM or HOUSING, SOCIAL SERVICES, or anything worthwhile that serves the common good.  NOW you suddenly have trillions of dollars to use to bail out the toads in the financial sector?  The only way that works is through a massive devaluation of the currency (that spells hyper-inflation) and through the imposition of crippling taxes and costs of the working and middle classes.  And you will pay and pay and pay for decades unknown into the future.

As a lawyer, I can tell you that this is the most amazingly ambiguous, incredibly obnoxious,  sweeping and unconstitutional rip off of the public since the beginning of the Republic. It is a blatant power grab.  This is a guaranteed ball and chain for future Americans for generations to come and it will certainly drag the standard of living for most Americans down to the lowest imaginable levels.

It's your life.  It's your money.  It's your future.  It's your government.  This will be pushed like lightning through Congress. Now, get off your fanny and do something.  s

The Honorable Patty Murray
United States Senate
173 Russell Senate Office Building
Washington , D.C. 20510-4701 DC Phone:202-224-2621DC Fax:202-224-0238
Seattle phone: Voice: 206-553-5545
FAX: 206-553-0891
electronic: http://murray.senate.gov/email/index.cfm

The Honorable Maria Cantwell
United States Senate
511 Dirksen Senate Office Building
Washington , D.C. 20510-4704 DC Phone:202-224-3441DC Fax:202-228-0514 Electronic Correspondence:http://cantwell.senate.gov/contact/index.cfm
Seattle phone: Voice: 206-220-6400
FAX: 206-220-6404

The Honorable Jim McDermott
United States House of Representatives
1035 Longworth House Office Building
Washington , D.C. 20515-4707 DC Phone:202-225-3106DC Fax:202-225-6197
Electronic Correspondence:http://www.house.gov/mcdermott/contact.shtml
Voice: 206-553-7170
FAX: 206-553-7175

s



--~--~---------~--~----~------------~-------~--~----~
Alliance for Democracy- South Puget Sound Chapter
www.SoundDemocracy.org

Adam Smith:

Contact Rep. Smith

Tacoma, WA Office

3600 Port of Tacoma Road, Ste. 106
Tacoma, Washington 98424
Toll free: 1 (888) SMITH09
Phone (253) 896-3775
Fax (253) 896-3789

Washington D.C. Office

2402 Rayburn Office Building
Washington D.C. 20515
Phone (202) 225-8901
Fax (202) 225-5893

 Brian Baird:

Contact Congressman Baird

Washington, DC Office:

U.S. House of Representatives
2443 Rayburn House Office Building
Washington, DC 20515
Phone: (202) 225-3536
Fax: (202) 225-3478 

Vancouver Office:

O.O. Howard House
750 Anderson Street, Suite B
Vancouver, WA 98661
Phone: (360) 695-6292
Fax: (360) 695-6197

Olympia Office:

120 Union Avenue
Suite 105
Olympia, WA 98501
Phone: (360) 352-9768
Fax: (360) 352-9241

Massive Bailout? Hardly, a Massive Tar Pit Instead from The Wall Street Examiner's 'Winter Watch' blog.

"Naturally I need to weigh on what is being called the biggest “bailout in history”. I do not believe that is what is going down at all. Instead the US Government is facilitating the greatest asset grab of securities since Alexander Hamilton’s agents and cronies picked off the Continentals from the Rubes back in 1790. Hamilton’s associates (friends of Hamilton) did not pay anything close to par either, instead these Continentals went for enormous discounts. And Paulson’s new Leviathan hedge fund (the US Treasury) will end up paying deeply distressed prices as well. Therefore it is most important to follow the real bouncing ball on this, and not be fooled. This post is going to be my primary framework over the next several months, so any discussion with me or use of my ideas is meaningless unless you are aware of my thinking."

The Socialist Senator talks about the bailout on his Huffington Post blog.

His four part plan, from the column:

"I have proposed a four part plan to accomplish that goal which includes a five-year, 10% surtax on the income of individuals above $500,000 a year, and $1 million a year for couples; a requirement that the price the government pays for any mortgage assets are discounted appropriately so that government can recover the amount it paid for them; and, finally, the government should receive equity in the companies it bails out so that when the stock of these companies rises after the bailout, taxpayers also have the opportunity to share in the resulting windfall. Taken together, these measures would provide the best guarantee that at the end of five years, the government will have gotten back the money it put out.

Second, in addition to protecting the average American from being saddled with the cost, any serious proposal has to include reforms so that we end the type of behavior that led to this crisis in the first place. Much of this activity can be traced to specific legislation that broke down regulatory safety walls in the financial sector and allowed banks and others to engage in new types of risky transactions that are at the heart of this crisis. That deregulation needs to be repealed. Wall Street has shown it cannot be trusted to police itself. We need to reinstate a strong regulatory system that protects our economy.

Third, we need to address the needs of working families in this country who are today facing very difficult times. If we can bail out Wall Street, we need to respond with equal vigor to their plight. That means, for example, creating millions of jobs through major investments in rebuilding our crumbling infrastructure and creating a new renewable energy system. We must also make certain that the most vulnerable Americans don't freeze in the winter or die because they lack access to primary health care.

Finally, we need to protect ourselves from being at the mercy of giant companies that are "too big to fail," that is, companies who are so large that their failure would cause systemic harm to the economy. We need to assess which companies fall into this category and insist they are broken up. Otherwise, the American taxpayer will continue to be on the financial hook for the risky behavior, the mismanagement, and even the illegal conduct of these companies' executives."

tactic. McCain is proving once again what a mercurial and opportunistic leader he has become. Running back to DC is the high of cynical politics seeing as he sits on no relevant committees where the real work is currently being done. He will be needed only when time comes for the full Senate to vote on whatever comes out of committee. Before then, his presence in DC is akin to Bush in New Orleans after Katrina.

His desperate ploy does have the advantage of putting a slumping campaign (FOX news poll has Obama up by 6 as of Sept 22nd) on hold for a bit of retooling while McCain gets a day or two of free press for doing nothing.

Campaign suspension is stupid. If anything, Friday's debate is supposed to be about domestic policy and should be more of a reason to get up to the podium.

It was a bit surprising coming back into the U.S., because every airport television was about the financial crisis and people were actually watching. I've been through a lot of airports over a number of years, and if it's not the NFL, people usually don't care about what's on the airport TV.

Both Time ("How Wall Street Sold Out America") and Newsweek ("The Bailout Artist: Henry Paulson's Bold New Plan") have the debacle on their cover this week. Time's article was pretty informative:

Warren Buffett, the nation's most successful investor, back in 2003 called [credit-default swaps] - which it turned out almost no one understood - "weapons of financial mass destruction." But what did he know? He was a 70-something alarmist fuddy-duddy who had cried wolf for years. No reason to worry about wolves until you hear them howling at your door, right?

Obama has called for increased regulation, which seems like a no-brainer, but he hasn't articulated many specifics. Meanwhile, McCain has talked about ending "wild speculation" and railed against Wall Street greed. Well, duh.

I was shocked to see people protesting "predatory lending" on CNN. As if you have to take the loan! Another 20-something, a friend of mine, was just approved for a $300,000 loan on a house. He has a good job and "could afford to make payments on it for four months," but it would be wholly irresponsible for him to do it. So - brace yourself - he's not!

Too many Americans have lived outside and beyond their income. My grandparents, when purchasing a house in the 1960s, had a much higher threshold for proving they would be able to make mortgage payments. Not only did my grandfather have to prove his income through paystubs, they also had to bring copies of bills in so the bank could calculate whether they would be able to afford the mortgage payment. Even though my grandmother was working, her income was excluded by the bank because she was of "child bearing age," meaning - from the bank's perspective - her income could disappear at any moment.

So not only have individuals been irresponsible, but banks today have become wreckless with the way they loan money. Both of these parties should pay heavily. There should be no no-strings bailouts, whether it's for your neighbor or your bank. Nobody is going to learn that while the system does work, it is designed to weed out the excess and the wreckless. Normally, this should only be a small percentage. When majority is drunk, though, the collapse will suck the sober in with it. This is why the government is now being put in the position to bailout.

Appropriately, I started reading The Forgotten Man: A New History of the Great Depression and thought this section was important, if only to be more aware of people who may try to change the system as a whole:

But there was a fundamental difference between men like [Herbert] Hoover and [Emma Goldman, Rexford Tugwell, Lillian Ward, et al.]. Hoover belonged to a group that exported American ideas. . .Men like Hoover and [Andrew] Mellon believed in the primacy of the American idea. They might want to modify America, but they did not doubt her. Men like the travelers, by contrast, were importers. They did doubt. Their progressivism went beyond the progressivism of, say, Theodore Roosevelt, after whom their ship was named, for they also believed specifically that ideas should be collected abroad and then used at home to improve the country.

I'm not a big fan of the bail-out-

-credit unions are "the way to go" as far as residential ownership is concerned.

I'd have hoped that the fiscally conservative crowd would have applauded the fall of foolish lenders (market fitness and all that pseudo-Darwin crap that some folks love to spout)...

...but, it looks like greed wins over logic again

>sigh<

According to the NY Times in September, "In 2007, even as the credit crisis was spreading, Wall Street firms paid out an estimated $33 billion in bonuses."

Insuring these companies is a funny idea; usually you ask for insurance on the possibility that something might happen to some of the property in the pool, and that the premiums will be enough to cover the losses, plus the administrative expenses (plus some profit).

The details about the House Republicans' plan aren't out yet, but so far it seems to me that it's more as if the companies are calling up and saying "Our houses are *all* on fire right now." "We've bought them at the height of a speculative bubble and we've been renting them out to strangers and they've been completely beat to hell and we have no idea what they would actually be worth on the market (if they weren't on fire.)" And the House Republicans' new plan is like saying - So, let's write the owners a policy (with no premiums from them) promising to pay whoever buys them whatever people paid for them at the height of the bubble, if it should happen to turn out that they can't be sold for that again when the fires go out. And the point is - that then they can use the checks from the insurance policy to pay off the bank mortgages, and make the companies' investments in the derivatives look good again...

I call this more like a big fat blank check, not insurance.

And they want to cut the taxes on dividends and on capitol gains yet again, by the way...!

Thad

The people who are really responsible are the people in Congress who set the rules of the game. If you're running a company, you have to do everything you can (at least within the rules) to make the company profitable. If you don't and your competitors do, your profits go down, your stock goes down, and pretty soon the board of directors fires you and replaces you with somebody who will do what the rules allow. It doesn't have a lot to do with your personal ethics - it has to do with your role in a system.

There's sad and moving testimony to Parliament by Josiah Wedgewood, the English pottery manufacturer, in the mid-19th century, begging to be regulated for just this reason. He says that as long as the rules allow children to work 16 hours a day (or whatever it was at that moment) he has to do it too, even though he personally hates it. If he doesn't, his profits will be lower than other companies'; his stockholders will sell his shares and buy shares in companies with higher returns, and his company will go out of business. It's only if the people who set the rules of the game make everybody making pottery reduce child labor that they can all be free to quit doing it.

Most of the talk in this thread so far seems to go back and forth about which individuals are personally the most morally responsible, which is a favorite American individualistic view of problems like this.

But how the system functions, and what people running companies have to do to keep them going as part of the system, resulted in this case from decisions by Congress about what to allow, and what to continue to allow in the face of warnings that the system was developing serious instabilities.

Best,
Thad

CEOs who got out before crisis left with millions:

Stanley O'Neal walked away from Merrill Lynch with a package now worth about $66 million. Less than a year later, the storied investment house was forced into a takeover by Bank of America.

Ken Thompson was ousted from Wachovia in June with a "golden parachute" now worth more than $5 million, and Chuck Prince was forced out at Citigroup with a parting gift now valued at $16 million.

Here's the kicker, especially since it's shaping up that this "bailout" will become a "blank check":

Under the government plan, the long-gone CEOs would not have to give anything back, said Steven W. Adamske, a spokesman for the House Committee on Financial Services. He said there was no constitutional way to recoup pay retroactively.

U.S. PIRG Consumer Blog

September 26, 2008: Updated version of help taxpayers by helping homeowners letter

Here's a newer (Wednesday) version of our coalition's Monday letter to Congress -- updated with numerous new sign-on groups -- demanding that bankruptcy judges be given the right to make court-supervised loan modifications as a mandatory condition of any Wall Street rescue bill. Preventing foreclosures keeps people in their homes making monthly payments and preserving neighborhoods. Helping homeowners helps taxpayers by reducing the cost of the Wall Street bailout. What part of that don't the President, Hank Paulson and Congressional opponents understand?

Economist Michael Hudson: The bailout is a giveaway that will cause hyperinflation and dollar collapse

Once in a century rip-off

Bailout talks stall as Bush meets with Congressional leaders and Presidential candidates. German Finance Minister says US will no longer be the financial Superpower. French President Sarkozy says the days when "the all powerful market is always right are over". The Real News Network spoke to economist and historian Dr. Michael Hudson who says that it's not a "bailout" but a "giveaway" and will create a new kleptocracy of billionaires.

Bio
Dr. Michael Hudson is a Wall Street financial analyst and historian. Dr. Hudson was Dennis Kucinich’s Chief Economic Advisor in the recent Democratic primary presidential campaign, and has advised the U.S., Canadian, Mexican and Latvian governments, as well as the United Nations Institute for Training and Research (UNITAR). A Distinguished Research Professor at University of Missouri, Kansas City, he is the author of many books, including Super Imperialism: The Economic Strategy of American Empire and of Super-Imperialism and of The Myth of Aid .

The House has decided to reject - for the time being - the bailout:

CNN:

About 60% of Democrats voted for the measure, but less than a third of Republicans backed the measure.

"Today is the decision day," said Barney Frank, D-Mass., on the House floor. "If we defeat this bill today, it will be a very bad day for the financial sector of the American economy and the people who will feel the pain are not the top bankers and top corporate executives but average Americans."

Bush acknowledged that many voters were opposed to helping out Wall Street with tax dollars, but said there is little choice to move forward with the plan. He said most if not all of the tax money spent to buy distressed mortgage-backed securities should be recouped when the Treasury sells them in the coming years.

Rep. John Culberson R-Texas had this to say:

"This legislation is giving us a choice between bankrupting our children and bankrupting a few of these big financial institutions on Wall Street that made bad decisions"

A number of Republicans seem to be holding the line on traditional economic conservatism.

"Bailout marks Karl Marx's comeback":

If he were to rise from the dead today, Marx might be delighted to discover that most economists and financial commentators, including many who claim to favour the free market, agree with him.

For decades, Austrian School economists have warned against the dire consequences of having a central banking system based on fiat money, money that is not grounded on any commodity like gold and can easily be manipulated. In addition to its obvious disadvantages (price inflation, debasement of the currency, etc.), easy credit and artificially low interest rates send wrong signals to investors and exacerbate business cycles.

The confusion of Chicago school economics on monetary issues is so profound as to lead its adherents today to support the largest government grab of private capital in world history. By adding their voices to those on the left, these confused free-marketeers are not helping to “save capitalism”, but contributing to its destruction.

In an interview on CNN, Lou Dobbs railed on the lack of leadership in Washington, D.C. and on Wall Street, saying:

And it's absolutely obscenely irresponsible of House Speaker [Nancy] Pelosi, Treasury Secretary [Henry] Paulson, President Bush, Sen. Harry Reid, the leader of the Senate; for these people to be clucking about like hysterical -- so hysterically.

What we are watching are business -- quote, unquote -- leaders who won't surface and put their faces before the American public who are hysterical. Absolutely hysterical.

To watch our political leaders, they have no idea in the world, Kiran [Chetry, the interviewer], what they're doing. Literally.

So, what politician should be on the podium with John McCain and Barack Obama when domestic issues are debated? How about Dr. Ron Paul. He's already well-published on the subject (with titles like "The Case for Gold: A Minority Report of the U.S. Gold" and "Gold, Peace and Prosperity: The Birth of a New Currency") and is against the Federal Reserve simply printing money (which is what will happen in the bailout) for the hell of it.

My take is that Dr. Paul is more knowledgeable about economics than either candidate still in the running.

...is that currency is traded, and that means that a ditch digger in some depressed earning market is economically unequal to a ditch digger in a progressive labor market, and that just blows-

The "gold standard" is >bunk<

I'd much rather support global monetary equity based on something real, like the value of calories...

...seems to me, ditch diggers working on the same planet is the same climate would expend similar amounts of energy to obtaining profit, and unless money can be based on something that reflects work in a real ecology, there is always room for inequity.

Charging interest on loans is bad enough, but to trade debt is even worse~

~defeat greed by making private loans to friends and family =)

AP: A vote with unforeseen consequences?

Add on the $3 billion funding dollop for rural school programs over the next five years. And another $8 billion over the same period in disaster aid, much of it for Midwestern states. And toss in unrelated legislation, far-reaching in its own right, requiring insurance plans to provide better benefits for mental health.

What do any of these have to do with Wall Street? Absolutely nothing! They're just printing money for the hell of it at this point!

Sen. Jim DeMint, R-S.C. said, "As the blood of our young men and women fall on foreign soil in the defense of freedom, our own government appears to be leading our country into the pit of socialism."

The Seattle Times has a Northwest angle:

Sens. Patty Murray of Washington state, Larry Craig of Idaho and Oregon's Gordon Smith supported the bailout

Sens. Ron Wyden of Oregon, Maria Cantwell of Washington and Mike Crapo of Idaho voted no.

Here's a part I don't understand, though:

"Doing nothing is not an option," [Sen. Craig] said, adding that Congress has a responsibility to protect taxpayers and eliminate golden parachutes for "greedy" CEOs.

Protect taxpayers from who? Did this mess not start in the subprime mortgage sector? Homeowners, property owners, banks, speculators, whomever participated in this garbage deserve to be holding the bag. Michelle Malkin has an article circulating in numerous papers, stating "illegal immigration, crime-enabling banks and open-borders Bush policies fueled the mortgage crisis. . .Half of the mortgages to Hispanics are subprime (the accursed species of loan to borrowers with the shadiest credit histories). A quarter of all those subprime loans are in default and foreclosure." The National Council of La Raza has been "'council[ing]' their constituents on obtaining mortgages with little or no money down."

I cannot emphasize this enough: a roof over your head is not an entitlement. It's not a right.

Creating an atmosphere where lenders are encouraged to lend to people who are not qualified is irresponsible. Printing money you don't have is irresponsible.

You want to create credit? Tighten the market up and stop printing money. Increase the minimum credit rating needed for people to own homes. Increase the down-payment percentage. Cut the market off, let it fix itself and then decide who it should be open to later.

Will we see a recession? At this point, I don't think anyone doubts that. But numerous people keep saying they have no idea what will happen once Congress injects this bailout into Wall Street. Dr. Ron Paul advocates the path that we "take our medicine" now rather than pay and have to take it later when it's much, much worse.

The Seattle Times: "Congress OKs historic bailout bill; Bush signs it":

With the economy on the brink and elections looming, Congress approved an unprecedented $700 billion government bailout of the battered financial industry on Friday and sent it to President Bush who quickly signed it.

Not everyone was sold this time around, though.

"How can we have capitalism on the way up and socialism on the way down," said Rep. Jeb Hensarling of Texas, a leader among conservative Republicans who oppose the central thrust of the legislation - an unprecedented federal intervention into the private capital markets.

Aaand the presidential angle...

Members of the Congressional Black Caucus credited Obama with changing their minds.

Reps. Elijah Cummings and Donna Edwards, both Maryland Democrats, were among them. They said Obama had pledged if he wins the White House that he would help homeowners facing foreclosure on their mortgages. He also pledged to support changes in the bankruptcy law to make it less burdensome on consumers.

I owe about $1,000 on my Visa. Hopefully the Obama administration will pay it off, since the irresponsible will be getting hand-outs.

McCain didn't do so well with members of his own party...

[Rep. Sue Myrick of South Carolina] said she hadn't heard from McCain as she made up her mind about how to vote. "They told me he was going to call me. He didn't," she said.

CNN: "Fannie Mae forgives loan for woman who shot herself":

Addie Polk, 90, of Akron, Ohio, became a symbol of the nation's home mortgage crisis when she was hospitalized after shooting herself at least twice in the upper body Wednesday afternoon.

In 2004, Polk took out a 30-year, 6.375 percent mortgage for $45,620 with a Countrywide Home Loan office in Cuyahoga Falls, Ohio. The same day, she also took out an $11,380 line of credit.

Over the next couple of years, Polk missed payments on the 101-year-old home that she and her late husband purchased in 1970. In 2007, Fannie Mae assumed the mortgage [TFI Note: At the age of 89! Holy cow! I can't believe someone actually signed-off on this!] and later filed for foreclosure.

Not once in the article is there any mention of why she's taking a 30-year mortgage and opening up over $10,000 worth of credit on a house she purchased forty-eight years ago.

Did she get greedy? Were - ahem - property taxes increasing at a rate she couldn't keep up with?

Instead we're left with a story pitting the Big Bad Bank against the Helpless Old Lady.