Two Trillion dollars of our money is not a partisan issue when GWB and Barney Frank both exhort us to 'pay no attention to the man behind the curtain'. We are told that there is oversight, and we need to trust it, but it would be bad if the people knew.
What I find extraordinary is that I spent 30 minutes googling the hell out of this issue ("transparency 2 trillion bernanke frank" result in 76,100 hits) yet only two 'reptutable' news orgainizations are actually dealing with this issue: Bloomberg and FoxNews. If I look in Google/News, I only get Bloomberg. (Both, thankfully, have filed FOI requests and FN has vowed a lawsuit if the request is not honored.)
My question, as a non-partisan American, equally suspicious of Bush and Frank, is:
Who's got our backs?
Where the HELL are the NYTimes, WashTimes, WaPo, LATimes, Boston Globe, CBS, Philadelphia Enquirer, ABC, Christian Science Monitor, NBC, SF Chronicle, PBS, Pittsubugh Post-Gazette, NPR, BBC, The London Times, AFP, The Wall Street Journal, ChiTrib, et. fricking al, on this story?
They're not watching out for me. They're not watching our for you. Who is? Who will?
Who's got our backs?
$Two Trillion, authorized by folks we didn't even elect, plus the trillion already voted in and spent by our 'representatives' (not sure about you, but on the night of that vote, that went so quickly, I could not reach my rep's office by phone or by web or by email. The grid had frozen]... That's about $10,000 each for every man, woman, child in the country... About $30,000 per family.
Where is it? Who decided? How? Why are we not allowed to ask?
Why is this not a story worth reporting in the media?
Who's got our backs?
Why haven't my wife and kids and co-workers even HEARD of this issue?
20 years ago, we wouldn't have even been AWARE of this happening.
SOMETHING need to be done. I need my back watched. So do you.
We need a voice, an ear, a heart, a brain...
A voice; clear, loud and definitive.
We must affect change. I would like to try. Anybody out there want to help me ?
Let me know. I'll do what it takes.
I'll watch our backs.
Leave a message here. If there is response, we'll ramp it up.
Best,
--Oldowan
The cartoon above is over 100 years old. The inset may even be older. It may be time to add a third version to depict the robbers of the late 20th and early 21st Century. Perhaps the Queen will construct one this weekend. Click on the cartoon for a larger view.
Calling Paulson and other Investment Bankers “Robber Barons” would be to compliment them.
At least the old Robber Barons of the late 19th and early 20th centuries had a few civic bones in their bodies. For example, there was Carnegie whose legacy created all those libraries. There was J. Paul Getty, founder of Getty Oil who continues to share his art, long after this death with the world. However, if you are searching for a civic bone in one of the Robber Barons of the late 20th and early 21st centuries, you would have better luck searching bone in a slug.
FOR MORE INFORMATION ON WHY HENRY PAULSON DOESN’T QUALIFY AS A ROBBER BARON:
The House is likely to cave in to the Wall Street billionaire bullies today, but ordinary Americans can still hold out for a miracle--after all there have been plenty of them so far this political season.
QUEEN’S REVIEW OF “HOW TO BREAK THE MONEY MONOPOLY”
This great article appearing in THE NATION by Nicholas Von Hoffman is great from its beginning paragraph to the end. It is one more in the growing indictment of Wall Street
“Once again, the small group of financial organizations and the few thousand people who constitute what we call Wall Street have brought the country to the verge of ruin. It’s been barely ten years since they visited the dot-com boom and bust on the nation and twenty years since they took us to the edge of ruin in the savings and loan scandals. . .”
Not only does Hoffman remind us that this is not the first time that Wall Street has brought our country to the brink of ruins [and it's not been "barely ten years", it's been less than eight years], he also reminds us that Paulson has enriched himself by over half a billion dollars at Goldman Sachs. It’s not exactly like he is a disinterested party in all this.
Read More »
I wonder if the members of Congress, the Bush Administration, Paulson and Bernanke will remember the words of Abraham Lincoln: You can fool some of the people all of the time, and all of the people some of the time, but you can not fool all of the people all of the time.
It does seem that several million American chickens are beginning to remember that this is not the first time we have been threatened to “act or else be prepared for dire consequences.”
Considering the dire consequences that we suffered anyway and still continue to suffer in spite of the fact that we elected a Democratic Congress two years ago to repair the mistakes of the Iraq War, this chicken is willing to take her chances and say no to Wall Street and their $850billion dollar bailout. Bail yourself out–try a little of your own economic neo-liberal theories on yourselves. After all, “individual” responsibility as opposed to community is one of your cornerstones. You are the people who make fun of welfare. Stop asking for it. The American people have already given more far more than you deserve.
You are making the same mistake you made before, ignoring the problem, and passing legislation and terrorizing Speeches on DOOM, economy failing, destruction, gone, all gone, if you don't act now.
Economists are partially to blame. They didn't get their money out before the it was too late to be noticed. Are you aware that Real Estate deals like those that are bundled have been cited by FBI and CIA as a means to fund Alqaeda? Is that what happened? Have we been fighting an enemy, losing our children, losing our friends, losing our reputation worldwide, to fight an enemy who could only continue fighting with our own money?
Al-Qaeda has been using financial institutions to funnel money from it's financiers. I find it odd that the two primary sources have been Saudi Arabia, and the United States. The Finance committee would have oversight over any banking transaction... and I have to wonder what the hell is going on? There is no doubt that this bail out will be bad for All Americans. You're being told of the eminent danger from the same people who caused the downturn. And guess what?!?! They don't think it will actually work. They hope people won't do what follows the bailout... People all over the world and especially in the U.S. will pull out the money they have in the market in order to protect their financial situation during a time of economic crisis.
Once that happens, goodbye American Dollar. Take a good look at the person closest to you, cause you're about pass a bill that will turn that person into a possible if he/she doesn't get you first.
Why would you give someone hungry a bowl of soup, knowing full well the bowl has a hole in it? Fix the cause of the problem, then offer help to fix it. And I had hoped that terror tactics would have disappeared with the Bush Administration. Instead, the banking interests that demand this rescue are calling in loans, raising interest rates out of the blue.. all because they screwed up.
Seems to me the Bankers are telling the American people.. "We Come First, Screw your economy!" to which I say... "I see your true colors... shining through."
For those seeking re-election.. I will volunteer for your opponents. Read More »
We have one last chance at 'jump starting' this economy and that can only be done from below where 95% of lower to middle income citizens consume by purchasing products and services that are produced by the global economy. Nothing will be accomplished by throwing more and more money at Wall Street in an attempt to get the credit markets lending again because once the investment community became aware of the extent of consumer and business leverage they lost a certain amount of confidence in all facets of the U.S. economy. Both foreign and domestic credit markets are not freezing up but what is actually occurring is a natural reaction to the discovery that U.S. businesses and consumers have overextended themselves in an un-concerted attempt at maintaining a level of economic expansion (lifestyle or revenue stream) that is unsustainable given the continuing drop in consumption spending by consumers as a result of their declining incomes.
Now that both businesses and consumers are facing the reality of the real market economic forces that act to stabilize out of balance conditions, all facets of the economy are crying for immediate relief even those such as the financial institutions that will just have to write off or write down most of the over valued credit assets that their customers both businesses and citizens are unable to continue to carry.
Until the 95% of low to middle income U.S. citizens are afforded a substantial increase in income (equated to all the lost income never received from years of productivity gains) the global economy will continue to tank. No other option remains - either use the $700 billion (more required) to 'jump start' this dying income starved economy or watch it decline to the point of no return.
Also, we shouldn't believe everything pandered by the sensationalist media parrots especially when it regards Economics. Investors moved back into the markets today mainly to acquire 'dirt cheap' bargain stocks and investment instruments not simply because they even remotely expect help in the form of a bailout from the U.S. Congress or that if it did transpire would have any effect on confidence anyway. Therefore, what all of us should attempt to do is maintain a link to reality based upon the facts of each day and not take credence in any neoclassical Economic ideology predictions that are rooted in policies that have brought us to this calamitous point in time.
Moving our economy back to a higher level of consumption spending that is not based upon consumers who are over leveraged and businesses that are equally overleveraged because their income is being drained off by greedy executives and board members must be the goal for our nation. Draining more income from the 95% of low to middle income citizen taxpayers in order to invest in worthless debt related assets that would be better purged from our economic system entirely does not lead to a sustainable economic system nor does it help in resolving our current chronic income crisis - it only makes matters worse. We need to invest in America not throw what may be our last remaining dollars that haven't yet been devalued (given time) to the point of being worthless up into the wind, only to be blown across a fast encroaching economic desert.
We have the power to thoughtfully address the income crisis which is the root cause of our economic calamity but only if we remain open-minded to all approaches that are centered upon getting substantial income in the hands of average Americans who will faithfully spend (representing 2/3's of GDP) it on products and services. Not only is it the economically sensible thing to do but the morally right thing to do.
http://structuralEconIssues.blogspot.com/
Queen’s Comments
I just read an article in Global Research that made me even more resolute in wanting to put the brakes on this $700billion bailout proposed by George Bush and Paulson. It is titled “Financial Bailout:America’s own Kleptocracy” and was written by Michael Hudson, a Research Professor of Economics at the University of Missouri.
“. . .We must act now to protect our nation’s economic health from serious risk,” intoned Pres. Bush on September 19. What he meant was that the White House must make the Republican Party’s largest group of campaign contributors whole–Wall Street, that is–by bailing out their bad gambles. . . “ Near the end of the article, Hudson suggested that the Republican slogan this November should be “Gambling insurance, not health insurance.”
What the Paulson-Bernake Plan Really Means to Americans
This plan will enable banks to sell off the homes of five million home mortgage debtors faced with default or foreclosure this year. Home-owners will lose their homes but the Fed will pump enough credit into the mortgage-lending agencies to enable new buyers to go deeply enough into debt to take the jumk mortgages off the hands of the gamblers who presently own them. If this sounds like a shell game, it sounds like a shell game, because that is exactly what it is.
http://structuraleconissues.blogspot.com/
o Use $700 Billion to Stimulate Real Economy
o Fast Bailout of Wall Street â€" No Help for Main Street
o Stand Up Citizens - It is Time to Be Counted
o Death of the Great Consumption Engine
o Stepping from the Past into the Future
o Our Nation’s Dying Debt Engine
o $700 Billion to Feed the Supply Side Monster
o $700 Billion Bailout â€" Reverse Robin Hood Effect
o Financial Pollutants, Government Bailout, and HOLC
o Great Depression History Propaganda Spread by Elite
o Income Drained From Below Covers Losses of Elite
o Federal Toxic Debt Clearinghouse â€" Cleansing Debt from Books
o U.S. Treasury Open To Loot â€" An Economy Spiraling Down
o AIG Raids U.S. Treasury â€" Lobbyists Work Pays Off
o Root Causes of Our Current Income Crisis
o Acquiring a Rational Economy
o Workers Demand Democracy Not Machiavellian Evil
o Income Crisis - Accelerating For Impact into Economy
o They Sacrifice the Dreams of a Nation
o Building a Foundation of Understanding
o Completely Nationalize Freddie Mac and Fannie Mae
o Deflationary Stage of Income Crisis Reached
o The Illusion of Justice
Queen’s Comments
Remove the sweeping power given to Paulson and the Bush Administration. In fact, remove them entirely from the picture and any Wall Street representatives and bankers. That is the first step.
Many Americans, including the Queen, feel that conservative Democrats and Republicans have played their financial shell games for the rich for the past thirty years and we are done. We are calling their bully bluff and saying NO.
We understand that without conservative Democrats voting with Republicans that we would not be in the mess we are in today. We want a new deal–not another raw deal. Congress didn’t get it in 2006 when we elected a Democratic Congress on the mandate to end the Iraq War and bring our sons and daughters and our money home. (Perhaps we should have given our Democrats a litmus test for being a progressive--many of them would not have tested positive.) Maybe they will get it this time.
In case you haven’t heard, the House voted against the proposed bail-out. 228 NAY to 205 YEA.
Well no surprise, the server is down for the House of Representatives and I am unable even to email my US Congressional Representative Sam Johnson and thank him for voting against the Bailout.
It would be an historical first for me to ever thank Sam Johnson for any of his votes. Thus it is a shame I am not even able to email him.
Of course, it may be relevant to point that that although Sam and I are in agreement on the outcome, it is not for the same reason. Sam voted against the bail-out because he hangs on to the economic neo-liberal nonsense that the market will correct itself.
I am against the bail-out because it changes little. The same failed administration that brought us such memorable lies as “WMD” and “smoking gun” would be in charge of distributing $700 billion of the taxpayers money? Paulson and Bush are to be responsible for handling $700 billion dollars of American taxpayers money? And I supposed to trust them? How many times will Congress ask me to be a fool? Not this time. Not this year. Pelosi is going to have to return to the drawing board for this one.
Well it might be fine for rich conservative Democrats and their Republican pals, but it’s not OK with me. After all, the real Kings and Queens in a Democracy are you and me, pal–not them. I hope that more Americans wake up to this and start wielding their power too.
Monday: Call to Stop Paulson's Plunder
(1) Call your Representatives and Senators at 800-473-6711 or 202-224-3121 and say No Bailout!
(2) Email them too and tell your friends:
http://democrats.com/stop-paulsons-plunder
After a week of high-drama negotiations, Congress and Hank Paulson issued Bailout version 1.1, which is just the original Paulson pig with a lot of lipstick.
Republicans say the deal will be profitable for taxpayers, but they are lying - just as they did about the invasion of Iraq producing lower gas prices. It's a lie because Paulson has full power to pay too much for the securities and he will because his real goal is a bailout of bank executives and shareholders with our money - a massive ($2,333 per person!) transfer of wealth from the poor and middle class to the rich.
Democrats say they got oversight, accountability, and limits on executive compensation but each of these provisions is so full of Republican-written loopholes that they are meaningless - just like all other restrictions imposed on the Bush Administration, from Iraq to wiretapping. And that's before Bush simply negates any restrictions he doesn't like with one of his unconstitutional (and hence impeachable) signing statements.
So our answer remains ABSOLUTELY NOT.
The House will vote on Monday and the Senate will vote on Wednesday.
So call your Senators and Representative right now to say "No $700 Billion Bailout for Wall Street" - dial the Capitol switchboard at 800-473-6711 or 202-224-3121 or dial direct using the instant phone lookup on the right side of http://usalone.com
And if you have not e mailed your Senators and Representative , please do it now:
http://www.democrats.com/stop-paulsons-plunder
Find more information and comment here:
http://www.democrats.com/still-no-bailout
Thanks for all you do!
________________
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BAILOUT BIL DEFIES WILL OF PEOPLE
Contact for your member of the House or Representatives. Image cc
White House and Congress Suspend Democracy
To Help Wall Street
(Wash. DC) The White House and Congressional leaders from both parties announced a tentative bill to bailout failed financial institutions. The bill is a response to the $700 billion initially request by the White House last week. The bill allocates $250 billion to start with a total authorized of $700 billion. The money will cover the losses of distressed Wall Street firms facing bankruptcy due to bad investments, primarily in risky real estate securities known as subprime securities and "derivatives."
There were no provisions announced to bailout citizens facing foreclosure or help with their bad investments.
Read More »The House Republican strategy is more of the same--of that much I am certain. The deal that the Democrats have worked out with Paulson and Bush is likely a good deal for the people because Bernie Sanders is behind it. That is the ONLY reason I trust it. If Bernie Frank says it's a good deal and it works for the people, then it is. He is a democrat who can be trusted to represent the people.
As a citizen, I would say: go for it and finally end the rule of the conservatives who have just about single handedly ruined this nation with their conservative ideology that serves the rich. If it has to be labeled as a "democratic" legislation then so be it. We don't have to have the House conservative Republican approval to pass this bill. Let the world know that 1) this situation was created by greedy conservatives and 2) the mainstay of their creed "the market will adjust itself did not happen." It will be the complete and utter end of the conservatives AND the Republicans--not the Democrats. They will no longer be able to manipulate the markets the way they have for the past 8 years.
The Bush/Paulson scheme didn't work and the reason it didn't was because it was so transparent that even the dumb and dumber Americans FINALLY understood that they were being shafted once again by the rich conservatives who have run this counntry in the ground and started to call their senators and Congress people over it. The idea that the White House and conservatives have gotten so bold that they could demand $700billion--a fund that even they, when someone finally had the nerve to ask, how they arrived at that sum, could not answer. Someone (from Paulson's office I think) said that they did't know, but they know it had to be a really big sum. They honestly said just that. I don't know if that came from the White House or the Department of Treasury but regardless they used no economic theory, no math to determine the $700 figure. It was just something they pulled out of their you know what.
Read More »by Nick Feden
(To the tune of "Hey, Delilah" by the Plain White T’s)
Hey Henry Paulson,
What’s it like in New York City?
Heard that AIG was coming down,
But now they’re sitting pretty.
Thanks to you.
Man, I could use a bailout too,
I swear it’s true.
Hey Henry Paulson,
Don’t you worry ‘bout explaining,
We’ll just borrow from our grandchildren,
I don’t hear them complaining.
Sleight of hand,
Just in case you need a back up plan-
Invade Iran.
Oh it's what you do to me
Oh it's what you do to me
Oh it's what you do to me
Oh it's what you do to me
What you do to me.
Hey Henry Paulson,
I know times are getting hard,
And when the housing prices fell
Your friends were hoist by their petard.
Oh, what a swerve.
That we should get what they deserve.
It seems absurd.
Hey Henry Paulson,
I’ve got so much more to say,
But all the banks I couldn’t pay my debt to
Took my words away,
Then came to you,
Now you offer them my money too?
Henry, Et tu?
Oh it's what you do to me
Oh it's what you do to me
Oh it's what you do to me
Oh it's what you do to me
A trillion bucks seems pretty large,
To put into a great big barge,
Then close our eyes and just give you the key.
You’ll come back in a ragged raft,
With remnants of their criminal acts,
And sell us what they couldn’t dump for free.
Henry I can promise you,
That by the time that you get through,
The USA will never be the same,
And you’re to blame.
Hey Congress People,
Just be good and don’t you listen.
Two months and he’ll be outta here
And you just might be with him, if you do.
You know it all comes down to you.
You can vote however you want to.
Hey Henry Paulson here’s to you,
This one’s for you.
Oh it's what you do to me
Oh it's what you do to me
Oh it's what you do to me
Oh it's what you do to me
What you do to me.
In Politics, the goal is to get elected for the next term. Everything you do will determine (or should) whether you get re-elected. Politicians rely on ignorance. Whether or not you vote on bad decisions, or good. Either way, you're vote should represent the people in your district. They will do anything in order to convince you to vote for them. If they lie, the cost to call you out by your opponent would need to be extremely high in order to reach enough people. I can only guess that most people don't pay any attention to c-span. But I try to catch it as often as possible, and this deal smells like crap. The body language of the Sec. of Treasury and Federal Reserve Banks.
Either way... both will manipulate through media. That includes these committee meetings and interviews. No provision of this bill will make a difference. If there isn't a full audit of these corporations, and a full audit of the 'assets' they wish to offload onto the people, then there is no reason to even consider such a thing. Both have been opposed by the writers of the plan. Manipulating the public is the goal. If this "Bill" ends up like FISA, then this means that nobody truly cares about the people, and care more about their own safety (financial and physical) at the cost of our General Welfare.
....Continued.... Read More »
The Money Party (7):
Bailout Blackmail
Just Say No
(Wash. DC) We're being blackmailed into accepting the responsibility and debt for the worst managed financial institutions in the history of this country. The starting price, our debt, is $700 billion dollars.
What's really about to happen is that the failed financial institutions will be rewarded for their bad behavior. As a result, they and others will be encouraged to do it again. It's just a matter of time.
We're under the gun and told that we have just days to make a decision to bailout these mismanaged entities. The last thing they want is an open hearing on the problem. Deliberation is deadly for them.
Read More »Take a look at the following headlines and blurbs. If these don't get you off that couch and to the telephone to call your Congress people and tell them NO DEAL TO THE LATEST SCAM FROM BUSH AND HIS CONSERVATIVE PALS, then nothing will. While you are at it, you can tell them to impeach the entire Bush administration now. REMOVE THEM FROM OFFICE ON THE GROUNDS OF GROSS NEGLIGENCE AND INCOMPETENCY.
Go Peak Oil: Life after the Oil Crash for the complete stories
http://www.lifeaftertheoilcrash.net/BreakingNews.html
One of my favorite phrases from this: Pigs get fat, Hogs get slaughtered
Mike Whitney: The United States is Now in a State of Financial Martial Law
These are dark times. While you were sleeping the cockroaches were busy about their work, rummaging through the US Constitution, and putting the finishing touches on a scheme to assert absolute power over the nation's financial markets and the country's future. Industry representative Henry Paulson has submitted legislation to Congress that will finally end the pretense that Bush controls anything more than reading the lines from a 4' by 6' teleprompter situated just inches from his lifeless pupils. Paulson is in charge now, and the coronation is set for sometime early next week. He rose to power in a stealthily-executed Banksters’ Coup in which he, and his coterie of dodgy friends, declared martial law on the US economy . . .McClatchy: Bailout Plan Could be Used to Mask Previous Illegal Activity
Paulson has surrounded himself with former Goldman executives as he tries to navigate the domino-like collapse of several parts of the global financial market. And others have gone off to lead companies that could be among those that receive a bailout. . .NY Times: Paulson Attempting Most Enormous Power Grab in History
Talk about a blank check. It isn’t just the size of Treasury Secretary Henry Paulson’s $700 billion rescue plan that is stunning — it’s also the "most amazing power grab in the history of the American economy," Andrew Ross Sorkin writes in his latest DealBook column in The New York Times. In its original form, at least, Mr. Paulson’s proposal for bailing out the financial system would appear to give him an incredible range of powers but offer remarkably little transparency or oversight. . .Wall Street Journal: No Oversight Proposed for Paulson's Bailout Plan
If the Bush administration has its way, anyone harmed by the Treasury Department’s handling of the $700 billion Wall Street bailout might have no remedy. Draft legislation proposes sweeping powers for Treasury Secretary Henry Paulson to buy and sell mortgage-related securities however he sees fit. Aside from requiring periodic reports to Congress, the bill provides no oversight of the bailout’s management — and specifically bars any court or agency from reviewing it. Congressional Democrats said they were wary of handing a lame-duck administration what one aide called a "blank check."LATOC: Rumor is Paulson's Attempting to Intimidate Corporate Executives
I happen to know that Paulson has invited some Wal-Mart executives to getthem behind the bailout. They flew to D.C. yesterday and he is meetingwith them today. They were briefed prior to arriving by some treasuryofficials and scared shitless. Apparently, they are giving the same cannedspeech they gave Congress, lots of fear, no details, simply, if you don't dothis, its the end of the financial world. So, it appears Paulson is trying torally not main street but the big corporations to support his bailout.Seeking Alpha: Treasury's Bailout Plan is Breathtakingly Awful
Okay. Let's leave no room for ambiguity here. The Treasury's draft plan forsaving the world is breathtakingly awful. It would give the Secretary of theTreasury entirely unchecked discretion over up to 700B dollars. Even that"limit" has a loophole big enough that you could drive a truck through it, sothe Secretary could in effect spend up to 1.8T dollars, right up to thenewly raised Federal debt ceiling, without further Congressional action. Thisact would be such a wholesale delegation of the power of the purse that Iwonder whether it is even constitutional. Of course, the act explicitly putsthe Secretary's actions beyond any judicial review, so perhaps questions oflegality or constitutionality are merely academic . . .Bloomberg: Paulson's Plan Will Mostly Benefit Goldman, Morgan Stanley
Goldman Sachs Group Inc. and Morgan Stanley may be among the biggestbeneficiaries of the $700 billion U.S. plan to buy assets from financialcompanies while many banks see limited aid, according to Bank of AmericaCorp. "Its benefits, in its current form, will be largely limited to investmentbanks and other banks that have aggressively written down the value oftheir holdings and have already recognized the capital impairment,'' JeffreyRosenberg, Bank of America's head of credit strategy research, wrote in areport dated yesterday, without identifying particular banks. Many banksmay not participate in the Troubled Asset Relief Program because theyhaven't had to write down as much assets under accounting rules, meaningdecisions to sell into the program would cause them to lose capital, wroteRosenberg. Investment banks operate "under a mark-to-market accountingmodel while commercial banks hold assets at cost until realizing a loss . . ."Bloomberg: Goldman, Morgan Stanley Plan on Seizing Regional Banks
Stock market declines of the past 10 days helped push Lehman BrothersHoldings Inc. into bankruptcy and Merrill Lynch & Co. into a takeover byBank of America Corp. That's helped financial services leapfrog the mining ndustry to become the most active for mergers and acquisitions this year,data compiled by Bloomberg show. Regional banks probably will become"lunch'' for larger institutions, JPMorgan Chase analyst Steven Alexopoulostold clients. "We are seeing deals that are highly opportunistic and speedilyarranged, where targets are distressed,'' said Marco Boschetti, co-head ofglobal mergers and acquisitions at the Towers Perrin consulting firm . . .
Fortune Magazine: Meet the New Wall Street Same as the Old Wall Street
The decision by Goldman Sachs and Morgan Stanley to recast themselvesas bank holding companies over the weekend may shake up the nation'sbanking landscape. Then again, it may not. After capturing outsized profitsover the years, both firms may be reluctant to forsake their trusted investment banking model altogether, according to some analysts. Andgiven their relative lack of sophistication in the traditional banking business,both Goldman and Morgan are certainly at a disadvantage along that frontAlternet: Paulson's Bailout Plan is a Financial Weapon of Mass Destruction
Not since the Bush administration's lies about Iraq's "weapons of massdestruction" have the American people been so despicably misled. The Bushadministration's proposal to buy, with taxpayers' money, $700 billion of toxic liabilities from the corporate financial titans of Wall Street is a fraud.It is by no means necessary, as Treasury Secretary Henry Paulson claimsin the agency's Fact Sheet, "to promote market stability, and help protectAmerican families and the U.S. economy." It is necessary only to assurethe financial survival of Wall Street banks and brokers, the administration'smost loyal supporters and its greatest political contributors -- and in largemeasure the cause of the financial meltdown the country is facing.Bloomberg: Paulson May Push National Debt to Record Breaking Levels
Treasury Secretary Henry Paulson's $700 billion proposal to stabilize thebanking system may push the national debt to the highest level since 1954,threatening an erosion of foreign appetite for U.S. bonds. The plan, whichasks Congress for funds to buy devalued securities from financial institutions, would drive the debt above 70 percent of gross domestic product and the annual budget gap to an all-time high . . .Financial Times: Money Market Funds Suffer Massive Outflows
Money market funds in the United States suffered an estimated $197bn ofnet outflows last week as confidence in their safe-haven status weakenedafter one fund "broke the buck" and others closed. The outflows mark anew and potentially dangerous phase for the $3,400bn money market fundindustry as continued redemptions could result in forced selling of theirsecurities into illiquid bond markets. Some money market fund operatorsare facing the prospect of closing funds to halt redemptions . . .Wall Street Journal: Fannie, Freddie Takeovers Cost U.S. Banks Billions
About a quarter of the nation's banks lost a combined $10 billion to $15billion in the wake of the federal government's takeover of mortgage giantsFannie Mae and Freddie Mac, a new industry survey found. In the survey,the American Bankers Association reported that 27% of the nation's 8500banks held preferred shares in Fannie and Freddie in their investment portfolios. The shares are expected to be worthless . . . Until recently, theshares were considered rock-solid investments, similar to holdings ingovernment securities, the association maintains. It says the losses aregalling to small bankers because they took pains to avoid the exotic loansand loose underwriting standards that have hobbled Wall Street titans . . .Business Week: Bailout Endgame Approaches for Washington Mutual
Investors turned skittish again on Monday, Sept. 22, when they pushedWaMu shares down 20%, to $3. Big bank stocks got hit on fears thatPresident George W. Bush's $700 billion bailout of troubled mortgage assetsmight not be a good thing for banks if they are forced to recognize evenlarger losses on their mortgage holdings. The Wall Street Journal reportedthat would-be buyers have been looking for the federal government to takeover WaMu's bad loans before consummating a merger. CNBC reported thesame day that the bank is waiting to see whether the proposed $700 billionbailout wins congressional approval before continuing with merger talks.Seeking Alpha: Mortgage Delinquincies Continue to Climb
It's beginning to get really ugly out there... unfortunately 13 months agowhen we were told "this is just a subprime issue" we repeatedly saidsubprime is a symptom of the problem, not the problem - it is the tip ofthe iceberg - we have alt A mortgages, option ARMs, prime mortgages,credit card loans, auto loans, student loans, credit card debt. It's allcoming down the pike. It appears the pike is coming right at us. This is whyI cringe each time 1 data point "improves" slightly and all the Kool Aiddrinking bulls clutch to it and say "ignore the rest of the data". At somepoint we have to move from denial to acceptance. Specific to foreclosureswe are probably 70%+ of the way through the subprime - by mid 2009they should be "done" and then we will move onto the red meat . . .Seeking Alpha: Commerical Real Estate Loans the Next Shoe to Drop
Residential mortgages have gotten most of the attention during the creditcrisis, but a heavy concentration of commercial real estate loans may be abetter metric for gauging which banks are most at risk for failure in thecoming months, according to Standard & Poor’s. Eleven banks failed in thefirst half of 2008 and not surprisingly, S & P’s RatingsXpress Credit Researchis predicting more this year and in 2009, due to continued deterioration incapital ratios, liquidity and in CRE, land development and constructionloans. Since construction loans are bullet loans with interest reserves accruing until a project is completed, we expect that problem constructionloans will continue to rise in coming quarters. We also expect that lossseverities among defaulted construction loans will be materially higherduring this economic downturn compared with earlier downturns givensharp price declines among homes and condominium projects. The ratingagency also said most of the failures would be concentrated in small banks,especially those with a high degree of exposure to commercial real estate.
NY Times: Retail Chains Could End Up as Ghosts of Christmases Past
For many of the nation’s retailers, this is shaping up to be the most criticalholiday season since the recession of the early 1980s. Chains that farepoorly could end up as ghosts of Christmases past. Not only are retailersgrappling with a sputtering economy and tight-fisted consumers, but thecredit crisis is making it harder for them to finance their operations. Mostretailers that are not already bankrupt have managed to buy their winter inventories, but that happened before Wall Street was brought to its knees.With credit continuing to tighten, industry professionals now think any weakretail chain that turns in a below-average Christmas performance will be acandidate for bankruptcy early in the new year. Already, more than adozen retail chains have filed for bankruptcy this year - including Boscov’s,Mervyn’s, Steve & Barry’s, Linens ’n Things and the Sharper Image . . .James Kunstler: "The financial system now a truckload of stinking carp"
So many shoes are poised to drop this week that the American scenemight be confused for the world's greatest-ever clog dancing festival, but acloser look will reveal a circle of cavorting skeletons. Last week's ripemoment turned out to be the Thursday night Washington photo op whenTreasury Secretary Paulson and Fed Chief Bernanke emerged from a huddlewith House Speaker Nancy Pelosi and just about every other legislativeeminentissimo in an attempt to reassure the nation that its financialsystem had not turned into something like unto a truckload of stinking dead carp. I don't know about you, but I got two distinct vibes from the faces inthat particular tableau: 1.) abject fear, and 2.) a total lack of convictionthey knew what they were doing. The product was a cockamine scheme for the US treasury to absorb all the losses from a twenty-year binge inwhich Wall Street created the most complex set of swindles ever seen . . .Washington Post: "This will end with riots in the streets or in a bloodbath"
A guy at one of the big financial firms told me that many traders hadbought swanky houses by pledging the stocks they owned, which are now -- in the cases of Bear Stearns and Lehman -- worth pennies. He is alsoexpecting divorce rates to skyrocket when the trophy wives discover thatthey can't maintain the lifestyles they thought they'd married into. Andthat lifestyle will definitely be changing. All the big firms are downsizingdramatically. When a financial journalist friend asked a prominent executive how this will, he replied, "With riots in the streets." Either a riot or abloodbath. As one trader summarized, "Pigs get fat. Hogs get slaughtered.Senator Chris Dodd: "We're only days away from a complete meltdown"
Senate Banking Committee Chairman Chris Dodd says the United Statesmay be "days away from a complete meltdown of our financial system"and Congress is working quickly to prevent that. Dodd said Friday thatDemocrats and Republicans on the Hill are coming together to support theBush administration’s developing plan to buy up bad debt from financial institutions and get the credit system working again. Dodd told "GoodMorning America" that credit is seizing up and people can’t get loans.
It is not true that this is 700 billion that we will never see again- like the money spent in Iraq. Some economists estimate that when the government eventually sells these assets off that the government will either make or lose 200 billion. In the Chrysler bailout, the US taxpayer got ever nickel back, with a bit of a profit. It could be argued that more than 200 billion will be lost, but whatever the number, these assets aren't worth zero.
Last April, I put a PBS video up on YouTube that explained the sub prime market crisis. This post attempts to put this crisis into the larger perspective we find ourselves in today.
Ten years ago, you would go to a bank for a home loan, and the banker would decide how good a risk you were because they would be lending you money that came from their depositors' savings accounts. Banks had rules about how much cash and collateral they had to have to support the loans they had on their books, and the bank or S&L had an interest in making sure the loan was good.
Enter banking industry deregulation in 1999 when republicans in congress rammed through repeal of the Glass Stegal Act. What this did was allow investment banks (which were not regulated) to aggressively compete with the banks for this business. Instead of requiring 20 percent down they would offer 15, 10 and even zero percent down. They would lend the money to the home buyer, then turn around and sell the debt as a security. This "securitization" of debt meant that they would pool a thousand loans together so that if one defaulted, the risk would be spread out. Just like people bought Treasury and municipal bonds, they would buy these mortgage backed securities. Instead of liability on their balance sheets, they recorded it as a profit generating asset. You'll also hear these mortgage backed securities refered to as CDOs.
The financial industry has trillions of dollars of these credit instruments floating around, and financial banks had no requirements to be conservative with the risks they took with loans. Most owe 30 times more money than what they actually own. They call this "highly leveraged". It makes the person seem very sophisticated and clever to be able to magnify the power of their money so much. I know a few dirt farmers that would put it a different way. They'd say these boys were in hock up to their eyeballs.
Interestingly, many in congress viewed this with great suspicion and noted that if an institution walked like a bank and talked like a bank then it should be regulated like a bank. Loans being issues with little concern for the risk of not being repaid bore great resemblence to the Japanese real estate asset bubble of the 90s. Unfortunately, the Federal reserve was under the control of a laissez faire economist that believed that financial market players were smarter than government bureaucrats. This fed Chairman- Alan Greenspan- refused to regulate the financial banks, and the republican congress blocked legislation that would have regulated these markets.
There are trillions of dollars of these mortgage backed debt instruments that are in part held by investment banks. Today, with housing prices going down and owners defaulting on their loans, the value of those debt securities go down. Today, there are few buyers of many of these exotic debt instruments including, but not restricted to the mortgage backed securities. No one knows what they are really worth, and because no one will trade them, they have become illiquid assets
Because the amount of money an investment bank can borrow is based on what their assets are worth, they cannot borrow as much money as they used to be able to do. This means they cannot make the profits they used to. Goldman Sachs for example reports their profits for the last quarter are down 70%. When other companies begin to doubt your ability to repay loans, they demand even more collateral and proof of the worth of your assets. It would have been possible for Lehman to strengthen their balance sheets last year by selling some of their stock last year when they gave every appearance of being an impregnable bank. They refused to, taking the risk that they could bluff their way through it. Last weekend, they were so far gone that no one wanted to buy them. Merrill Lynch had a similar exposure on their balance sheets and knew they were next, so they opted to merge with BA before they met the same fate.
It is not true that all of these illiquid assets are mortgage backed, and it is also not true that they are worthless. Some of these loans were for houses whose real value is one half of what they were appraised at. In other cases the loans will be fully repaid with interest.
What the media is not discussing is that this securitization of debt was extended to all forms of credit and the crisis should not be viewed as a real estate asset bubble but a general credit asset bubble. This shall be covered in an upcoming post. It is astounding the games that these financial geniuses were playing with money.
References: (Don't take my word for all of this)
A great book on this is "The Trillion Dollar Meldown: Easy Money, High Rollers, and the Great Credit Crash", Charles R. Morris $9.99 if you want it now and have a kindle, $10 for some used copies on Amazon.
Today, in an article in The Nation, “Goldman Sach Socialism”, William Greider points out what the Queen and others pointed out yesterday albeit Greider was more eloquent:
“Wall Street put a gun to the head of the politicians and said, Give us the money–right now–or take the blame for whatever follows. The audacity of Treasury Secretary Henry Paulson’s bailout proposal is reflected in what it refuses to say: no explanations of how the bailout will work, no demands on the bankers in exchange for the public’s money. The Treasury’s opaque, three-page summary of plan includes this chilling statement: [Greider then quoted the now famous bully passage, Section 8 from the three page ramson note that Paulson and Bernake have given to Congress.]
“Section 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.” In other words, no lawsuits allowed by aggrieved investors or American taxpayers. No complaints later from ignorant pols who didn’t know what they voted for. Take it or leave it, suckers. . .”
It is just one more example of extortion from the Bush Administration. The question still remains as to whether Congress will bend over one more time and take it.
Who knows? All I can say at the moment is that I am so disgusted both with the Bush Administration as well as with Congress that I am beyond angry.
This is exactly what happens when conservatives are put in control of our government–the people of our nation lose big time.Here is the link to the rest of Gerider’s article if you have the stomach to read any more about this farce.
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