Gold

Gold has fallen this morning.

Yeah, hedge funds will go bust. Somebody has to die in this war and its most like the hedge funds.But I dont see that being a big deal. Let the Greenwich area have a differnet smell ?

Prof Roubini has indicated that about 2 trillion dollars seems to be the floor level of the bailout and not the upper ceiling.What impact does the good professor see in the foreseeable future for the value of the dollar ?

In the MSM discussions of regulation I keep hearing talking heads blathering on about how the “hedge fund industry is doing great, and it’s the LEAST regulated industry.” This really makes my blood burn. I hope that the struggles of this industry get more press so this line of argument can die a natural death.

Funny…but i guess i just don’t feel that bad for the hedge funds. Levering more than they should. Manipulating our markets in ways never imagined. There is one truth to the cycle of life. What goes up must go down. Everyone just needs to accept the party is over. Let’s take our pain, suffer, and then rebuild in about a decade because that is what will happen once Congress passes this ridiculous piece of legislation. Folks, please write your congresspeople. Given that most people never do this is more important than ever. This is from Mish’s Website. Also ask these people to filibuster the current proposal. Don’t let the ex Goldman Sachs guy take our country hostage.Most Sympathetic ListShelby, Richard C.- (R – AL)110 HART SENATE OFFICE BUILDING WASHINGTON DC 20510(202) 224-5744E-mail: senator@shelby.senate.govBunning, Jim- (R – KY)316 HART SENATE OFFICE BUILDING WASHINGTON DC 20510(202) 224-4343Web Form: http://bunning.senate.gov/public/index.cfm?FuseAction=Contact.ContactFormGrassley, Chuck- (R – IA)135 HART SENATE OFFICE BUILDING WASHINGTON DC 20510(202) 224-3744Web Form: grassley.senate.gov/contact.cfm#emailformKyl, Jon- (R – AZ)730 HART SENATE OFFICE BUILDING WASHINGTON DC 20510(202) 224-4521Web Form: kyl.senate.gov/contact.cfmEnsign, John- (R – NV)Washington D.C. Office119 Russell Senate BuildingWashington, D.C. 20510Phone: (202) 224-6244Fax: (202) 228-2193Web Form: ensign.senate.gov/forms/email_form.cfmCongressman Mike Pence (R – IN)Washington DC1317 Longworth HOBWashington, DC 20515(202) 225-3021 office(202) 225-3382 faxWeb Form: https://forms.house.gov/pence/IMA/contact_form.htmSend this post to 5 or 10 of your friends and have them do the same. Do it now, while you are thinking about it.I must be honest and state that this action is highly unlikely to work. However, it is the only shot we have, and some revisions might be considered or strengthened as a result of what we do.Ask For A FilibusterPlease email and phone the following Senators with this message:For the good of the United States of America, I am asking [Senator/Congressman] [insert name here] to stand up to justice and protect the taxpayer. Please filibuster Paulson’s proposal. Instead, please consider solid alternatives offered by Hussman and Mish to recapitalize banks in a way that protects the taxpayer.Shelby, Richard C.- (202) 224-5744Bunning, Jim – (202) 224-4343Grassley, Chuck – (202) 224-3744Kyl, Jon – (202) 224-4521Ensign, John – (202) 224-6244Congressman Mike Pence – (202) 225-3021

The 1.8 trillion(and growing) financial bailout soup-A recipe by Super Chefs Paulson and Bernanke1.Bring the cracked and worn out economy pot to overheat.Scare Congress with apocalyptic warnings about how the economy is going off the cliff .Throw in the “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.”clause to the bailout soup thereby giving dictatorial powers to Chefs Paulson and Bernanke.2.Add Upto $700 billion of junk from struggling institutions.3.Add a dash of $50 billion from the Great Depression-era Exchange Stabilization Fund from the Depression era cupboard for flavour.4.Add at least $10 billion in Treasury direct purchases of mortgage-backed junk in September5.Add the GSE hot curries curries—Up to $144 billion in additional MBS purchases by Fannie Mae and Freddie Mac6.All the while chant”Our banking system is a safe and a sound one”7.Add the worlds biggest insurer bailout seasoning -$85 billion loan for AIG8.Add a dash of sweetener —At least $87 billion in repayments to JPMorgan Chase9.Crack the freddie and fannie eggs together and dunk into mix—$200 billion for Fannie Mae and Freddie Mac.10.Chop and dice —$300 billion for the Federal Housing Administration to refinance failing mortgage11.Add 4 cupfuls—$4 billion in grants to local communities12.Chop into squares and add—$29 billion in financing for JPMorgan Chase’s government-brokered buyout of Bear Stearns in March.13.Garnish with-—At least $200 billion of currently outstanding loans to banks issued through the Fed’s Term Auction Facility, which was recently expanded to allow for longer loans of 84 days alongside the previous 28-day credits.14.Throw in the taxpayer and struggling homeowners and bring to a boil.Voila the soup is ready

@ PeterThanks for your comments. I appreciate them and you can bet I’ve already taken most of these steps and more. I would even suggest people open a 2-3 different bank accounts preferrably at a credit union (check out what it invests in first) just incase your main bank fails. My main bank is Wachovia. I’ve moved a large percentage of my assets out and opened 2 different local accounts just in case.

Could anybody explain to me, what will happen if the 700b bailout is not executed. What is the doomsday scenario?

Why not Euro government bonds at 4% interest rate?

And, when all our monetary value is gone, the international bankers will take their stash and move to a better host environment, and continue to feed. But, with one glaring drawback. There will be no USA to contain their new host country from retaliation, as happened in Russia, in Germany, in England… If the USA goes down under the weight of parasitic greed, I say these international money changers have met, at last, their Waterloo.

Financial Times: Hedge fund returns moneyThe best-performing hedge fund manager of the past two years has closed down his funds and is returning money to investors after concluding that the danger of losing money from a bank collapse is too high.Andrew Lahde, founder of California’s Lahde Capital, told investors last week that further credit problems – the basis of his profits – were likely but the reliance of the bet on bank counterparties made it too risky.

you forgot to add in CDS:1. 64 Trillion2. netted out would be about $15 Trillion3. assume 20% default on those as teh economic crisis sets ingive $3 Trillion likely losses in CDS market

zooztI have the same question – I know it has been discussed as part of a whole host of articles and threads, but now since such rushed and radical action is being debated, perhaps we need a more explicit account of what this “doomsday scenario” will look like and if there are any possibilities for different outcomes than the simple either/or bailout or doomsday. Anyone?

I’ve done that too. As I said……..”and more” (see above comments).

Viral e-mail:Your Urgent Help NeededDear American:I need to ask you to support an urgent secret business relationship with a transfer of funds of great magnitude. I am Ministry of the Treasury of the Republic of America. My country has had crisis that has caused the need for large transfer of funds of 800 billion dollars US. If you would assist me in this transfer, it would be most profitable to you.I am working with Mr. Phil Gram, lobbyist for UBS, who will be my replacement as Ministry of the Treasury in January. As a Senator, you may know him as the leader of the American banking deregulation movement in the 1990s. This transactin is 100% safe.This is a matter of great urgency. We need a blank check. We need the funds as quickly as possible. We cannot directly transfer these funds in the names of our close friends because we are constantly under surveillance. My family lawyer advised me that I should look for a reliable and trustworthy person who will act as a next of kin so the funds can be transferred.Please reply with all of your bank account, IRA and college fund account numbers and those of your children and grandchildren to wallstreetbailout@treasury.gov so that we may transfer your commission for this transaction. After I receive that information, I will respond with detailed information about safeguards that will be used to protect the funds.Yours FaithfullyMinister of Treasury Paulson–

Could it be any worse than the changes that are carried out besides the 700b bailout? I mean, perhaps it would have been better to let the worst come if it meant that US would have kept their “form of capitalism” (for lack of better short description)..?

hmmm. So maybe it is a step toward world peace? Interesting.

Start Listening At 5:50 of this video. No printing and no inflation, commodities going down said the professor. To me, this = no weekening of dollar compared to other currencies.http://www.cnbc.com/id/15840232?video=859660172&play=1Don't like betting against the professor, but I’ll put my marker on a weekening dollar resulting in inflation.hlowe

This would be funny if it weren’t so true !

Wonderful!!! Did you write it? But it should be addressed to “Dear Nigerian Friend”

The US government actually making a profit?Why am I sceptical?

My friend Ben Dover says this is gonna hurt…11:43 a.m.U.S. also plans to buy assets from foreign banks: Paulson

Apparently, they didn’t like the new deal…

you’ll be able to deposit your fat check on your new, Paul insured, Goldman checking account.

700 Billion will not be enough. Why is Paulson asking for so little when in six months, he will need another 1.3 Trillion? Ask for all of it now or risk losing credibility later when he asks congress for more.Roubini? what do you think?

Then why did US government/people chose to be so called Capitalists. Was it meant just for preaching to rest of the world?

Hey, hey, hey. Where’s your entrepreneurial spirit?

“Bernanke supports the Treasury’s plan to purchase $700 billion in illiquid assets from financial institutions. He emphasized the plan will not cost the taxpayer $700 billion, rather the taxpayer is paying $700 billion for assets, which should eventually provide a return.”what a professor+central bank chairman…This kind of presentation is like a kindergarten teacher telling jokes to the kids.

When Paulson became “secretary” of the Treasury:”[He]sold about $25 million of holdings in a Goldman fund whose sole asset was a stake in Industrial & Commercial Bank of China, the world’s largest publicly traded financial institution. The bank raised $22 billion in its initial public offering in October 2006, the world’s biggest IPO.”Managing the U.S. relationship with China is an increasingly important part of the Treasury secretary’s job. During the Fannie and Freddie crisis in July, Paulson used his credibility with Chinese leaders to reassure them that the U.S. mortgage companies weren’t in jeopardy.” Ben Stein NYTimes December 2007

“Trust me.”

If this is such a great deal then why doesn’t a private company open up a TARP, IPO and raise the capital?

Finally, someone who is saying on this forum: “Paulson and Bernanke are engineering a second Great Depression.” Just read America’s Great Depression by Murray Rothbard.

Oh, right, in that case…Maybe the government can issue stock in this bailout, printed on the back of a flag, so you can have something to wave as they pass by in their stretched SUV limosines.

So then they can stea.. borrow 700 billion at a time for multiple times?

“Rescue plan hits speed bump in Senate” and the market starts to falter. This is going to be extortion in real time. You can expect the babies to start their temper tantrums RSN.

Maybe we can outsource our violent overthrow of the government to the Indians! Do they have US work Visas? In all seriousness though, this is a terrible tragedy.

Yes, Senator Bernie Sanders says it is only a balance they must maintain. They can buy and then sell and borrow again — the final amount I suppose is infinite if fiat money is used. Congress isn’t buying debt: it’s giving these people more money–our money–to buy more, and pay themselves more money.The extreme measures being taken show the depth of the problem. Goldman and the rest of them were going under Thursday. Crisis is driving them.

12:24 p.m.Rescue plan hits speed bump in Congress

Exactly. If they are maxed out at $700 billion, they simply sell some at a loss and purchase more. In fact, they could purchase $700 billion worth of crap at face value, sell back to the same company for ten cents on the dollar, then purchase $700 billion more worth of crap, relieving the company of $1330 worth of crap. And it is all beyond the purview of the courts, Congress or anyone else.

“Morgan, Goldman Seek Deposits”great! Heliben you invited two oudated wild players to join the game for the gentlemen…did your mother tell you: one dollar saved is one dollar earned?oh… sorry… i just remeber you are going to have hugh support ($700 B) after today’s gap show.

Sounds like a bad deal to me, but hey I’m just a dumb tax payer.

Why is heavens name would the U.S. taxpayer pay a “hold to maturity” price of seriously impaired paper? Bernanke has contempt for the taxpayer. He really believes he is smarter than everyone else. the MSM have been inferring that the delay in passing this program is due to the complexity of it and lack of understanding on “main street’, bull! Main street understands exactly what this is, and they don’t like it.

They aren’t interested in the real economy and have no plans to bail it or its people out. If they did you would see F together with GM on the no-short list, and not all those financials.

10+ years of labor to bail out bernanke’s boys, and all we get is a lousy flag.

ha ha, that is a good one. Except that it is sadly probably how they think.On another note: lets say that all of this leads to a severe worsening of the current recession. Could the government stop the worsening of the economy by implementing some sort of drastic “martial law” type of regulations (“martial law for the economy”)? The economy would then no longer be “free market” of course, but would it be possible to stop the further deteoriation domestically within the US?

he is an honest one.

seems like Americans are complaining and not happy with this bailout but Congress appears now disconnected with the populace

Credit for that comment goes to Alessandro

For 700 billion dollars, they can build a whole lot of things we need right here in America now;- Improve our energy situation; Picken’s plan- Rebuild our ailing electric grid- Finish rebuilding Louisiana- Improve transportation infrastructure- etc.This will solve the core problem, that is replacethe real jobs that got exported (to the benefit ofbig business).So then the people can pay for things with a real wage instead of paying for things with borrowed money.Or we can give the 700+ billion to the wall street elite.

Bernanke nor Paulson would admit that WallStreet owes the American People an apology. These Rat F— Sons or a Bitches. They do not feel any remorse for their actions of these cronies. This is beyond contempt.

Stock reverse and crater-too bad hanknben are busy today. Otherwise we would see the PPT regain 11K on the Doe…

Paulson and Bernanke are trying to sneak this through quickly so there is no time for due diligence.Some of the same tricks that created this mess.The longer this scam is examined, the more it stinks.

“…while Wall Street manipulates the wealth of the economy for profit.”I would have liked you to have said, “while finance serves the intermediate function of allocating capital from areas in which it is in surplus to areas in which it is needed.”Which doesn’t really change anything. It’s pretty clear now that it was a mistake to think that the rest of the world (TROW) depended so entirely on US capital that we could outsource our productive sectors and build an economy in which financial services predominate. Furthermore, and perhaps even more importantly, the financial sector – overly dependent on bright young men with good theoretical educations and little practical experience – had taken the path of hyping and selling non-productive investments instead of searching out productive ones. Specifically, real estate as opposed to plant & equipment.And it’s not an either/or question of which you want to save, finance or economy. Both are necessary. But the financial sector is at present too large. Debt and credit balances will matter. Those who are highly leveraged are going to hurt. Those who have maturity mismatches are going to hurt even more. Debt doesn’t go away easily. Either it is paid up, or crammed down in a bankruptcy. The savings on the other hand, disappear quickly. Why? Because those intermediaries invested them in those non-productive assets which must be crammed down because they have no other utility.Inflation is the devil. Nothing destroys savings as quickly and thoroughly as inflation. A cram down has a bottom. Inflation has no ceiling. We hope to get through this recession with enough capital to rebuild our industry. Supporting the debt risks triggering inflation. And should that happen it will be much more painful to manage.

Bernanke said;The suspension of “mark-to-market” accounting for assets, a change backed by “many banks,” would instead hurt investor confidence.So it’s ok to hurt the tax payers back, but forbidit that the investors’ confidence wanes?!

I am suddenly starting to develope som respect for congress…

Hanknben must have mad some calls and said we can’t have stocks crashing while we are speaking!!! Rally underway…

Only $1 Trillion? War is beginning to seem kinda cheap.

Ah, I get it. Defeat the Axis of Evil by ourselves becoming a rogue state with loose nukes. Brilliant!

“Federal Reserve Chairman Ben Bernanke bluntly warned Congress on Tuesday it risks a recession, with higher unemployment and increased home foreclosures, if lawmakers fail to pass the Bush administration’s $700 billion plan to bail out the financial industry.”What a sham!!! We are already in a recession!!!

UNDERSTANDING THE CRISIS by Llewellyn H. Rockwell, Jr.”The core issue is that there is nothing to restrain money creation.” What caused this? It is a simple question, and yet answers are all over the map, as you might expect. Here’s mine in two words: fiat money.The word “fiat” here means by order of the state, which is to say that it has no independent worth and is eventually worth nothing. The possibility of precisely that happening emerged in August 15, 1971. Since Nixon severed the last tie of the dollar to gold, the world’s monetary system has not been restrained by anything physical. We’ve depended on the discretion of central bankers. We can’t trust that, and this crisis shows precisely why.Of course there are subsidiary factors: the lifting of restrictions on Freddie and Fannie; subsidized lending; the Fed’s artificially low interest rates; the Community Reinvestment Act; financial “deregulation”; the war; Bush profligacy; debt. There is much more besides. But fighting each of these forces individually is like battling down flies at the garbage dump. The core issue is that there is nothing to restrain money creation.The first time that people hear this, they find their minds rather boggled, and they want to know more. My whole experience in this area is that once people start digging around the area of monetary theory, they find that (1) it is not as difficult a subject as it seems, (2) it is endlessly fascinating, and (3) it explains far more than they realized before.It was F.A. Hayek who bore this burden most directly for those in the English-speaking world. His books on the source of the business cycle and what to do about it appeared in the late 1920s and throughout the 1930s. These works were cited by the Nobel Prize Committee in 1974 as his most important contribution to economic thought. His ideas are directly applicable to our current plightIt has been a real tragedy that these works have been out of print. But this year, the Mises Institute made a hard push to get this book out in time for the current financial calamity… Here it is: Prices and Production and Other Works on Money, the Business Cycle and the Gold Standard, by F.A. Hayek…http://mises.org/story/3118Specifically, Hayek explains the mechanism by which loose credit generates false signals to investors, leading them to chase fads all over the market, and ending in sector-wide failures…

“Federal Reserve Chairman Ben S. Bernanke said the U.S. economy will shrink if markets don’t begin functioning normally”It will shrink anyway. There are numerous examples of bank crises followed by bailouts (ex Sweden 1990) and the economy always ends up in a recession. By the way US is already in a recession

If you have concerns about using $700 Billion to $1.8 Trillion of your tax dollars to bailout the financial services industry please consider calling or emailing one or all of the Senators listed below. These Senators are seen as the most likely to stand up for the taxpayer on this matter. Message:For the good of the United States of America , I am asking the Senator to stand up and protect the taxpayer. Please filibuster Bush/Paulson’s proposal and take time to consider other alternatives to address this issue.If you believe this is important please send this post to 5 or 10 of your friends and have them do the same. Do it now, while you are thinking about it.Shelby, Richard C.- (202) 224-5744Bunning, Jim – (202) 224-4343Grassley, Chuck – (202) 224-3744Kyl, Jon – (202) 224-4521Ensign, John – (202) 224-6244

Dow losses cut in half just like that!

Stocks erasing all losses-about to go green-Hank must have spoke!

Your job and your house or $700 billion.Sounds alot like robbery.Lose – Lose for us.Win – Win for them.

People need to grasp that this in no longer about the Treasure buying mortgage papers.The original Paulson proposal was for “bying mortgage related assets” with “The term “mortgage-related assets” means residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, ..”This has now morphed into “purchase troubled assets” with “The term ‘‘troubled assets’’ means—… any other financial instrument, as the Secretary determines necessary to promote financial market stability.”The Treasury can now buy gems, CDS, futures, yen interest swaps, derivatives … whatever.In effect, The Treasury Morphs Into A Hedgefund with $700 billion in basic capital which can and will be leveraged up to the hilt.One entity to rule them all – worldwide.

EVERYONE:VISIT MIKE SHEDLOCK (MISH) WEBSITE. HE HAS ALL THE SENATORS FAX NUMBERS AT THE READY THAT ARE FIGHTING THIS BAILOUT BILL. CRACKS ARE STARTING TO APPEAR IN THE SUPPORT. IF WE KEEP UP THE PRESSURE WE MIGHT BE ABLE TO GET IT CHANGED A LITTLE …..DO YOUR AMERICAN DUTY!!!!

In recent years, when a big call-in effort has been orchestrated by the public, many of our representatives simply have taken their phones off the hook. I know this happened to me with Trent Lott’s office. Ever since they’ve all been guaranteed high-paying jobs by lobbyists if they’re pushed out of office, they’ve ignored and, at times, ridiculed the public.I’m not saying not to contact them: just don’t be discouraged if you’re ignored. We have to find a way around them. Angry masses in front of their “workplaces” would certainly do the trick, IMO.

LOLOL Nice save PPT, nice save!

I completly agree, your wasting your time. History shows the only way for real change is for the mass man to rise up and hit the street. People need to protest, so far there has been nothing. There is no hope because the masses are just too ignorant and we will get what we deserve.

Stocks all green LOLOLOLOL

Prof. Roubini, professor’s blog webmaster, and all,Apologize for this off-topic post and if a similar idea has been floated around.This is primarily to add on top to the post by PeteCA (on 2008-09-20 12:34:45) regarding ‘INFORMATION SOURCES FOR ARTICLES ON THE US ECONOMY’ as well as the repliers (OuterBeltway and ptm) in the professor’s previous entry on Sep 19, 2008.I wonder if it is feasible that we can expand professor’s blog (with his permission) with some kind of Roubinipedia regarding some fundementals of economics and finances etc. as well as good information commented and cited by the community herein. Due to the professor’s amazing productivity, it is very easy to lose track of good information provided by the community. In my view, a lot of good information here is worth revisit from time to time. Some good examples are the Quotable that LB has on his blog and a reference that ptm provides. Roubinipedia can also serve new comers and/or self-learner well.With the professor’s permission, I believe we can find moderators of Roubinipedia from the community itself as needed. The project of Roubinipedia is similar to open source in computer software and/or the model of Wikipedia.This is just a premature idea (and petition). Of course, it is at the professor’s discretion, who is already very kind to allow us to learn and share here.In my view, people may make better decisions with proper thinking. Without factual knowledge, it is hard to appropriately deliberate or even think. Like what the Professor does at his blog, sharing of factual, objective, inspiring, and intellectual knowledge and thought is a good way to promote common good.Just my tiny two cents for consideration.

I can’t believe that Bernanke actually acknowledged that this plan would not be paying market worth prices for the debt instruments!Any representative who would vote to allow this action to proceed emergency or otherwise is telling everyone he doesn’t care about the majority of his constituents.We know we are in trouble if they are still debating this bill tomorrow. This bill of Paulson’s is DONE, DEAD, KAPUT!

This is what stocks rallied on?By Robert SchroederLast update: 3:18 p.m. EDT Sept. 23, 2008WASHINGTON (MarketWatch) The U.S. Treasury’s plan to rescue the financial system by buying bad assets from companies is “unacceptable” in its current form, Senate Banking Committee Chairman Christopher Dodd, D-Conn., told reporters following a hearing in his committee with top U.S. financial officials Tuesday. “This is not going to work” the way it’s written now, Dodd said. Dodd and other senators are seeking to add aid to homeowners and strict oversight to the plan.

GOLDFor anyone who has not yet purchased gold, IMO the train is about to leave the station. We are on the threshold of being Argentina’d. Don’t kid yourself- this bailout will pass, and it is only the first of many. Currency default is now highly probable, if not certain. Through my entire life I have always thought the gold bugs were lunatics and never bought gold until a few weeks ago. I am now commiting large dollars, mainly to gold mining stocks and options on such stocks. Maybe you like physical gold or some other PM investment better-fine. We are very close to the end, yet gold is still remarkably not very expensive. But very soon it will be very expensive. FIND A WAY TO HEDGE YOUR DOLLAR RISK NOW!!! Good luck to all.

Can anyone tell me how these derivatives work? And why some bloggers considered them as WMD? I am shy of 2 years in retiring and with this financial crisis I am really nervous if that is even possible.

Thanks Gloomy. Do you mind naming some of the gold mining stocks you mentioned?

Derivatives (wikipedia):Derivatives are financial instruments whose value changes in response to the changes in underlying variables. The main types of derivatives are futures, forwards, options, and swaps.The main use of derivatives is to reduce risk for one party. The diverse range of potential underlying assets and pay-off alternatives leads to a wide range of derivatives contracts available to be traded in the market. Derivatives can be based on different types of assets such as commodities, equities (stocks), bonds, interest rates, exchange rates, or indexes (such as a stock market index, consumer price index (CPI) — see inflation derivatives — or even an index of weather conditions, or other derivatives). Their performance can determine both the amount and the timing of the pay-offs.

FAVORITE HEADLINE OF THE DAYFrom CNBC:”Bernanke Warns US Risks Recession Without Bailout”LOL

“Bernanke Warns US Risks Recession Without Bailout”How can he fail with that prediction?

They started too early – and ran out of funds…

I have mainly purchased the gold mining ETF, GDX, together with leap call options on GDX. Also a little physical gold, just in case.

LOL

This is from the Big Picture!You Tube of Marcy Kaptur ranting in Congress!It is worth a look!http://www.youtube.com/watch?v=S27yitK32ds

This is why change isn’t going to happen. And any possible systemic change where the central banking monetary system and their devastating cycles is challenged, forget it.The fact that there is so much support is that the supporters are probably in industries that are failing & are desperate. The real estate and building industries are desperate. Finance is desperate.Letters from these RE, CRE, and mortgage industries are going out to support this bailout plan.But there is criticism and resentment building for this ‘special moneyed interest’ banking bailout also anger building especially if the toxic garbage derivatives are bought by the government for more than so-called ‘market value’.What if some of this junk proves to be worthless or worth pennies on the dollar? The banks just flushed their effluent down the taxpayer drain.

You have hit on the essential good vs. evil aspect here. Really this is very simple, isn’t it?

Even better translation: “Hey you morons in Congress, give us the bailout or risk NOT TO HAVE a depression.”PeteCA, what may/will turn the current deep recession into a real depression is the strangling of the productive economy by sky-high taxes needed to fund these ridiculous bailouts (or sky-high interest rates if the idiots go on borrowing instead of raising taxes).Don’t be fooled. Even the worst financial crisis cannot start a depression.

Dear Herr. PaulsonI read you buddy. But you grossly misspelled my name. My name is “consumer” not “american”; thanks for taking note.After the job, the house, the car, the pension, good food and now the shirt are all gone, I have a couple of balls for you, they are worth more than the entire treasury today, come and get’em, and then you can call me “American” all you like.About safeguards:I miss fanny and freddie, but we still have salle, don’t we?GE shares are now down about 39 percent for the year, about double the fall of the Dow Jones industrial average and the broad Standard & Poor’s 500 index, did you give Jack a call?Will you build three pyramids in Detroit with this money?Is Mr. Grrenberg ready to be hosted in Guantanamo?Got a light?What’s the matter with you?Gotta go and check up on my grandson…

OK here’s a CDO tranche, a fairly simple derivative that is of concern in these negotiations.This tranche pays off if, out of a given pool of 100 mortgages, the 80th-worst though the 89th-worst mortgages continue to make their payments. It pays differently if those people pay off their mortgages in full, differently again if they force the bank to restructure their loan, and probably not at all if they send in jingle mail because after costs, revenue from the foreclosure sale won’t be enough to pay that tranche.To value it, it’s very important to understand the local markets that those houses are in, and the correlation among prices in the overall loan pool.What, you say you have no idea where those particular houses are and you surely have no idea what that correlation is and whether it changed since last week? Welcome to the club, the banks don’t either. They cannot value these things.Other creatures, like the CDO^2, are far far worse than this!

What about this translation?Hey stupid politicians, approve this bailout (oops, I mean bailin by the public) bill or you will get a recession that will happen regardless and you will be blamed for it your whole life, as your political career will end and you will not see a dime from lobbyist contribution aftermath.And, me, Warren Buffet, aka the Exorcist in the ol’ days, and who was never ashamed and or afraid of telling it as I saw it because I was confident about my bets and not afraid of either short sellers or adverse losses, I am no so scared that I have to change my tactic and join the party of the winners and manipulators if I want to be saved. This bailout is my last chance to clean my Berkshire holdings and bets I made especially in the insurance and financial services sector. I should’ve stuck to Dairy Queen.

How many fascist Republicans does it take to screw in a lightbulb?They’ll never get around to it. They’ll ask you for the money to buy a new bulb, steal your wallet in the dark, beat the crap out of you, and then tell you loudly and often that it was the Democrats’ fault.

With the bailout bill in its current form (as proposed by Paulson), the Treasury Secretary can commit unlimited amount of many during his remaining 3 months in charge, not just $700B. The worse part is that any losses upon resale will be permanent and there will be no way to reverse them.I know this scenario is far stretched but assume Paulson can buy $700B worth of paper by the end of October. He will need to sell some of it, probably at a loss (say sell half with a 25% loss). He will have $350B worth in paper and 350*.75=$262.5 Billion of cash (for a total of $612.5) At this point he has the right to borrow an additional $87.5 Billion (to be added to the original $700B). He can repeat this several times.In fact the size of this bailout is a function of its duration (hopefully 3 months, probably 2 years), the asset turnover (how fast, in average, a security is sold after being purchased) and average loss per unit (the average difference between resale and purchase price).Given the size of the distressed assets (marked to fantasy), there are all reasons to assume that asset turnover will be very high (at least during the first year). There is also a good reason to assume that, in average, each resale operation will lead a loss (otherwise the banks has no incentive to offload their balance sheet to the Treasury). Even if the Treasury has a plan to acquire $700B of distressed assets and hold them until (supposedly) the market turn around. The size of the bailout is just not enough to stabilize the whole market and the Treasury will be FORCED to sell some of these assets (in the same environment banks did not want to sell) in order to buy even more distressed assets.

“we reflate a bit with heavy printing by the Fed, and we muddle through.”No. A depression is defined as a large fall in production of goods and services, that is a real fact of the real economy. Printing more money can’t do anything about it. The only effect of printing is to rob those who produce valuable goods and services to give to the banks. How can that help the economy?

“In short, inequality cooked up the current Wall Street meltdown. Any serious attempt to end this meltdown — and prevent another — has to recognize inequality’s role.”TooMuchsnip from there: (every American needs to sign up for Sam Pizzigati’s Monday updates!)“What we are witnessing,” a front-page Washington Post analysis announced last week, “may be the greatest destruction of financial wealth that the world has ever seen.”The ongoing Wall Street meltdown is drawing all sorts of breathless historical comparisons. But few analysts seem to have noted an equally compelling historical coincidence: The “greatest destruction” of wealth we are now witnessing follows three decades of wealth’s greatest concentration, years that have seen America’s wealthy double their share of our nation’s treasure.Could these two phenomena be related? And if they are, can a Wall Street bailout that ignores America’s ferociously top-heavy distribution of income and wealth ever restore real economic security back to average Americans?The staggering suddenness and size of Wall Street’s meltdown has left many observers convinced that ever-escalating rewards for America’s movers and shakers have become a significant contributor to everything that ails us economically.Even conservative-leaning economists are bewailing the consequences of overgenerous compensation at the business summit. Huge “short-term rewards” for Wall Street’s finest, as economist Robert Samuelson wrote last week, “blinded them to the long-term dangers” inherent in the hazardous risks they were taking — with other people’s money.But decades of concentrating wealth have had consequences that go even deeper into the roots of the current Wall Street crisis. That concentrating served to inflate America’s now-popped housing bubble. In metro areas throughout the United States, housing costs rose fastest in those areas where income and wealth had concentrated most intensely.Asset bubbles like the housing speculative surge come naturally to extremely unequal societies. Inequality has always unleashed dynamics that make speculation inevitable.Where wealth tilts to the top, average people have less to spend. The wealthy, in turn, have less reason to plow that wealth into productive investment in the “real” economy, simply because average people can’t afford to buy whatever that investment might produce.But big wealth-holders have to do something with their dollars. They can, after all, only personally consume so much. So what happens with the dollars the wealthy cannot consume and cannot invest productively? The wealthy plow these dollars into speculation.The concentration of wealth at the top, of course, doesn’t just leave the wealthy with more wealth. They have more power, too, more clout in the political sphere. Over recent decades, America’s wealthy have translated that power into electoral and lobbying blitzes that have swept away consumer- and homeowner-friendly government regulations.U.S. mortgage lenders, freed from regulatory oversight, were then able to misleadingly market high-interest subprime loans to millions of American families.Those families, for their part, had little choice but to sign on the dotted line. In a deeply unequal United States, with workers taking home a record low share of the nation’s income, far fewer families could report enough income to qualify for a traditional mortgage.In short, inequality cooked up the current Wall Street meltdown. Any serious attempt to end this meltdown — and prevent another — has to recognize inequality’s role.

Prescott BushMain article: Business PlotOn July 23, 2007, the BBC Radio 4 series Document reported on the alleged Business Plot and the archives from the McCormack-Dickstein Committee hearings. The program does not in any way state or imply that Prescott Bush was involved in the plot. The program mentioned Bush’s directorship of the Hamburg-America Line, a company that the committee investigated for Nazi propaganda activities, and the alleged 1933 attempt, supposedly led by Gerald MacGuire, to stage a military coup against President Franklin D. Roosevelt aimed at forcing Roosevelt to resign (or, failing that, to assassinate him) and at installing a fascist dictatorship in the United States. [6]wikipedia

The GD2 was already engineered. Greenspan kicked it off and Paulson is closing the deal.

As most of you are aware, I do not believe in conspiracy theories, but…I suddenly see a scenario that makes a lot of sense and smells of forward planning in a sucker play:Given:1. The President of the USA has now full Authority to do whatever he damned well likes – the exception being he can be impeached.2. The FedRes is a non-governmental corporation with no oversight or control, in real terms, by the US Government; it makes its own rules and determines whatever it damned well likes is in its, best interests.What better mechanism for absolute control is for Congress, the Senate and the House of Representatives to fully cede all their Constitutional powers to the FedRes under the cloak of a looming economic collapse, er, “recession”.?The wording of this Act is just bare momentary and introductive convenience, as under ‘no scrutiny, recourse, overview and or judicial review, this Act morphs into whatever it damned well likes and cannot be questioned – by any Authority; anywhere.And then, there can be no threat of impeachment; the President gives all powers – military and otherwise, through Presidential Decree er, Order, to the ‘to be enacted’, “preferences” of the FedRes. ‘Long Live the Pope”.The ‘enforcer’ the guild of warrior priests, become Goldman Sachs staffed by the faithful.The game is at the edge:Its my opinion,Ho hum

?

Right on OuterBeltway !Allan Meltzer echoed/articluated this sentiment clearly and cleanly tonight on the PBS News Hour.At this juncture I think it is a more of a qualitative argument that needs to be made, and IMHO the fruit of this interview makes that case.Here is a link to the site, but they have not yet posted the link to today’s interview with Allan Meltzer et al.PBS News Hour Economists’s Discussion => Meltzer et al.

THE WORST OF BOTH WORLDSThe Frakenstein monster bill that will come out of Congress will be the worst of both worlds:1. It will contain punitive measures, such as executive compensation limits, which will mean many, but not all key players will participate. In other words just enough companies will not participate to crash the financials.2. Large additional bailouts added to the bill along with the participation of a large number of the players will ensure explosion of the national debt and a currency collapse.Frakenstein will come to life soon!!

Dear TfT -I think your excellent idea moves forward on the framework initiated by OuterBeltway/Miss America in the previous thread.

Be real! This whole thing is BEYOND UNBELIEVABLY STOOPID AND IT’S UTTERLY UNNECESSARY!Sweet Christ on a cracker, people! It’s like the whole entire human race is superfreakedout, trembling in horrorfried anticipation of the next big or little dirty move in a ponzi game they KNOW is rigged and dirty, everyone talking of havoc and homelessness and jobloss and everybody predicting more poverty and everybody wanting the blood of the bankers and the regulators and the non-regulator spineless politicians, with emotive calls from every quarter for the wha-wha-whambulance – “Oh, no! A usa/global financial crisis! How’d this happen? Who did this! No money! No money, did you hear?! Where oh where my god oh where will we EVER get the money to fix this impossible nightmare situation? Oh! Woe to us all! We’re broke! We’re so broke! We’re all bloody broke! Curses! Oh! Somebody save us! How can we be saved?! Oh my GOD, we’re all broker than BROKE!!!!!!HUMANITY, THE MONEY ISN’T GONE.YOUR MONEY IS IN THE TREASURE CHESTS OF OVERPOWERED WEALTH GIANTS.IT’SYOURMONEY.ALL OF MANKIND DID THE WORK THAT CREATED THAT MONEY, AND NO ONE WORKED EVEN TEN TIMES HARDER THAN YOU DID: THAT IS IMPOSSIBLE WHILE YOU LIVE IN A HUMAN BODY. THE BIGGEST PRIZES WERE NEVER UP FOR GRABS IN THE FIRST PLACE- THEY WERE BEQUEATHED IN THE BIRTH LOTTERY.IT’SYOURMONEY!TAKE IT BACK OFF THE BILLIONAIRES AND BE DONE WITH THIS NONSENSE BEFORE THE GLOBAL BOMBS THAT ARE UNDER EVERY CHAIR AND BED ON THIS PLANET EXPLODE.TIME TO BE SMART AS HOMER SIMPSON, HUMANITY.TIME TO HAVE A “D’OH!” MOMENT, HUMANITY, WHERE YOU REALIZE HOW WRONG YOU’VE BEEN GETTING IT.Just WHAT part of “Overpay has nowhere to come from but from underpay”DON’T YOU UNDERSTAND?

Goldman to Raise $7.5 Billion From Berkshire, Public (Update1)By Christine HarperSept. 23 (Bloomberg) — Goldman Sachs Group Inc. will raise at least $7.5 billion from Warren Buffett’s Berkshire Hathaway Inc. and public investors in a bid to quell concerns that pushed up the Wall Street firm’s borrowing costs and hurt its stock.

3minutePHDinEconomics

There is not much I can do to stop this bill but if there was I would do it.I already wrote my senator. But if anyone he has more pull please use it.I am in the trades and already have been hurt by the slow down and am willing to go throught what ever it takes to remove the infection and infectious people

PBS News Hour links to Meltzer et al are now posted:PBS News Hour Econ-Discussion => Massive Financial Rescue Faces Skepticism in Congress MP3 => Massive Financial Rescue Faces Skepticism in Congress

Two more points: look what it’s cost the economy to be insured: the AIG bailout, and the yet-to-be-revealed bailout number from the derivative unwind. It’s a huge number, and that’s in addition to the normal premiums. Makes you wonder if maybe we should start looking for alternatives.Also, the $700B (for this round) we’re about to invest in businesses-with-dead-business-models (IBs) could be invested into businesses that have quasi-valid business models (regional and local banks that know how to make non-RE loans). There are still a few such banks out there, and they should be getting the public’s capital if they actually need it. They may not need it – remember, if they’ve been making solid loans these past 7 years, they’re probably pretty well-run, and will continue to do well. The failure of their poorly-run competitors will mean more business for the healthy (well-run) banks.

I second PeterJB’s statement: “?”I like you “Mother of God,” don’t go!You’re as forward thinking as was Ryskamp.

Is there a way to convert unproductive assets into productive assets?Silver Lining -> A New Bank to Save Our Infrastructure

http://www.theseminal.com/2008/09/23/awaiting-your-correspondance-important-business-matter/

Erasmus,The only way the government can make money from this is if they buy these assets at distressed levels, which properly prices the risk. If the fund is buying at higher than that, then there is no upside, only losses. This is loss transfer, from the banks to the taxpayers.

Crisis=opportunity. By waiting until after the election, Democrats can most likely get almost all of what they want and limit the excesses of the current proposal. On the other hand, they can give in to blackmail and cave in now. As for the Republicans, the faction opposing this hasn’t exercised any power over the party or the country for some time. It may be time though to make a tactical compromise in order to give the measure a not so gentle going into that good night.

And it only costs 8 to 10 thousand a year, every year, and you are stuck with it for ever?

The Great American Cashout

Brilliant. Perfect. Bless you a thousand times. You really do understand.

A quote from Alexis de Tocqueville from “Democracy in America”:”…it is easy to perceive that the rich have a hearty dislike of the democratic institutions of their country.The people form a power which they at once fear and despise. If the maladministration of the democracy ever brings about a revolutionary crisis,and monarchical institutions ever become practicable in the United States, the truth of what I advance will become obvious.”

As I understand it, CDS are basically a policy (or promise) to pay out in the event that some “event/thing” happens. That “event/thing” might be such and such a company’s share price falls below some point. Or a commodity drops in value. So probably look more like hedging company risks than what you would call traditional insurance.The value of these promises is said to be no less than $50 Trillion dollars. There is no easy list of who made what promise, to whom and for what value.AIG alone had $441 Billion on it’s books according to The Economist. They do not mention what these promise event/things were or who they were made to.Therefore what they are trying to do, I think is:Buy or prop up (in some form) as many of the holders of these promises as they can so they can be unwound in an orderly fashion.If one “default event” triggers an unwinding, this is turn could likely trigger another and another. Those who have made promises they are no position to keep would be quickly exposed.For example – here is a press release in the StreetInsider, where the media company Fairfax discusses the state of CDS’s they made since 2003:http://www.streetinsider.com/Press+Releases/ (search for Fairfax on 22nd Sept.)So these are not confined to a few investment banks; although maybe they channeled huge numbers of them.

Funny,Was that Paulson in the back of the truck?

NO To The Paulson-BernankeDerivatives Scam BailoutBail Out the American People, Not Wall Street!An Economic Recovery Strategy for Protectionists,Dirigists, Mercantilists, and PopulistsBy Webster G. Tarpley9-23-8WASHINGTON DC — The grand theft bailout now being rammed through Congress by Treasury Secretary Paulson, Federal Reserve Chairman Bernanke, and other officials of the Bush regime with the help of accomplices Pelosi, Majority Leader Harry Reid, and other parliamentarians is a monstrosity for the ages, combining every hideous feature of monetarism, elitism, oligarchism, and sheer feckless incompetence. It is to all intents and purposes a national suicide note of the United States of America, a contract with the devil that absolutely guarantees irrevocable national decline. For any person of goodwill there can be only one impulse at the present moment, and that is to stop this bailout — to block it, to sabotage it, to bottle it up, to load it with killer amendments, and to do everything legally possible to stop this insane design from going through.IF MCCAIN VOTES AGAINST THE BAILOUT, HE WILL WIN THE PRESIDENCYIn political terms, McCain is now running well to the left of Obama on this issue, with a much stronger populist profile. McCain has attacked the outrageous greed and corruption of Wall Street. Obama does not dare attack Wall Street, since these are his masters. Obama, sounding like Milton Friedman, only attacks Washington. Obama has said that he will support whatever Paulson demands. That is not a surprise, since Paulson represents Goldman Sachs, and Obama is a wholly owned property of Goldman Sachs, which is his single biggest source of campaign contributions. Obama is a creature of Brzezinski, Soros, and Rockefeller, and without them he has no existence; Obama is an abject Wall Street puppet, an agent of finance capital. This week, both senators will have to decide how they vote on the odious derivatives bailout. Obama will surely vote in favor of it, since this is what Wall Street demands. If McCain votes against it, he will most probably propel himself into the White House on the model of Give ‘Em Hell Harry in 1948. Filthy corrupt Democrats like Schumer are already attacking McCain as the new Huey Long. Huey Long, the Louisiana populist of the 1930s, had many positive features, and we could certainly use a good dose of Huey Long in this country to counteract the elitism, oligarchism, condescension, and arrogant snobbery of foundation operatives like Obama. The bailout is already very unpopular ­ 72% of all voters are opposed to it ­ and it will become more and more hated when it becomes clear that it is also a failure. McCain’s course is clear. Will he have the brains and guts to cross Obama’s T on this vital issue?PAULSON OF GOLDMAN SACHS, WOULD-BE FINANCE DICTATORPaulson is a ruthless and brutal eco-freak usurer who learned his trade at the Goldman Sachs stock-jobbing operation. He is now the leading member of the committee of public safety which rules in Washington, and which includes Gates, Rice, and Mullen. He now demands the astronomical sum of 700 billion dollars for the bailout of mortgage-backed derivatives, collateralized debt obligations, credit default swaps, and other poisonous derivatives. Make no mistake — this is not a bailout of homeowners who are threatened with foreclosure; it is a bailout of the lunatic house of cards which desperate bankers have built on these mortgages using derivatives. The entire crisis is not a crisis of subprime mortgages, it is a crisis of the derivatives bubble which was launched by Wendy Gramm of the Commodities Futures Trading Commission and Greenspan of the Fed with the connivance of Robert Rubin of Goldman Sachs and Citibank, and others in the Clinton administration, some 15 years ago.These derivatives now amount to a total worldwide notional value that can be estimated between 1 quadrillion and two quadrillion US dollars. This sum is so large that it dwarfs the total value of the entire planet earth and all those who live here. Compared to the cancerous, bloated, and fictitious mass of derivatives which is at the root of this crisis, the $700 billion demanded by politicians, large as this may seem, is nothing but a drop in the bucket. And a drop in the bailout bucket is what it will be. The mass of world derivatives between $1 and $2 quadrillion represents an insatiable black hole which is capable of putting an end, not just to civilization, but the human life itself. The moral choice could not be clearer: humanity will either destroy the derivatives bubble in our time, or the derivatives bubble will surely destroy humanity. Those are the stakes in the current exercise.Paulson and Bernanke, both lawyers for the Wall Street jackals, lampreys, vultures and hyenas, argue that the public interest demands a bailout of their cronies at Goldman Sachs, Morgan Stanley, J.P. Morgan Chase, Citibank, Bank of America, Wachovia, and the other large money center institutions. Before the American public antes up $700 billion just for openers in the game of genocidal poker which run by the infernal croupiers Paulson and Bernanke, we would be very well advised to examine the veracity of this premise.COMMERCIAL BANKS ARE INDISPENSABLEIt is of course true that the healthy functioning of the United States economy requires a viable and flexible system of commercial banks. No one should doubt the necessity of commercial banks.Andrew Jackson was clinically insane on this point, and he still has not a few followers around today. But it ought to be clear that without the services of a well developed commercial banking system, it is impossible to organize business activities as essential as payments, deposits, checking, payrolls, and the discounting of short-term commercial paper, bills of exchange, bills of lading, and all the credit instruments that are intimately connected with real productive activity. Without a functioning commercial banking system, the economic heart of the United States would stop beating, as it briefly did at the end of the Hoover administration in March of 1933. Without commercial banks, no wheel of a factory or railroad can turn, and no commodities can move to show up in supermarkets.JPM, CITI, BoA ARE DERIVATIVES MONSTERS, NOT COMMERCIAL BANKSBut when we look at institutions like J.P. Morgan Chase, Citibank, and Bank of America, we become aware that these large money center institutions have become detached from any conceivable connection to the world of production, wages, transportation, and all other useful and productive activities. These institutions are not commercial banks any more in any meaningful sense of the term. Ten years ago, in the midst of the Asian financial crisis and the aftermath of the Russian GKO state bankruptcy collapse, the boss of JP Morgan Chase went on television to announce that his bank was specialized in the “risk business.” The risk business meant that JP Morgan Chase, had simply given up on the traditional activity of commercial banks, which was primarily to provide loans to corporations for productive investment in plant and equipment that would also create well-paid industrial jobs. J.P. Morgan Chase decided long ago that that activity was nowhere near profitable enough to be continued.Instead, J.P. Morgan Chase devoted itself more and more to the issuance, sale, and purchase of derivatives. As early as 1992, the best definition of J.P. Morgan Chase was that it was no longer a commercial bank but rather a derivatives monster. In 2002, the J.P. Morgan Chase derivatives monster came very close to imploding, collapsing in on itself like the hopeless black hole that it still remains to the present day. According to the most recent report of the Comptroller of the Curreny of the US Treasury dated September 30, 2007, JP Morgan Chase today has between $90 trillion and $100 trillion of derivatives. In reality this is a very l
ow-ball estimate, and the real derivatives exposure is some multiple of this figure ­ perhaps $300 or $400 trillion, especially now that Bear Stearns, a smaller black hole of derivatives has been absorbed. But even a mere $90 trillion is already six times the US GDP (currently estimated between $14 and $15 trillion).DERIVATIVES ARE FINANCIAL AIDSThe question of the derivatives is once again the central issue of the crisis. Most people may not even know what derivatives are, although by now many have some idea that they are dangerous and toxic. French President Jacques Chirac once defined derivatives as financial aids, and he was right. A share of stock supposedly represents part ownership in a corporation. A corporate bond is a debt instrument issued by a corporation, with some claim to a part of the assets in case of bankruptcy liquidation. That means that the stocks and bonds are paper, but paper that is at only one remove from the real world of production, consumption, employment, and wages. The derivative is something radically different.A derivative represents paper based on paper, no longer a stock or bond, but a future, option, or index that is based on some stock, bond, or other form of paper. Derivatives are therefore at least one step further removed from the world of tangible physical commodity production of useful items which humanity requires in order to survive and to conduct civilization as we know it. In addition to the options, futures, and indices, we have all the possible permutations and combinations of the above, with new variations that are almost infinite. Even to catalogue these would take a book. In addition to these exchange traded derivatives, there is a much larger class of derivative which does not appear on the Chicago Board Options Exchange or analogous institutions in all the money centers of the world. The second and larger class represents the counterparty derivatives, including such things as collateralized debt obligations, mortgage backed securities, structured notes, credit default swaps, and the myriad of other derivative products.These derivatives were originally supposed to be used as a hedge against risk, but before too long they began to represent the biggest single source of risk and the entire lunatic edifice would finance. By now, to repeat this point yet again, the total world derivatives of in excess of one quadrillion dollars — that is to say, 1000 billion dollars, and may be already approaching the neighborhood of $1.5 quadrillion or even more. One of the inherent problems of derivatives is that nobody knows this exact figure, since derivatives are not reportable in many countries and tend to escape regulation by the proper financial authorities.DERIVATIVES ARE USELESS AND A THREAT TO CIVILIZATIONYou cannot eat derivatives. You cannot live in a derivative. You cannot wear derivatives as clothing, nor can you drive a derivative work. You cannot sail in them or fly in them. They cannot be used as tools of any useful trade. They are not computers, not machine tools, not pharmaceutical equipment, not agricultural implements.Derivatives are therefore totally outside the realm of capital goods production needs, no matter how these may be defined.FOR RECOVERY, WIPE OUT, SHRED, DELETE ALL DERIVATIVESJ.P. Morgan Chase, therefore, performs no useful or productive social function, and there is absolutely no reason in the world why the people of the United States should want to bail out this pernicious and socially destructive institution. It has probably been several decades since J.P. Morgan Chase created a single modern productive job. J.P. Morgan Chase’s strategic commitment in favor of the derivatives bubble means essentially that we can easily dispense with most of the functions of this self-styled “bank,” really a casino. Instead of being bailed out, J.P. Morgan Chase ought therefore to be seized by the Federal Deposit Insurance Corporation, and put through chapter 11 bankruptcy. In the course of that bankruptcy reorganization, the entire derivatives book of J.P. Morgan Chase must be deleted, shredded, used as a Yule log, or employed to stoke a festive bonfire of the derivatives. The world did much better when there were no derivatives, and will get along just fine without them.Derivatives were of very dubious legality in general and were illegal in some of their specific forms until the mid-1990s.INSTRUMENTS MEANS DERIVATIVESAccording to Paulson’s pact with the devil published in the New York Times on September 20, 2008, the Secretary of the Treasury is supposed to be empowered by Congress to spend $700 billion on mortgage related securities, obligations, and instruments. That last word instruments is the favorite euphemism of television commentators and journalists who want to propose a derivatives bailout without using this word, which has now become to some degree unmentionable and taboo, presumably because of its highly negative connotations left over from the crises of more than a decade ago. Accordingly, one very good killer amendment that ought to be added to this pact with the devil should state that not one penny of taxpayer money should ever be used to finance the purchase of derivatives, no matter how they may be euphemistically referred to.WHY BUY MORTGAGE BACKED SECURITIES THAT HAVE NO PRICE BID?Paulson wants to buy up derivatives. But at what price? Derivatives have no intrinsic value. Like the rasbucknik in the old L’il Abner comic strip, derivatives have negative value, since somebody has to be paid to cart them away. Counterparty derivatives currently have no price, since there is no market where they are trading, and nobody would want to buy them if there were such a market. Collateralized debt obligations were selling at 5 cents on the dollar a few weeks ago, but that was well before the current crisis broke in its full fury. So how will Paulson know how much to pay for the derivatives he wants to purchase? Will he use the discredited Black-Sholes model, which led to the bankruptcy of the Long Term Capital Management hedge fund ten years ago? Given all this, the only price which can be assigned to the mass of derivatives is not their notional value, but rather a big fat ZERO. Anything else is stealing from the government.”INVESTMENT BANKS” DRIVE UP THE PUMP PRICE OF GASOLINELet us now leave behind the category of the commercial banks and move on to institutions like Goldman Sachs and Morgan Stanley, the stock jobbing operations or counting houses that like to call themselves investment banks these days, even though they do not have the status of a commercial bank and are not members of the Federal Reserve. Why should any public money at all be used to prolong the noxious lives of these sociopathic and pernicious institutions? A short examination of what these so-called investment banks do will reveal that there is no public interest in keeping these creatures alive, and that, once again, touch better off without them.Investment banks used to assist corporations and floating issues of stocks or bonds on the financial markets. Investment banks were supposed to function as the advisers of industrial corporations and other corporations as they sought to raise capital needed for new plant, equipment, and jobs. But today, these functions have virtually disappeared. The investment banks do a certain amount of work in initial public offerings for IPOs of new securities, but these are almost always of a financially speculative nature. The main thing is that investment banks now place bets on certain classes of assets in the hope of turning a purely speculative profit for themselves. Goldman Sachs and Morgan Stanley maintain trading desks and engage in purely speculative trading of assets which they themselves own, and most of the time these assets represent derivatives of one kind or another. In recent times, the most important asset class which Goldman Sachs and Morgan Stanley
have been trading is probably future indices on commodities, especially oil. Goldman Sachs and Morgan Stanley between them have in the past year by various estimates accounted for about half of the speculative activity in the commodities markets of London, New York, and other money centers which brought about the doubling of the per barrel price of oil between July 2007 and July 2008, increasing the cost of gasoline to almost five dollars per gallon.GOLDMAN SACHS, MORGAN STANLEY CREATE I.C.E. TO FLAY AMERICANSIn a very real sense, American motorists filling their gas tanks at the pump at exorbitant prices have been involuntarily subsidizing the speculative derivatives activity of Goldman Sachs and Morgan Stanley. How bitterly ironic that the same American motorists should now be taxed in order to permit their tormentors to live on and to continue to mercilessly loot them. Goldman Sachs and Morgan Stanley found that even the very weak regulatory regime maintained here in the United States under the auspices of the Commodity Futures Trading Commission was too onerous for them because it slightly constrained their rapacious quest for speculative profits at the expense of the American people. These two investment banks therefore created a new speculative commodity exchange, the ICE or Intercontinental Exchange located in London, with a regulatory regime is virtually nonexistent. The ICE or Intercontinental Exchange in London is where about half of the world futures contracts in oil have been trading in recent months.Goldman Sachs and Morgan Stanley, like their now-defunct brethren Bear Stearns, Lehman Brothers, and Merrill Lynch, have also made many speculative investments in the area of mortgage backed securities based on predatory subprime mortgages. The adjustable rate mortgages that underlie these derivatives should have been declared illegal long ago. But now let us imagine what will happen if a hapless victim of these predatory lending practices is forced into foreclosure in the current world economic great depression.Goldman Sachs will send the bailiff to your door to throw you, your family, and your belongings out on the street, even though you have been taxed to permit Goldman Sachs to continue its sociopathic existence. You will in effect be robbed out of one pocket even as you are being pushed out the door and made homeless by the same institution which has been the beneficiary of your forced charity.Surely any politician daring to come forward to suggest the public bailout of Goldman Sachs so that it can continue to enforce foreclosures against the American citizens who are paying the bill for the financial excesses of this bandit institution ought to be tarred and feathered and run out of town on a rail. Yet this is exactly what Pelosi, Reid, Dodd, and Frank are proposing to force through the U.S. Congress in the coming week. This represents a new low in public morality.With Fannie Mae and Freddie Mac, the situation is slightly different, but the same criteria ought to apply. Fanny and Freddie worked very well during the three decades after the formation of Fannie Mae in 1938 as an agency of the federal government — a hillbilly cousin of the US treasury, as it used to be called.Things began to go wrong in 1968 when Fannie Mae was privatized, under the pernicious influence of the doctrines of the monetarist Milton Friedman of the infamous Chicago school of pseudo-economics and obscurantism. Fanny and Freddie have now been placed under the control of conservators, but they ought to be nationalized as part of a permanent state sector of the US economy, and operated as the public utility that they were intended to be. The salaries of their officials ought to be determined by the government-wide GSA schedule. Fannie and Freddie have guaranteed mortgages, and ought to continue to do so. But they have no obligation to guarantee mortgage backed securities or any other form of newfangled derivatives which were never mentioned in their charter.Accordingly, Fannie and Freddie thought to strip away the mortgage backed securities that have been used to package or bundle the mortgages that they now hold. The mortgages represent a valuable asset for the future, under conditions of economic recovery which we intend to organize. But that extra layer of derivatives paper represents a useless additional tax on the public treasury, which the US government has no obligation to maintain. In short, it is time to separate the socially useful core of actual mortgages representing residential and commercial properties from the harmful and speculative overlay of the mortgage-backed security. By this kind of financial engineering, speculators can receive condign punishment, even as the public treasury is believed of an extra layer useless payment which would only reward speculative crimes.If anyone should inquire as to the ultimate philosophical causes of the current George Bush world economic depression, the answer is simple: this depression is a direct result of the influence of Milton Friedman and the Chicago school, who are themselves to kind of come down American version of the Viennese school of Friedrich von Hayek. Ludwig von Mises, and other charlatans masquerading as economists. The common denominator of the Chicago school is the Vienna school which is represented by the right-wing anarchist thesis that government is always bad and the private sector, especially speculators, are always good. This absurd thesis is now being consigned to the dustbin of history. Friedman and von Hayek, if they were alive today, would doubtless demand the full fury of the free market the unleashed against the American people. This would lead, not to a recovery, but merely to death on a large scale.The implications of the Chicago school and the Vienna school under current circumstances are nothing short of genocidal, and even the financiers are hastily dumping the discredited doctrines of Friedman and from Hayek as they rush to get their hands into the public till through bigger and better bailouts in an endless series. There is nothing anywhere in the world left today that might resemble a free market, only an endless list of cartels, trusts, monopolies, oligopolies, duopolies, and other conspiracies in restraint of trade. In fact, there has been nothing even vaguely resembling a free market in most of the world in the past several centuries. What is collapsing today in September 2008 is the delusion that such a thing as a free market might exist in the modern world.The same negative judgment applies to the lunatic doctrines of Joseph Schumpeter, who preached the madness of creative destruction as a way out of the world economic depression of the 1930s.Schumpeter’s doctrines today are nothing less than a public menace, and persons who demand a deflationary crash of the world economy by preaching the Andrew Mellon formula of liquidating labor, liquidating stocks, liquidating bonds, liquidating real estate, etc., are to be put in a padded cell. This is even worse than Herbert Hoover. It was tried in 1932-33, and it turned out to be a bottomless pit already then, so it does not need to be tried again.BACK TO THE NEW DEAL: RESTORE THE GLASS-STEAGAL FIREWALLScribblers like Friedman and von Hayek were paid by finance oligarchs to wage a relentless war against that heritage of the Franklin D. Roosevelt New Deal, the set of policies which allowed humanity to survive the Great Depression of the 1930s. The current crisis would not have been possible in the present form if the institutional safeguards enacted during the New Deal had been left in place, as they should have been. These safeguards represent permanent features of civilization, and they need to be restored. The best example is the repeal of the Glass-Steagall Act under the Clinton administration in 1999. The Glass-Steagall Act was a classic piece of New Deal legislation which established that being a commercial bank and being a stockbroker are mutually ex
clusive activities that could not be legally combined in the same company.Commercial banking was one thing, and stock brokerage was something completely separate. Naturally, the greedy financiers and their spokesmen clamored for the repeal of Glass-Steagall, and they finally got their wish. Now less than 10 years later all of the Wall Street banks, seemingly without notable exceptions, are bankrupt and insolvent institutions that cannot not survive without a massive infusion of taxpayer money. We need to restore Glass- Steagal, which will mean among other things that Goldman Sachs and Morgan Stanley will not be eligible to become bank holding companies after all. If you don’t like your tax bill next year, you should thank Newt Gingrich and others who made it their business to destroy and roll back the achievements of the New Deal in the name of the despicable ideology of monetarism as preached by Friedman and von Hayek. Newt, by the way, is now calling for an immediate deflationary crash to find out what the real prices of housing might be. This is like doing experiments on your own flesh, and Newt should go to the funny farm.BACK TO THE NEW DEAL: RESTORE THE UPTICK RULEAnother example is the uptick rule. This New Deal measure meant that it was illegal to sell a stock short if it were continuously in decline. The speculator had to wait until there was an uptick, meaning a trade in which the stock in question increased in price; only then could a short sale be carried out. Another piece of bitter irony inherent in the present crisis is that this uptick rule was abolished by the feckless and incompetent Chairman Cox of the Securities and Exchange Commission at the beginning of last summer, just in time for the explosion of the world credit crisis which has led to the current world economic depression. Incredibly enough, Chairman Cox of the SEC has been unable to pull himself together long enough to permanently re-impose the uptick rule.Instead, he has drawn up a list of 799 financial institutions and banks whose stock will now be illegal to sell short for at least 10 days, although one suspects that this prohibition will be prolonged indefinitely. This crackpot expedient reveals the true nature of the current monetarist regime. Shorting and destroying General Motors, which actually produces something useful, is fine, but no shorting of JP Morgan Chase, which is a public menace that produces nothing but toxic paper. The long-term roots of the current crisis go back to August 15, 1971, when Nixon, Kissinger, Arthur Burns and George Shultz wantonly destroyed the Bretton Woods system of fixed currency parities, ushering in the new world of financial risk which is now collapsing around us.NATIONALIZE THE FEDERAL RESERVE AS A BUREAU OF THE TREASURYThe present crisis ought to provide the death warrant for the failed Federal Reserve System. When the Fed was created back under Woodrow Wilson, its Rockefeller and Morgan sponsors promised that the Fed would protect us against all future financial panics. The Fed failed once in 1929-1933, and now it is failing again for a second time. The Fed is worthless as a firewall against depression. We must therefore seize the Fed, audit it, nationalize it, and operate it in the future as a bureau of the US Treasury. From now on, we must go back to the Constitution, meaning that the size of the money supply and short-term interest rates will have to be determined by public laws of the United States, passed by the House and the Senate and signed by the president. Using this method, we can mandate new initial credit issues of $1 to $2 trillion to be used exclusively as low interest (.5% to 1%) and long-term (30 to 40 year maturities) credit for productive purposes only ­ manufacturing, farming, mining, commerce, energy production, infrastructure, and the other things we need. We should stop having the Fed lend money to Citibank at 2% and then having the Treasury borrow that same money back for 4% to 5% in the form of Treasury paper. Nationalize the Fed, and let the Treasury finance itself, cutting out the parasitical middlemen like JP Morgan Chase, Goldman, Citibank, and the rest. The taxpayers will be the big winners.HOOVER’S RECONSTRUCTION FINANCE CORPORATION WAS A FAILUREThe Paulson-Bernanke $700 billion is roughly comparable (factoring in about 2000% inflation from 1932 to 2008) to the Herbert Hoover Reconstruction Finance Corporation, which started with $2 billion real 1932 dollars, but failed because it tried to prop up insolvent banks and shore up collapsing financial values. Under FDR, the RFC was put under Jesse Jones, who used it to create real plant and equipment with great success. Under Jones, the RFC contributed decisively to US economic recovery by building up the Metals Reserve Company, the Rubber Reserve Company, the Defense Plant Corporation, the Defense Supplies Corporation, the War Damage Corporation, the U.S. Commercial Company, the Rubber Development Corporation, and the Petroleum Reserve Corporation. In other words, the RFC under Jones rebuilt the industrial infrastructure which we have been using down to the present day. Most of these investments represented added physical commodity production. Today, this could be repeated to produce infrastructure and energy plants for civilian use.CLEARING THE DECKS FOR WORLD ECONOMIC RECOVERYIt is time to forget about paper and the price of paper, and to concentrate on production ­ securing the tangible physical commodities and hard commodity production which are necessary for human life and civilization. It is impossible to prop up financial values in a panic, and it is foolish to try. To secure a decent future, we must now enact the following measures. Any of these points, all of which seek to defend the general welfare and the public interest, can and should be used as killer amendments to be attached to the current bailout monstrosity as a means of bringing it down.Stop all foreclosures on homes, farms, businesses, factories, mines, transport systems, for a period of at least five years or for the duration of the present world economic depression, whichever takes longer. If you throw a family out of their home or shut down a family farm, taxicab company, trucking firm, ferry, airline, railroad, or factory of any kind because of debt, you will be on your way to Leavenworth. All politicians now say that we have to keep families in their homes. Excellent! A uniform federal law with real teeth is the way to do it.Seize bankrupt banks and financial institutions. Put them through Chapter XI bankruptcy, and cancel the hopelessly unpayable parts of their debts, starting with their derivatives book.Wipe out all derivatives, whether exchange traded or counterparty, without compensation. They have always been illegal. They are now a threat to all of our lives. Not one penny of public money must go to buy derivatives.Securities transfer tax or Tobin tax on all financial transactions, including stocks, bonds, foreign exchange, etc. This is a sales tax on finance oligarchs who need to start paying their fair share. This will take the life out of the booze for many speculators.Stop oil, food and commodity speculation with comprehensive re- regulation including position limits, 50 to 100% margin requirements depending on market conditions, and by distinguishing between legitimate hedgers and predatory speculators.No tax increases on households. Surtax for foundations like the Ford, Rockefeller, Carnegie, Annenberg, and Gates Foundations, who use their funds not for charity but for subversion and divide and conquer social engineering to divide and weaken the American people in defense of the financier interest.Restore business confidence and credit with new credit issue through the nationalized Federal Reserve, operating under the legal auspices of the US Treasury. Use credit as a public utility. Provide cheap, long-term credit for productive purposes only, not parasitical specul
ation or financial services.Institute an absolute guarantee for Social Security, Medicare, Medicaid, Head Start, WIC, food stamps, unemployment insurance, and the other remaining elements of the social safety net. No “entitlement reform” under any circumstances. Austerity for bankers, not people. Use the proceeds from the Securities Transfer Tax to replenish the Social Security Trust Fund and preserve the other vital programs through the end of the twenty-first century.Using New Deal methods, it is possible to stop a depression cold in a single day. We did it before, and we can do it again. Only 28% of the American people now support the monstrous derivatives bailout, with 37% opposed and 35% unsure, according to Rasmussen on Sept. 22. This is an issue powerful enough to crystallize the current party re-alignment in the same way that slavery in the territories did in 1860, or the last depression did in 1932. Within a month, the current empty husks of the gutted Democratic and Republican Parties could collapse, and be replaced by the pro-Wall Street Bailout Party led by Obama and his phalanx of rich elitists and Malthusian fanatics from both parties, and the pro-middle class and pro-worker Anti-Bailout Party with support from right-wing Republicans, libertarians, and working class Democrats. Who will have the brains and guts need to assert leadership over the Anti- Bailout Party? Will it be McCain? Or Hillary Clinton? Or someone else? We will soon find out.

So you are saying that the problem stems from counter party default (or more precisely the risk of counter party default) more then anything else?

Guest, you are suffering from a lack of institutional imagination. Your repertoire of mechanism designs needs an upgrade–with all due respect.Banks are dispensable: I left my bank, Chase Manhattan, one week before Lehman collapsed, for a credit union. Banks are for-profit institutions; credit unions are not. Every member of a credit union is a shareholder, in contradistinction to the mere customers of a bank. There is absolutely no reason that people cannot be shareholders of the banks that hold their deposits, or own the companies they work for. Except that this would undermine the plans of the property owners, whose vile maxim is to maximize their expected utility while minimizing that of everyone else.Given a choice between two Nash equilibria in a competitive game, they would rather choose the strategy that gives them the highest payoff and their opponents the least, than a payoff in which all players are highly rewarded, even if they are more highly rewarded. [A payoff in which our lords and masters receive $1,000,000 and we receive $1 is preferred to one in which they received $1,000,000,001 and we receive $1,000,000,000.]

This is very interesting!

I understand that people tend to filter incoming data to fit their preconceived ideas. Maybe I’m guilty too, but it’s hard to understand anyone thinking that McCain – Mr. Keating Five, Mr. De-regulation, the candidate whose campaign includes Phil Gramm, a man who drafted and pushed the legislation that repealed Glass-Steagall, the candidate whose campaign manager received $30K a year for 5 years to “advocate” for Fannie and Freddie – is the good guy who will watch out for the little people and clean up the big bad banks. He hasn’t said much about the crisis or the bailout and doesn’t seem to be clued in to what is going on. Last Monday he actually gave a speech saying that America’s economic fundamentals are sound.And as to Obama embracing the bail out, well I would say that he accepts it more than embraces it and in this interview points out some of the same flaws discussed here.http://today.msnbc.msn.com/id/26184891/vp/26850025#26850025As to blaming Republicans, the Ds are no saints and yes, Clinton did sign the bill repealing Glass-Steagall, BUT the Rs had complete control of two branches of government from 2000 to 2006. Who are we supposed to blame? The Easter Bunny?

In the paragraph DERIVATIVES ARE FINANCIAL AIDS, you have an error. One quadrillion dollars is 1000 trillion, not 1000 billion.

well, duh.

Now the remaining financial institutions are locked in a game of multi-player prisoners dilemma. They could all “confess” simultaneously, and admit their exposure (if they could calculate it) or they can “defect” and say nothing, until the weakest one is forced to mark their junk to market, report it and then go belly up. It’s rational for them all to defect, and if they hold out long enough, Uncle Hank will not only take their bad assets off their hands, but will pay such a high premium for them that the ratings agencies will say, “my, what wise investors! Look at that astonishing return on those risky illiquid investments! AAA+!” It wouldn’t be enough for, oh, I don’t know, UBS to break even. Then investors would say, “hmm, UBS purchased $500,000,000 in CDOs and only broke even? We could do better with short term T-bills at .028%!” So at the very least, Hanky Panky has to do better than T Bills, and substantially better, if confidence is going to be restored. And if the bank has to give up equity, then confidence is NOT going to be restored.Hence he has to pretend he insisted on oversight through the left side of his mouth, even when this is only lip service, because he believes, not without some justification, that Congress is populated with idiots; and simultaneously through the right side of his mouth he insists that nothing he does with the money will be subject to the review of any court or administrative body, or any over-, under-, hind- or any other kind of sight of any form whatsoever.Saying this with a straight face as if it were the most reasonable thing in the world is what CEOs are paid for.

Oh, BTW, look below to the post by L. Morgan Stanislaw, III on 2008-09-23 22:00:01It gives additional insights about counterparty risk, and some other cabal voodoo tongue

Thanks for this!I am spending my hard earned money on bare necessities only, in protest.I no longer dine out, purchase books, or watch television. I have no need of DVDs. I never travel. I refuse to own a car, which would mean taking on the cost of ongoing maintenance, gas and insurance, not to mention the burden of an auto loan–I use public transportation. I refuse to own a cellphone. I will not pay for entertainment. Fortunately I don’t have kids: too expensive. What future would they have here, now that the American Dream has become a nightmare?I’m also taking the money I’m saving out of circulation. Great idea.

I should also add, if US tax payers are trusting enough to hand over USD$1 Trillion to some guy on the basis of a three page memo – far be if from me to pass judgement.It’s really none of my business. As a foreigner I have a vested interest in them doing me this favour.So, in advance, let me be the first to say thanks. Just in case.

You are right,I know Paulson dreams about this (counterparty credit risk through OTC derivatives) whenever he has a nap between two bailouts. He doesn’t want them to unwind, so he proposes to bribe the system (or respond to its blackmailing depending on your position).Isn’t that funny, the system has diversified itself so much that it became undiversifiable (the betas were replaced by the alphas, and the alphas by, well, Schmalphas, and then by Omegas, that is the end of Wall Street as we know it).

Coming from a Marx, this is a real insult to America’s self-proclaimed capitalist status.I hope you don’t mind the joke and do not take it personally. I couldn’t restrain myself from saying it longer.Apologies,Boycotting is a silent but powerful weapon of last resort.

I think they were swamped with emails and phone calls from concerned Americans like many on this blogsite. One of the Senator’s mentioned it in the hearings today in the Banking Committee hearings.

Excellent article, places the Paulson plan in the greater picture of American debt.Also, interesting proposal as an alternative to Paulson’s plan:Injection of preference shares by the government into decapitalised institutions, on the lines proposed by Charles Calomiris of Columbia University. This would be a bail-out, but one that constrained the behaviour of beneficiaries, not least on payment of dividends. That would make it far better than dropping benefits on the unworthy, via mass purchases of overpriced toxic paper.Thanks for posting it.

The time has come to save capitalism from the capitalists.Luigi Zingales in “Why Paulson is Wrong”:http://faculty.chicagogsb.edu/luigi.zingales/Why_Paulson_is_wrong.pdf

http://www.bloomberg.com/apps/news?pid=20601087&sid=aeJQFuvxEkIM&refer=homeSept. 24 (Bloomberg) — Investors outside the U.S., who own more than half of all Treasuries outstanding, say the government’s $700 billion plan to revive the banking system will diminish the appeal of the nation’s bonds.Treasury Secretary Henry Paulson’s proposal, which seeks funds to rescue banks by purchasing devalued securities, would drive the country’s debt to more than 70 percent of gross domestic product. The last time taxpayers owed as much was in 1954, when the U.S. was paying down costs from World War II.“The image of U.S. Treasuries as a safe haven has been tainted by the ongoing financial debacle,” said Kwag Dae Hwan, head of global investment in Seoul with South Korea’s $220 billion National Pension Fund, which holds about $14 billion of U.S. government debt. “A big question mark hangs over whether the U.S. can deal with an unprecedented amount of debt. That is unnerving all the investors, including me.”

Found by William Banzai 7:]DRAFT NO. 1U.S. TreasuryOffice of Henry (Hank) PaulsonLEGISLATIVE PROPOSAL FOR TREASURY AUTHORITYTO PURCHASE TOXIC FINANCIAL ASSETSSec. 1. Short Title.This Act may be cited as “Taxpayer networth annihilation and Investment banking wealth Recovery Plan” (“TwIRP”) .Sec. 2. Purchases of Toxic Assets.(a) Authority to Purchase. – The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary in his sole, absolute, divine and knowing discretion, any and all manner of Toxic Assets from any Financial Institution, as those terms are defined in section 13 of the Act.(b) Necessary Actions. – The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation:(1) appointing such employees and hiring konsultants (da Konsultanz with a K), unemployed investment bankers and advisors as may be required to carry out the authorities in this Act and defining their duties;(2) entering into contracts, MOUs, LOIs, including lucrative contracts for investment banking and financial advisory services for the management of Toxic Assets;(3) designating Financial Institutions as financial agents, revenue collectors, purchasing agents and proxies of the Government, and they shall perform all such reasonable duties related to this Act as financial agents and proxies of the Government as they deem fit in their sole and absolute discretion;(4) establishing vehicles, including offshore SPIVs and conduits, pyramids and highly leveraged PONZI structures that are authorized, subject to new ideas by the Secretaries quantitative engineer, to purchase Toxic Assets and issue open ended obligations;(5) directly and indirectly, granting bonuses, equity kickers, management fees, performance fees, restructuring fees, brokerage commissions, finders fees, entertainment accounts, unemployment compensation and other compensation arrangements; and(5) formulating such regulations, fine print, boilerplate, standard terms, ISDA riders and other terms as may be necessary or appropriate to define terms or carry out the authorities of this Act.Sec. 3. Considerations.In exercising the authorities granted in this Act, the Secretary shall take into consideration means for –(1) Reinstating Wall Street investment bankers into the financial pecking order of society;(2) shafting the taxpayers; and(3) appropriate steps to paper over any conflicts of interest in the hiring of Wall Street contractors or advisors. Any regulation issued under this authority shall not be subject to the rest of the United States Code.Only to the extent reasonably feasible, the Secretary shall attempt to provide stability or prevent corruption in the financial markets or banking system;Sec. 4. Reports to Congress.Within three months of the first exercise of the authority granted in section 2(a), and semiannually thereafter, the Secretary shall only if feasible, attempt to report to the Committees on the Budget, Financial Services, and Ways and Means of the House of Representatives and the Committees on the Budget, Finance, and Banking, Housing, and Urban Affairs of the Senate with respect to the authorities exercised under this Act and the considerations required by section 3.Sec. 5. Rights; Management; Sale of Troubled Assets.(a) Exercise of Rights. – The Secretary may, at any time, in his sole, absulute, reasonable or unreasonable, divinely inspired discretion, exercise any rights received in connection with Toxic Assets purchased under this Act.(b) Management of Toxic Assets. – The Secretary shall have authority to manage, securitize and repackage Toxic Assets purchased under this Act, including conjuring revenues and engineering away all portfolio risks therefrom.(c) Sale of Toxic Assets. – The Secretary may, at any time, any place, to anyone, upon terms and conditions and at prices determined by the Secretary in his sole and absolute divine discretion, sell, or enter into securitiised loans, CDOs, CDSs, kickers, participations, synthetic securities, repurchase transactions, black holes or other financial weapons of mass destruction in regard to, any asset purchased under this Act.(d) Application of Sunset to Toxic Assets. – The authority of the Secretary to hold any Toxic mortgage-related asset purchased under this Act before the termination date in section 9, or to purchase or fund the purchase of a mortgage-related asset under a commitment entered into before the termination date in section 9, is not subject to the provisions of section 9.Sec. 6. Maximum Amount of Authorized Purchases.The Secretary’s authority to purchase Troubled Assets under this Act shall be unlimited, but for optical puroses shall be expressed as $700,000,000,000,000,000,000,000,000,000,000,000,000,000,00000000000000000000000000000000000000000000000000000000000000000…. outstanding at any one time.Sec. 7. Funding.For the purpose of the authorities granted in this Act, and for the costs of administering those authorities, the Secretary may use the proceeds of the sale of any securities issued under chapter 31 of title 31, United States Code, and the purposes for which securities may be issued under chapter 31 of title 31, United States Code, are extended to include actions authorized by this Act, including the payment of administrative expenses. Any funds expended for actions authorized by this Act, including the payment of administrative expenses, shall be deemed appropriated at the time of such expenditure.Sec. 8. Review.Decisions by the Secretary pursuant to the authority of this Act are absolutely non-reviewable and committed to absolute agency discretion, and may not be reviewed by any court of law, any administrative agency, any Congressional Committee, media, newspaper or press or other divine authority.Sec. 9. Termination of Authority.The authorities under this Act, with the exception of authorities granted in sections 2(b)(5), 5 and 7, shall be in perpetuity.Sec. 10. Increase in Statutory Limit on the Public Debt.Subsection (b) of section 3101 of title 31, United States Code, is amended by striking out the dollar limitation contained in such subsection and inserting in lieu thereof “such amount as is determined under Section 6.Sec. 11. Credit Reform.The costs of purchases of Troubled Assets made under section 2(a) of this Act shall be determined only if feasible and if we have more time.Sec. 12. Indemnification and Release.No consultant, agent, employee or other firm engaged pursuant to this Act shall be held accountable for negligence or shabby performance, including in particular, service and performancein a grossly negligent and reckless manner. Such parties shall be fully indemnified with the full faith and credit of the USA.Section 13. Definitions.For purposes of this Act, the following definitions shall apply:(1) Financial Institution. – The term “Financial Institutions” means any institution including, but not limited to, banks, thrifts, credit unions, broker-dealers, and insurance companies, having significant operations in the United States; and, upon the Secretary’s determination in consultation with the Chairman of the Board of Governors of the Federal Reserve, any other institution he determines necessary to promote financial market stability. For the avoidance of doubt, the term shall include Goldman Sachs, Morgan Stanley and any spin off, successor or surviving entity.(2) Secretary. – The term “Secretary” means the “Hank” Paulson and h
is heirs.(3) Toxic Assets. – The term “Toxic Assets” means residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before September 17, 2008; and, upon the determination of the Secretary perhaps in consultation with the Chairman of the Board of Governors of the Federal Reserve, any other financial WMD, as he determines necessary to promote the strength of Wall Street; including without limitation, leveraged buyout credits, prime brokerage margin credits and and all CDS counter party liability.(4) Black Scholes Formula.– A term utilized to convince the cynics and skeptics that we know what we are doing.(5) LTCM. A previous financial disaster that would have led to financial meltdown. Discounted by the regulatory authorities as a 1000 year aberation.(6) Alan Greenspan. A once in a 1000 year goofball.(7) George Bush. A circus clown who lives in the Whitehouse.(8) SEC. Somebody please Eject Cox.(9) 2 Big 2 Fail. 2 Stupid 2 Survive.(8) United States. – The term “United States and USA” means the United Socialistic American States, territories, and possessions of the United States, Wall Street, East Hampton, Nantucket and the District of Columbia.HEAR YE, HEAR YE, HEAR YE, may it be known by all thee present, that this TwIRP is hereby declared the law of the land.

On addition to the changes to the US capitalistic system, it looks like we are also getting changes on the UN level. UN is becoming some sort of governing body for financial rules?At the U.N., leaders call for new rules for global marketshttp://www.latimes.com/business/investing/la-fg-un24-2008sep24,0,2983685.story

UNITED NATIONS — World leaders heard assurances from President Bush on Tuesday that he is acting swiftly to contain America’s financial upheaval, but allies and critics alikecalled for a collective effort to rewrite the rules governing global capital markets…. …Although he did not ask for action by other countries, several speakers at the General Assembly’s annual fall debate insisted that a new multilateral forum overhaul the global financial system.French President Nicolas Sarkozy proposed that the Group of 8, which includes the United States and many of its wealthy allies, take up the task at a special summit in November, with the added presence of China and other developing nations.”No country, however powerful it may be, can bring an effective answer to the financial crisis on its own,” Sarkozy said.

so perhaps the goal of Mr George Bush was to rectify all of the failings of the Bush dynasty? As when his father did not finish off Saddam nor get to serve a second term, but he took care of both of these.

I am willing to storm the gates of the white house. Please organize

Organize the boycot

Getting 10% from Goldman, not bad. If US treasury repeats the same trick, I’m gonna have a huge drink on that.

MORE DEREGULATION IS THE INTENT!The intent of the laundering bailout plan! The debt gets bought at par! Then!!!Wall street is coming back, but less regulated!The financial hustlers are pulling a switch! All the investment hustlers will come back working for hedge funds and private equity funds that will own enough control of the banks to influence lending. The new rules that allow private equity and hedge funds to own 33% non-voting stock without being designated a bank holding company will allow them to do banking while being unregulated and unsupervised. THIS IS EVEN WORSE THAN WHAT WE HAD BEFORE! Paulson and Bernanke are giving the ultimate incentive for PRIVATE EQUITY AND HEDGE FUNDS to control banks. They will eventually gamble the FDIC secured deposits into oblivion. We need to highlight this!!!

Bing! I think we have a winner! I drew the same conclusion overnight as did some others watching this game closely.Everyone is so busy being horrified at the Paulson Plan’s orchestrated passage through the Congress that they have ignored the Fed’s relaxation on control stakes. By raising the control stake to 33 percent and allowing private equity/hedge funds seats on bank holding company boards they have opened up the US banking industry to secret, offshore, tax-free ownership by an invisible and unaccountable elite.Once again the “crisis” of the Lehman Brothers/Reichstag Fire has permitted “emergency” relaxation of a rule of fundamental accountability that would have been sacrosanct had it been up for public consultation or legislative review.

Buffet this a.m. on Squawk said he bought GS because the price was right, and that price level is his most important due diligence point. Then he turns around and states, “It doesn’t matter what taxpayers pay for the TARP assets.” It sound like “let them eat cake!” Buffet just bought himself a seat at the innner-inner circle.

As Warren Buffett has so helpfully provided a market reference price for Goldman Sachs equity, I think that the US Congress should adopt it as a benchmark and insist on parity in its investment.

My political slogan isTHE TAXPAYER IS TOO BIG TO FAIL(with regards to capslock boy, now mysteriously absent)Even I was wondering where the rats were fleeing to. In my neighborhood (Lincoln Center) on Sunday, there were Secret Service agents around. They looked as if they were straight out of Central Casting. I wondered whether they were there to check on any number of financial wizards in the Upper West Side, who might have been doing inordinately well during the past few years, but who decided, after the deepest consideration, to move their assets and themselves overseas, in case Hank Paulson’s suggestion to leave him alone with his $700 billion might not be so well taken by the legislature. Party time might be over. Time to make like a tree and leave.

and while doing that, becoming a Paulson fan as the Financial Times states:Likening the situation to an “economic Pearl Harbour” he (Buffett) added that “Last week we were at the brink of a something that would have made anything seen in financial history pale [in comparison] … the Paulson plan is absolutely necessary to avoid going over the the precipice.”http://www.ft.com/cms/s/0/83bf493c-89ba-11dd-8371-0000779fd18c.htmlWe are on our own. The masses will keep the debt, the big guys will be bought out. They will continue feeding us up with debt. No easier way to control the masses and to profit from them, no doubt. It looks ugly, very ugly.

This is a historic moment. We need to act now while we can influence the debate.Let’s rally against the bailout in the heart of the financial district!Gather at 4pm, this Thursday, Sept. 25 in the plaza at the southern end of Bowling Green Park in New York City, which is the small triangular park that has the Wall Street bull at the northern tip.(Not in New York City? Organize a rally in your neck of the woods.)What: Say NO to the Wall Street bailoutWhen: Thursday, September 25: 4pmWhere: Southern end of Bowling Green Park, in the plaza areaWhat to bring: Banners, noisemakers, signs, leaflets, etc.Do whatever you can for this historic event and contact all your groups and friends. This proposed financial bailout is without precedence and we have to stop it!We have everything we need to create a large, peaceful, loud demonstration.Together, let’s get started.- Seriously yours,Billionaires For Bush

The Looming Refugee CrisisI’ve been corresponding with a high profile (non-RGE) economics and banking blogger for several years. You would all know him, probably, although he doesn’t post here. Yesterday he wrote to me to ask about emigration to the UK and his prospects for finding a job and securing a work permit if he sold up and relocated from the a southern US state. That is a very bad sign.An influx of well-heeled economic migrants with huge talent will be excellent for reviving the UK property market and recapitalising our banks with new deposits, but it bodes very ill for the rest of the world.In my time I’ve seen influxes of Jamaican middle-class blacks, Ugandan middle-class Indians, South African middle-class whites, and the rich elites of every nation to London. When middle-class Americans start asking about emigration as their primary fallback option, then these are scary, scary times indeed.I personally will welcome my friend to the UK. Immigration has made this country ever since the Brettons settled the Celtic fringe, followed by the Romans, the Danes, the Angles, the Normans and everyone else in this age of globalisation. I am proud that the UK – home of magna carta, habeus corpus and the Mother of Parliaments – is still considered a refuge. But I am sorry for the refugees, and for those they leave behind.

Warren Buffett’s purchase of Goldman Sachs has just established the market price for buying what’s left of the IB players. These are the terms the U.S. Gov’t must insist upon, at least.Americans, remember your power. We have more leverage than Buffett does, because we have more money. That 700B should buy us complete control of the IB business, and then some. Buffett has shown us how desperate they are.===== separately, and much more importantly…. ===============We are now in plain sight of a tectonic shift in national economic direction and governance. In a few short weeks, the U.S. government may gain control over most of the outstanding mortgages of the country, and conceivably control what remains of the IB business, should it elect to. That gives the U.S. government nearly explicit control of a significant portion of household expenditures and a big role in answering the question of where and how capital is allocated within the real economy from this point forward.Let me refrain from over-stating the case. Not all the pieces are in place yet, but they are headed that way. It’s not too early to start asking the “what-if” questions.I’ve heard knowledgeable people say that the reason China has vaulted so quickly to the forefront of industrial adaptation is because their government has both command of the economy, and the grasp of how to manage that economy.Very soon, the public sector may gain more influence over the real economy than it’s had since the second world war. We should start thinking about what we’d do with that influence should we get it.This is not a simple question, and it’s not helpful to recite too much dogma from either end of the political continuum. China’s success indicates the phenomenon of “hybrid vigor”; they’ve got a formula that uses the “best of both worlds”.If the public sector does secure greater influence over the economic policy of the U.S. – e.g. household spending patterns, and industrial sector investment patterns in particular, where should the public steer the economy? What sectors, what classes/types of players within each sector would get resourced, which would be demoted to the sidelines? Why?The public is about to take responsibility for some major components of the resource allocation mechanism of this nation. The finance sector has formally abdicated by virtue of the crisis they precipitated and dumped into our laps. What are we going to do with this machinery?Congress should be thinking about these bigger trends as it negotiates the bailout.

means that banks are unwilling to lend to each other and a bearish portent on equity markets

Must not be a Goldman economist. You can take those. We’ll also keep the Asian quants and docs that you want to throw out. Fair trade. More alpha to the US.Also, is it also the new white flight? I’ve got news for you.The New White Flighthttp://wsjclassroom.com/teen/teencenter/05nov_whiteflight.htm

Whites aren’t quitting the schools because the schools are failing academically. Quite the contrary: Many white parents say they’re leaving because the schools are too academically driven and too narrowly invested in subjects such as math and science at the expense of liberal arts and extracurriculars like sports and other personal interests.

You can take those too.P1AQL.

This is a time when US citizens will find out who our true friends are. The list of people who are willing to tell the truth is shrinking rapidly. Buffet is just protecting his own rear end. The fact thast he won’t even speak out against the rescue is really disappointing. My guess is that, yes, he does want the cash stream. And quite possibly he is also acting to limit couterparty losses, or to salvage some deals that he has made in the OTC markets. That is specualtion though.PeteCA

307 bps now and still rising

When more problems arise, they will propose more of the same. If necessary, it won’t stop with the current 700 billion. Nobody knows where it will stop. Systemic crash is not an option.

What a tirade…! and I love it!

`Turning Left’ (Bloomberg today)“It’s the end of an era,” said Shanghai-based Andy Xie, a independent analyst who was formerly Morgan Stanley’s chief Asia economist. “In 1989, when the Berlin Wall fell, socialism was discredited and the whole world turned right. Now financial capital has been discredited and the whole world, including the U.S., is turning left.”China’s economy has grown an average of 9.9 percent a year since former leader Deng Xiaoping ditched hard-line Communist policies and began moving toward a free market in 1978.

this is state-sponsored fascism, not socialism

To paraphrase Richard Nixon, “we are all Commies now.”

London BankerThanks for continuing to share your personal anecdotes. They add an interesting viewpoint to to unfolding disintegration in the US economy.I noticed some comments recently (actually a commentary from the Weiss team at Money & Markets) where a top US basnker had left the USA and gone to China. He is now working for a company or bank in China – scouring the world looking for takeover deals in natural resources. So the Chinese are stealing our lifeblood … and using it against us.We had expected in the USA that this credit crisis would unfold as a series of waves. But no-one foresaw the rapid deterioration that would happen in just the second maqjor wave of the crisis. It’s a direct indication that the quality of the “bad” assets at some major US banks is actually worse than people had estimated – or that the degree of counterparty risk is even higher than acticipated. Mr. Paulson is an absolute master at financial sleight of hand. Personally, I thought that Mr Paulson and Mr Bernaske had a better-than-average chance of hiding the true state of the US financial condition … until after the upcoming Nov elections. It is really astonishing to see things fall apart this quickly.PeteCA

I imagine the best and the brightest inside Goldman are right this moment trying to figure out how it uses the Treasury not only to sell their own crappy assets dear but also to buy other people’s crappy assets cheap.At any rate, it won’t take long for Goldman Sachs to figure out how to make that $700 billion work for Goldman Sachs. This you can trust them to do. After all, Warren Buffett just did.(Michael Lewis, Bloomberg)http://www.bloomberg.com/apps/news?pid=20601039&sid=a6a6nqXGVdZY&refer=home

Does anyone believe we will Not see hyperinflation and/or ultimately having to hit the reset button? Please explain.I am not talking about asset deflation as that is obviously occurring now and will continue longer.hlowe

yes agree though there is still a chance we get a deflationary depression instead of a hyperinflationary depression if the govt interventions are not able to handle this deleveraging process…remember we still have about 64 Trillon of CDS derivatives to go through (with est of these about 3 Trillion in actuall losses)…

O.M.G.

I would be interested in a rally in DC as I live in northern VA.

Brenanke being grilled by the Economic committee………this administrations fiscal policy being grilled.I don;t think that the bailout is gonna come easy……………1 Tillion$ more of dept = 12,000$ dept per US family (of 4)

I Love Ron Paul!!!!!!!!!!!This guy just raked Bernanke over the coals saying the FED did not have constitutional authority to do what they have done…..and more importantly asked………where is the money going to come from???????????????????????

It puzzles me why some people confuse Warren Buffet’s business acumen with moral astuteness or even political correctness. I confess that he usually calls a spade a spade, is no fool, and does not suffer fools gladly. That’s why when he calls the current situation an “economic Pearl Harbor” I parse it as a description of a disaster, nothing more. If I had as many billions as he had I’d be able to take some risks, forget the losers, and have the winners lauded as a sign of genius. But perhaps he’s onto something with the Goldman play, and the thing he’s onto is…a “sure” thing. If you want to read the tea leaves, you might surmise he thinks the bailout is a lock, and in the bag. I hope he’s wrong.

But on the contrary, if we do not bail them out, we will see the depression n stagnant growths seen by Japan n Scandinavian countries.What will you choose??

Just a thought, In some parts of Asia its very common to keep quite a bit of cash at home and jewels too. The down side of this is the rate of breakins is higher.If the word got around that too many people have cash at home, you will need to invest in some good security measures.

You CAN’T……http://www.armytimes.com/news/2008/09/army_homeland_090708w/Quotes:…They may be called upon to help with civil unrest and crowd control or to deal with potentially horrific scenarios such as massive poisoning and chaos in response to a chemical, biological, radiological, nuclear or high-yield explosive, or CBRNE, attack……The 1st BCT’s soldiers also will learn how to use “the first ever nonlethal package that the Army has fielded,” 1st BCT commander Col. Roger Cloutier said, referring to crowd and traffic control equipment and nonlethal weapons designed to subdue unruly or dangerous individuals without killing them.“It’s a new modular package of nonlethal capabilities that they’re fielding. They’ve been using pieces of it in Iraq, but this is the first time that these modules were consolidated and this package fielded, and because of this mission we’re undertaking we were the first to get it.”The package includes equipment to stand up a hasty road block; spike strips for slowing, stopping or controlling traffic; shields and batons; and, beanbag bullets.“I was the first guy in the brigade to get Tasered,” said Cloutier, describing the experience as “your worst muscle cramp ever — times 10 throughout your whole body.“I’m not a small guy, I weigh 230 pounds … it put me on my knees in seconds.”The brigade will not change its name, but the force will be known for the next year as a CBRNE Consequence Management Response Force, or CCMRF (pronounced “sea-smurf”)…

11:48 a.m. Fed won’t print money to pay for Paulson plan: Bernanke (MarketWatch).No details given yet, I’m curious to hear more about this statement

From LACE:Based on second quarter 2008 Call Report data, there are 585 “D” and “E” rated commercial banks

yes it is the fault of US corporations with the parachutting MBA approach rather than the appraoch of the Germans and Japanese that have HIGHER labor rates than the US even but are flourishing!

Warren Buffet will at last live up to his namesake: other investors, misled by his vote of confidence that the bear market has bottomed out, will find themselves buffeted into oblivion as the market plunges another 20 or 30 percent. Then he might pick up a few of the survivors.This is a $5 billion dollar siren call to certain death. He wins in almost every case: either the federal government does the right thing and commissions a body of seventy economic scholars to craft well-considered legislation with the utmost care, in an effort that would recall the production of the septuagint, and even then the market will go south; or else the government gives in, and the market goes south; or the government delays, only to produce an inferior result (you can rely on incompetence), and the market really goes south; or the government does nothing, and the market implodes, but main street recovers when the bankers themselves get hungry (they have to eat too). Buffet comes out OK in just about any scenario.

Again I ask, why are US stocks not imploding?From Morgan Stanley:”Following a slight decline in August, business conditions tumbled sharply to all time lows in early September, continuing the precipitous decline that began earlier this summer. Our headline index sagged eight points to an historical low of 22% six points below the previous record low of 28% reached in January and April of this year.”

Reuters – Wednesday, September 24WASHINGTON, Sept 23 Banks can expect to pay significantly higher premiums for deposit insurance starting next month, the head of the Federal Deposit Insurance Corp said on Tuesday.

This assumes that the secretary will give as much as possible to Goldman Sachs.That then infers that this was planned by the administration years ago to prop up GDP artificially and allow Bush to win the 2nd Term unlike his father.

Indeed, if the Treasury shoots its bolt here, it won’t be able to finance fiscal stimulus for the broader economy.

I think Roubini is being PC. The government saves hedge funds because hedge fund managers make significant campaign contributions and our politicians have a vested interest in keeping those hedge fund managers happy, at the expense of all other taxpayers.

Because Hank Paulson and Ben Bernanke are full of shit. The bankers are holding the taxpayer hostage. If we all went to credit unions, they’d crap their pants. Congress ABSOLUTELY should play brinksmanship: wait for the stock market to drop. Make their day. If it doesn’t drop, the Secret Service should be hauling Paulson and Bernanke’s asses to Guantanamo.

Yesterday, when Paulson was asked whether we should put the taxpayer on the hook for this bail-out, Paulson answered: “They already are.”What they never say in their testimony is: if the bailout does not go through, hundreds of major and minor banks will fail, shifting the burden to the underfunded FDIC. The FDIC would require this funding to respond to claims. By funding the bailout, they avoid the FDIC claims. That’s what Paulson meant when he said the taxpayers “already are” on the hook for funding this bailout, one way or another.

Congress members are pontificating and not suggestingalternative solutions. There is a distinct differencebetween yesterday and today in the questions. TodaySmells!Pardon me for the Repost!Financial Capital is going to use this emergency to clean their slate of debtand remake themselves into TOTALLY UNREGULATED REPLACEMENT. They will beginthe next stage in the plunder! The further deregulation of private capital andhedge fund participation in banks without supervision is the next stage. Theamerican taxpayer has proved he is not paying attention and this is survival ofthe fittest Social Darwinism. If we do not pay attention, then we are not actingaccording to adaptation rules, and we will be robbed again. We will be robbeduntil we stop the process! There is no nationalism involved here! There is nofairness involved!THIS IS SOCIAL DARWINISM, THE LAW OF THE JUNGLE. The peoplethat are doing this have only one rule. If you let me do it, then I can!!!!In their minds, it is up to us to adapt and protect ourselves by preventing themfrom doing this. We have allowed this to go on for too long and we are shortof CIVIC MINDED PEOPLE IN OUR GOVERNMENT. We have a great task! TurnCongress into Civic Minded Civil Servants in 2 days!!!PAULSON CONSIDERS THIS JUST ANOTHER NEGOTIATION, AND HE WILL DROP THE HAMMERON US IF WE LET HIM! Congress will make the mistake to build on his proposal, insteadof replacing it altogether. They should come up with something akin to the SwedishBailout!

Why aren’t stocks imploding? You can view every actionby the authorities over the past year as an attempt toprop up the market. And for reasons having to do withhow stocks are dealt, you might say that the pros arewaiting for prices to rise a little before they dump.Economic statistics by themselves are usually not acause of gigantic moves; these usually come after someevent that affects the solvency ability of big playersof their ability to finance purchases of stocks. There’salso the remnant of a belief that the effect of thefinancial crisis on the real economy won’t be catastrophic.Over the last year, when the market failed to tank afterevery bit of bad news, nervous people on this forumwho had bet on a decline tended to scream a lot. Timehas shown that the pessimists were on target. Adjustyour strategy accordingly.

Wolf writes: The US public expects action.Say what? The only “action” that I expect, want, is for the Fed and the government to do NOTHING but let the markets clean up after their own messes!It’s subtle crap like this that brainwashes us into going along with the rich elites’ plans to screw everyone.

Probably most participants here haven’t had been poor. Poor as in, deathly sick with no money, or disabled, or unemployed with a large family to feed. But I don’t think they’re laughing except maybe out of frustration. As for the international bankers, they’re probably just the worst of a bad bunch. And in normal times that bunch carries the day with their arguments about self-interest and economic rationality. For a lot of people the last ten or twenty years seemed pretty good. Railing against international bankers put you squarely in Crank City.If you’re going to pit yourself against the system, by all means get rid of all the bankers, international or not, and the people who close factories, and the people who consider poverty a moral failing. And please do it calmly and with analysis and if you can please go easy on paranoia and apocalypse.

Your comment requires a response. I think I am not to blame, the others on this board are not to blame. What could we have done differently?I believe we have tried as hard as we could, and are trying even harder right at this critical moment, to break the cover of darkness and deception, to allow light to flow in and influence events for the benefit of all souls. The war continues, and that poor old man may be a battle temporarily lost if his physical body weakens because of these economic events.We try to be useful to the Truth, not to the bankers. Please help us, show us how to do better or add your own voice.

The taxpayer will be “on the hook” for more if the bailout passes. If not, foreign dollar holders will share the burden as the Fed may have to (finally) do the normal thing and just PRINT, unsterilized.

@Hong Kong Banker – You are completely right. These effects will happen anyway.

I choose NO Bail Out.The money can be better spent elsewhere.

When Ben Bernanke testified this morning before Congress, most of our representatives whined and griped, but showed no spine. It looks like they need another rap on the head to remind them about who the boss is.Americans, let’s rise up on our hind legs and fight!You are entitled to a clear, authoritative and well-supported explanation of what the actual impact would be if the bailout was not done. Throw cold water on the buffalo stampede by demanding facts.No facts, no bailout. No equity, no bailout.The IBs are desperate for a bagholder. Don’t be their bagholder! They originated this mess, it’s theirs. Let them lie in it.Instruct your congressperson: No facts, no bailout. No equity, no bailout. Make sure they understand that you are going to vote based on their behavior.www.senate.govwww.house.govA democracy only works when the people are actually involved. Are you involved, or still watching TV?Sign a petition, send an e-mail to your local paper and TV station. Invest 10 minutes in the future of your country. It’ll free you from your sense of powerlessness, and you’ll like yourself all the more because you showed some spine.Get involved, and do it NOW.

Very likely stocks will still decline if plan is accepted.

Hey if it goes to the FDIC, at least you have a chance toget your money out, but for a bailout, you haven’t a prayer.

Fantastic comment. Extremely good point about these members who say it’s just really distasteful but we have to do something. I see the public as more upset than ever. Rep. John Murtha, Democrat from Pennsylvania, says mail and phone calls from his district are running 90 percent against the plan. Sen. Diane Feinstein, Democrat California, reports 12,000 calls and emails from constituents, nearly all opposed to the proposal. Most all members of Congress are reporting a deluge of phone calls. And I know what they’re saying: DON’T GIVE THESE CROOKS THE MONEY.

By the way folks.For those that do not know, Peter Schiff (http://www.europac.net/#)was a financial advisor to Ron Paul during his campaign.hlowe

Here is the email that I sent…Dear Senator,I am writing to express my opposition to the proposed $700 billion rescue plan for Wall Street institutions.You have a difficult choice to make this week. On one hand, if we do not bailout the financial industry, we will probably precipitate a deep recession (loss of 15% of GDP) or possibly a great depression (loss of 25% of GDP).On the other hand, if we do bailout the financial industry, it will place such a burden on the economy that we will most likely enter a decade of inflationary economic malaise and risk hyperinflation through the retreat of foreign investments. I am convinced that voting against the rescue plan is the lesser of the two evils.To be more specific, I object to the rescue plan on several levels. One is that, given the background of Messrs. Paulson and Bernanke, they have a fundamental conflict of interest in asking you to choose between the taxpayers and the Wall Street firms they have worked with in the past and continue to work with on a day-to-day basis. More striking is the fact that Bernanke represents the interests of a private bank with a public sounding name rather than the tax payers. You need objective, economic experts to explain the real risks.A second level of objection to the rescue plan is the proposal’s vagueness. The oxymoron of immunity clauses and lack of any over-site clauses extends one’s credulity beyond reasonableness. But more fundamentally, the exact nature of the financial need is not described. It is not explained because these institutions cannot determine their own liabilities! The uncertainty lies in the nature of Credit Default Swaps (CDSs) and the undocumented inter-dependency (debt exposure) of these fragile instruments among all of the financial institutions. No one knows if its a $700 billion, $1 trillion, $3 trillion or more debt exposure. We do know the notation sum of all the CDSs are beyond the world’s combined Gross Domestic Product (GDP) running between $600 trillion and $1,000 trillion. Therefore, it is a fair question to ask if the taxpayers even have the ability to solve this world-wide financial crisis.A third level of concern lies in the distinction between the real economy and the financial industry. The real economy provides services or produces goods in exchange for currency. The financial industry, on the other hand, draws a profit manipulating the excess wealth produced by the economy. The real economy “hosts” the financial industry and ideally, the financial industry moves cash from excess areas to cash-starved areas thereby promoting growth in the economy. Unfortunately, this traditional investment was seen as too “unproductive” and an un-regulated shadow banking system arose creating these high-risk CDS mal-investments.Therefore, I ask that you allow these high-risk ventures to fail and not drag down the economy with the tax called inflation. In spite of all the dire warnings and furrowed brows, the best strategy is to not over burden other industries that otherwise would not be significantly impacted by the collapse of a financial industry.Finally, please consider the effect of this rescue plan on our mounting national debt and subsequently on the USD. As you know, more bailouts lead to more more money which lead to more inflation. We are inching towards a tipping point where our foreign investors will sell off their Treasury notes, and when this occurs we will enter an inflationary spiral.Thank you for your assistance in this dire matter.

I’m SERIOUS about that, btw. I speak better than I can write. Back in the day, I was a state champion at oratory, and I have done virtually nothing BUT prepare for this moment in history for a decade! I am not higher educated; I got the same dumbed-down highschool edumacation all americans get. Like Paul Simon sings, “when I look back on all the crap I learned in high school, it’s a wonder I can think at all”, but I have made it my priority and business to inform myself thoroughly with reliable information (how do you s’pose I got here to Nouriel’s most excellent blog?? I found you intelligent bunch, did I not?) and I found as an adult an incredible teacher who taught me EXCELLENT critical thinking skills – lucky, fortunate me! I have focused on these matters like a laser for years! I studied strategy and tactics at the foot of a master lawyer politician, too. I studied history, religion, philosophy, politics, and learned to think WELL outside the box. I know that overpayunderpay cannot be separated and are one thing, and that overpayunderpay = overpowerunderpower AND THAT THIS IS NOT THE NATURAL ORDER. I have the rational proofs that justice is glorious and crucial to sustainability. I waded into the valley of the shadow of conspiracy theory and came out alive, knowing the bits that are total bullhockey from the historical truth of past, proven conspiracies, and I have an Irish temper that when summoned WILL NOT STAND FOR THE LIES!Humanity is standing on the brink of either having no future or having the greatest escalation of human happiness that has ever been possible, and though I drastically prefer to remain an unknown nobody, I know I can rip the veils from the eyes of those many, many hardworking americans who have not had the good fortune I have been given – the luxury of the time to SAVVY UP.If you think ego is speaking here, think again! It does not slip from the forefront of my consciousness that we all have egos that are NOT our friend and we all have biases we must confront if we are to be able to see the big picture of reality whole.And the thing I advocate is the only thing that is NOT subversive of the values America is SUPPOSED to embody, is NOT subversive of Democracy, Not subversive of Justice, Justice Capitalism, freedom, liberty, fraternity, peace, safety, happiness, sustainability, survival!There. I said it. We are in a race between education and catastrophe, and what the people need most is to unlearn what ISN’T true!I don’t think anybody knows better than me, that that is the hardest learning there is, but I have tackled the steepest learning curves there are, and for as long as I look out at the world and see it writhing in hell so needlessly, the world has a volunteer in me!

Once again we find Bush’s fingerprints at the scene of the crime…Pass this one around folks!

Also, I did ask the publisher to correct my grammar in the quote from Paulson. Told ‘em its hard to write while you’re standing on your hind legs and screaming bloody murder!Give ‘em hell, sentient beings of America!

It’s good to have soulbrothers and soulsisters(even far away) that focus on the bigger picture. I’ve followed about the same track as you. It was pretty lonely at first and damn painful to get to the heart of this mess, to the so called civilized world. But indeed, instead of frustration it gave me total peace with myself. And as you, I really think we’re at that crossroad of immense opportunity. It will be painful, it can be postponed, but the choice will eventually be made. I hope I could be part of making it happen.

Paulson accepts limits on exec compensation under planBy Greg RobbLast update: 3:02 p.m. EDT Sept. 24, 2008Comments: 24WASHINGTON (MarketWatch) — Treasury Secretary Henry Paulson said Wednesday that the White House was willing to accept adding limits on executive compensation to his package. Democrats have demanded limits on pay for executives at firms that benefit from the government rescue. “The American people are angry about executive compensation and rightfully so,” Paulson said. “We must find a way to address this in the legislation but without undermining the effectiveness of this program,” Paulson said.http://www.marketwatch.com/News/Story/Story.aspx?guid={7A97A8F3-B0F5-41E8-BD92-1268E1609699}&siteid=mktw

“but without undermining the effectiveness of this program”WEASEL WORDS ALERT, AMERICA…learn to listen for the weasel words! They are always there!A SMALL PART OF JUSTICE IS NO PART OF *JUSTICE*Kiss my rosy red cheeks, Mr. P!

New Thread

Make no mistake, Dear tutterfrut, all the wisdom of the ages and then some is on our side, and the dawn WILL break this long night. “Loud, hear our plea! Come hours, be ours!”I tell people to never suspect you are just an insignificant speck in the universe. You are so significant you were given a HUGE universe to live in! Shine on, and goodness blessus as we help bring light to a world with too much heat!I agree wholeheartedly, it is great joy in itself to have examined life well, and by always retesting your beliefs to have become confident that you are pursuing your happiness with all your nerve and your every second by pursuing equal justice for all the humans – since the very purpose of life is TO BE HAPPY…to always be maximizing the good and minimizing the bad…which requires always consulting reality. It feels so good to know you are on the right path, and I have every rational, considered proof that I am on the right path – I don’t have to, and don’t, rely on faith or moralism. Happy Happy Joy Joy!!(maybe this peaceful idea revolution needs to be danced into people’s heads??)

Don’t get me wrong here, it is wise to save a portion of earnings for rainy days and the future, it is good to take good care of yourself (plus then i don’t have to do it for you so you’re doing me a favor, too.) But one of our human problems is a general belief in the ubermorality of saving, when saving is actually with-holding money from circulation where it is put to use. This thinking that those who save up heaps and piles of money are somehow superior beings of better character providing society a great benefit is baloney in any rational, reality-based view of the picture.like i observed before: Capital formation is HIGHEST in the MOST egalitarian countries. just check out scandinavian countries.

I knocked on my neighbors’ doors and gave them the lowdown a week ago. Called everyone I could think of, including my wonderful plumber! Emailed every American on my addy list. Posted a heads-up piece about this place – Mr. Roubini’s good place – at a writer’s site I know of. Signed up on the cashout site to with-hold an amount (small, i grant you – because the machinations of dick cheney back when he was running EDS into the ground so he and cronies could be rewarded with golden parachutes for their despicableness) from the money-system. Told my senators and congresscritter in no uncertain terms that passing this bill as paulsen wants is tantamount to treason to the people of this country and told them such treachery is being observed by me, the voting constituant. ENOUGH IS ENOUGH, Congress! DO YOUR JOB, you buncha slackers!And damn our mainstream media for its having abandoned its righteous duty to fully inform the public sans bias! The msm should properly be called The Propaganda Ministry of the US Government! Most of the propaganda the citizens suffer from is propaganda by omission of relevant fact!I am waaay past suffering these fools gladly!

I just read today that U.S. consumer credit card debt is $900 billion. Talk about a simple recap plan…pay off everybody’s credit card…makes about as much sense as anything. Think how happy voters would be with a Congress that passed that bill. Too bad we just finished paying ours off.

I am painting the day and night skies with best good wishes for you and your kids, Guest.I live where there are tornadoes and blizzards, so I always try to keep a couple weeks’ worth of food, water, candles etc etc in the basement as emergency supplies.Personally, if I were preparing for societal meltdown, I’d try to get my hands on a boatload of Irish Whiskey (make mine a JJ & Sons, please) and a boxcar of Kentucky Bourbon. Best combination barter items and antiseptic I can think of.grin grin. be well. and try to help the people around you become more rational, so you will have straight-thinking people around you. That’s everyone’s best assurance that we can survive and thrive even if conditions should go hard up against us.

according to orson welles, the only reason you men invented civilisation was to impress your girlfriends.sugars? we, the women and children, are not amused these days.

I AM THE WaMu(to I am the Walrus, the Beatles)Adapted by WilliamBanzai7I am he as you are he as you are me and we are all together.See how they run like hedge fund bums from a gun, see how they fly.I’m crying.Sitting on a write down, waiting for the FDIC to come.Corporation tee-shirt, stupid bloody Thursday.Man, you been a naughty bank, you let your loans go wrong.I am the eggman (woo), they are the eggmen (woo), I am the WaMu,Coo coo, kachoo.Mister FDIC man sittingPretty little FRB men in a row.See how they fly like Bailouts in the Sky, see how they run.I’m crying.I’m cry, I’m crying, I’m cry, I’m crying.Mortgage Backed mustard, dripping from a dead dog’s eye.Crabalocker John Mack, pornographic Greenspan,Boy, you been a naughty girl and you let your risk control knickers down.I am the eggman (woo), they are the eggmen (woo), I am the WaMu,Coo coo, kachoo.Sitting in an Seattle garden waiting for Hank’s bailout to come.If the sun don’t come, you get a tan fromStanding in the Seattle rain.I am the eggman, they are the eggmen, I am the WaMu,Coo coo kachoo ka coo coo kachoo.Expert texpert CDS choking traders,Don’t you think the joker laughs at you? (ho ho ho, he he he, ha ha ha)See how they smile like ABS bankers in a sty, see how they snide.I’m crying.Semolina mortgage Pilchard, climbing up the corporate Tower.Ignoramus penguins singing Hare Krishna finance.Man, you should have seen them kicking Paulson and Bernanke down.I am the eggman, they are the eggmen, I am the WaMu,Coo coo kachoo ka coo coo kachoo(rhythmical speaking along with juba’s).Juba juba juba, juba, juba, juba, juba, juba, juba juba. Juba juba…..(speaking)

Huh? Surely you jest. It’s the hedgies’ borrowing that will blow up their lenders (mutual funds, pension funds, investment banks remaining,…etc) and their CDSes will have already turned to toast (AIG) so the lenders will sell out their stock holdings, whereupon stock market tanks more, whereupon the stock issuing co’s will need to raise capital but they can’t. Can you spell “money heaven”? It’s sort of a reverse King’s Wardrobe effect: the visible disappears. Gotta go….

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