The Big Takeover

Video Primer:

Visit msnbc.com for Breaking News, World News, and News about the Economy

The article itself:
http://www.rollingstone.com/politics/story/26793903/the_big_takeover/print

The global economic crisis isn't about money - it's about power. How Wall Street insiders are using the bailout to stage a revolution

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Grayson pressed on, demanding to know on what terms the Fed was lending the money. Presumably it was buying assets and making loans, but no one knew how it was pricing those assets — in other words, no one knew what kind of deal it was striking on behalf of taxpayers. So when Grayson asked if the purchased assets were "marked to market" — a methodology that assigns a concrete value to assets, based on the market rate on the day they are traded — Kohn answered, mysteriously, "The ones that have market values are marked to market." The implication was that the Fed was purchasing derivatives like credit swaps or other instruments that were basically impossible to value objectively — paying real money for God knows what.

"Well, how much of them don't have market values?" asked Grayson. "How much of them are worthless?"

"None are worthless," Kohn snapped.

"Then why don't you mark them to market?" Grayson demanded.

"Well," Kohn sighed, "we are marking the ones to market that have market values."

In essence, the Fed was telling Congress to lay off and let the experts handle things. "It's like buying a car in a used-car lot without opening the hood, and saying, 'I think it's fine,'" says Dan Fuss, an analyst with the investment firm Loomis Sayles. "The salesman says, 'Don't worry about it. Trust me.' It'll probably get us out of the lot, but how much farther? None of us knows."

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I find Matt Taibbi a bit shrill and uneven at times but that article is a good solid read. I haven't fact checked it exhaustively, but it's correct in the main in its retelling of the economic disaster that now burdens us.

We can only hope...

Killer Economy? The deepening recession may lead to growth in suicide rates.
http://www.newsweek.com/id/179422?from=rss

Recent weeks have seen a spate of suicides by some of the most financially powerful people in the world. German billionaire industrialist Adolf Merckle lay down in front of a train after huge investment losses threatened his family's business empire. Chicago real-estate mogul Steven Good shot and killed himself in the driver's seat of his Jaguar after the property-auction business turned sour. René -Thierry Magon de La Villehuchet lost $1.4 billion to Bernie Madoff, went to work, took sleeping pills and slit his wrist.
...[skipped]...
"Middle-class people are less likely to commit suicide over money troubles because gains and losses are never that disproportionate; their family relationships tend to be closer, deeper and broader; and their religious beliefs are stronger and play a greater role in buffering their sense of hopelessness."

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Good news is hard to find so this will have to do. Now I'd like to see a billionaire suicide stimulus package.

That'll do nicely, comrade.

Paulson's Billions!

Paulson wants his other $350 billion to allocate according to his private whims. Reality has become a bad remake of Richard Pryor's Brewster's Millions. Well, except that Paulson is playing with someone else's money and burning through it like he was on a drunken shopping spree.

I'm so glad we avoided that $15 billion auto industry bailout. We saved just enough by doing that to actually give them $17.4 billion instead. But that's the current estimate, these things tend to grow like Pinocchio's nose and for the same reason.

Thanks for the American dream,To vulgarize and to falsify until the bare lies shine through. - William Burroughs

Try $4.28 trillion dollars!

Source:
http://www.cnbc.com/id/27719011

CNBC brings the pain by tracking the numbers closely. And what does it all get you - the taxpayer?

Nobody knows!

Paulson, Bernanke and Kashkari must have lots of kids in need of an Action Jackson with a Kung Fu grip this Xmas season...

Where does it all go?

It's quite simple really. We are in the hands of foreign powers.

The Foxes Guarding the Hen House II

The New Trough
http://www.rollingstone.com/politics/story/24012700/the_new_trough/print

It didn't have to be this way. Five days before Paulson struck his deal with the banks, British Prime Minister Gordon Brown negotiated a similar bailout - only he extracted meaningful guarantees for taxpayers: voting rights at the banks, seats on their boards, 12 percent in annual dividend payments to the government, a suspension of dividend payments to shareholders, restrictions on executive bonuses, and a legal requirement that the banks lend money to homeowners and small businesses.

In sharp contrast, this is what U.S. taxpayers received: no controlling interest, no voting rights, no seats on the bank boards and just five percent in dividend payouts to the government, while shareholders continue to collect billions in dividends every quarter. What's more, golden parachutes and bonuses already promised by the banks will still be paid out to executives - all before taxpayers are paid back.

No wonder it took just one hour for Paulson to convince all nine CEOs to accept his offer - less than seven minutes per bank. Not even the firms' own lawyers could have drafted a sweeter deal.

...[skipped]...

sense and should be immediately scrapped - a move that would also handily get rid of most of the crony contractors. As for purchasing equity in banks, the next round of deals - and there will be more - has to start from the premise that the banks are bankrupt and will therefore accept whatever terms we choose to impose, including real regulatory oversight. The possibilities of what could be done if a chunk of the banking system were genuinely under public control - from a moratorium on home foreclosures to mandatory investment in green community redevelopment - are limitless.

Because here is what George Bush and Henry Paulson are hoping we won't figure out: When a society no longer has enough money to pay for its most pressing needs, there are worse things than discovering you own the banks.

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Comment:

I hate to repeat myself endlessly but all I can do is wonder why we are bailing these assholes out instead of filing charges against them. I think all we are doing is postponing the inevitable. I suppose that must seem like a worthy goal to some, but I'd rather just get the inevitable over with first and then get onto the good stuff. Kind of like saving dessert for last, if you know what I mean.

When Assholes Play Monopoly...

...they land on Free Parking and demand all of the fines paid during the game even though the rule is optional and they never mentioned it before the game began. Now in the middle of playing they want an advantage that they shouldn't fairly receive.

Sound familiar?

The game of Monopoly actually has an interesting origin. The first version was created in 1904 by a Quaker named Elizabeth J. Magie Phillips and was called "The Landlord's Game." The purpose of the game was to illustrate the negative aspects of concentrating land in private monopolies - a purpose still served in the final version of the game we play today. Anyone that plays Monopoly will quickly learn that the way the game economy is set up in its essentials is predicated on two factors: luck and the fact that whomever gets the upper hand early in the game tends to destroy his opponents. See more here:

http://en.wikipedia.org/wiki/Monopoly_(game)

http://en.wikipedia.org/wiki/The_Landlord's_Game

Capital is like gravity, once it attains a certain mass it just keeps attracting more capital to itself as by an unseen force. The unseen forces of capital are profit (which is reasonable depending on the circumstances) and usury (which is not). There are other techniques at work too, like the gaming of the system that exists when currencies are devalued by those issuing them or when stocks are manipulated so that they rise or lower at the whim of the bigger players.

When you play Monopoly you become aware of certain inherently unfair aspects of the game, and yet our lives are played out within an economy the rules of which the game attempts to emulate.

Food for thought.

The Foxes Guarding the Hen House

Paulson and Kashkari are the biggest con men we have going. These two chrome domes would stick a knife in your grandmother and then steal the gold from her teeth. Is it too ass-holy to note that one of these dudes surnames looks like it literally means "cash n' carry"? So yeah, I see Kaskkari as a man that walks off with the goods. What a pair!

So When Will Banks Give Loans?

http://www.nytimes.com/2008/10/25/business/25nocera.html?pagewanted=1&partner=rssuserland&emc=rss

It is starting to appear as if one of Treasury's key rationales for the recapitalization program — namely, that it will cause banks to start lending again — is a fig leaf, Treasury's version of the weapons of mass destruction.

In fact, Treasury wants banks to acquire each other and is using its power to inject capital to force a new and wrenching round of bank consolidation. As Mark Landler reported in The New York Times earlier this week, "the government wants not only to stabilize the industry, but also to reshape it." Now they tell us.

Indeed, Mr. Landler's story noted that Treasury would even funnel some of the bailout money to help banks buy other banks. And, in an almost unnoticed move, it recently put in place a new tax break, worth billions to the banking industry, that has only one purpose: to encourage bank mergers. As a tax expert, Robert Willens, put it: "It couldn't be clearer if they had taken out an ad."

...[skipped]...

"We share your view," Mr. Kashkari replied. "We want our banks to be lending in our communities."

Senator Dodd: "Are you insisting upon it?"

Mr. Kashkari: "We are insisting upon it in all our actions."

But they are doing no such thing. Unlike the British government, which is mandating lending requirements in return for capital injections, our government seems afraid to do anything except plead. And those pleas, in this environment, are falling on deaf ears.

...[skipped]...

Late Thursday afternoon, I caught up with Senator Dodd, and asked him what he was going to do if the loan situation didn’t improve. "All I can tell you is that we are going to have the bankers up here, probably in another couple of weeks and we are going to have a very blunt conversation," he replied.

He continued: "If it turns out that they are hoarding, you'll have a revolution on your hands. People will be so livid and furious that their tax money is going to line their pockets instead of doing the right thing. There will be hell to pay."

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And this is why you don't write blank checks without significant oversight and detailed instructions as to what to do with the money. I mean, we taxpayers aren't even stakeholders in any of this. Once again we trust in the good will of free-wheeling investors and bank presidents.

Did anyone hear the guilty admission of Greenspan yesterday? He basically admitted that he is a blinkered know-nothing. Of course, this is substantially after he has profited from his supposed ignorance.

The Greatest trick!

The greatest trick was getting you to believe that headlines like this one matter to you personally: "Stocks drop on recession, profit worries."

Maybe this whole linking of stocks and retirement funds wasn't too smart, esp. if you are going to trash regulation of that market. Do you likewise take your monthly mortgage payment or rent to Vegas and just roll the dice with it? That would be stupid, right?

What we are seeing is the complete meltdown of nearly every GOP talking point. There is no free market, if there were they wouldn't need a bailout. The bailout itself is proof of both market protections and socialism at the top of the class structure.

Oh sure, they are going to back-peddle so fast it will look like a blur. But this is the right-wing that used disaster, scorched-earth capitalism against us all to attain their goals. Now to retain power they want to act as if it was all the result of a few bad eggs who are "Republicans in name only" (RINO).

Man, I hate the GOP. So much.

No, really - a lot.

Reagan Era Asst. Treasury Sec. Paul Roberts

Ex-Asst. Treasury Sec. Paul Craig Roberts on Wall St. Bailout: “Has Deregulation Sired Fascism?”

http://www.democracynow.org/2008/10/17/ex_asst_treasury_sec_paul_craig

JUAN GONZALEZ: What about this issue of the government’s bailout being aimed primarily at the financial institutions rather than the homeowners who—and the defaults that are at the root of the crisis?

PAUL CRAIG ROBERTS: Yes. Well, it suggests that the bailout is either incompetence or fraud, because the problem, according to the government, is the defaulting mortgages, so the money should be directed at refinancing the mortgages and paying off the foreclosed ones. And that would restore the value of the mortgage-backed securities that are threatening the financial institutions. If the value was restored, the crisis would be over. So there’s no connection between the government’s explanation of the crisis and its solution to the crisis.

...[skipped]...

AMY GOODMAN: Paul Craig Roberts, the piece you’ve written, one of them, asks, “Has deregulation sired fascism?” What do you mean?

PAUL CRAIG ROBERTS: Well, the original Paulson plan was to give the Secretary of the Treasury $700 billion with no accountability and give him complete control over the financial system. And that, of course, is state capitalism or fascism. If you control the financial system, you control the economy. And so, that was my way of pointing out the dramatic sort of power that was said to be necessary to stem a crisis that, in my view, could be fixed just by refinancing mortgages, like they did during the Great Depression.

AMY GOODMAN: Who is driving this? Who framed this bailout? And explain exactly who it is who benefits right now.

PAUL CRAIG ROBERTS: Well, what the bailout does is it takes troubled financial instruments off the balance sheet of the banks and puts them on the balance sheet of the taxpayer at the US Treasury. So it’s a bailout of the financial institutions whose recklessness caused the problem. And as I’ve already said, it does not address the problem. It only addresses the problem of the banks. So the foreclosures and the defaulting mortgages will continue as the economy worsens, and yet nothing is being done to stabilize that default rate or to stop these foreclosures. So the money is essentially being poured into the coffers of Washington’s financial donor base.

JUAN GONZALEZ: In some of your articles, you reject a view by some Democrats that this is the end result of a deregulatory fever that began in the Reagan administration, and you point to a more recent aspect of this. And you point specifically to decisions that were made during the Clinton administration and the current Bush administration in 1999, 2000 and 2004. Could you elaborate on what those particular key decisions that were made?

PAUL CRAIG ROBERTS: Yes. First, just let me say the Reagan administration didn’t do any financial deregulation.

In 1999, in the Clinton administration, they repealed the Glass-Steagall Act. This was the Depression-era legislation that separated commercial from investment banking. In 2000, they deregulated all derivatives. And in 2004, Hank Paulson, the current Treasury Secretary, who at the time was chairman of Goldman Sachs, he convinced the Securities and Exchange Commission to remove all capital requirements for investment banks, and thus they were able to drive up their profits by amazing leverage. For example, when Bear Stearns finally went under, it had $33 in debt for every dollar in equity. So this is an amazing leverage. And it’s amazing that all reserves against debt would have been removed by the Securities and Exchange Commission. So, the whole thing is reckless beyond imagination. Now, they claim that they had new mathematical models that assessed risk and that they didn’t need these reserves. Well, that was all a bunch of hooey, as we now see.

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Comment:

Wild stuff. Again and again and again I find sources that claim to know exactly how to resolve the financial crisis that we find ourselves in - and just as often I find that those sources criticize the Wall Street bailout as basically incompetence or fraud. I can find very few sources beyond those that will benefit from it in support of the Wall Street bailout.

So once again to be perfectly clear about it: almost everyone agrees that the 700 billion dollar bailout is unnecessary and does nothing to resolve the problems the nation now faces.

I said it to my SO over dinner tonight: the government can never again claim that we don't have the means to do whatever we want to do. If they can socialize this kind of thievery and saddle the taxpayer with it I hope they are finally prepared to do things like create a universal healthcare plan, subsidize renewable energy, rebuild the U.S. infrastructure, etc. I mean, we could just borrow even more money, right? What's the difference?

Man, I can't believe we aren't talking about prison terms for anybody on Wall Street. I can't believe we are actually going to reward people for making the most egregiously irresponsible financial decisions anyone has ever heard of.

How do you feel about those AIG style junkets that your personal $5K contribution is going to pay for? Sweet, huh? I mean, you didn't need it for rent or groceries or anything needful, right?

WTF?

Hunters become the hunted: State investigators hit AIG with fraud probe over fat cat expenditures

http://www.nydailynews.com/money/2008/10/15/2008-10-15_hunters_become_the_hunted_state_investig.html

State investigators launched a fraud probe into AIG on Wednesday following revelations that top execs spent $86,000 on a partridge hunt after the feds gave the company billions to stay afloat.

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Comment:

Yes, we were all played. Inexpertly even. It made no difference. You are still on the hook for your $5K so that execs at investment firms can keep living in the exact same foolish manner that they always have.

Smell the theft. That stink is going to linger.

I am still entirely unsatisfied that bailing out investment firms was either necessary or any kind of emergency. But that's me, I actually give a damn what happens to ordinary people but not so much about what happens to assholes on Wall Street.

Un-fucking-believable!

AIG, Castigated for Resort Event, Plans Another One (Update2)

http://www.bloomberg.com/apps/news?pid=20601087&sid=aVXfypExIZ9M

Oct. 8 (Bloomberg) -- American International Group Inc., castigated by the White House, Congress and Barack Obama for hosting a $440,000 conference days after an $85 billion federal bailout, plans to hold another gathering for brokers next week.

The event, at the Ritz-Carlton in California's Half Moon Bay, aims to "motivate and educate" about 150 independent agents who sell AIG coverage to high-end clients, said spokesman Nicholas Ashooh.

White House spokeswoman Dana Perino today called "despicable" expenses from the first gathering, a weeklong conference last month at the St. Regis Resort in Monarch Beach. Those costs included $23,000 for spa services, according to Representative Henry Waxman, chairman of the Oversight and Government Reform Committee.

AIG considered buying advertisements to explain its position, only to be told by public relations consultant George Sard that it would be "a really bad idea."

...[skipped]...

Obama, the Democratic presidential nominee, said during last night's debate with Republican candidate John McCain that AIG should repay the U.S. Treasury for the costs of the event.

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Comment:

Honestly, isn't this exactly how you would act if it was clear that there was absolutely no penalty for the foolish manner in which you conducted your business? I mean, if I were handed billions of dollars for my mistakes I might be inclined to make many more mistakes in the future too!

And BTW, that's going to be about $5000+ USD per taxpayer for the bailout. I know you've been hearing $2000+ USD per person in the U.S. - but they aren't all taxpayers right now. I agree that many of them will be taxpayers and that they will likely still be paying off this kind of shit. But for now, it's on the backs of 138 million or so taxpayers we have today.

Senator Obama: this is why you should have voted "nay," you dumb-fuck! It's your job as a senator to protect the people from this kind of waste and corruption - not to vote for it and thereby force the taxpayer to pay for it.

Up, Up and Away!

Lehman's Golden Parachutes Were Being Secured While Execs Were Pleading For Federal Rescue

http://www.huffingtonpost.com/2008/10/06/lehmans-golden-parachutes_n_132258.html

WASHINGTON — Days from becoming the largest bankruptcy in U.S. history, Lehman Brothers steered millions to departing executives even while pleading for a federal rescue, Congress was told Monday.

As well, executives who feared for their bonuses in the company's last months were told not to worry, according to documents cited at a congressional hearing.

...[skipped]...

Waxman questioned Fuld on whether it was true he took home some $480 million in compensation since 2000, and asked: "Is that fair?"

Fuld took off his glasses, held them, and looked uncomfortable. He said his compensation was not quite that much.

"We had a compensation committee that spent a tremendous amount of time making sure that the interests of the executives and the employees were aligned with shareholders," he said. Fuld said he took home over $300 million in those years _ some $60 million in cash compensation.

Waxman read excerpts from Lehman documents in which a recommendation that top management should forgo bonuses was apparently brushed aside. He also cited a Sept. 11 request to Lehman's compensation board that three executives leaving the company be given $20 million in "special payments."

"In other words, even as Mr. Fuld was pleading with Secretary Paulson for a federal rescue, Lehman continued to squander millions on executive compensation," Waxman said before Fuld appeared as a witness.

The government let Lehman go under Sept. 15, only to bail out insurance giant American International Group the next day, in a cascading series of financial shocks and failures that put Washington on track for the multibillion-dollar rescue starting the end of that week.

Waxman described that plan as a life-support measure. "It may keep our economy from collapsing but it won't make it healthy again," he said.

That sentiment echoed on Wall Street, where the Dow Jones industrials sank below 10,000 on Monday for the first time in four years. Investors fear the crisis will weigh down the global economy and the bailout won't work quickly to loosen credit markets.

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World Markets Plunge On Crisis Fears

http://www.huffingtonpost.com/2008/10/06/world-markets-plunge-on-c_n_132138.html

Britain's benchmark stock index, the FTSE 100, lost 220.11 to 4,760.14 _ a 4.42 percent fall. The declines were led by the banking industry, with the mining and oil industries also suffering drops. HBOS PLC's share price dropped 15.7 percent, while the Royal Bank of Scotland Group PLC fell 13.6 percent.

Germany's DAX index fell 4.22 percent to 5,552.27. France's CAC-40 index dropped 4.85 percent to 3,882.81. In Russia, the RTS stock index tumbled more than 7 percent in first 20 minutes of trading.

Over the weekend, many European governments moved to save troubled banks, and made more promises to protect depositors from the credit crisis.

Germany on Sunday agreed a 50 billion euros (US$68 billion) package to bail out Hypo Real Estate, the country's second-biggest commercial property lender, after a rescue plan by private lenders fell apart.

France's BNP Paribas SA committed to taking a 75-percent stake in troubled European bank Fortis N, and Sweden and Denmark followed Ireland and Britain in raising the amount of savers' deposits guaranteed by the government.

Britain's treasury chief Alistair Darling said he was "ready to do whatever it takes" to get the country through the credit crunch, and was looking at a "range of proposals."

But analysts said that, like the U.S. plan, the lack of detail in many of Europe's moves failed to restore investors' confidence, resulting in the stock market tumbles. "What the markets need are some more details about exactly when and how these plans are going to come in," said Richard Hunter, head of British equities at Hargreaves Lansdown Stockbrokers, "And they need some proof that some of these measures are taking hold."

Across Asia, all markets were also in the red. Tokyo's Nikkei 225 index fell to its lowest level in 4 1/2 years, sinking 4.25 percent to 10,473.09.

Hong Kong's Hang Seng index slid 5 percent to 16,803.76. Markets in mainland China, Australia, South Korea, India, Singapore and Thailand also fell sharply. Indonesia's key index plummeted 10 percent, it's biggest one-day drop ever.

In Russia, the RTS stock index tumbled more than 7 percent in first 20 minutes of trading.

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U.S. Stocks Sink as Financial Fear Spreads

http://www.washingtonpost.com/wp-dyn/content/article/2008/10/06/AR2008100600847.html?hpid%3Dtopnews&sub=AR

The Dow Jones industrial average lost more than 695 points at one point today and fell below 10,000 for the first time since October 2004. It was trading off 6.5 percent, about 672 points, shortly before 2:30 p.m. The technology-heavy Nasdaq fell about 7.7 percent, or 151 points, and the broader Standard & Poor's 500 stock index fell 7.2 percent, or 79 points.

Investors are being led by fear, analysts said. The $700 billion financial bailout plan enacted by the federal government last week has yet to loosen the credit markets and banks remain reluctant to lend to each other. The price of gold has skyrocketed as investors seek a safe haven. Oil fell below $90 a barrel today for the first time in months. Overseas, banks are increasingly facing problems of their own.

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Comment:

One: Foreign nations and markets were pretty smug just a few days ago - now everyone's in crisis mode. What gives?

Two: I repeat, ad nauseum no doubt, this bailout is simply a handout so far. The existing bailout does NOTHING to fix the underlying problems that will continue to hamper the smooth running of the economy. The "trickle down" economic theory simply doesn't work. When rich folks panic they hoard because they can - they don't have to spend hardly any money. When poor folks go into panic mode - not so surprisingly - they actually spend because there is nothing to hoard. But they know they are going to need that bacon, that milk, those eggs, a loaf of bread and some Huggies. In other words, the economy flows perforce.

But let's sing out the Lehman wizards of Wall Street on a pleasant tune by The Fifth Dimension. What goes up, must come down, however soft the landing.

We should be waiting with torches and pitchforks.

Worst Xmas Evah!

No rescue in sight for what ails economy

http://www.latimes.com/news/printedition/front/la-fi-econ5-2008oct05,0,353217,full.story

"The wheels seem to be coming off the economy right now," said Brian P. Sack, vice president of the respected forecasting firm of Macroeconomic Advisers. "It's hard to see how we avoid a recession, and it could prove a tough one to climb out of."

Even if the financial bailout plan begins to work, the nation will be lucky if all it experiences is a bad slowdown. The alternative, economists say, is something much worse -- a contraction that might go on for years.

The latest sign of trouble came Friday when the government reported that American employers sliced September payrolls by 159,000 jobs, the ninth straight month of losses and one that puts the country on track to shed a million jobs this year.

But jobs are only part of the trouble; almost every major player in the economy -- which had been growing until recently, if only slowly -- is now beating a hasty retreat:

* Consumers, who account for more than two-thirds of the nation's total economic activity and who boosted their spending earlier in the year thanks in part to more than $100 billion in government stimulus checks, have reversed course and begun cutting expenditures. Real consumption, after adjustment for inflation, slipped two-tenths of a point in June, a half-point in July and flat-lined in August, the latest month for which numbers are available, according to the government's Bureau of Economic Analysis.

...[Skipped]...

As for retail, it had grown into one of the major employers in the economy as Americans saw their incomes and wealth rise and wanted to buy more stuff.

But with the incomes of the majority of Americans flat-lining and wealth declining as home values and investments plummet, the retail industry is likely to shrink as well.

"We expect 8,000 stores to close this year, which is probably a record," said Howard Davidowitz, head of Davidowitz & Associates Inc., a New York retail consulting firm.

"This will be the worst Christmas shopping season in a century," he predicted.

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Comment:

Um, yeah...the bailout is not designed to do anything but force the taxpayer to hand over billions, possibly trillions, to the very same financial gurus that wrecked their own investment firms. If you have tracked this story at all, we are literally handing over a minimum of $700 billion to people who modeled tranches of bad mortgage securities instruments on the track record of good mortgages in order to slap on the veneer of a blue chip investment onto them and thereby woo unscrupulous investors into parting with their hard-earned cash.

There is no planned oversight to speak of in the bill that has already been passed. It's all bullshit. It is one big giveaway. There is no provision to make the taxpayer a future stakeholder in any of the wealth that may later be generated by these companies. Say bye bye to billions.

In your nightmares you might imagine that the very wealthy share their wealth with the rest of us - but that is the same sad, bullshit "trickle down" economic theory that is always trotted out to justify this exact same strategy every time. These people have more money than they can realistically spend in their lifetimes even if they spent all of their time trying to do that instead of trying to get their hands on even more money.

What the bailout doesn't do, and was never designed to do, is stimulate the economy in any meaningful way. All it does is prop up some investment firms that were going under.

Why should the American taxpayer care about that even slightly?

Where is aid for middle-america? Where is the help we need to give to people in foreclosure? When people lose their homes, and then possibly their jobs because they have become financially unstable, they go on welfare and other kinds of public assistance. Did you know that people with bad credit find it difficult to get jobs because prospective employers consider them a security risk? Isn't it better to take over these bad mortgages, renegotiate them, allow people to stay in their homes, help them keep their jobs and thereby keep the wheels of the true economy rolling along? That's how you manage a slow-motion disaster: one family at a time.

The upshot here is this: the real bailout is yet to come.

Bailout Double Hostage

http://www.c-spanarchives.org/flash/player-time.html?start=2008-10-02%2020:06:57&stop=2008-10-02%2020:18:45&net=1

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Comment:

Chicken Little politics. More importanly, this...

...Senate roll call vote:
http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=110&session=2&vote=00213

...House roll call vote:
http://clerk.house.gov/evs/2008/roll681.xml

My personal hit list:

Senators -
***Dianne Feinstein (D)
***Barbara Boxer (D)

Representatives -
*** Dennis Cardoza (D-18)
*** George Radanovich (R-19)

I am voting for the opposition. No mercy.

The Wrong Bailout

Wary of Public Outcry, Revised $800B Wall St. Bailout Stuffed with Earmarks to Sway Election-Year Incumbents

http://www.democracynow.org/2008/10/3/wary_of_public_outcry_revised_800b

ROBERT JOHNSON: I think this bill, five weeks before an election, is illustrating for the American people, when there are two currencies of power—votes and money—that even at this time, when the power of votes is at its cyclical high, meaning just before the election, they are almost laughing at the American people, in the—by the nature and structure of this bill. This is a very sad result.

...[skipped]...

JUAN GONZALEZ: Robert Johnson, you mentioned Henry Paulson. The New York Times has an article today, a fascinating look at how this crisis unraveled, and they claim that back in 2004, it was Paulson himself, who, as head of Goldman Sachs at that time, had meetings with all the other major investment banks and the Securities and Exchange Commission and convinced the SEC to allow them to reduce the amount of money that they kept in reserves to back up any debt that they had, in essence, that he pushed the SEC to reduce regulation and allow them to take the risks that ended them up where they are today.

ROBERT JOHNSON: I read that story, as well, and while I can’t comment in the sense of having been there, it doesn’t surprise me. Investment bankers were trying to relieve constraints, diminish capital and give themselves the freedom to take more leverage, and that is a very significant part of why we’re in this mess today.

I do also want to underscore that I believe it was Secretary Paulson who made the call to let Lehman Brothers go bankrupt, that led to the very, very violent restructuring of AIG with taxpayers’ money, which led to the crisis that led to this bailout bill. I believe, when people take the zoom lens out and look at the history of this bill, they will look at Henry Paulson as being the person who made the critical error that has sent us not only into a national, but a worldwide, credit freeze right now. He’s got a lot of work to do to earn his reputation back with the taxpayers’ $700 billion in the next chapter, and I am nowhere near as comfortable as Warren Buffett is about having him be the person to do that.

...[skipped]...

What I would like to see in this bill, I would like to have seen the money injected as capital infusion by buying preferred stock into the banks, so that the taxpayer would retain some rights, existing stockholders would be deluded. Existing stockholders, after all, are the owners of the companies that made this mess. Then, in the recovery, the Treasury could make back as much as, some estimate, $300 billion on that stock ownership, instead of having those existing stockholders make that money.

Secondly, and perhaps a place where we should have started, was the Home Owners’ Loan Corporation acknowledging the overhang of these—and unaffordability of all these mortgages and developing a restructuring, which, by the way, would raise the value of the securities, these mortgage-backed securities, that are toxic assets sitting in all the banks.

I do believe we need a bailout. As I said the other day when I was talking with Bruce Marks, I do not think this is a synthetic or fake crisis. We do need to inject what you might call life back into the organs of the economy. There was a story this morning. The Federal Reserve reports that bank lending to small businesses is being cut off very rapidly. And this does not portend well for the economic health of every region of the United States.

But homeowner relief, some significant regulatory reform, equity capital injections into the banks, which, by the way, because of the use of capital and the leverage of capital, you get ten to twelve times the impact on the credit flow in the economy as when you pay—when you overpay for toxic assets as the TARP facility would.

I think it was a very misconceived bill. Paul Krugman, Joe Stiglitz, John Makin on the American Enterprise Institute, Alex Pollock, the American Enterprise Institute, Lucian Bebchuk at Harvard Law School and Olin Foundation—these are conservatives and liberals all standing around saying, “Why are you doing the wrong thing, Secretary Paulson?” And Congress went along.

...[skipped]...

Yes. It went up by roughly $150 billion for those kinds of special pork-related projects. Now, what you’re seeing is the Congress and the Senate are daring the American people to get mad and throw them out. As David Sirota said in his first book, Hostile Takeover, this isn’t about choosing between Rs and Ds; this is about a bipartisan money machine working against the population. They’re daring you. They’re daring you to turn out in five weeks and, in essence, support challengers against incumbents, because the incumbents are the ones responsible for doing this bill.

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Comment:

Democracy inaction or the beginning of some kind...?

My advice: vote every motherfucker that voted for this travesty - this great social and financial injustice - out on his ass!

Seriously.

There were and are dozens of ways to do this better and far more wisely.

And let's be very clear about one other thing. This really doesn't fix anything. It's just a money-grab. Who gives a shit if some investment firms go belly up? Who cares if foreign investors cry like bitches? This is very specifically about how to spend money for which we taxpayers work very hard. We were all just robbed - every person in the U.S. now owes a part of this handout worth a few grand and rising. Because that's the real problem: they didn't fix the underlying problems, those will still need to be fixed and escalate the price of this bailout.

I don't like to be alarmist, but this could be the final looting that is even possible. When you fall back from your current position, is there another to which you can fall back to the next time? Or is this it - the final belt-tightening before the end?

Brad DeLong on Nationalization

Time Not for a Bailout, But for Nationalization...

http://delong.typepad.com/sdj/2008/09/time-not-for-a.html

Nationalization has the best chance of avoiding large losses and possibly even making money for the taxpayer. And it is the best way to deal with the moral hazard problem.

It might work like this. Congress:

• grants the Federal Reserve Board the power to take any financial firm whatsoever with liabilities and capital of more than $25 billion that is not well capitalized into conservatorship


• requires the Federal Reserve Board to liquidate any financial firm in its conservatorship when it judges that the firm is insolvent (paying off in full or not paying off in full the liabilities of the firm at its discretion), unless


• the Federal Reserve Board finds that preservation as a going concern is in the interest of the taxpayer, in which case Congress


• grants the Federal Reserve Board the power to transform equity stakes in the firm into junior preferred stock at par value and then transfer ownership and custody of the firm to the Treasury


• requires the Federal Reserve to terminate conservatorship if the firm becomes well-capitalized once again.

In addition, Congress:

• grants the Treasury the power to issue up to $500 billion of troubled asset redemption bonds, the proceeds of which are then to be loaned to the Federal Reserve to be used to cover the liabilities of those liquidated firms that the Federal Reserve judges it is in the interest of the taxpayer to have their liabilities paid off in full.

Paulson had his shot. It's time for the Democrats to pass a nationalization in the taxpayers' interest bill and dare Bush to veto it. If he does, then announce that the congress will pass it again the day after the election. And if he vetoes it again, announce that congress will pass it yet again on January 21, 2009.

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Comment: As DeLong notes, we want to avoid doing nothing and allowing fear to freeze liquidity. My only concern is that he doesn't seem to be distinguishing between any of the many types of financial firms. I guess he's seeing them all as a kind of public good no matter their particular stripe.

What I also like about his idea is that is avoids the poison pill as discussed below and regains political clout for those proffering this kind of sensible plan. It could be the Democrats if they have any brains.

::rolls eyes::

Losers Take All

Big Financiers Start Lobbying for Wider Aid

http://www.nytimes.com/2008/09/22/business/22lobby.html?_r=1&oref=slogin&pagewanted=all

Even as policy makers worked on details of a $700 billion bailout of the financial industry, Wall Street began looking for ways to profit from it.

Financial firms were lobbying to have all manner of troubled investments covered, not just those related to mortgages.

At the same time, investment firms were jockeying to oversee all the assets that Treasury plans to take off the books of financial institutions, a role that could earn them hundreds of millions of dollars a year in fees.

Nobody wants to be left out of Treasury’s proposal to buy up bad assets of financial institutions.

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“Is this the United States Congress or the Board of Directors of Goldman Sachs?” Rep. Dennis Kucinich Rejects $700 Billion Bailout

http://www.democracynow.org/2008/9/29/is_this_the_united_states_congress

This is a copy of the bill which will provide for a $700 billion bailout of Wall Street. It has provisions in it where it talks about helping homeowners, but when you read the fine print, you see it has language like “may” instead of “shall” and “encouraging” instead of “mandating” help for the millions of homeowners who are worried right now about whether they’re going to lose their home. There’s no help for them in this.
...
So what we have here is a rescue plan that essentially gives all the speculators a bailout and puts the bad debts in the custody of the government. The president of the Dallas Federal Reserve Bank has said that this plan could create a fiscal chasm, says that the problem isn’t tight monetary policy, it’s the reckless behavior of some of these investors who have now found themselves in a position where a government bailout is going to help reward their bad behavior.
...
Well, you know, that implies that you would accept the underlying premise. I reject the underlying premise that we needed this bill. And as a matter of fact, that we’re putting this up before an adjournment in an election season shows that Congress is being put under extraordinary pressure to bail out Wall Street. We haven’t looked at any alternatives, Amy. This is—you know, it isn’t as though, if you had a liquidity crisis, that—you know, a real one—that you’d start to look at all the alternatives. We haven’t done that. We have a bill here, a bill of more than a hundred pages, that we haven’t had a single hearing on the bill, you know—on the concept, yes, on what Paulson and Bernanke asked for initially. But, you know, we need to have hearings on this. There’s 400 economists and three Nobel Prize-winning economists who have said, “Whoa, wait a minute! What are you doing? Why are you rushing this?” You know, this thing doesn’t smell right, frankly.
...
I said we’re the Congress of the United States; we’re not the board of Goldman Sachs. Goldman Sachs is struggling to survive. And, you know, their former chief is now the head of the US Treasury. He’s in a position to be able to direct assets in a way that would help enhance his own financial standing. I mean, that’s a clear conflict of interest. And, you know, that’s something that needs to be said. You know, why are we permitting the person who has essentially been in a position where he’s managed assets that—you know, many of which are now in trouble, and he can come back and help clear the books for a lot of his friends? This is wrong. It’s fundamentally wrong. And, you know, it’s one of the things that adds a degree of stench to this.
...
Well, there’s many ways that you can stimulate the economy. One is that you can have massive infrastructure spending. You could get that started right away. It would have to go far beyond what Congress passed the other day. If you want to spend money into circulation and move the money in the economy, you can do that through spending on things that are tangible: bridges, water systems, sewer system. You can stimulate the economy by having a national healthcare plan. I mean, that would take a little bit longer to set up, but that would be a huge break for all these businesses that are having difficulties.
...
Well, you know, the word “oversight” has new meaning here. You know, oversight could mean “I overlooked something.” And frankly, the Securities and Exchange Commission looked the other way while all these—all this fast-paced trading was going in derivatives and derivatives of derivatives. We have about a four—$500 trillion, almost a half a quadrillion dollars of derivatives floating out there that no one really understands how that’s going to affect the underlying economy when some of these things start imploding.
...
You know, I think that—I think we’re looking at a situation here where it is precisely the lack of regulation and the lack of oversight by the administration that has caused this. Congress is going to have hearings next month, but frankly, we should be having hearings now, before we pass a bill. I mean, it’s just upside-down that you have hearings about the underlying problem after you pass a bill, because you have hearings first, you do the analysis, and then you come up with a fix that can protect investors, strengthen the economy.
...
We need to challenge again the underlying assumptions about a debt-based economy, about whether or not we should revisit the 1913 Federal Reserve Act, which has an unfortunately privatized monetary system and created a system which includes banks having the ability to create money almost out of thin air with a fractional reserve. We have to look at the implications of that, maybe put the Federal Reserve under the Treasury and have the Treasury really be responsive to the interests of the American people and keeping the economy going.

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I see those that want to take and how they will keep taking. Remember how Warren Buffett wanted in on the action? Here is more of the same.

And then I see Kucinich - who is normally derided as a UFO-freak - as one of the few that is making any sense whatever. But his political clout has been completely marginalized. Kucinich's presidential candidacy was of real interest me. So, of course, he didn't have a bloody prayer.

I'm with the seers of moonbeams...

No Deal #2!

This is the bit that interested me most:

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Republicans blamed Pelosi's scathing speech near the close of the debate - which attacked Bush's economic policies and a "right-wing ideology of anything goes, no supervision, no discipline, no regulation" of financial markets - for the vote's failure.

"We could have gotten there today had it not been for the partisan speech that the speaker gave on the floor of the House," Minority Leader John Boehner said. Pelosi's words, the Ohio Republican said, "poisoned our conference, caused a number of members that we thought we could get, to go south."

Source: http://news.wired.com/dynamic/stories/F/FINANCIAL_MELTDOWN?SITE=WIRE&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2008-09-29-15-07-56

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Comment: So this supposedly monumentally important bailout can be postponed for more political posturing. Is that right? I thought we were in panic mode - that we had to do something right the fuck NOW, as in TODAY!

Remember about what I said about the Rethugs backing away from this as if it were radioactive? They are doing it again - they caused the situation, and now want the Democrats to have to take the blame for the fix.

This was caused by deregulation. "Free markets" have never existed, nor should they. Banks and financial markets must be heavily regulated in the future. Did we learn nothing from the S&L scandal of so many years ago?

WTF, people. Wake up and smell the social democracy!

P.S. The news article I link to above was altered during the time I first saw it and the time I posted about it. I am sticking to my version above.

Kaptur Brings the Pain

I don't know much about her, but I do like her comments in these two videos:

They Want Mama to Make It All Better!


Sounds Like Insider Trading to Me!

Main Street First: The Failure of Our Republic

[Video Link] from ANP:
http://link.brightcove.com/services/player/bcpid1463341016?bctid=1822459290

Doubtless the fix is in. I am hearing that the bill is sure to be passed in some newly revised and newly idiotic form.

The people are getting pissed off. We'll see how long that lasts before the media massages away all fear, uncertainty, and doubt with calming messages about beauty aids, soda pop and other un-foods, sexy blonds and endless sports news.

More later...