Vote or crash!

Rally hogs in the market, PPT fighting hard to keep this thing from imploding, Dow ONLY down 240 now LOLOL. Watch for an emergencyu Fed ease today of 50 bps.

This bailout put lipstick on the original Paulson boondoggle. The representatives in Washington have been warned! A large part of the economic mindshare has spoken against this bailout. If these morons want to vote for this plan, then lose their seat at their next election and have the whole thing end up being worthless anyhow then there’s not much you can do except show the pigs the way to the slaughterhouse now!The rediculousness of it is compounded by the fact that foreign purchase of this $700 billion in new debt is extremely doubtful. Why on earth would the Chinese or Japanese purchase this debt when in all likelyhood they would get a better return at home or elsewhere. So we will end up buying the debt ourselves and get the ignoramous privledge of paying ourselves back with interest!Wake up America!

“Maybe they should today start with a coordinated 100 bps reduction in policy rates in all the major economies in the world to show that they are starting to seriously recognize and address this rapidly worsening financial crisis.”How would further, coordinated rate cuts help resolve the crisis if the problem is not the lack of liquidity but the lack of counterparty trust?

So T’d off I didn’t even correct the misspellings.This bailout put lipstick on the original Paulson boondoggle. The representatives in Washington have been warned! A large part of the economic mindshare has spoken against this bailout. If these morons want to vote for this plan, then lose their seat at their next election and have the whole thing end up being worthless anyhow then there’s not much you can do except show the pigs the way to the slaughterhouse now!The ridiculousness of it is compounded by the fact that foreign purchase of this $700 billion in new debt is extremely doubtful. Why on earth would the Chinese or Japanese purchase this debt when in all likelihood they would get a better return at home or elsewhere. So we will end up buying the debt ourselves and get the ignoramus privilege of paying ourselves back with interest!Wake up America!

“a coordinated 100 bps reduction in policy rates”. No way! This will not help and we now have to stop this ratecutting madness. This will end in a depression WeimarstyleThe problem is still the mountain of debt that has been piled up.

Scary picture!But we must voice concerns against Treasury, when NR and other eminent economists could predict financial crises we should ask government officials what were they doing during this time “Sleeping”; Maybe busy with Iraq or Iran or may be dealing with WTC; What was media doing calling them Lunatic, Mad; What was Wall street doing “Doling out Bonuses”.This is a Shame! These men should be held responsible for disaster which they will create world over by lack of actions or inability to comprehend a problem. This will create a chaos world over.

The ticking time bomb in this proposal…It is not this rule that got these institutions in trouble!!!SEC. 132. AUTHORITY TO SUSPEND MARK-TO-MARKET ACCOUNTING.(a) AUTHORITY.—The Securities and Exchange Commission shall have the authority under the securities laws (as such term is defined in section 3(a)(47) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(47)) to suspend, by rule, regulation, or order, the application of Statement Number 157 of the Financial Accounting Standards Board for any issuer (as such term is defined in section 3(a)(8) of such Act) or with respect to any class or category of transaction if the Commission determines that is necessary or appropriate in the public interest and is consistent with the protection of investors.*

What the bailout won’t /can’t fix!!! The US is in dire straights!11:11 a.m.[C] Citi CFO: deterioration in consumer credit to impact Q3

11:15 a.m. [C] Citi CFO: Q3 write-downs on SIV assets to be $1.7 billion11:14 a.m. [C] Citi CFO sees Q3 write-downs on mortgages, leveraged loans11:14 a.m. [C] Citi CFO: Q3 write-downs on those assets to be $1.5 bln

Citi axing 10,000 jobs

I’ve been reading your write-ups with great interests. This time, I must agree with both your analysis and conclusion. I am not convinced the TARP will help as the investors rightfully lost confidence in the financial markets. Should the market continue to slip further despite a voted TARP, I believe we can go and hide in our anti-nuclear shelter! Before we do so, we want to go to our banks and withdraw our cash balance and keep it safe in our bank safe deposit boxes.

Sorry, Nouriel…

http://www.filesavr.com/sifmaPlease make sure your Rep knows he can listen to this SIFMA Analyst Call.Millions for defense, not one cent for tribute!

House and Senate phones overloaded.Keep the pressure on, everyone!This is a tug of war. We need to keep our capital, and use it to repair our economy. Wall Street wants to grab what’s left and run.Pick up that rope, and PULL! PULL! PULL!www.house.govwww.senate.govNO deal until our money gets invested into our real economy!

MS CDS spread at 12% wow, thanks Nouriel for that statistic.http://www.filesavr.com/sifma

I have hidden $50K worth of cash and gold in a safe deposite box. I may withdraw more this week from my bank and put it in the box.Am I being paranoi?

Looks like under 1170 is the “no go zone” for the S&P, 10,800 for the Dow…I am amazed with what is going on, combined with the horrid economic news out the last several days, stocks are holding up as well as they are!

Yes, I was thinking about doing that. U.S. gov. is goint to monetize this nations debt.

The Dow should be @ 8k if there wasnt so much Gov intervention. it is going to be painful anyway

S&P down 50 to 1163

http://www.filesavr.com/sifmaMake sure they know before the vote. All the stuff they were told they could promise us, is fluff. It’s Paulson, original version, basically.If they vote yes, they can’t say they weren’t informed.

What we need is wage/personal income inflation to increase the capacity of the homeowners to pay for all of these 100%+ LTV loans. This could be done quite simply by applying a $2.00 a barrel tax on imported oil each month, that increases by $2.00 each month for a period of 60 months. Then take this revenue stream and pass it back to the taxpayer as quarterly stimulus checks. This would eventually encourage US domestic energy production which has a high job creation multiplier, 4X plus. More US wage income, problem solved.

I took another turn today and sent the following:To: Senators Susan Collins & Olympia Snowe andCongressmen Tom Allen and Mike MichaudFrom: John LevesqueDate: September 29, 2008RE: The Paulson Bailout BillThis is my second letter to all of you. I wish to convey my level of dismay at the scope of the bill you shall soon vote on. I have to tell you all that in my reading of the past four days, I have found no fewer than 10 variations of an approach that would address the needs of the taxpayer, consumers and markets without such potential devastation for the taxpayers of the US. Have any of you considered any other options?I am a medical professional and not some knee-jerk activist. This bailout is really only a handout to the banks and financial institutions that created the mess in the first place. Why are my tax dollars being spent to make sure the rich, powerful and well-connected, experience no losses on bad decisions? Why am I being made to bear the brunt of the cost of such a give away and why should I pass that cost on to my daughter and her children?The basics are this folks: we carry too much debt in this country. Sooner or later (likely sooner) other countries and investors will cease to believe we will ever pay back the unfathomable sums we have borrowed. Our standing in the world, tenuous enough after the last decade, will continue to become marginalized. This is a bad plan.I implore all of you to seek alternative plans that will more appropriately address the taxpayers and families (who vote for you, not the business entities) and their needs. This economy, 70% based on CONSUMERISM is not able to continue when the consumer has no money. The banks, having re-supplied themselves with reserves will still be unlikely to loosen lending since THAT’S HOW WE GOT HERE IN THE FIRST PLACE! Go and find information from ECONOMISTS – not lobbyists – such as Nouriel Roubini and others who have offered more sensible alternatives. By the way, most of these economists are not surprised that we are in this mess. They saw it coming long ago – why didn’t Paulson and the people in government?I am letting all of you know that as of today, I am a one issue voter. I am incensed and I will promise to work for your immediate removal from office if you vote for the passage of this bill. As promised, my letters to editors will go out against not just the bill, but against you personally for supporting it and betraying your constituents. I have a voice and I will use it to it’s fullest to call for your removal if this passes. I am not loyal to either party – I am loyal to my interests as an American – and this bill espouses everything wrong with politics in this country today. Don’t think for a second that I am alone. There are many more of us out here than you know – and you will feel our collective power in the form of a pink slip in November if you chose to vote against the ones who have given you your jobs. That I promise.

Listening to C-SPAN… the majority are in the “we have made this a better bill” “the cost of doing nothing outweighs the cost of the bill” “I am convinced the taxpayer will make money from this bill”Hello Fascism.

UH-OH!!!12:53 p.m.Fitch lowers U.S. life insurance sector outlook to negative

you dont need a meterologist to tell you the wind is blowing..- i cant rem who said that but.. there it is..ppl need logic and not rely to much on data/quant research.. social science is such that it is impossible to quantify and separate cause and effect..want to find out the root cause of all this? explore :www.mises.orgmrskeptical

tax all labor offshoring

Yikes!!!

The global economy has ground to a halt…1:19 p.m. Nov. crude down $7.91, or 7.4%, at $98.98/brl on Globex

Alright Miss America, if the vote is passed, should we expect the Dow to rally 500 points?

GOLD GOLD GOLDToday is significant in a number of ways. Mark today down as the day gold decoupled from the general commodity market.

Dow surging only down 190 now!!! WHats happening???????

current totals:yay=111nay=84no vote=239

122 for 111 against so far!

136 tied NOW~~~~

NO PASSAGE!!!

196 yes221 NO!!!!!!!!!!!!!!!!!!!!!!17 left

On March 26, 2007, Bill Fleckenstein wrote, Greenspan….the former Fed chief pushed subprime lending like a shady mortgage broker as he helped promote the second asset bubble in a decade. (Contrarian Chronicles makes this point in several articles: See archieves)Amid all the confusion over subprime lending, it’s worth bringing one fact to the fore: Alan Greenspan was recommending adjustable-rate mortgages in February 2004 — just as short-term rates were making their lows. Then, in a speech on April 8, 2005, he extolled subprime lending:”With these advances in technology, lenders have taken advantage of credit-scoring models and other techniques for efficiently extending credit to a broader spectrum of consumers. . . . As we reflect on the evolution of consumer credit in the United States, we must conclude that innovation and structural change in the financial services industry have been critical in providing expanded access to credit for the vast majority of consumers, including those of limited means. . . . This fact underscores the importance of our roles as policymakers, researchers, bankers and consumer advocates in fostering constructive innovation that is both responsive to market demand and beneficial to consumers.” …Regular readers are well aware of my opinion of the Fed, which has not been widely embraced. Last Wednesday, however, it was echoed in the mainstream press, via Andy Laperriere’s outstanding article in The Wall Street Journal, “Mortgage Meltdown.”… Not only does Laperriere debunk the myth that subprime is tiny and the fallout will be minimal, he also lays blame where blame is due:”The fact that Congress is now holding hearings on the fallout from the second major asset bubble in the last decade should prompt some broader questions. For example, what role did the Fed’s loose monetary policy from 2002 to 2004 play in fueling the housing bubble? Should the Federal Reserve re-examine its policy of ignoring asset bubbles? Asset bubbles are harmful for the same reason high inflation is: Both create misleading price signals that lead to a misallocation of economic resources and sow the seeds for an inevitable bust. The unwinding of today’s housing bubble is not merely an academic question: It is likely to inflict real hardship on millions of Americans. To reduce the risk of a similar outcome in the future, it is important that policymakers, economists, and policy analysts correctly diagnose the root cause of the current housing bust, not just its symptoms.” …(For those who’d like to really understand more about how all the pieces of the mortgage food chain fit together, click here to listen to Jim Grant…)But without the Fed’s policy — notably Greenspan’s during his entire 18-year tenure — of repeatedly bailing out reckless speculators, the problems we face would, in all likelihood, never have reached such gargantuan proportions…http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/BlameGreenspanForThisBubbleToo.aspx

dow = -500 IN A FLASH

Nice bit of window dressing there by the TPTB to force Congress into the “Yea” lobby just before the vote. Very elegant mini-crash to scare them to do the bidding of their masters on Wall Street.

Is there any chance of Horse Trading, that is what we can expect from these unethical politicians

PRAISE THE LORD! PRAISE THE LORD. PRAISE THE LORD. It has failed!!

Go to http://www.mises.org and/or http://www.lewrockwell.com and from there access “The Bailout Reader” and you’ll get lots of info on exactly how the Fed’s interest rate policy created the Real Estate bubble…it was certainly ‘no little effect.’ The Fed’s been blowing bubbles since the day it was founded….

ALL THE WEALTHY PEOPLE WHO LEAVE IN MAJOR CITIES IN USRUN AWAY GO TO COUNTRY SIDE.YOU ARE NOT SAFE IN THE BIG CITIES THERE WILL BE A MAJOR ANARCHY. AND RIOTING.

House votes on bail-out bill (HR 3997): 435 congressmen/women; 226 ney / 207 yea / 1 no vote. Time Remaining: 0:00live feed @ http://www.cnn.com

Motion to reconsider is on the table HR7175… motion to improve section 7A needed. vote ongoing

The House leaders can now hold private meetings with those who voted no to try to convince them to change their vote, or to offer them “incentives” to change their vote, and they can bring the bill up to a new vote later in the day.There is reason still to be in contact with your representative.

YOU ARE DREAMING MY FRIEND.

FROM TUNE OF YOUR VOICE YOU SOUND SO SCAREDON’T BE SO SCARE, THIS IS ALL MONEY. ARE YOU ALIVE THAT’S IS WHAT COUNTS.CAN YOU WALKCAN YOU SEE CAN YOU BREATHE ENJOY LIFE DON’T WORRY

suck my ass “friend” !!! and scare the morons like you !!!

Heed Brian’s advice. Celebrate your colossal victory, but only long enough to re-load the cannon!Be ready, be energized, and by all means Fight!

. 1917 BOLSHEVIK TYPE REVOLUTION WILL EVENTUALLY HAPPEN IN THIS COUNTRY.

As a canadian I have tremendous admiration for the democracy at work in the USA as shown today by the rejection of the bill.Frankly, I thought there was 0% chance that the bill could be defeated!The fantastic american people proved me wrong. But as other bloggers mentionned above, the fight is not over and manipulated markets are a reality and greedy congressmen abound so I hope the american people will keep on the fight with the ecstatic admiration and full support of your fellow canadian friends (and blogging help).I hope all the representative who voted yes will bite the dust at the coming election. Let’s publish their name!And we need to start a fund to pay for a statue for Nouriel Roubini to be erected in front of the congress !

“This is essentially Mr Paulson’s bill to help his friends and I can’t buy it,” said Paul Broun, a Republican of Georgia. “This is a huge cow patty with a piece of marshmallow stuck in the middle of it.”Almost restores my faith in democracy – except that today is the exception, not the rule. And there are three days to go until Thursday, so you can bet all the might of Wall Street will be looking to shift 20 votes by whatever means necessary.

can you imagine the EGG on hankNbens face if this si the worst that happens from the bill not passing!!! “Oh, it will be the end of the world if you don’t pass it”! AHAHAHAHAHAHAHAHA FU HANK!

I just remembered, 2cents said this already — in a grand manner. I repeat: Great!!! Down in flames. Now get those who voted yes and nail them up and vote them out!! If someone changes their vote from nay to yea castigate them til the end of time on top of it!

Wow, I thought that there was suppose to be financial armageddon,2000 to 3000 point drops, if the original bill wasn’t passed within24 hours.

Paulson = Liar

http://www.house.gov seems to be overloaded. I hope the first to see how the votes went will post it here.

A family member from Irvine, CA (who’s a branch manager at Bank of America) told us two weeks ago that her bank held a “workshop” where the last two days were dedicated to discussing their bank’s new security measures. During these last two days, the workshop included members from the Homeland Security Office who instructed them on how to field calls from customers and what they are to tell them in the event of a national disaster. She said they were told how only agents from Homeland Security (during such an event) would be in charge of opening safe deposit boxes and determining what items would be given to bank customers.At this point they were told that no weapons, cash, gold, or silver will be allowed to leave the bank – only various paperwork will be given to its owners. After discussing the matter with them at length, she and the other employees were then told not to discuss the subject with anyone.The family member has since given her notice to quit the bank.I found the news alarming and decided to find out more myself. On a trip to my bank here in Houston, I remarked to a young bank employee (who’s new there), “well I guess you’ve been told all that stuff by the manager and the Homeland Security about what to tell your customers” – and to my amazement, the young woman came right out and said yes she’d been through all that, then whispered to me across the counter, “but we’re not supposed to talk about – I could lose my job.”

http://bellaciao.org/en/article.php3?id_article=9995

OK. Celebration over. Everybody back to work.First lesson; all of the problems we had an hour ago still exist. We have only not made matters worse.Second lesson; MSM isn’t very helpful in understanding the issues. Web worked better. Time to use that to find a solution.That discussion should start now.

First the man in the dark alley says I need a few bucks to get by. But your hesitation soon prompts him to pull his gun; the request becomes a demand.John Peters says when U.S. banks looked more and more like poor credit risks, Uncle Sam’s bailout request quickly turned into a threat. “Taxpayers would surrender,” he said, “or face certain disaster.”Peters (Grand Theft Taxpayer, LewRockwell.com) then brings on the wisdom of H.L. Mencken”“The whole aim of practical politics is to keep the populace alarmed and hence clamorous to be led to safety by menacing it with an endless series of hobgoblins, all of them imaginary.”Go for it, Barney!

They both supported it in the debate.

I understand all this, Mr. S. Quant never can show cause and effect. I want to know if anyone can give a rough picture of the magnitude/relative importance of the Fed policy in all this.

ELECTED PRESIDENT OBAMA WILL ENTERS WAR WITH IRAN AROUND FEB OR MARCH 2009 THE WAR WILL BE THE MOTHER OF ALL THE WARS, WHICH WILL GIVE BIRTH TO ALL THE WARS AROUND THE GLOBE.HAVE A GOOD YEAR EVERY ONE.

Why dont the lawmakers hold an emergency session with Roubini,Stiglitz,Morici and the like? This is not a time to rejoice really..this is a total mess.

3:00 p.m.Treasury will work with fellow regulators on markets3:00 p.m.Treasury to use ‘all tools’ to protect markets

Just because we need an interventiondoesn’t mean we need a HORRIBLE intervention.

Senate Republican leader John Boehner says the $700 billion financial rescue will not go up for another vote today.

The markets are holding in incredibly well here I think…

Gads. You’d think people would know how to write HTML in this day and age

I read somewhere in the last 2 weeks that nullifying the CDS’s would stop the bleeding. There would still be losses, but the potential cascade of $60T of CDS would cease to exist. This could ease pressure on the top end.Stopping the waves of foreclosures would stop the bottom end, so resetting the value of all mortgages (to include the folks who bought within their means) would help.Finally, has anyone addressed how the sharp decrease in property values is going to hurt local government revenue, since most of that is based on property tax? I think this is getting overlooked.

I wonder who said:“If the current “rules” don’t change, and I were to make a long term prediction, (i.e. the bubble is forced to fully deflate in a controlled manner), I see DOW somewhere between 10,800 and 10,100. (S&P 1,180 and 1,100)If control is lost, I see a bottom at DOW 8,500 and S&P 900.@ Allesandro, As we’ve all know, TPTB have been controlling this all along through access to credit… (as I stated 100x) “it’s fixed income… losses and gains can be reasonably calculated… etc…”I would say we are precipitously close to TPTB losing that “control.”My only question now is… If control is lost, will my bottoms hold???I wouldn’t bet on it… …but I wouldn’t bet against it either.Ssim Acirema

HORRIBLE need for REAL interventionnot this BS.

IF there is a problem with money not moving through the system (people can’t get loans), then wy not skip the middle men (wall street) and set up a federal loan bank that can give loans to deserving company’s/etc directly to “meet payrolls”.Again IF there is a problem, frankly I know of no small business (including my own) who is having any of those problems (in fact I just got another 0% check in the mail from a credit card company offering to let me use up to $50K at 0% til march of 2009).Some business’ need to fail and NO business shuld be “too big to fail”.

DEFINITELY … A great effort by all…BUT too early to celebrate …Keep your focus …I am sure that this is not over yet…more political games.The correct policy must be considered now.What happens to Paulson now?Valid alternatives must be on the table now.While the leadership has been wasting timewith its shenanigans, the plans of others have evolvedand should now be on the table.Kucinich gave a HAT TIP to Prof./Dr.Roubini in the floordebate this morning.Best…

cities, particularly in the most effected markets have been laying off workers at an accelerating rate. The bonds will be next.

I received one of those from WaMu on the day it was seized by the FDIC. The default interest rate wa 30.99%. WaMu was betting that many customers would pay late. Nasty.

Don’t think it’s over! It’s just the first round. The cheaters in CONgress are going to try and twist the hell out of the arms of the dissenters and try and get thing to a vote again probably tomorrow. You watch!!!!!!Keep the pressure up. Did you see the FED “injected” $630B into banks today to keep them afloat. How did they do that without CONgress support? If they can do that at the drop of a hat, why the big stink over this vote……screw it…the fed can just do what they want.REPEAL THE FEDERAL RESERVE ACT! FIRE BERNANKE AND PAULSON. Listen to the ecomomists that know how to fix this issue and let’s move on toward rebuilding the economy based on transparent books, and honest principles.Just MHO.

oh no doubt…..I also assuime IF those compnay’s go under the money “borrowed” would default to some outlandish rate also.But frankly I’ve run a small construction company for almost 20 years now ..on a shoe string.When I can get FREE money to put in a short term CD (even at 2.5-3%) I can take that risk.My current banks all have B+ or higher FDIC ratings.I can get the money and be out nothing , if some “high finace” genius wants to give me free money to get a few dolars for a big mack….LOL.

I never thought I’d be rooting for conservative republicans to prevail. Talk about strange bedfellows… This morning I wrote that I was low on ammo so I would lay low and wait for a clean shot. I’ve just been resupplyied. Now I will write to my congresswoman, Kirsten Gillibrand, and thank her. I will also write to her to urge her to support an alternative plan that includes real relief for the distressed homeowner, ala Roubini. In fact, I’ll refer her, Hillary Clinton and Charles Schumer to this website. I urge you all to do the same with your congressional representatives. We have the opportunity to create a bill on the side of the angels. Let’s go for it.

maybe the PPT didn’t get the memo?

House Minority Whip Roy Blunt, the Republicans’ top vote-counter in the House, tells a news conference that he miscounted — he believed Republicans had a dozen more votes for the bailout than they really did. He blames “partisan discussion” for the failure of the bill.

If We The People figure out that We have power and judgement and the ability to influence the political process, then America will never be the same again. it will be better!

Uh oh. Morphing again?I agree TPTB are losing control, day after day.Are you piling up cash and gold finally?

When you call to thank your Representative or ask them to change their vote to No (there’s sure to be a revote), or call your Senators, be sure to ask them to listen to the audio of last night’s SIFMA Analyst Callwww.filesavr.com/sifma

FT:Would you please seed the debate clouds, and set out your recommendations on next steps, issues to be decided, etc.?

When the monster shows up, as any horror buff knows, if you don’t have a silver bullet or a stake to drive through the heart, you’re out of luck. Question, for our side, was Professor Roubini our silver bullet to this bailout plan? His posts Friday, Sunday and this morning were powerful thrusts against the monster. Is there any doubt that they carried weight with the nays?Bloomberg News, sent to my iPhone this morning before the vote, quoted Dr. Roubini thusly:Two Issues“You’re not resolving the two fundamental issues: You still have to recapitalize the banking system, and household debt is going to stay high,” said Nouriel Roubini, chairman of Roubini Global Economics and economics professor at New York University.”

WOW! Down 777 at the close-largest one day drop in history. Futures already limit-down for the morning so buckle up!

The good news out of today was that the will of the people, for better of worse, was represented as it should be. My faith in politics was somewhat restored today.

FF futures have a 100% probability of an inter-meeting 50 bps redux, could be tomorrow morning.

The FED has added $630 billion in swap funds in the market today. $330 this morning and $300 after the bill failed! So plan “B” is in effect as of now.Surely Congress can see that the Treasury and FED are thumbing their noses at them. What Congress doesn’t deliver the FED and Treasury will circumvent!I any of these yea voters have any chance to redeem themselves before they pack their bags, they can stick around and dig into the details of the FED’s and Treasury’s swap programs and find out just where everything is going and make it public!Paulson & Bernanke … Goodbye!

Daryl Montgomery, organizer of the, NY Investing Meetup, writes about the failed Emergency Economic Stabilisation Act of 2008in this post.He notes that the bill was much too small to have any significant impact:

Even if the bill had had some means in it to revitalize the U.S. banking system, this still would not have happened. The simple reason for this is that the bailout was much too small to have had any significant impact. At no point in the verbose discussions and pontifications in the congressional hearings did anyone specify approximately how large the problem was that this bill was trying to address. I personally had no problem of finding an estimate of $13 trillion of bad loans (which I think is much too low). The Treasury, the Fed and the congressional research staff either couldn’t determine this number or didn’t want to discuss it publicly. If they had, the absurdity of this latest government endeavor to deal with the credit crisis and its real intent as just a give away to big Wall Street banks would have become immediately obvious.

Montgomery also notes that the protection of taxpayers was a sham:

The taxpayers were supposedly protected in the bill because the government would get some ownership rights in companies that had their bad debts purchased. Rights in a company that fails – and most if not all of these companies will fail – are of course worthless. If after five years the government is facing a loss in the program, the president was required to ‘submit a plan’. How submitting a plan would magically restore lost money from out of business companies was not detailed in the bill description.

Who ever is on CNBC right now is a clown, CREDIT = Capitalism?? BullS–t! Embarrassed? Those that voted for it should be ashamed of themselves.

From the genious Hussman:”A better approach would be for the government to provide capital directly, in the form of a “super-bond,” in an amount no greater than the debt to bondholders. The “super-bond” would be subordinate to customer liabilities, so it could be counted as capital for the purpose of capital requirements, and would be seen by customers as a legitimate cushion of protection. However, in the event of bankruptcy, it would have a senior claim in front of both stockholders and even senior bondholders. Do that, and you’ve actually got a mechanism to protect the financial system while at the same time protecting customers and taxpayers. Ideally, the super-bond accrues a relatively high rate of interest so that financials have an incentive to shift to private financing as soon as possible, but you would also defer the interest until the bank meets a minimal level of profitability to make sure that the financing doesn’t strain the institution’s liquidity.”http://www.hussmanfunds.net/wmc/wmc080929.htm

4:44 p.m. Paulson: Treasury tool kit is substantial, but insufficient4:43 p.m. Paulson: Committed to use all tools to protect economy

I’m with you Gloomy. We can take the pain. We can also take back our country.

http://www.whoshalllive.com/video.html

This is the link:http://www.cnbc.com/id/2694525045% to 45% as I write. Cast your vote now!

One more poll on CNN home page:http://www.cnn.com/Vote ‘Good news’.You may probably cast more that one vote using different browsers (i.e. Internet Explorer and Firefox). They rig the game, we can do it as well.

The shadow banking needs to go. We need more transparency moving forward so that the Market can truly assess risk. There is nothing wrong with valuing securities other than mark to market as long as you state why. In fact, similar securities being held for similar purposes might stabilize the valuation even in unsettled times. Transparency allows a less regulated environment. That was the problem, black box finance and little regulation.

Prof, I respect your opinion immensely, but I do not understand how this rhetoric of bailing out Wall Street continues. It is ridiculous that anybody still says that. This plan is to help bailout America, whether or not it is flawed, how can we sit here honestly assume the economy will be any better with nothing in place. We aren’t even talking fundamentals anymore, this has gone beyond that, bank runs ultimately by definition are psychological and we need to calm people down. Also I am not sure how your argument of this hurting the tax payer works. Politically, if Congress couldn’t pass this bailout plan, what makes you think they will be able to raise taxes in a flailing economy with lower real wages and higher unemployment? Additionally, the top 10% wage earners in America account for 70% of the tax revenue, so we are really asking Wall Street individuals to bail out themselves. I, for one, would rather be employed and paying higher taxes than unemployed in a rapidly deteriorating economy. But politicians won’t raise taxes in this environment, instead all this money creation will lead to rampant inflation, and then we’ll be really screwed.

An article that cites Roubini and has some interesting points:http://www.informationclearinghouse.info/article20900.htmPlease, note these periods:Besides, there’s no guarantee that the banks will use the money in the way that Paulson imagines. As one Wall Street veteran explained to me, “I don’t see one penny of that $700 billion ending up helping the broader economy. I see it being used to prop up share prices so the insiders can salvage as much as possible when dumping their shares”.Indeed, the $700 billion is just part of a massive “pump and dump” scheme engineered with the tacit approval of the US Treasury and the Federal Reserve. Once the banksters have offloaded their fraudulent securities and crappy paper on Uncle Sam, they will do whatever they need to do pad the bottom line and drive their stocks up. That means they will shovel capital into hard assets, foreign currencies, gold, interest rate swaps, carry trade swindles, and Swiss bank accounts. The notion that they will recapitalize so they can provide loans to US consumers and businesses in a slumping economy is a pipedream. The US is headed into its worst recession in 60 years. The housing market is crashing, securitzation is kaput, and the broader economy is drifting towards the reef. The banks are not going to waste their time trying to revive a moribund US market where consumers and businesses are already tapped out. No way; it’s on to greener pastures. They’ll move their capital wherever they think they can maximize their profits. In fact, a sizable portion of the $700 billion will likely be invested in commodities, which means that we’ll see another round of hyperbolic speculation in food and energy futures pushing food and fuel prices back into the stratosphere. Ironically, the taxpayers largess will be used against him, making a bad situation even worse.In short, it won’t work. Nor is it designed to work. The bill is just Paulson’s way of carving a silver canoe for he and his brandy-drooling investor buddies so they can paddle away to some island paradise while the rest of us drown in a bottomless ocean of debt.

It’s amazing how many people, including some on this blog, are totally misreading the situation.The House Republicans fear socialism, even this “socialism for the rich”, more than collapse of the economy. They are mostly well-trained rabble, pious schoolchildren, who sincerely believe the free-market ideology that led to this disaster in the first place. They have been more than happy with handouts to the rich for decades! But their deep fear of anything non-capitalist has brought them to total absurdity: they want bankrupt businesses to buy government insurance and to escape capital gains tax, even though these businesses obviously have no revenue!Do any of them understand that the day-to-day operations of the US government and military are totally in the hands of foreign rival creditors? We can and should hate Paulson but at least that lying miser understands the stakes for US capitalism and world power. The “no” vote is a sign of deterioration not “victory for the people.”Do these small minded rightist fools understand BWII, the international flow of funds, the organization of world trade, etc.? Do they understand the link between the military, petrodollars, bonds, and export-led growth? OF COURSE NOT. They just want their small minded and frankly shopkeeper fascist fantasy that they too can one day get rich.But US capitalism has happily cultivated these Panglossian delusions for decades, if not two centuries, because it has helped them repress various domestic untermenschen. So the US deserves such self-destructive stupidity. It is the economic equivalent of falling on your own sword.Darkie

please cite me a legal documentstating we are OBLIGED under the law to pay taxesif you can then i’ll pay themin the US

Totally agree…..

Anyone notice today on CNBC how haggard and wore out all of these commentators, i.e. poll dancers, pimps, and 2 cent horrors were looking and acting like today? The looked and sounded really pathetic,. like a bunch on whinners and babies,..Whaahh,..F—ing,..Whahh, we didn’t get our precious bailout,…” I think the pitch in Marie Fartoroma voice went up a few chords today, she looked mad like she just lost the familly fortune. They keep just saying the same thing over and over that “this is not a bailout of wallstreet”, like a damn broken record that is skipping.Gee,.. I wonder if any of these morons ever stopped to think that maybe just maybe the will of the people was spoken today in one voice,..NO BAILOUT for WallStreet Crooks,.you slime-bottom-sucking PiecesOS! You can all go to hell.

Every cable station and network is owned by some company who is affected by this… no more advertising and they we won’t have to lsiten to him… Advertising Money is tanking…. they will never be unbiased….

Bless you a thousand times, Medic.

Agree. This is documented in the audio of the SIFMA Analyst Meeting available herewww.filesavr.com/sifmaand note that there is no requirement for relending.We should keep the Direct Purchase mechanism and simply get rid of the Market Purchase mechanism, as described to the analysts on that audio. Then the bailout package will be fine, they can pass it and go home.The banks will scream bloody murder but they don’t _have_ to participate in the program …

Debt Rattle today (would you believe Roubini is mentioned in one of the comments; Roubini is ubiquitous):If you go to the racetrack and bet on a horse, you receive a piece of paper that confirms the bet you made. There are many different varities of bets possible; for now, let’s say you simply bet on one specific horse to win the race.After the race is over, you have either won your bet or lost it. There’s nothing difficult about the process, anyone can -learn to- understand it, and everyone, except in very rare circumstances, accepts it, both the winners and the losers.What is happening in world finance these days is that a group of very heavy betters have become very heavy losers, and they have done so with borrowed money. In the past few years, in order to hide their losses, they have turned to a very clever little trick: they want to make us believe that the race is not over, even though we can all see that it is. In fact, if they have their way, the race will never be over, unless and until their horse wins.The US government has joined the argument on the side of the losing betters. They have allowed the losers – who are their friends-, for years, to hide their predicament, their losing tickets, through Level 3 and off-balance sheet “creative accounting”. Now that the government’s betting buddies’ creditors are losing patience, and demand their money back, which the buddies don’t have, the Fed and Treasury want to buy all those losing tickets, with money that belongs to the taxpayers whose best interests they are presumed to represent.And they up the ante today: the president declares that this will cost the taxpayer nothing; and if you believe that one, you’ll like the guys who claim that there are profits to be made on this avalanche of losing bets.Now there’ll be plenty of “experts” who are more than willing to tell you that comparing mortgage-backed securities -to take just one sort of bet- with horse racing is inherently flawed. Their argument will be that there is true value behind the securities: the homes that were purchased with the underlying mortgages.At first glance, that may look plausible: it seems clear that the homes are not all of a sudden worthless, so how could the mortgages and securities be? My first thought is that the horse you bet on is not worthless either just because it lost one race. But that doesn’t make you win your bet, does it? And the horse is still tired.There are deeper problems with the “the home still has value” argument. The most flagrant is the actual purchase prices, which doubled or tripled in a decade, while no value was added to the home itself. From that follows that many homes were sold at prices that people couldn’t truly afford. The US has for that reason already seen milllions of foreclosures, with many more inevitably to come. And the elevated prices, of course. are also the ones the securities are based on.So perhaps at some time in the future your losing horse might win a race, and perhaps at one point some money can be made on a new mortgage for a foreclosed home. But that makes no difference for your losing bet, and neither does it make the securities valuable again. Both races are over. For good. Which makes it impossible for the US taxpayer to play even on the losing betting tickets their government is about to buy with their money, while making a profit on them is too ridiculous to seriously discuss.If home sales ever recover to any kind of extent, it will be at prices that are far lower than they have been so far in this millenium. That is the only way to make them affordable. And even if it happens, it is going to take years. In the meantime, the gambling losses will have to be paid.Your government tries to convince you that your life will be miserable without their losing betting buddies. If you ask me, it will be much worse with them, because if you want to keep them around, you’ll have to pay their debts. And they’ll just use the money to go bet on the next race. Maybe you should keep the money and buy your own tickets. That way you get to keep the profits too, if there are any.But if I were you, I’d lay off the gambling for a while. It looks to me like a sure bet that you’re going to need every penny you have just to feed your children.PS: For stock markets, these are dark days indeed. I see Amsterdam lost almost 9%. Fortis Bank got $17 billion last night, but still lost 23%. Wall Street is a bit better so far, but National CIty (-50%) and FIfth Third (-35%) start to look like prime candidates for the next round of trouble.

One point in favor of waiting: Pelosi might be gone. She looks bad in this episode. She also looks bad from the troubles with the Olympic Torch passing thru SF. The Chinese in her district will all now vote against her.

Well said, Darkie! You’re right that these republicans have a “shopkeeper fascist fantasy”. However, I can’t help thinking Paulson engineered this whole collapse. He surely knew that requiring that his actions be not subject to judicial review would get people riled up. I know it got me plenty riled. Thus, I’m inclined to believe this whole thing was engineered as Naomi Klein would argue in her book “The Shock Doctrine”. Afterall, the rich are indifferent to the state of the economy. They buy low and sell high and they couldn’t get poor even if they tried, given the interest on interest that they earn. This will discipline the proletariat, which includes just about everyone nowadays. Then we will recognize our true masters. It’s all been planned way in advance, I surmise.

I sincerely believe that Paulson and the government are working against time for bailout cover up to keep secret the rampant fraud in the mortgage markets: fraud that could topple their financial system if it becomes known.Catherine Austin Fitts, former assistant Secretary of Housing, believes that “allegations of mortgage collateral fraud are true—not just for FHA and Ginnie Mae at HUD but across the board throughout the mortgage markets.” She writes:”In 1994, after the first FHA/HUD financial audit was published, a mortgage banker came to see me. He was a serious engineering type who clearly worked hard and had mastered the details of his business. He was distressed, he said. For decades he had been keeping a tally of total outstanding FHA/HUD mortgage insurance credit. He had brought printouts of his database for me. It turned out that the government’s published financial statements showed the amount outstanding was substantially less than the actual amount outstanding. He was sure. I assumed that the guy was crazy. If what he said were true, then the U.S. Treasury and the Federal Reserve would have to be complicit in significant fraud, including securities fraud.”After I began researching HUD fraud in the late 1990s, I would be contacted by people with experience with HUD fraud. They insisted that the same home was being used to create ten or more mortgages that were placed into different pools. They alleged that Chase as the lead HUD servicer and the other big banks were implementing such systems. This was why we would see the same house default two, three, or four times in a year, they claimed. FHA mortgages had to be churned through multiple defaults to generate the cash to keep all these fraudulent pools afloat. This, they insisted, was all going to finance various secret government operations and private agendas.This issue of collateral fraud was repeated in other markets. As I started to learn more about precious metals and the commodities markets, I would hear story after story about precious metals arrangements in which what investors really had was a bank credit—there was no bullion behind the arrangement.I have come to believe that the allegations of mortgage collateral fraud are true—not just for FHA and Ginnie Mae at HUD but across the board throughout the mortgage markets as well.What this means is that Freddie Mac’s and Fannie Mae’s obligations must be converted to what is essentially government debt. Such conversion means that investors simply don’t care if the mortgages have a lien on anything real or not (at least for the time being). Otherwise, there would need to be a process by which all the defaulted mortgages can be sorted through to determine which of the mortgages are legitimate and which are not.Creating and managing such a process would indeed crash the global financial system. It is hard for a multi-trillion-dollar financial system to maintain liquidity when contracts and laws are meaningless.The challenge for Hank Paulson is that by increasing the national debt by $5 trillion—whether collateralized by real estate or by phony paper—he can delay the day of reckoning, but he cannot cancel it. (Posted August 14, 2008)Catherine Austin Fitts served as Assistant Secretary of Housing and Federal Housing Commissioner in the first Bush Administration. Her company Hamilton Securities Group served as lead financial advisor to the Federal Housing Administration during the Clinton Administration. She is a former managing director and member of the board of the Wall Street investment bank Dillon, Read & Co. Inc.http://news.goldseek.com/GoldSeek/1218694140.phpA similar charge has been made by Carolyn Betts who worked for FHA’s lead financial advisor in carrying out the congressional mandate that HUD enter into “negotiated” sales of its nonperforming multifamily loans to state housing finance agencies. (undernews at prorev.com at sam smith’s progressive review)

This is the best summation I’ve heard yet of this handout and the behind the scene machinations.This representative has a plan called Wall Street Reckoning. Don’t miss it and pass it on: http://redstaterebels.org/2008/09/wall-streets-greed-game/

Ditto that. For the first time in months, I have some hope for the future generations. Lets pray that the leaders of the US can finally come up with a restoration package that makes sense.

Hey MBC -I just checked out your video – Dude, get some help.Religion has been used since the dawn of time to control the masses with fear. You must be very afraid……

Well of course by that definition of “solving the ills of WS” the only solution would be to pay above market for that toxic junk” and the taxpayer should not do that.But I would be willing to help indirectly. If we reflate the housing market, it would make lots of that stuff less toxic. Ben’s printing press should have that effect. Keep it up Ben.Now the justifications (especially Ben’s) for the Paulson plan is that we should buy the stuff now, at above market, then whenever the market reflates it will make the taxpayer whole. Can you spell “moral hazard”? When it’s only the taxpayer at stake, I doubt either the government or the Fed would care much about reflating.No, the time to force reflation is NOW, when the banks are at stake. Now Ben is doing his job, don’t change a thing!(if that’s possible despite the massive political pressure being exerted.)

Look. The plan would not bailout America. That is the problem. There are better restoration ideas out there which make a lot more sense. It is just that these plans all require Wall Street to take most of the pain. Can this pass through Congress and the Senate, where there is so much vested interests in these govt bodies? The leaders of the US of A need to decide what is their duty: to the country or to the bankers…

I am glad to see that representatives are still listening to the public. Today is a great day for American democracy. It looks like the greed of the market will be followed by fear, which is a healthy thing overall. Most people investing in the market have no idea what they are doing or they would have moved to limit their risk in a recession by reducing their exposure to the stock market.

I am not sure I would agree with you about reflating the housing market. If anything, I would say this is a very bad an non-welcome idea. More to the point, Ben can inject liquidity, but he can NOT dictate where it goes – I think we now have a one-year long proofs full with unsuccessful Fed intervention to confirm this conclusion – if he could, he would have done so a long long time ago. Besides, even if we assume inflation would propagate uniformally through the economy (an assumption I am strongly against), it will have 0 real impact on relative RE prices (probably negative impact on mortgages – as rates are inflation-adjusted) and therefore would not solve a thing about the toxicity of of MBS and related papers.However, I find your opinion about Fed monetizing debt through unsterilized liquidity injections somewhat worthy of consideration, at least from a rhetorical point of view – sharing the pain with lenders. But I am not sure I would want to go that way, lenders (China) can still raise the hell out of borrowers through much higher bid rates. I would try to summarize the Options we have going forward.1-Status-quo: Fed keeps sterilizing its injections and Treasury wiping out investors each time it bails out a failing institution: a slow and lengthy deflation mainly driven by deleveraging and asset fire-sale.2-Reflation: Unsterilized interventions, debt monetization3-Redebtization: Treasury and other government agencies (Fed, FDIC) are being transferred the cost to save and recapitalize the banking system.4-”Evaporflation” (MA): forced or voluntarily. Debt reliefs and debt unwinding.The end game will depend on which combination would the market actors be (forced) to take.As a consequence deciding where to safe-haven one’s wealth is tricky and almost unpredictable as it is dependent on Exogenous factors (some bureaucrats’ decisions) – but I would recommend one should split the portfolio between Gold, US$ and other foreign currencies (Swiss franc, Euro, JPY, Yuan)

1. Basically this is what the Paulson plan would institutionalize. Rather than borrowing from the taxpayer and lending to the banks, we take a big lump all at once from the taxpayer and give to the banks.2. I think this is the best of the bad options. It could get ugly but what else is there?3. This is the same as Paulson, to the extent it goes. If the FDIC takes the loss or the Treasury, eventually it lands on the taxpayer. But FDIC interventions have been quite successful in that respect so far; they are driving hard bargains and wiping out and haircutting with abandon.4. Maybe I misunderstand the phrase “evaporflation”, the evaporation of debt with inflation is basically 2. above, isn’t it? I read Roubini’s explanation, at least one of them, and this was my takeaway. Please explain if it’s not.So the debt goes one of three places: it is paid by taxpayers, or it is monetized away, or banks take the loss. Banks are taking substantial losses right now, and the question is what to do with what remains.I only see two choices (payback or monetization), and despite the difficulties it would cause with trading partners, I think the second is better overall.

Prof. Roubini,I urge you to propose an alternate, responsible plan urgently. The republican congressmen who voted against it are feeling the wrath of people who are panicking because of today’s market decline. A plan proposed by a noted economist like yourself who has been on top of this crisis, will be a great service to this country and the whole world.Thank you

Let’s assess what just happened.The banking industry made a desperate grab at the Treasury to “socialize the losses”. For now, we’ve fought them off, and we got a good, close look at all the trickery that is standard fare for Washington.We know they will be back soon, and in greater numbers. We need to prepare for two possibilities.The first possibility is that we get the luxury of identifying and promoting a rational solution. The other possibility is that things get out of hand.The “rational solution” track will take a good month to implement, maybe more. We might start thinking now about how to insert the likes of Dr. Roubini into the decision-making process. He won’t we welcomed; he’ll need to be injected by acclamation. We’ll need to make a vigorous effort in that direction, or we’ll get shut out. How can that be accomplished? How can a “blue ribbon panel” that’s not stacked by Wall Street be constituted? The big players that scan this blog have the proper access. What they need now are the names of people with the standing, the track record, and the trust of all sides. Please offer names, not just Dr. Roubini’s, but others, too. Volcker, Walker, Rivlin…who else can we identify?What if things “get out of hand”? What’s that mean? It means we’re going to have to move quickly to keep capital flowing to the businesses in your local community:* we’ll need to find new ways to originate loans. We’ll need to move deposits from stricken banks into healthy ones, and quickly. Maybe we need to start this bottom-up “selection” process now. Those deposits are like votes – they should go to the deserving and the capable. This may be a good time to consider local credit unions; they have local authority over loan-making, they know the community, they can move fast, and they’ve (generally) missed out on the RE binge.* we’re going to need to find new ways to get capital to start-ups. Re-building our economy implies doing a lot of things differently. A lot of business models are going to get destroyed by the absence of cheap credit and energy, and we’re going to need new ones quickly. How will we resource these new companies?* we’re going to need to find ways to utilize existing resources a whole lot more efficiently than we currently are. Re-use, fuller use, operating cost reductions and so forth are going to be mandatory for survival at the business and household levels.The next few days will bring furious maneuvering and tricks from Wall Street and their proxies in Congress. It may also bring rapid, structural change in the finance sector. Think about what we’ll need in order to rebuild our community’s business fabric: ready cash, viable banks, local investors that know how to start businesses, and mechanisms to re-purpose idled assets.I hope each of you will step up your preparations for the change that may be about to happen. The readers of this blog are among the brightest and most aware people on the planet. As a team, we can do a lot of good if we play our cards well.Thanks again to everyone that fought hard this past few weeks. Good to be here among you.

Last week I commented that the September market is following a pattern of increasing volatility – with large up’s and down’s of hundreds of points. This reminds me very much of the market in Sep 1987. Right before the October crash. There are also other parallels. In 1987 the issue was portfolio insurance (through futures contracts), and the system failed when the futures markets collapsed. Now the issue is bond insurance and CDS contracts. It has been speculated that the $700 billion that Paulson asked for was not all tied to MBS securities. Rather, some was secretly earmarked to cover major potential losses in the CDS market. The failure today means that the credit default swap market is headed towards hitting an iceberg. In fact, that process probably already started with the collapse of Lehman.Viewed in this light, the major 777 point loss on the Dow was just another “volatility move”. Just like in Sep 1987, these volatile movements grow in size, as the market becomes more and more fearful and emotional. The implication is that we could actually see a day with a downwards move on the Dow that is 1,000 points, or 1500 points, or even 2,000 points. I’m not making any predictions. Just noting that there are some strong parallels to 1987 here.PeteCA

Says Richard W Behan in “The Pillaging Mr. Paulson”:…These [Wall Street financial] corporations manufactured and sold so-called collateralized debt obligations and mortgage backed securities, by aggregating and then “slicing and dicing” huge pools of individual mortgages. Their products, bond-like instruments, were thus “derivatives,” and as long as the real estate market continued upward, so did the appeal of these manufactured securities.The trade was profitable, but not hugely so, because there was a cost of raw material involved: the Wall Street titans had first to buy the original mortgages.A “credit default swap” is not so sorely handicapped. It is akin to an insurance policy, a contract simply created and sold, obligating the issuer to make good on an underlying debt instrument—a bond or similar security—should the original debtor default. The financial institutions issuing credit default swaps just write them up, and they find a ready market among the buyers of mortgage-backed securities and collateralized debt obligations, who wish to safeguard their investments. These buyers make periodic payments to the issuers for the protection provided; credit default swaps are thus carried as assets on the issuer’s books, and the business is enormously lucrative.As of March, 2008, according to the U.S. Comptroller of the Currency, the nation’s financial institutions had sold credit default swaps with a “notional value” of $16.4 trillion. They were liable for $16.4 trillion if every underlying debt-instrument defaulted.As long as the underlying debts (typically the original mortgages) don’t default, the issuers of credit default swaps—the institutions Mr. Paulson wants to rescue—make profits that many consider obscene, and compensate their executives accordingly. (Mr. Paulson, CEO of Goldman, Sachs until his appointment to head the Treasury Department, amassed a net worth of $700 million during his 32 years at the bank. Goldman,Sachs stands to benefit immensely from the bailout.)But the mortgage default tidal wave in the U.S. is rapidly becoming a tsunami. No one can know what the total of defaulted debt might become, but the clever packagers and issuers of credit default swaps are likely to face trillions of dollars in claims.Mr. Paulson’s proposed legislation authorizes the Treasury to spend $700 billion to buy “mortgage related assets” from any financial institution…in the United States.”Just what are “mortgage related assets?” Sec. 12 of the draft billdefines them:“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…” (Emphasis added.)A credit default swap is an instrument based on or related to mortgages, and Mr. Paulson’s beneficiaries on Wall Street would dearly love to be rid of theirs. Mr. Paulson is frantic to oblige.Hidden in the sweeping, utterly unlimited authority of the bailout legislation, and obscured in the manic rush to have it enacted, is the shifting of nearly unimaginable financial liability—up to $16.4 trillion—from private financial corporations to the American taxpayers.It is difficult to see how that would “stabilize the markets” or loosen up the flow of credit.Not so fast, Mr. Paulson.http://coldtype.net/Assets.08/pdfs/0308The%20Fraudulent%20War.pdf He can be reached at rwbehan@rockisland.com.

Let’s think about it for a minute …The President says that the country is facing an economic crisis.He says that pension plans might be wiped out.If that’s true, don’t you think that the FIRST step the Gov’t would take would be to BALANCE its own budget ???? !!!! ????Did we ever see them even contemplate doing this?Did anyone suggest major cutbacks in our foreign wars?Did anyone come out and say that entitlement spending has mushroomed to ridiculous proportions?NOPE.Does this look like a Government that’s really re-thinking all of its priorities – in view of a real economic crisis?What we’ve got is the US economy sinking like the Titanic. And Wall St is still trying to work out how to take control of all the lifeboats and save their own a** !!!PeteCA

SEMANTICS ALERT:Some of the MSM are beginning to refer to the TRAP Plan (whoopsie–did I transpose those letters?–darn) as a “rescue plan” instead of a “bailout.” Much more palatable a term, don’t you think?

A Better BailoutBy Joseph E. StiglitzSeptember 26, 2008The champagne bottle corks were popping as Treasury Secretary Henry Paulson announced his trillion-dollar bailout for the banks, buying up their toxic mortgages. To a skeptic, Paulson’s proposal looks like another of those shell games that Wall Street has honed to a fine art. Wall Street has always made money by slicing, dicing and recombining risk. This “cure” is another one of these rearrangements: somehow, by stripping out the bad assets from the banks and paying fair market value for them, the value of the banks will soar.There is, however, an alternative explanation for Wall Street’s celebration: the banks realized that they were about to get a free ride at taxpayers’ expense. No private firm was willing to buy these toxic mortgages at what the seller thought was a reasonable price; they finally had found a sucker who would take them off their hands–called the American taxpayer.The administration attempts to assure us that they will protect the American people by insisting on buying the mortgages at the lowest price at auction. Evidently, Paulson didn’t learn the lessons of the information asymmetry that played such a large role in getting us into this mess. The banks will pass on their lousiest mortgages. Paulson may try to assure us that we will hire the best and brightest of Wall Street to make sure that this doesn’t happen. (Wall Street firms are already licking their lips at the prospect of a new source of revenues: fees from the US Treasury.) But even Wall Street’s best and brightest do not exactly have a credible record in asset valuation; if they had done better, we wouldn’t be where we are. And that assumes that they are really working for the American people, not their long-term employers in financial markets. Even if they do use some fancy mathematical model to value different mortgages, those in Wall Street have long made money by gaming against these models. We will then wind up not with the absolutely lousiest mortgages, but with those in which Treasury’s models most underpriced risk. Either way, we the taxpayers lose, and Wall Street gains.And for what? In the S&L bailout, taxpayers were already on the hook, with their deposit guarantee. Part of the question then was how to minimize taxpayers’ exposure. But not so this time. The objective of the bailout should not be to protect the banks’ shareholders, or even their creditors, who facilitated this bad lending. The objective should be to maintain the flow of credit, especially to mortgages. But wasn’t that what the Fannie Mae/Freddie Mac bailout was supposed to assure us?There are four fundamental problems with our financial system, and the Paulson proposal addresses only one. The first is that the financial institutions have all these toxic products–which they created–and since no one trusts anyone about their value, no one is willing to lend to anyone else. The Paulson approach solves this by passing the risk to us, the taxpayer–and for no return. The second problem is that there is a big and increasing hole in bank balance sheets–banks lent money to people beyond their ability to repay–and no financial alchemy will fix that. If, as Paulson claims, banks get paid fairly for their lousy mortgages and the complex products in which they are embedded, the hole in their balance sheet will remain. What is needed is a transparent equity injection, not the non-transparent ruse that the administration is proposing.The third problem is that our economy has been supercharged by a housing bubble which has now burst. The best experts believe that prices still have a way to fall before the return to normal, and that means there will be more foreclosures. No amount of talking up the market is going to change that. The hidden agenda here may be taking large amounts of real estate off the market–and letting it deteriorate at taxpayers’ expense.The fourth problem is a lack of trust, a credibility gap. Regrettably, the way the entire financial crisis has been handled has only made that gap larger.Paulson and others in Wall Street are claiming that the bailout is necessary and that we are in deep trouble. Not long ago, they were telling us that we had turned a corner. The administration even turned down an effective stimulus package last February–one that would have included increased unemployment benefits and aid to states and localities–and they still say we don’t need another stimulus. To be frank, the administration has a credibility and trust gap as big as that of Wall Street. If the crisis was as severe as they claim, why didn’t they propose a more credible plan? With lack of oversight and transparency the cause of the current problem, how could they make a proposal so short in both? If a quick consensus is required, why not include provisions to stop the source of bleeding, to aid the millions of Americans that are losing their homes? Why not spend as much on them as on Wall Street? Do they still believe in trickle-down economics, when for the past eight years money has been trickling up to the wizards of Wall Street? Why not enact bankruptcy reform, to help Americans write down the value of the mortgage on their overvalued home? No one benefits from these costly foreclosures.The administration is once again holding a gun at our head, saying, “My way or the highway.” We have been bamboozled before by this tactic. We should not let it happen to us again. There are alternatives. Warren Buffet showed the way, in providing equity to Goldman Sachs. The Scandinavian countries showed the way, almost two decades ago. By issuing preferred shares with warrants (options), one reduces the public’s downside risk and insures that they participate in some of the upside potential. This approach is not only proven, it provides both incentives and wherewithal to resume lending. It furthermore avoids the hopeless task of trying to value millions of complex mortgages and even more complex products in which they are embedded, and it deals with the “lemons” problem–the government getting stuck with the worst or most overpriced assets.Finally, we need to impose a special financial sector tax to pay for the bailouts conducted so far. We also need to create a reserve fund so that poor taxpayers won’t have to be called upon again to finance Wall Street’s foolishness.If we design the right bailout, it won’t lead to an increase in our long-term debt–we might even make a profit. But if we implement the wrong strategy, there is a serious risk that our national debt–already overburdened from a failed war and eight years of fiscal profligacy–will soar, and future living standards will be compromised. The president seemed to think that his new shell game will arrest the decline in house prices, and we won’t be faced holding a lot of bad mortgages. I hope he’s right, but I wouldn’t count on it: it’s not what most housing experts say. The president’s economic credentials are hardly stellar. Our national debt has already climbed from $5.7 trillion to over $9 trillion in eight years, and the deficits for 2008 and 2009–not including the bailouts–are expected to reach new heights. There is no such thing as a free war–and no such thing as a free bailout. The bill will be paid, in one way or another.Perhaps by the time this article is published, the administration and Congress will have reached an agreement. No politician wants to be accused of being responsible for the next Great Depression by blocking key legislation. By all accounts, the compromise will be far better than the bill originally proposed by Paulson but still far short of what I have outlined should be done. No one expects them to address the underlying causes of the problem: the spirit of excessive deregulation that the Bush Administration so promoted. Almost surely, there will be plenty of work to be done by the next president and the next Congress. It would be better if we got it right
the first time, but that is expecting too much of this president and his administration.

Folks, if your representative IS on the above list, please call, fax or email them and give them hell. Threaten them with campaigning for their political opponents.

There’s a reason why Paulson let the market slide by almost 800 points. Congress is now like a deer caught in the headlights. If they pass a rescue bill, they’re dead scared that the public will be enraged and refuse to re-elect them. But if they don’t pass one, they terrified they will cause a meltdown on the stock market and lose all their campaign contributions. So this is really a battle between Paulson and the US public – about who can instill the most fear into the most Congressmen. In the end, Congress will probably try to pass some middle-of-the-road measure, and then run so fast off Capitol Hill that you’ll only see their fuzzy tails bobbing in the breeze.PeteCA

4. is different from 2. in that, at least part of the debt will just disappear. To be brief. Option 2. has a positive effect on (reads increase in) the money supply whereas 4. has a negative effect. The consequences on inflation and on the dollar are therefore totally different.In 4. each lender in the borrow/relend Ponzi scheme realizes that, if he wants to get some of his investments back, he needs to forgive/work out part of the debt.Therefore, there is a third alternative, which I believe is the lesser evil (between your 2 choices). Lenders and borrowers need to work out together to forgive some of the debt burden. This will mean lenders (up in the borrow/lend food chain) will take an immediate haircut and that borrowers will see less available future credit.However, this option requires a high degree of intervention and coordination (and motivation) – and it is, from a game theory perspective – a lose/lose option if all lenders act accordingly and a win/lose option for any individual rule breaker.Following the reflation/monetization path will easily motivate and trigger a win/lose option small player to bring the whole system down (Think about a tacit corporate oligarchy/cartel in a price-fixed environment where each individual has a very strong incentive to break the tacit rules the FIRST to make more profits/less losses). All it may take is for a country as small as Singapore, Turkey, Egypt, or Belgium (small as of % of US debt held not size of the economy) to precipitate a fire-sale in the bond market. Enough triggers are forming right now.Also, related to the topic, but somewhat out of logic, I hear (and used to think) that US Debt holders cannot dump U$ denominate assets because they will lose in such a scenario. I do not know if the debt holders are “rational” enough not to be compared to investors dumping Mortgage based and other related securities at the risk of triggering their own losses through more home foreclosures and negative equity. More over, the current model assumes these debt holders will continue to experience sufficient growth to buy up more US debt (the added debt is a combination of trade deficit and private bailout/loss transfer, a reduction in trade deficit (due to a recession for example) is therefore not enough to translate into less needed external funding).

I’ve read that the nominal value of outstanding Credit Default Swaps is many trillions of dollars. This is the functional equivalent of counterfeit money. As we all know, bad money drives out good.So no “taxpayer funded” bailout is remotely possible. I like Krugman’s plan, based on Sweden, I think, in which the Gov’t buys up new shares of the banks in trouble, gaining partial ownership. This will have to be done in a way that allows some inflation of the currency. It’s far to late to avoid that, I think

Blowing bubbles a small example:I live in Vancouver B.C. where we used to have the Vancouver Stock Exchange. Mostly it traded in penny stocks and it was run by a colorful and shady group of speculators, mostly in gold mining stocks. They operated on the “greater fool” principle of the last one in holds the bag.Periodically when conditions were ripe for them they could run a stock up from a few cents to as much as a hundred dollars a share. Whether there was actually any gold there or not was immaterial–what mattered was the belief in the public that there was.In such cases they made a killing when they sold their shares and then watched them plummet leaving others to hold the bag.Not unlike the current mess.

Frankly speaking, You american are just not earning any money.One day, the whole world cannot continue to help you. They will give up on USD.I will be bloody rich too if any time i gamble away in Wall Street lose money someone will Bail out me with $700 Billion.This is a sure win business in the world. It is easy money.No wonder bankers can earn such high pay by just losing away our hard earn money we save for years. Wall Street do not care about main Street. They care about their wallets only. The Wall street party will goes on if they are not taken care

“It leaked out that the only reason Citi did this deal is that they expected the bailout to go through, and would then turn around and dump the Wachovia (and their other) toxic waste into the Paulson program. They bought it to get a bailout, just like Buffett said he did with Goldman. Today they both got a little surprise.”And this is exactly why they will stop at nothing to claw their way back into this bailout. These reprobates are a powerful force who know without it, they are finished. They won’t give up their empire quietly and without a fight. They have also bought and paid for our elected representatives and have much of the mainstream media cheering them on. Sadly, neither candidate for President opposes the bailout.Continued vigilance is needed here

One clarification: I don’t equate the collapse of the Wall Street stranglehold on investment intermediation with the collapse of the real economy. Share prices may be down, but the shares as stakes in companies in business actually producing things or services of value still have inherent value.The real question going forward is whether more value in the real economy can be created by distributing the power once concentrated solely on Wall Street to less concentrated networks of investors. If the answer is yes, then the failure of the Wall Street model – with all its embedded corruption, distortion, fraud and misappropriation – is no great loss to the country or the world. Something better will be innovated, and something better will endure.

You are not paranoid enough. Time to get creative, or dig a hole.

Congress needs to act.We need to give them things they can do that can get passed.Things like:- Increasing FDIC limit’s to stop bank runs.- Increasing the SEC budget for regulation.- Stimulus to the States and U.S. Territories to save the municipal bond markets.- Cram downs of the senior slices of the CDOs so mortgage servicers can re-negotiate loans that can be saved.- Debt for equity swaps to re-capitalize the banks (but not the shadow banks).- Loans to the very big employer’s (GM and Ford) to save jobs.- Forcing the Credit Default Swaps onto a regulated exchange.We do not like the Paulson Plan, we need to give Congress alternatives!

I wholeheartedly agree. I had lost all faith in the integrity of our political system. I’m not ready to say “Faith Restored”, but at least there is some sunlight shining through today. If anything, it has encouraged me that if I get off my ass and try to do something about it, and like minded peopple do the same thing, then progress can be made.Let’s remember that this was just one battle. There will be more to come.Great work to everybody who participated, and special thanks to Field Marshal Roubini and General Mish for rallying the troops.

I hope somebody is writing these up as very brief legislative drafts (don’t have to be perfect) and sending them to Congressmen and Senators, preferably their own. I get the impression that the only legislative draft circulating is based on Paulson; this needs to change.Sorry I’ve been busy here for the past few days but cannot contribute for the next few.

yes but seven is the number of God

Why can’t the govt just guarantee interbank loans directly as they do w/ fdic insured deposits? Why wouldn’t this just restore confidence directly instead of throwing $700B at the wall and hope for the best?

Spot on, Darkie. Spot on.Gramsci is cackling in his grave. Capital, he reminds us, relies for its reproduction on hegemony, on the ideologically secured consent of the population. The ideology on which it relied to secure its ends for the last twenty-thirty years is now mobilised against it.

Interestingly, Asian people still trust the USA is able to do something to save the markets.They never learn.

“Make no mistake. China, Japan and the U.K. will never stop buying U.S. government bonds. In 5 years, Wall Street will be back!”I’ll happily take the other side of the bet.With this crisis foreigner will ask themselves what debt really is, what wealth really is and they will draw their own conclusions.The United State of America is a great country and the economy will recover in the years to come, but don’t count on more bubbles. Valuations and debt levels have still a long way to go.

LondonBanker, Alessandro,i find myslef asking the same basic question abt the USdollar swap lines :http://www.federalreserve.gov/newsevents/press/monetary/20080929a.htm- where has all the USdollars gone to?- why is USD needed at the first place (as opposed to local euros)?- don’t the foreign central banks carry a pile of reserves?- and can they just pump in their own currency (ie euros)?also, i recall nouriel roubini wrote a paper in 2005 saying that asian economies learnt all the wrong lessons from the 97 asian crisis and more importantly, another asian crisis is on the cards.. whats your take?mrskeptical

Not all the assets in the banks are denominated in Euros. They have assets which are denominated in other currencies, of which the bulk is USD. In order not to manage huge FX risks, they have to match their funding (liabilities) with the assets. Hence they need to borrow USD. They can also convert the Eur to USD funding via interbank FX swaps but that market is as frozen as the moeny markets. Hence, the central banks are stepping in to do execute the FX swaps on behalf of the banks.

Talking about Krugman which I never do but have to give him credit here:”So what we now have is non-functional government in the face of a major crisis, because Congress includes a quorum of crazies and nobody trusts the White House an inch. As a friend said last night, we’ve become a banana republic with nukes.”Good article – er, brief.Ho hum

http://krugman.blogs.nytimes.com/2008/09/29/ok-we-are-a-banana-republic/Sorry, forgot to include the link for Krugman’s article

In researching this so-called “housing crisis”, I was surprised to find that housing prices aren’t the problem.Recent median US house prices in Aug dropped to around $203000. The US median household income is around $50000. This means that someone buying a house today with 10% or more downpayment, a 6% interest rate, and a 25 year amortization would only have to spend roughly 30% of household income to cover the mortgage payments, which is well within historic norms.So, if housing affordability on average isn’t the problem, then what really is the root cause of the current crisis? I believe it boils down to three items:1. consumers, losing the discipline of past generations, started living beyond their means… in other words, people on average stopped putting aside some income in savings/investments, and instead, borrowed amounts that were unsupportable by their income, and only supported by their home equity when prices were rising.If the government wants to spend money to solve this crisis, they should provide low cost financial courses that teach people more about household finances, living within their means, and the true cost of double-digit credit card interest rates.2. Financial institutions got too agressive, offering easy access to credit cards, and then realizing that in the short term, they could make more money by getting people to borrow too much, and then help them consolidate with high interest rate subprime loans. They were more interested in getting previous “prime rate” customers to take on more debt to become sub-prime, then they were about fiscal prudence.If the government wants to do anything here, they should pass a rule that all financial instutions offering credit cards, subprime, or alt-A style mortgages should provide a written, easy to understand summary of the true cost of higher interest rate credit card or sub-prime debt, versus prime debt.3. Financial institutions became “junkies” on making high short-term returns on investment by writing CDS contracts, and then hedging with CDS contracts, without putting aside enough collateral to be able to pay out the insurance they provided with CDS contracts. Likewise, by not taking into account the fact some CDS writers might default on their contracts, the banks in general took on far more risk that they thought they were.So, what’s the solution? I’d say, don’t waste taxpayer money on bank bailouts… instead, let the weaker banks fail, and sell off the assets to the stronger banks (much like the Merrill Lynch, or Watchovia deals).Also, I don’t see a problem if highly indebted people can’t get access to more credit. The long term solution is that the US consumer learns to live within their means. People with financial discipline should still be able to get loans and mortgages, if their income and downpayments support the amount they’re borrowing.And, w.r.t. CDS contracts, I think the recent New York action to treat them as insurance, and therefore, ensure through regulation (I generally don’t like more regulation, but in the case of no-regulation for CDS’s the banks and government clearly blew it) that companies writing CDS contracts put aside and maintain reasonable collateral will make the CDS market a useful tool for managing risk.And, w.r.t. those fighting against mark-to-market… forget it. Mark to market will only speed along the delevering process, and in the end, the US will benefit from some larger, but much stronger bank survivors.

I too wrote my Senators and Reps saying the same thing. Let the free markets get rid of the weak and bad decision makers. I saw no one from the Financial community rushing to get my advice when the markets were soaring and the cheerleaders were crowing as “masters of the universe! No bailout and handcuffs and removal of all those that exacerbated a bad situation.

If only I could understand what in God’s name you are trying to say. Here is something for you to chew on: if the USA decided to take care of us first a lot of foreign countries would all of a sudden be eating a lot of mud soup. Bon appetit!

Dr. Roubini,I already took the liberty of referring my represetatives to your writings. An alternative plan that is not merely tweaking the failed one, but one that directly and effectively addresses the problems that caused the credit crunch, is very much needed now. The senate meets later in the week. It is time to draft a new bill. I don’t know what I can do to see that your views are incorporated into a new bill, but I am willing to do whatever I can to help make that happen. Please let us know how to marshall the full force of your exponetially rising credibility and bring it to bear on our representatives so that a bill can be drafted that is effective and fair to all.

The propaganda is just plain ridiculous!Paulson May Find Market Turmoil Helps Renew Push for BailoutBy John Brinsley and Rebecca Christie – Sept. 30 (Bloomberg) — Treasury Secretary Henry Paulson may have to rely more on the worst stock market plunge in two decades and a deepening credit-market freeze than personal persuasion to sell his bank bailout plan to Congress.http://www.bloomberg.com/apps/news?pid=20601087&sid=aP0flwFILdqQ&refer=homePaulson knew perfectly well that a sell-off would be a good weapon against Congress. And the 200pts sell-off right into the close (from 500+ to the record breaking 777 in mere seconds) looks extremely suspicious. As it look suspicious the FED tightening credit like a madman into the two biggest bank failures in history ($120bn+ in less than a week).

This is extortion in real-time.

Paulson should resign.With his recent lapses: problems contained, US financial system is sound, three page pledge for 700 billion dollars with its unconstutional elimination of of control and elimination, he has clearly proven that he is the wrong person on the wrong position. US citizens should go for his resignation, no less.

People think this is a Wall Street bailout, this terminology is FALSE. this is a credit crisis. When credit freezes up this affects everybody, small businesses and entrepreneurs will not be able to borrow money, competition will dwindle and innovation will fall off. The next big idea might not be able to get the funding it needs to get started, and the big corporations will remain in power. People will no longer be able to access capital and that has severe economic consequences. This is well beyond Wall Street. Anybody who thinks this is simply to save Wall Street are idiots who do not understand macroeconomics.

They’re trying to scare the hell out of everybody on Gloomberg TV. They’ve all been lined up again: Jim Rogers, Marc Faber, Peter Schiff, David Tice.I wonder who decides on those appearances…

Farmers are going to need machines and fuel and medicine and software and markets for their products, just like they do today.The coming economic re-building is not going to look anything like the Great Depression. We have plenty of fuel and roads and food, and everyone will have a role to play in the re-building.All that is happening is that resources are finally being re-channeled into the areas that produce wealth, instead of just consuming wealth or trading it.Consumption of non-essentials will fall, and we will become more efficient about doing the essentials. We’ll find new and different ways of entertaining ourselves. That’s it.Fear is not a terribly helpful emotion, as it diverts attention from problem-solving.

PeteCA:I concur. I’d like to follow PeteCA’s lead, and offer to the group the name of David Walker, former head of GAO. To all readers, please read up on Mr. Walker. He’s done a terrific job of thinking and speaking out on the budgetary and fiscal dimensions of the U.S.’ end-of-Empire realities. He’s a leader in the most constructive sense of the word.I nominate him for a seat on the Financial Market Redesign Team. That’s right: the next bill needs to begin the fundamental re-design of the nation’s financial resources allocation system.In the short run, that Team should concentrate on maintaining the flow of credit to the real economy. We should take Wall Street out of the conduit of money between bank accounts and corporate cash accounts.Once that is taken care of, the topic of derivatives and ABS and mark-to-market become important, but can stay contained within the Financial sector and not bring down the entire economy.

It’s all over NBC too. Matt and the gang lecturing the public as if they children, but at the same time not disclosing that they are owned by GE who needs this bailout to protect it’s massive mortgage portfolio.

PeterJB, that is the most hopeful I’ve heard you sound in … a long time. We surprised and amazed me, too. I am very hopeful. Glad to see a smile on your face.I am also very hopeful about the comments I’m reading from many others here. We are spiraling in on the root causes, and we’re not succumbing to the gloom-n-doom mentality. We’re attacking problems like we’ve got some spine.I see this coming tectonic pile-up as the greatest news in my generation. That’s right, I welcome it. We are doing urban renewal, and that means the outmoded, inefficient, polluting structures of yesteryear must come down. The landlords of these slums will object, but it’s going to happen, and no mortal can prevent it.As I struggle to assimilate these momentous events, I’m doing a rough sort of them into two major buckets: “controlled demolition” and “what’s next?” – short term, and intermediate term. Both have to happen simultaneously, lest we be tempted to retain the slums for lack of well-conceived alternatives.So let’s get with the innovation. Let’s get the household and small business income statement back on solid footing, and the rest of the stuff will gradually work itself out.I especially note the remarks coming in from the European and U.K. quarter, emphasizing cooperation and decentralization. I feel they are a good long stride ahead of the U.S. in this department, and I hope we’ll work to catch up.

I solicit from everyone: names for the blue ribbon team to vet the save-the-fin-sector-from-itself team. We need people that understand how the real economy works, understand central banking, and the fed budget.Time is now. Please name names. I nominate:David Walker (Former head of GAO)Paul Volcker (Former FedRes Chairman)Andrew Grove (CEO, Chairman Intel)Alice Rivlin (Former Director, Congressional Budget Office)Need some academics, like Dr. Roubini (who also has exp within Treasury Dept). Who else?Gotta mobilize! Wall Street is turning up the sky-is-falling nonsense. Congress and the public needs authoritative data.For those well-heeled readers: A full-page spread in the Post or the NYTimes would be helpful. We need new faces on NPR and PBS, right away.Who is spearheading this effort???

Nobel laureate Joseph E. Stiglitz has spoken truth on TV several times. Paul Krugman could do decently as well.Unfortunately IMHO all big name economists suffer from a kind of economics-is-really-alchemy-not-science syndrome and repeat unbelievably dumb stereotype sentences like “lowering interests rate stimulates the economy” and “we need money supply to expand or the economy will not grow”.

Sorry, there was a bug in HTML parsing. Fixed this morning.

+1 on Poole and Hussman, not sure about Magnus he spoke truth last time I heard him, but his solution was along the lines of “obviously we need the goverment to come to rescue”.

@PeteCA :” There’s a reason why Paulson let the market slide by almost 800 points. Congress is now like a deer caught in the headlights. If they pass a rescue bill, they’re dead scared that the public will be enraged and refuse to re-elect them. But if they don’t pass one, they terrified they will cause a meltdown on the stock market and lose all their campaign contributions. So this is really a battle between Paulson and the US public .”If this kind of power takeover by a small band of men who have seized control of the U.S. Treasury and Wall Street is left unchecked, there soon will be no need of a Congress. America is experiencing a coup d’etat of all her financial mechanisms—the lifeblood of her commerce. She is being bound by lines of credit—ropes of bondage—that ultimately will destroy her and Western Civilization.Congressman Carroll Reece (R-TN) more than half century ago chaired a congressional committee that concluded there was evidence of a “diabolical conspiracy” to enslave America.Norman Dodd, staff director of that Congressional Special Committee to Investigate Tax-Exempt Foundations, i.e., the “Reese Commission,” was interviewed in 1982. Dodd , educated at Andover and Yale, was employed in various industries before settling into banking with a Morgan bank of New York, which was deemed the most prominent in the country. He observed the ’29 Panic and was asked by his superiors, “Norm, what do we do now?” to which Mr. Dodd replied, “Find out what you do not know about banking.”Mr. Dodd was subsequently asked to do it. He agreed and reported back 2.5 years later. The directors replied, “Norm, what you are saying is we should return to sound banking.” Mr. Dodd concurred. They replied, “We will never see sound banking in the United States again. Since the end of Word War I we have been responsible for the institutionalizing of conflicting interests and they are so prevalent inside this country that they can never be resolved.”Dodd eventually submitted his resignation to Morgan.

Guest:Is all this true? If so, give me some links….I want to review the data myself. I’ve always thought this could be true.

Paulson intentionally diverged from the RFC-HOLC MODEL OF THE DEPRESSION IN1933(professor’s structure is based on this) because he saw an opportunity to rescue Goldman Sach’s Exposure to the Shadow Banking System. We now know that he bailed out AIG, just to save Goldman Sachs. He knew he would get more bang for the buck by infusing capital into the banks in exchange for equity, but he chose the auction TO GAME THE SYSTEM. He wanted to unload the toxic assets of the fraternities chosen investment banks and also their CDS exposure in the SHADOW BANKING SYSTEM. He would control the process and the rules of the auction. You know who would come first! PAULSON MUST IMMEDIATELY RESIGN,BECAUSE HIS INTENT WAS TO ABUSE AND LOOT THE SYSTEM LIKE A BANANA REPUBLIC.THIS IS NOT A BANANA REPUBLIC AND WE SHOULD NOT TAKE HALF MEASURES.1)The government must inject capital for equity in banks that can lend.SCREW THE INVESTMENT BANKS! THEY DO NOT LEND TO CREDITORS, THEY BORROW TOSPECULATE. DON’T BAIL THEM OUT! LET GOLDMAN AND MORGAN FAIL FOR DELAYINGIN OBTAINING A DEPOSIT BASE. A LITTLE NEGATIVE REINFORCEMENT FOR GAMING US!!!BAIL OUT LENDING INSTITUTIONS, NOT SPECULATORS!!!2)The HOLC-HOME MODEL OF THE PROFESSOR IS GREAT! ALL THE OTHER PROFESSORPROVISIONS ARE GREATTHE ECONOMIST ARE TOO AFRAID TO BE BLAMED FOR A DEPRESSION! WE MUST TAKETHE LEAD AND THE BLAME AND THEY WILL FOLLOW!PLEASE FEEL FREE TO PROVIDE INPUT AND MODIFY MY IDEAS!

+1 for Waldman as well and he is probably more presentable.

Joe K. on CNBC made a “slip” I think in closing, saying “we might be here tomorrow”. Oh, the irony!!! And Art Cashin said that yesterday they pumped $630 billion into the system and it did nothing. Please tell me how $700 is going to help?

I agree Paulson should resign and Bernanke too. They have both performed treasonous acts against the USA.

I agree that the people of the United States will be better off if Wall Street crashes–in the long run and barring the response of an aggressive world war from our government. Kevin Phillips in Bad Money makes the point that people in Britain and the Netherlands are better off now than at the height of those empires.

OuterBeltWayIf David Walker took any kind of active role in the resolution process for this mess … then I’d say we’re making our first real signs of progress.PeteCA

I’m not sure the people ate that easily scared. Roughly 30% of the US respondents who are polled are now saying they believe we are entering a depression. People are starting to really accept this idea.PeteCA

When forces would purposely drive the market down in order to get their way, we have a lot more to worry about than 401k programs. The proof that they did is that the stated object of our financial leaders and White House officials has been to prevent panic, to calm the markets with reassuring words that the fundamentals of our economy are strong.So, with an official government “Working Group” plunge protection team in place, it now becomes obvious that to gain the control of America’s finances that they seek, they, at the very least, permitted and fanned yesterday’s “panic.” Because they have the ability to use treasury funds to buy equities, it is reasonable to assume that they also were able to sell large quantities of equities to promote the panic.They drove it down.Watch the words of the president this morning for the key phrases, “401(k),” “ATMs,” “car loans,” etc.– not to calm the panic but to fan it.The minute the bailout failed yesterday, MSN Money’s markets website of pale blue links, red-linked the warning, “Financial Crisis.” It’s still there.http://moneycentral.msn.com/investor/market/home.aspx

I personally believe this is still not just about some Wall St bankers trying to avoid financial ruin. I believe there are some cronies of the Bush administration who are trying hard to avoid criminal prosecution here. They are pulling all the strings … to get a bailout plan, to hide evidence, and to quash investigations by the Justice Dept.PeteCA

I have an idea I want to float about keeping the credit flowing to the real economy while the fin sector does it’s demolition work.I’m assuming that there are thousands of banks in the U.S. that are solvent and well-managed. Somewhere, maybe in the OTS or FDIC, there’s a stratified list of banks, ordered by leverage ratio, loan portfolio composition, delinquency ratios, etc. We can easily ID an official, indisputable ranked-by-health list of banks.If members of the public that currently have sizable deposits in the banking system were to look at this list, and transfer their money to a few of the top banks in their geographic area, we will almost instantly fix our commercial credit flow problem for all the but the very largest of corporations.This action would:a. protect the deposits of the populationb. put more resources into the hands of demonstrably capable bankersc. induce investors to buy the stock of these well-run banks, as they would be the “naturally selected winners”d. put the credit-flow decisions into the hands of “more local” banks, ones that actually have a relationship with the people they’re lending money toe. dispatch to an early and graceful demise the poorly run banks that have caused the problems we now face. “Controlled demolition” would be achieved.f. transition what remains of our society’s capital from the under-performing financial sector into the real economy, where tomorrow’s growth will occurAs the commercial credit instruments in place mature, they can be rolled over at one these well-run banks. The real-economy businesses, one by one, would be freed from dependence upon stricken banks.The effect of this action would be to effectively de-couple the real economy from the cancerous financial sector.The would eliminate one of the principal extortion levers that the fin sector is currently using against the real economy, e.g. “if we go down, we’re takin’ you with us”.The other benefit of this plan is that the decision-makers are the public: no one can stop them from moving their deposits. Wall Street has no lobbying leverage with Main Street.Best of all, it can be done right away, and can proceed at the pace dictated by events.Please help me refine this idea if you feel it has merit, or help dispatch it if it’s not workable.

And by the way … while on the same subject. If you think that an “economic crisis” is a tiny problem for the Republicans right before an election, then imagine what the exposure of criminal actions and securities fraud would do. Let’s recognize that some very high powers in the Gov’t have a vested interest in stopping – or slowing – investigations at the current time.PeteCA

Paulson MUST go!I’ve been really impressed by what ordinary Americans have achieved in holding up this bill, but getting rid of Paulson is equally important. How can the top bad guy be left in charge of dealing with this mess? How can anything be worked out while he’s still there?

Bloomberg this morning …ExclusiveWorldwideRegionsAfricaAsiaAustralia & New ZealandCanadaChinaEastern EuropeEuropeFranceGermanyIndia & PakistanItalyJapanLatin AmericaMiddle EastU.K. & IrelandU.S.MarketsIndustriesEconomyPoliticsLawEnvironmentInvestScienceOpinionSpendSportsArts and CultureEditors’ Video PicksBloomberg Markets MagazineSpecial ReportRESOURCESBloomberg TVBloomberg RadioBloomberg PodcastsBloomberg PressU.S. Heading for Slump, With or Without Bailout (Update1)By Rich Miller”Sept. 30 (Bloomberg) — The U.S. may face its longest recession in a quarter century no matter what action Congress takes on Treasury Secretary Henry Paulson’s $700 billion plan to rescue the battered banking industry.Economists including Joseph Lavorgna of Deutsche Bank Securities and David Greenlaw of Morgan Stanley said it now appears the economy shrank in the third quarter as credit- crimped consumers cut spending for the first time since 1991. A further contraction is likely in the next two quarters, some economists predicted, which would make the recession the longest since 1981-82. “Comment: Well at least the “esteemed” economists at some of our large banks are now prognosticating that a bad recession is on its way. Briliant … boys. All of the data have been showing that the US was headed for a recession as bad as the early 1980′s, or even the 1970′s, for quite some time now. Special thanks to Contrary Investor, Paul Kasriel, Chris Puplava, Mike Larson & Sean Broderick for a lot of long-term analysis that’s way better than what Wall St has been dishing out.But here’s my comment: I lived through that hard recession in the 1980′s. And at NO TIME then did we ever see Fannie and Freddie crashing, Bear Stearns go bust, AIG get bailed out, municipal bond ratings plummet, Lehman go bankrupt, or the President and Sec of the Treasury telling the American people that the sky is falling.Whatever this is … this is no ordinary recession. Not even a hard one.PeteCA

I’m so tired of the corruption, fractional reserve banking is more evil than terrorism at this point I would be willing to risk starvation to see the bankers lose thier power. I would be far more willing to risk poverty and even hunger than to risk my life in some phony Iraq war!!! The media is corrupt beyond belief every news channel and every talking head is telling the public this bailout was really for main street, I want to puke!!! The stock market is rigged our whole government is rigged and I’m fed up, it may just be time for Rome to burn!!!!

I believe FDIC maintains a list of banks in trouble but it’s top-secret, specifically to prevent what you advocate (bank runs on weak banks). Don’t know what information is available to the public.Realize that the banks don’t have all those dollars in their vault, only 3% of them (the “reserve ratio” which the Paulson plan might lower to 0%). So money will have to be injected from somewhere to make that work.It’s already happening to some extent. Bank runs are what killed WaMu and, I’ve heard, Wachovia too.

We can attack the corruption rationally and get results. Don’tdespair and get on the phone! Forget the talking heads! Justhave a rational comment for your representative!Democracy canwork, but we must give it a try!!! THE PEN IS MIGHTIER THANTHE SWORD! THIS IS AN EVOLUTION OF THE INTELLIGENTSIA, NOT ADESTRUCTIVE EVENT!

I just dont understand why Obama is pushing to pass this bill also.He is supposed to be fore ‘Change’??

Anyone have a list of House representatives who are likely to switch sides and vote in favor of the bill on Thursday?

The thing is they will not resign unless their back is against the wall.How do you push their back against the wall? Lets get a website and collect signatures maybe?

Can anyone confirm / deny the bank health data is compiled and publicly available through the OTS or FDIC?

Should the SEC suspend Mark to Market accountingfor a few days?

@randy: “I agree Paulson should resign and Bernanke too. They have both performed treasonous acts against the USA.”I agree, randy. Paulson cannot be trusted. No man can serve two masters, both the investment bankers and the citizenry. For where his treasure is, his heart will be also. If he and Bernanke are not removed immediately from office, I foresee the collapse of the financial underpinnings of this nation within the year.Bernanke is issuing dollars now in the nefarious land of trillions, with no oversight, no audit, and no check except a blank check. Paulson is passing them to only Heaven knows who. Both have proven extraordinarily untrustworthy. Both have proven they serve the financial elite and not the people. Both have proven no man can control the wealth of nations and remain unscathed.What devil have we set loose among us?Bernanke and Paulson have gone mad. They are out of control. They must be stopped.If Congress gives these two men even more sanction, as it plans to do in the bailout passage, then Congress is but a mere accomplice and must be stopped, also — by whatever means possible.

So much for financial armageddon if the bill didn’t pass-hell, stocks have made back half of yesterdays losses already! MANIC!!!

I do not see that happening, i.e., a more distributed finance system–at least for now. Only a total wipe out would provide the ground for it.Right now–even when you look at Nouriel’s suggestions–bigger fish are swallowing the big fish.

It seems the Plan is to use the “MEXICAN BAILOUT OPTION BY THE EXECUTIVE”.The EXCHANGE STABILIZATION FUND is being floated for use by PAULSON. I knewthat precedent would come back to haunt us when it happened in 1994. The executive can use the EXCHANGE STABILIZATION FUND TO PROTECT THE DOLLAR.This gets around Congress!From the nationaljournal.com!September 30, 2008I Called The White House …In the wake of the House’s failure yesterday to pass the $700B bailout bill, both presidential candidates reached out to President Bush this morning to discuss next steps.From Barack Obama spokesman Robert Gibbs, per NBC/NJ’s Athena Jones:”Senator Obama called President Bush this morning. They spoke about the need to push for a package that Congress can agree on. Senator Obama specifically brought up his proposal to increase the amount of money that is federally insured in order to more fully protect small businesses and families concerned about their savings, believing that such a proposal can broaden the coalition supporting the package.”And, per NBC/NJ’s Adam Aigner-Treworgy, John McCain read this statement a few moments ago in Des Moines:”In light of the House’s failure to act, this morning, I spoke to the President about two things that the administration has not done, but should do following the inaction of Congress: First, the Treasury has already used its Exchange Stabilization Fund to back money market accounts. I encourage it to use it this fund as creatively as possible to provide backstop for accounts across our financial system to maintain confidence on the part of savers and investors. And second, the recent housing bill gave the government nearly $1 trillion in authority to purchase mortgages. Housing and mortgages are at the root of this crisis. I encourage Treasury to take action to shore up mortgage values. The Administration can take these actions with the stroke of the pen to help alleviate the crisis gripping our economy. I urge them to do so. Also, the FDIC should quickly be granted the authority to increase the deposit insurance cap from $100,000 to $250,000 so that families do not have to worry about their money. We cannot allow a crisis in our financial system to become a crisis in confidence.”Copyright 2008 by National Journal Group Inc.The Watergate · 600 New Hampshire Ave., NWWashington, DC 20037202-739-8400 · fax 202-833-8069NationalJournal.com is an Atlantic Media publication.htv.jpgblogometerlogo2.jpg

http://www.larouchepac.com/news/2008/09/30/debt-junkies-must-gop-cold-turkey.html

Funny…teh 2X levered S&P ETF should be up over 7% right now, it is not! It is only up 2.95%…market getting ready to sell off?

Barney Frank and Christopher Dodd and Nancy Pelosi are working to bail out the Democrat Paulson and Bernanke and the financials with this bailout and to add on some largess for the Democrats, not to cover up for Bush. This bailout is the fruit from the seeds of deep, ongoing corruption planted decades ago in American soil: it sweeps across party lines. It goes way beyond partisan politics, into the very heart of the republic. The American people are not represented by this one-party leviathan.The law is stealing our money and our liberties.

12:02 p.m.[AA] Alcoa to lay off remaining 660 workers in Rockdale, Texas

Does anyone have a list representatives who are likely to switch sides and vote against the bill on Thursday?

Special interest influence on the Congress knows no party. The website, MAPlight.org, a nonpartisan group based in Berkeley, Califoria, that tracks campaign finance issues reports: Over the past five years, the 205 members of Congress who voted for the bailout received 54% more in campaign contributions from banks and securities firms than the 228 members who voted against the bill.

How are the markets going to react Friday when 200K jobs are lost in a single month?

What the hec is wrong with deflation everyone is so afraid of it. And if we are gona bail anyone out it should be aimed towards the base of the pyramid scheme.

or at least the slaves forced to built the pyramid…

Wolf in the Wildslooks like a very sensible plan to me. And I don’t see where you would need to burn taxpayer money apart from the deposit guarantee. Once you agree that shareholders and bondholders needs to eat the losses all the rest is details and I’ll let others iron them out.But remember that those shareholder and bondholders are mutual funds, pension plans and hedge funds. This is Paulson and Bush scare tactic: “give me a s*itload of money or your pension will go up in smoke”. Obviously the plan is that pensions will go up in smoke anyhow, and the money will be shared among good friends. But this is not said today.Instead you with your very sensible plan, need to go out in the street and tell people they have half the pension money they thought they have. Not easy. Necessary IMHO, but not easy.

You know America are sell Toxic Debts to the Chinese and other countries in the end? The banks cannot sell toxic debts, the FED buy from them and sell to foreigners by issues bonds. This may really resulted a run from US treasuries in the end. The mother of all crashes shall Occure somewhere in the middle of DEC 2008. I think my odd rather low.http://johnlawcapitalist.blogspot.com/

“By the way, the first thing I’d do is say, ‘Let’s not call it a bailout. Let’s call it a rescue.’ Because it is a rescue. It’s a rescue of Main Street America,” Mr. McCain said Tuesday on CNN.In a statement released Tuesday morning, Senator Obama said Congress should not start over as it moves to pass what he called “the economic rescue plan.”Look at what we’ve got, two sides to the same coin, a coin stolenfrom the average person.

Presidential candidates unveil plans to aid in bailoutBoth advocate raising limits on FDIC insurance.Interesting proposal

I have a question for all of you (and for prof. Roubini too!)Paul Krugman posted this on his blog Conscience of a Liberal (Title: OverFed?):”Until this past year, the Fed’s balance sheet was simple and clean: basically, it held Treasury bills, and its only liabilities worth mentioning were the money supply (strictly speaking, the monetary base.) And there was next to no risk. Now the Fed holds a vast array of “liquidity tools” — loans under the various emergency programs, the TAF, the TSLF, and all that; and it’s taken on quite a lot of risk.All this is independent of the Paulson plan and all that.”I asked him this question (I don’t know if it will be posted…):”Excuse me, professor Krugman.I’m quite an economic illiterate.Could you please explain me in what sense the money supply / monetary base is a liability for the FED ? That is, if the banknotes are NOT redeemable, how can they be liabilities for the FED ? In other words, I can NOT go to the FED with a 1.000 $ note and ask them (him/her) to give me the equivalent in gold (for example), or silver… so, how could be that 1000 $ note considered a liability for the FED ? It should be NET WORTH for the FED…If I’m wrong could you please correct me ?Thank you very much.”Could you help me to explain this strange thing ?

What a genius, let’s just rename it and that fixesall the problems.Ok, let me try, it’s not an ELECTION it’s a CLEANSING.

Without trying to discount the massive liquidity / credit crisis that is occurring in addition to other crises currently unfoldng, I believe that the biggest risk right now is confidence in the US financial system. Our financial institutions and economy as a whole are anchored / built on credit and leverage which can only be achieved through confidence in our system / institutions. A loss of confidence that tips beyond the panic point at a macro / cross border level is beyond devastating. Our economy would grind to a halt. The problem is that although the wisest thing to do for any foreign or domestic company with concerns about their liquidity exposures is to secure your capital due to severe uncertainties, that may ultimately be the most damaging thing to do. There is little doubt that a comprehensive plan needs to be undertaken immediately. It has to happen quickly and must convince that it could potentially be effective; otherwise, deterioration will increase. Any additional deterioration in current situations minimizes the effectiveness of any future action – no matter how comprehensive. Ladies and gentlemen, when the real panic ensues, there is little anyone can do to turn that tide.

Is anyone else having trouble accessing Krugman’s article “OK, we’re a banana republic now”?I can’t access the Larouche article either. That site won’t load.Colour me crazy, but when stuff like that happens I generally suspect that there’s a stealth effort to control information.Am I nuts?

If the bailout plan is legislated, the markets will gain in value. The major macroeconomic events don’t seem to have any important effect on the markets nowadays. This is not because such events are priced earlier, but because the markets became a casino due to excess liquidity, and this liquidity is gathered in the hands of a few; hence the bailout effort to save a few bankers.Unfortunately, credit risk is confused with liquidity risk. The former depends on the circulation of the money. That is, there has to be equilibrium in the balance of payments system in an economy. One may also think this as equilibrium between borrowers and lenders. The problem is that the equilibrium is broken. Thus, the borrowers are not able to pay the money because their income is lessened as the money is gathered in the hands of a smaller group of people (lenders) within the society. The higher the sum of the money gathered is, the higher the default events will be. Moreover, in such a distressed economy, there are more people looking forward to borrowing, however, fewer will qualify due to their deteriorated income streams. As a result, spreads increase because risk is higher.Actually, in a fractional reserve system, money is eventually gathered in the hands of a few because lenders (for example, a bank) make money based on arbitrage (riskless gain – or positive gain with zero investment). Suppose there was only one bank in the system. If one borrows from the bank to buy a house, he/she transfers the money to another who is selling the house. The house seller then deposits the money in the same bank. Now, if the lending rate is higher than the deposit rate (which should be the case) and the borrower pays the money back, the bank makes money out of thin air (Free Lunch to the bank). As a result, mentioning risk management in such a structure is irrelevant, since one manages risk perfectly at the expense of another when an arbitrage strategy exists in an economy. Thus, the root of an economic crisis is not the quantity of the money. It is rather the circulation of the money.An economy with higher production rate and less leverage will have less default rates. This situation has implications for the utilitarian approach in economic analysis. Thus, any system inflated under a liability scheme is not a system where everyone has the chance to maximise his/her utilities (There exists a time such that one will have to incur losses. Thus, future value of one’s budget will be less than its current value with probability almost surely 1). Moreover, a crisis happens when a lender’s ability to arbitrage the system ends. Therefore, one needs to reset the system by transferring value from lenders to borrowers (restoration of the equilibrium in an economy). That’s why, any plan, in order to mitigate the problems of a crisis, should be based on the restoration of a balance between borrowers and lenders not only through the use of a monetary policy (restoring the balance through the banking system), but also through the use of a fiscal policy (taxes).Professor Roubini’s solution is thus in regards to restoring the equilibrium between the borrowers and lenders at the expense of the irresponsible investors (both lenders and borrowers) through the use of a monetary policy. He offers a haircut to match debt payments with borrower’ income, and equity/debt swap to deleverage the system without causing any crash (thus bubble will be burst under control). Further, if the government wants to participate, it can create a CDO type restructuring of the equity of the distressed banking system. However, in order to seal a real deal, I think that the current taxation system of the US has to be reviewed as well.Professor Roubini has, by far, offered the best alternative among all other ideas. I hope it will be reviewed carefully. Thank you for you kindness Professor.Final Word: A liability scheme may make an economy much unfair than it already is.

Has anyone in congress actually discussed Dr. Roubini’s plan?

You’ve eloquently and succinctly helped to me to grasp the totality of the current insanity.Thanks.

Then why not just insure them for a billion dollars?Problem is that FDIC doesn’t have enough reservesfor $100 k insurance.

But the government could throw the famous $700bn to it. Immensely more efficent use of more borrowed money.

@Guest on 2008-09-30 13:16:01I hope they will. Actually, they should or they better be discussing it. I think, it is a really nice solution.@Guest on 2008-09-30 13:18:31Thank you for your feedback.

Shock doctrine indeed. The idea that any of this is a “suprise” to the insiders strains credulity.My paranoid creed: “Everything is going according to plan, you just don’t understand the plan.”So in this case, the crash is a long planned opportunity to impose Friedman-school “reforms.” Look for the death of social security, the last worker protections, zeroing out of the middle class’ retirement funds, etc. And of course, a puke of very-important-people telling us how our swallowing this foul medicine will make them well so drinkie drinkie.Arrgh. Well, why should we Amurrikans get treated any better than Argentina was? Sauce for the gander…

Thanks Anon. I’ve tried it. Again just now, as a matter of fact and I still get a “loading timed out” error message.If Roubini becomes inaccessible, then I swear I’m heading for the hills.:(

Ya, but then how can the fat cats dump all theirtoxic crap on Main Street?

LOLOL stocks have now recovered ALL the losses suffered after the bailout failed! How is a person supposed to feel confident about wall thief when we now have 1200 point swings in the market over 2 days???

Henry C.K. Liu’s site won’t load either.PBS and Asia Times Online are a no go too.Can someone either confirm or ease my suspicions?Thanks.

Dear Professor:With all due respect, what do you mean for “total systemic meltdown” or how do you measure it in relation to S&P-500? For me, a total S. melt down is seeing the S&P-500 under 100 points, say 12 points. Is that what you meant? Thank you.

If stocks continue to rally, doesn’t that just solidify the “NO” vote from yesterday? This is insane! The dow is now up 425 points! We are going to gain back EVERYTHING from yesterday, EVERYTHING!

I’m in the pacific northwest, and was able to connect to all of the sites mentioned.

Ok, I’ve just posted another one.

Dow now up almost 500 points!

Gold???Any thoughts on this article?Inflation, deflation, monetary velocity and goldhttp://benbittrolff.blogspot.com/2008/09/inflation-deflation-money-velocity-and.htmlhlowe

This is a horrible con job about to be passed on the people of the US. There are many other viable, less expensive options open but they would not give the power to those trying to grab it. If this passes tommorow in its current form, God help us all…

I am no economist, but I have spent close to 20 hours a day for a decade being baptised by fire in the ubernasty world of deep, deep, deep geopolitics. I would give anything to tell you all the truth about why any plan that would actually work to end this nightmare is absolutely being 100% ignored.But if I told you the truth, you would hunt me down and make sure I was forcibly medicated, because the truth is so heinous and ugly that it is almost impossible for good and decent people to believe. The truth would drive most people past the limits of what they can allow in, and would probably steal all happiness and peace of mind from the best hearts and souls.PeteCA is on the right track, but even Pete has only glimpsed the tip of the tip of the tip of the iceberg of the stratospheric criminality being protected by passage of this bill or of any bill that allows coverup to continue.Keep fighting to get Nouriel Roubini’s solution on the public’s radar.You are in a knifefight.Don’t bring plastic cutlery to defend yourselves with. The time for steel is now.Henry Paulsen wants your freedom turned into his license.Ill gotten gains will be ill spent.There is a reason Sibel Edmonds has been gagged.Valerie Plame was not outed because of some petty wish by the bushco criminal cabal to get back at her husband. That is the cover story.The black network behind BCCI never went away…

I agree with the main points set out here.Yesterday’s Congressional show was party leadership trying their best to give Wall Street what they want, while not getting dumped by the voters.That’s why yesterday’s vote was so important. Under duress, the covers got pulled back, and everyone gets a chance to see the wriggling maggots.It’s educational. Revolting, but educational.There were two other major forces at work yesterday. Some of those Congresspeople understand what’s going on, and risked life and limb to stop that train.The other force is the fact that many Congresspeople don’t understand how the economy and the Fed/Treasury/Wall Street cabal works. That makes it tough to stand up to the pressure.Keep the flow of information going, and try to slow the train down to give Congress a chance to get more educated.This is what the Buffalo Stampede was for. Create enough fear, people will jump and ask questions later.

The NAR lobbying letter. I am sure that other industries are trying to counter “crackpots” who let their voices be heard .This is not over .”the NAR sent this campaign out to its members today…excerpt:”Dear ,Main Street Needs Relief NowMove beyond the debate over who is responsible and move towards a solution that will benefit REALTORS and the consumers we serve.Please urge your members of Congress to support EESA.By now you have heard that Congress failed to pass the Emergency Economic Stability Act (EESA). This is a critical time for our nation, and REALTORS everywhere need to call on Congress to enact a recovery plan that will end the economic crisis we are facing.I have received messages from many of you, wondering why NAR is supporting this unprecedented government investment in financial institutions and the housing market. The truth is that consumers everywhere already are feeling the impact of the credit crisis. Many buyers can no longer find financing they need to buy a home, contracts are being pulled off the table, and sellers are taking their listings down. Without swift and substantial intervention, all REALTORS and the consumers we serve will soon face a market where:Getting a mortgage, small business, or short-term loan becomes extremely difficult, even for good credit consumers and businesses.Consumer and business bankruptcies rise significantly, as refinancing options are shut down.Lines of credit are reduced and interest rates on personal and business credit cards rise, adding to the burden on families.Consumer and business spending declines, further depressing the economy.Unemployment increases significantly.Budget deficits increases noticeably due to declining revenue collection at all levels of government…..”

Re-post from above. Hat-tip to Tom who dug this out from FDIC.Where can you find out about the health of your bank?Tom reports that the FDIC does provide access to the raw data about banks, but it doesn’t rate them.It does, however, provide a list of several commercial organizations that provide rating information. Here’s an excerpt:

Institutions rated: Commercial and state-chartered savings banks, savings and loans, credit unions, and the 100 largest bank holding companies in the U.S. (approximately 18,000 institutions).Rating method: Institutions are assigned ratings from A+ (best) to E, based on ratios representing liquidity, asset quality, capital, and earnings.

.See this link:Bank Rating ServicesSome of these services let you look up the data for one bank for free. You can check on the health of your current bank with this tool.This should be quite educational!

Come on, if you are going to promote conspiracy stuff,give us a hint of something that will happen shortly thatcan be verified.

I just don’t understand why the democrats are not calling for Paulson’s resignation.This is a total mystery to me.

Here is the link to search for raw financial data provided by FDIC banks found in the Federal Financial Institutions Examination Council’s (FFIEC) web site. Hope it helps.http://www2.fdic.gov/ubpr/UbprReport/SearchEngine/Default.asp

Has the Times UK been sued over their Sibel series? No. Has their information been shown incorrect? No.Was Brewster Jennings an acknowleged CIA front investigating illegal nuclear proliferation? Yes. Was their work and progress stopped and informants exposed by Plame’s outing? Yes.Was it the investigators into BCCI who I took that line from? Yes.You’ll have to find your own crystal ball – I have none. I have only facts.

Below are three Wikipedia definitions for “conspiracy.” To ignore conspiracy theory is to ignore reality to the benefit of the conspirators.· In the criminal law, a conspiracy is an agreement between natural persons to break the law at some time in the future, and, in some cases, with at least one overt act in furtherance of that agreement. …en.wikipedia.org/wiki/Conspiracy (crime)· A civil conspiracy or collusion is an agreement between two or more parties to deprive a third party of legal rights or deceive a third party to obtain an illegal objective. …en.wikipedia.org/wiki/Conspiracy (civil)·In a political sense, conspiracy refers to a group of persons united in the goal of usurping or overthrowing an established political power. Typically, the final goal is to gain power through a revolutionary coup d’état or through assassination.en.wikipedia.org/wiki/Conspiracy (political)

A simple an inexpensive measure to provide liquidity to Main Street, where it is needed, would be to allow tax payments of citizens and companies to be deferred for, say 18 months, with a reasonable late interest rate, make the debt senior to all other claims (if that’s not already the case) and voila: Instant credit for anyone who needs it (and is solvent enought to be taxable).Also, instead of using tax money to increase the FDIC limit, let the IRS pay interest on voluntary (and reclaimable) advance payments, so that one’s deposit is backed by all future tax claims against himself (and what could be surer than that …).This would effectively make the IRS the “bank of last resort” for the tax player, quasi the FED for the common man. It would be cheap, easy to understand, trivial to implement and mitigate the Wall Street threat of kidnapping the US economy.

We all know that in professions, the idea has been service to the client before service to self. That’s what a profession is.The financial sector of our economy is the largest profit-making sector in America. Our financial services companies make more money than our energy companies — no mean profitable business in this day and age. Plus, our healthcare companies. They make almost twice as much as our technology companies, twice as much as our manufacturing companies. We’ve become a financial economy which has overwhelmed the productive economy to the detriment of investors and the detriment ultimately of our society.Banks, money managers, insurance companies, certainly annuity providers. They’re all subtracting value from the economy. They have to subtract.you’ve go to pay somebody something to provide a service. It’s just gotten totally out of hand. JOhn Bogle estimates that the financial sector takes $560 billion a year out of society. Five hundred and sixty billion.There is in a good corporation and in capitalism a core of being of providing goods and services, at raising the standard living.Today’s capitalists are different from yesterday’s capitalists-they’re operating on their own. Instead of for the interest of whose money has been entrusted to them. The productive system adds to the value of our economy. And, by and large, the financial system subtracts. And, yet, it’s growing and growing and growing. And this short term thing where short term orientation in which trading pieces of paper is regarded as a social value has become a distortion of Capitalism.Whatever political party….are problems are systemic social problems of self interest. It is has manifested throughout our culture and metamorphasised into the “Ugly American”. It is a disgrace.ultimately, the system will correct. The bigger the boom, the bigger the bust. In other words, you pay the price. It’s not a self sustaining system at this kind of a level.We need a federal standard of fiduciary duty for money managers. They’ve come from eight percent ownership of American business to 74 percent ownership of American business.a federal standard of fiduciary duty which demands that our pension trustees and our mutual fund directors make sure that those pension funds and mutual funds are operated in the prime interest of those who have entrusted their money to them.These mutual fund companies– these management companies are now owned largely by corporate America. Now, what is the job of a corporation when they buy into a mutual fund management company? It’s to earn a return on the capital they invest in that company. It’s not to earn a return on the capital of the investors who invested. The evidence is quite compelling that today corporations are run in a very important way to maximize the returns of its managers at the expense of its stockholders.We the People, For the People, By the People…..need to get our country back.

Oh and when they fail they just get bailed out by the Federal Reserve or government, because they are too big and important to fail!!! Don’t be fooled by expressions like “free markets” or “capitalism,” it’s truly class warfare! And just because you despise they’re corruption does not make you a socialist or unpatriotic!!!!!

I think there may be many currencies that work in a single payments area- like SEPA for example with all denominations exchanged for the Euro.

Don’t you guys know that under a provision of Government that in a national emergency, uncle sam can take over your farm?

I like it!

YOU ALL KNOW YOUR 2 SENATORS, GOOGLE AND FAX BOTH SENATORS AND THE REPS!!MISH’S WOBBLER LISTCongressional Most Endangered ListThe San Francisco Chronicle is reporting Many vulnerable lawmakers said ‘no’ to bailout.Two-thirds of Congress’ most vulnerable members — Republicans and Democrats alike — chose to protect their seats on Election Day rather than follow their party leaders and vote for an unpopular economic bailout plan.Their votes helped doom the plan President Bush, congressional leaders and top economic officials said was critical.”We’re all worried about losing our jobs,” Rep. Paul Ryan, R-Wis., said, endorsing the bill and voting for it after leading a rebellion against an earlier version last week. “Most of us say, ‘I want this thing to pass, but I want you to vote for it, not me,’” he said, speaking for colleagues who have tougher re-election fights than his own.The three vulnerable Republicans who voted “yes” were Reps. Christopher Shays of Connecticut, Mark Kirk of Illinois and Jon Porter of Nevada.The three vulnerable Democrats voting “yes” were Tim Mahoney of Florida, Paul E. Kanjorski of Pennsylvania and Jerry McNerney of California.Metrofax Most Vulnerable Target ListNote: The fax list is to every office of targeted reps. Please fax every office.Congress,Paul Ryan,Congress,2022253393,2022253393Congress,Paul Ryan,Congress,6087524711,6087524711Congress,Paul Ryan,Congress,2626542156,2626542156Congress,Paul Ryan,Congress,2626375689,2626375689Congress,Christopher Shays,Congress,2022259629,2022259629Congress,Christopher Shays,Congress,2035790771,2035790771Congress,Christopher Shays,Congress,2022259629,2033571050Congress,Mark S. Kirk,Congress,2022250837,2022250837Congress,Mark S. Kirk,Congress,8479407143,8479407143Congress,John C. Porter,Congress,2022252185,2022252185Congress,John C. Porter,Congress,7024341378,7024341378Congress,Timothy Mahoney,Congress,2022253132,2022253132Congress,Timothy Mahoney,Congress,9416279101,9416279101Congress,Timothy Mahoney,Congress,7728710651 ,7728710651Congress,Paul E. Kanjorski,Congress,2022250764,2022250764Congress,Paul E. Kanjorski,Congress,5708258685,5708258685Congress,Paul E. Kanjorski,Congress,5704966439,5704966439Congress,Gerald McNerney,Congress,2022260861,2022260861Congress,Gerald McNerney,Congress,9257370734,9257370734Congress,Gerald McNerney,Congress,2094768587,2094768587Phone NumbersPlease phone every office.Paul Ryan, Phone: (202) 225-3031 Fax: (202) 225-3393Janesville, WI Phone: (608) 752-4050 Fax: (608) 752-4711Kenosha, WI Phone: (262) 654-1901 Fax: (262) 654-2156Racine, WI Phone: (262) 637-0510 Fax: (262) 637-5689Christopher Shays, Phone: 202-225-5541 Fax:202-225-9629Bridgeport Phone: 203-579-5870 Fax: 203-579-0771Stamford Phone: 203-357-8277 Fax: 203-357-1050Norwalk Phone: 203-866-6469 No FaxRidgefield Phone: 203-438-5953 No FaxShelton Phone 203-402-0426 No FaxMark S. Kirk, Phone: 202-225-4835 Fax: 202-225-0837Northbrook, IL Phone: 847-940-0202 Fax: 847-940-7143John C. Porter,Phone: 202-225-3252 Fax: 202-225-2185Henderson Office Phone: 702-387-4941 Fax: 702-434-1378Timothy Mahoney, Phone: (202) 225-5792 Fax: (202) 225-3132Port Charlotte, Phone: (941) 627-9100 Fax: (941) 627-9101Stuart, FL Phone: (772) 878-3181 Fax: (772) 871-0651Paul E. Kanjorski, ph: 202-225-6511 fx: 202-225-0764Wilkes-Barre, PA ph: 570-825-2200 fx: 570-825-8685Scranton, PA ph: 570-496-1011 fx: 570-496-6439Gerald McNerney, (202) 225-1947 Fax: (202) 225-4060Pleasanton, CA (925) phone: 737-0727 Fax: (925) 737-0734Stockton, CA 95207 phone: (209) 476-8552 Fax: (209) 476-8587Fax Title: Scrap The Paulson Plan, Instead Try This

Greetings OuterBeltway ~IT’s been a few threads since I havereplied directly to you, but I have been admiringyour efforts and wish you continued strengthand resilience.The “Phil” in the above comment is not me -I did not post those relevant remarks, but I doagree with the sentiment.Be well …

Hey, this is a great idea, suspend payroll income tax.It is an immediate and direct liquidy injector at thelayer that needs it most; employee and employer,it promotes increased productivity, and it preventsexploitation from massive bailout giveaways.

Unfortunately TPTB will not allow that to happen as the response will clearly be a resounding “NO” and they know it. TPTB have to get this pushed thru. Our reps do not represent us, they represent them. Maybe soon the sheople will open their eyes and see the truth.

@ OuterBeltwayCheck my reply up-thread -> 2008-09-30 19:23:59Best …

If it’s true, then the FT article belowconfirms the old saying …”There’s one born every minute.”FT Article => Wealthy investors hoard bullion

I believe this is how it is supposed to be for a plan of this importance, where people’s life is directly impacted.I remember I was in France when a referendum was organized by Jacques Chirac to vote on the new and unified European Constitution (he had the constitutional authority to pass it). He and the plan he was hoping to pass was strongly defeated with a clear NO. All political parties, intellectuals, economists, academics, students … were debating and trying to convince constituents (those who don’t know) there point of view. The media played a fairly neutral role and attributed fairly equal time for each part to allow discussion.This is what is needed with this bill, although the infrastructure is not there.

The content of the fax as stated on MISH’S Global Economic Trend Analysis is:Fax Title: Scrap The Paulson Plan, Instead Try ThisToday the Irish government announced a surprise decision to safeguard the Irish banking system for two years, guaranteeing all deposits, covered bonds, senior debt and dated subordinated debt of the four main banks.The ResultInvestors welcomed the news. By 0755 GMT, Allied Irish Banks PLC (AIB) rose 14%, Anglo Irish Bank PLC (ANGL.DB) rose 22%, Bank of Ireland PLC (IRE) rose6.7% , and Irish Life & Permanent PLC (IPM.DB) rose 22%.Why Ireland’s Plan WorksWhat Ireland is fighting is the same thing that the Fed is trying to fight here (outflows from banks and money market funds into short term government debt.)The problem is NOT mom and pop pulling bank deposits, it is corporate treasurers and state treasurers whose jobs are on the line pulling deposits from weak banks and putting them into stronger ones.The fastest way for the US and other governments to solve this is to raise deposit insurance ceilings. This is a far better option than ballooning the Fed’s balance sheet more.Furthermore, I would highlight that fully guaranteed deposits would put the US government even more at the top of the capital structure of banks. Existing senior debt is all of a sudden now fully subordinated to a potentially unlimited amount of insured deposit debt.Why the Paulson Plan FailsThe Paulson plan fails because it does not stop mistrust between banks or mistrust by depositors. All it does is throw $700 billion in taxpayer money down a black hole.The Paulson plan is also unconstitutional. There is no constitutional authority for the US Government or the Federal Reserve to use public (taxpayer) money for what is definitely a private purpose (bailing out Wall Street).Finally, the Paulson plan takes time to implement fairly, and there are many holes in the oversight process.How To Stop The Run On BanksTemporarily guarantee all deposits at US Banks. Implement rules to ensure weak banks do not misuse this privilege by adopting risky lending practices. Conduct an orderly shut down all undercapitalized banks.Modified Paulson Proposal Is A DisgraceThe modified Paulson bill is so full of holes and toothless provisions it is a disgrace to suggest it is close to being ready for a vote. Most importantly, the bill will not create a single job, nor will it solve the underlying economic problems. Over 190 major economists agree.Fox Oversees HenhouseThe bill sets up an oversight board, which is directed to “ensure that the policies implemented” by Mr. Paulson are proper. Mr. Paulson is to be one of the five members of the board watching over his own actions. He is joined by the chairman of the Federal Reserve, the chairman of the Securities and Exchange Commission, the Housing Secretary and the director of the Federal Home Finance Agency.The oversight committee is a complete joke.New Proposal Cedes Congressional Authority To The AdministrationPaulson, or whoever the next Treasury Secretary is, can buy whatever he wants, at whatever price he wants. Why should Congress give such authority to anyone at any time?If you vote for this Bailout Bill I will vote against you.I will do more than that, I will work actively for your opponent, no matter who that person is, doing everything in my power to contribute to your defeat.If you vote for this bill I will contribute my time, energy and money to your opponent, whoever that may be.I will talk to my friends, my family and my co-workers and urge them to do the same. I have already contacted many friends and have asked them to do the same.Please scrap the Paulson proposal in entirety and try something that might work, that is constitutional, and does not put taxpayer money at risk. I have submitted such an alternative to consider. The Paulson proposal must be scrapped in entirety.Your NameIf you live in their district, please add your address and phone number.

Alternatively, one of the commentators on Mish’s site sent the following fax to his representatives:Republican taxpayers hate the paulson plan, and know we can do better.Democratic taxpayers hate the paulson plan, and know we can do better.Independent taxpayers hate the paulson plan, and know we can do better.Leading economists hate the paulson plan, and have proposed plans that are much better.So why is congress even voting on the Paulson plan, as if there are no other alternatives?And just so you know, I hate the Paulson plan, and I know YOU can do better.VOTE NO ON THE PAULSON PLAN.THEN GET TO WORK PASSING A REASONABLE PLAN.If you don’t, come election day, you too will learn to hate the PAULSON PLAN.

We are all sworn to protect the Constitution from powers foreign orDOMESTIC!The senate is going to take up a bill without the regular proceduresthat hallmark our democracy! This is a subversion of democracy!I consider such action tantamount to treason!THEY ARE GOING TO TAKE HOUSE BILL H.R.1424 STRIP IT AND PUT IN PLACETHE SUBSTITUTED LANGUAGE!THIS IS KABUKI DEMOCRACY!THE FINANCIERS ARE TELLING US THAT THEY OWN US, AND THEY WILL ROB USBLIND IF THEY SO CHOOSE!Here is the senate procedural bypass!From The HillUsually, constitutional issues prevent the Senate from acting on legislation that involves tax issues — any such bill must originate in the House. However, the Senate can circumvent the the rules by taking up a pending House bill, stripping it and putting in place substitute language. Senate Banking Committee Chairman Chris Dodd (D-Conn.) had cast doubt on that scenario after Monday’s failed House vote, saying it would only “compound” the situation, but others, such as senior Banking Committee member Robert Bennett (R-Utah), confirmed it was a leading idea.”Anything that’s within the realm of the rules is within the realm of possibility,” Bennett said.Some observers said a successful Senate vote could be an important tool in persuading wavering House members who may be considering changing their vote.

I was at an entrepreneurs meeting tonight and the founder of a mutual fund company passed out a chart that showed:Debt at $51Trillion/GDP at $14.312 Trillion = 365% debt ratio; 100% above the debt/gdp ratio in? yes, you guessed it – 1929. So, how can piling onto the numerator help us? If we are to spend money it must be on the GDP side of the equation.

The pundits have all been brainwashed.Insanity is being replicated by the second.Here is David Brooks’s contribution to the madness…

The only thing now is to try again – to rescue the rescue.There’s no time to find a brand-new package, so thecongressional plan should go up for another vote onThursday, this time with additions that would changeits political prospects.

David Brooks => Revolt of the nihilists

@ OBYes, but deposits and loans aren’t generally synchronized per customer. (i.e. some customers are big depositors and small borrowers while other customers are borrowing only and have no deposits at an institution. Therefore the new “good” bank will obviously take 99% of the deposits ‘no questions asked’, but it may only take 20-30% of the loans ‘with all questions asked’ these would get a 250 point inspection first! So while some loans may be basically O.K. the good bank will only take the best of the best. This is what will lead to bigger loses for the bad bank than might happen under a mitigation scenario.

@ OBHere is the FDIC Public Data Distribution site which has the quarterly data for every FDIC member.

Anyone?”I work in Credit Department at BoA (Senior Level Credit Analysist Boa Bldg 3rd fl, Char, NC). We just received memo indicating that all BoA credit cards are being closed as of 10/1. Credit score and income do not matter, all accounts are closed as of 10/1.” Executive VP Bank of America.”Can anyone confirm?????Reply to this comment By randy on 2008-09-30 15:23:52Sound pretty over the top, but…

The $700 billion request for banks is red herring. The real motive of Paulson & Bernanke is to replenish the Federal Reserve bank’s spent reserves. Once they are whole again, then they can say “Well, we tried but the problem, it turns out, is too big. We would need trillions more to really fix the problem they say, but we know the American tax payer cannot afford that. And they walk away with their central banks intact.In simple terms, the Fed is broke. (Which was pointed out by London Banker and Brad Setser http://www.federalreserve.gov/releases/h41/Current/http://blogs.cfr.org/setser/2008/09/26/extraordinary-times/)Once it is revealed that the Fed is broke, this request can be seen as a true scam and it beats all the Wall Street scams that we have seen to date. My epiphany for the day…Hide replies Reply to this comment By ptm on 2008-09-28 10:05:00===Nouriel,I understand that it is not easy to tell it loud and that you are already doing an amazing public service in speaking truth like nobody else, but ptm is right.The mother of all bailout is really a rescue of the FED. The FED is broke.The Treasury of the United States of America is next. In due time.Reply to this comment By Alessandro – http://castellidicarte.blogspot.com/ on 2008-09-28 10:21:31====Another way to look at this crisis is that there will be a depression, but before it happens the wealthiest people in America want their $700 billion back!Reply to this comment By Guest on 2008-09-28 10:59:18

I love this thinking!This would be an IOME (I owe me)! in that the taxes are my ‘investment’ to my country which in turn spends it back on me!Seriously it would put the credit card companies out of business. It would send the economy on a serious rocket ride! This would be the bubble of all bubbles unfortunately it would end kind of like the Hindenburg.

Good job. You’re way ahead of me.I remember reading Brad Setser when that was posted. I may have even seen your post. There is so much here anymore that I miss a lot. I remember LB cross-posting Brad’s summary.

This is a very solid possibility. However, I believe there are at least three other very plausible reasons for the bailouts, in addition to yours – known as the 4F’s:1 – Fleece: Profit taking (the ship sunk too quickly or too early for the rats to jump off and they don’t want to get wet – a la DiCaprio) (direct consequence)2 – Federal Reserve recapitalization (not guaranteed but possible)3 – Fear of the credit derivatives monster, which threatens a new Black Monday if it starts collapsing4 – Fraud: there are two possible areas of fraud (I mean the really very serious one). Fraud in the credit derivatives instruments (backed by fictive or not enough assets/papers). And fraud involving high ranked executives and politicians (as per PeteCA)The thing is that it is not necessarily an “either/or” situation.

“The bill sets up an oversight board, which is directed to “ensure that the policies implemented” by Mr. Paulson are proper. Mr. Paulson is to be one of the five members of the board watching over his own actions. He is joined by the chairman of the Federal Reserve, the chairman of the Securities and Exchange Commission, the Housing Secretary and the director of the Federal Home Finance Agency.”THIS IS THE EXACT LOCATION OF ALL THE FRAUD: the fraudulent FHA loans and the fraudulent Ginnie Mae loans at HUD where bankers repeatedly packaged and sold as many as ten mortage loans off one house with no property to secure them; the fraudulent manipulation of stock markets and regulation abuse and Enron-type accounting at the SEC; the misuse of interest rate manipulation and bailout and money manipulation at the FED; the raiding of the Treasury by the investment bankers via their Goldman Sachs Treasury Secretary.The foxes have been put in charge of the hen house. This is to insure secrecy while they cover up and continue their financial slaugher of the American taxpayers behind closed doors. Protect yourself if you can: your screams will not be heard.

I noticed on other cable channels….nauseating.

Someday soon, maybe tomorrow, the sum will rise as usual, but many won’t notice!

KRudd of Australia is stating that He, er, the whole Australian governmenent political and bureacratic is intensively contacting US Congressment to lobby them to accept the Paulson Bill – this could be interpreted as to lobby for the Congressment to ignore the desires of those people that they represent. I believe you call that interference with a foreign sovereign state.They have given the Banks here today “another 4b dollars and will not pressure them to pass the benefits on to the people!We are getting “Our Banks are Sound” noisebytes every hour over the radio…the politicians of the World are in a concerted panic and fear the revolution that is rising; they fear for their heads…Ho hum

Obligations of the U.S. government under Bush have increased from $29.1tn in 2000 to $67.3tn in 2008. Medicare, of course, by far and away showed the largest increase from $9.2tn to a whopping $34.1tn this year.(Keep in mind, mon cher lecteur, that only the US promises unlimited free procedures to people over 65. Don’t try going on dialysis at age 72 in Japan or Canada).o Let’s take a second glance at consumer debt to GNP. If “the consumer” defaults on $2.0tn of mortgage paper, his debt to GNP ratio will DROPo In fact, if we assumed an 8% maximum payment factor, defaulting consumers now enjoy a notional $160bn increase in annual puchasing power!!o In addition to which, the prices of crudeoil and natural gas have collapsed 33%in a matter of weeks, freeing up even more disposable income. 20m bbl/day x $50 x365 = $365bn/yr for crude consumption alone. You can do the numbers on gas and coal yourselfo Also, don’t forget the amazing paper profits the US Treasury has wrung up for you by borrowing $4.0tn in our own, until recently, declining currency!!!o And finally, if I hear one more congressional intelligence-challenged clown say that te $700bn asset swap is inflationary, I’m going to shoot the television. Anyone who doesn’t get this will be rounded up and sent to a special gulag where release is predicated on obtaining at least a B+ in Econ 101(obviously\, almost all prisoners will die in captivity)

Off topic, but bank news today from another part of the world:2008-09-30HARARE, Zimbabwe (AP) – Banking authorities raised the daily withdrawal limit in Zimbabwe, prompting tens of thousands to line up in desperate hopes of getting enough cash for groceries before spiraling inflation eats away more of the currency’s value. New rules went into effect the day President Robert Mugabe returned from the U.N. allowing withdrawals of up to 20,000 Zimbabwe dollars (US$35). The old 1,000 Zimbabwean-dollar limit was barely enough to buy a newspaper. The limit and the fact that Zimbabwe has the world’s highest inflation rate, officially 11 million percent, unofficially much higher, has meant long lines at banks most days.

Here, Here….we have got to increase the pressure, and keep our foot on their NECKS. For so so very long, We have rolled over and they are anticipating that we will give up. I say let us keep our Heads and let them know the Sleeping Giant has Awoken.

I’ll be there!PeteCA

Anyone contacting the Congress tomorrow …* Please point out to them that you can’t make a bad piece of legislation good – just by tacking on a few extra giveaways. Senators and Congressmen know what this means.* Please tell them you will be collecting a list of every Senator and representative who votes for this rescue bill … and running them out of office!* Make sure you ask them why this piece of legislation was railroaded through Congress, while skipping detailed review by all the appropriate subcommittees. No-one in Congress has gone over the wording of this bill with a fine toothcomb. THAT’S SUPPOSED TO BE THEIR JOB !!!* Ask them whether they are still giving this rescue scheme complete exemption from any review by US courts. And if they are, ask them why Mr Paulson’s actions are above the law, when every other American is subject to the laws of this country.I will be onto these guys.Hope you will be too.PeteCA

By the way …Here’s a great piece on the rescue billwritten by Prof. Miron at Harvard.He’s opposed.http://www.cnn.com/2008/POLITICS/09/29/miron.bailout/index.htmlPeteCA

Since they started this highly useless unfair bill in an obscenely demanding manner let us do the same:Wall Street Bail Out BillTo help the maintain financial stability and Wall Streetby provide liquidy to the source; individuals and small business- 1 Trillion Dollars- Paid for by taxes on financial instruments and the top 1%- Elimination of income tax on individuals making 250k or less- Elimination of tax on small business- Direct payouts to both groups- Free Health Care for both groups- Infrastructure improvement projects; transportation, energy- Unemployment benefits expanded to two years at 2x the current rates(2 for 2)- Work week reduced to 20 hours with full benefits, vacation and maternity time equal to 2 x European Countries.- 2 years severance for layoffs- Of course no congressional oversite or judicial review- $0 for toxic junk- Must be passed within 48 hours or elseCare to add anything else?

What we have here is a failure to communicate.The facts are that the debt levels of the U.S.A., U.K., Ireland, Spain, Italy, Australia, New Zealand, Canada, and many other European and ‘advanced’ economies are too large to be serviced by the income these economies generate.There are only two ways out of this:1.) Debt destruction through default leading to a severe recession or depression after which normal and stable growth can resume.2.) Postponing the problem by the creation of new debt with inflationary results and the eventual necessity of having the above occur latter.We must pass through debt destruction now or take on more debt and go through a much larger debt destruction latter.That is the choice. All the other posturing and spin is bull feces.Paulson and Bernanke and Cox and Bush and Wall Street and the House Leadership and the Senate Leadership, all hoped they could ‘contain’ the problem until after November 4th.The only rational solution is the Irish Solution, that is protect depositors and thus stop the bank runs, and let investors take a bath.Dow 8,000 will happen sooner or latter. It is better sooner than latter.

BRIBED ENOUGH IS A GOOD ONE! HEHEHEHEHEHEHE

Where can you see the credit locking up?

Somehow, despite many argumentative and logic flaws, you are arriving to a sound conclusion.New net government debt is not always matched with new net increase in private savings. More often than not, the new debt is financed through overleveraged debt (or as Alessandro would call it, forced savings). Moreover, most of the debt is, as in the case of US, is financed with foreign … money. The government is in fact swapping future hopefully-to-be-generated cash flows for liquid assets. I can argue that some of these future cash flows are inexistent and will never be realized (process of debtization), and I can also argue that debtization by the Treasury is equally inflationary as debt monetization by the Fed.It is true that the majority of mortgages are backed by real assets, however, the same cannot be said about refi-, 2nds, HEW, MBS, and other credit derivatives. The surplus in housing IS NOT temporary (that if temporary does not mean for you 5 years or longer). As in your Aron Spelling example, the banks lost only half a trillion so far. Paulson’s plan intends to overpay for banks toxic paper in hand. Paulson’s new plan, just like the F&F rescue is a debtization operation. What it will do in fact is, contrarily to what Bernanke is hoping for, inflate the asset side of banks balance sheets, which will simultaneously increase their leverage (if they cannot recap or if the stock does not recover immediately) and what it does is debtizing into life some of the fractional/leveraged instruments that should not have come to existence and should have evaporated. In fact, I believe that any monetization by the Fed is just a shortcut for a debtization by the Treasury. When monetizing, the Fed declares that part of US treasuries are officially “money”, but I would argue that not much would have changed. Treasuries are ALREADY a strong proxy to “money” (they serve as a medium of exchange (repo market) and as a store of wealth). Unless done extensively, debtization will make some illiquid (and I would say illegally born) instruments into a form of money (treasuries) that people will use. The only difference I see between the two is their impact on money velocity.Also, as per your “So what’s it going to cost Uncle to service a $2.0tn mortgage @4-5%? $60bn/year. So what’s the big deal??”, the big deal is that the NPV of “@4-5%? $60bn/year” is $2.0tn. Debt amortization is just a treasury/ accounting formality that I am not interested in.It is true, however, that according to the formal definition of inflation, Paulson’s plan is not inflationary, but quite the contrary, as it significantly reduces the risk for the Fed to have to monetize some of the toxic waste it had accumulated in its balance sheet. Also, the Fed was reluctant to expand the money supply by sterilizing most of its liquidity injections. But that is true only according to formal definitions, with which I do not quite agree.

Why don’t they issue Credit ‘War’ Bonds, that way, those of us who are so keen on passing this bailout bill can put their money where their fat mouth is?

Everybody relax. The bill will pass. It will. The credit markets will stabilize. All this liquidity will come back into the markets. In 3-4 years, this will be looked upon as just another bubble and crash. There will be more of these. The smart money will buy equities next week and make a killing. Just wait and watch. America has the safest, most stable, most dynamic and diverse economy. It will come back on top again.

America for socialism? USA is not a democracy state anymore. The Congress is control by the Wall Street Bankers.You can have a re-vote anytime?THIS IS CRITICAL: Please fax AND phone your congressman. Do not bother with any members of the House except for Nancy Pelosi.Call them with this simple message “If you vote for this bill, you will lose my vote”.Click Here For Congresional Phone And Fax NumbersSenate Fax ListPlease fax everyone on this list.Sen. Richard Shelby (R) 202-224-3416 or 202-224-5137 (try both not sure which is correct)Sen. Harry Reid (D) 202-224-7327Sen. Jim DeMint (R) 202-228-5143Sen. John Ensign (R) 202-228-2193Sen. Jim Bunning (R) 202-228-1373Sen. Chuck Grassley (R) 202-224-6020Sen John McCain (R) 202-228-2862Sen. Barack Obama 202-228-4260Sen. John D. Rockefeller 202-224-7665Sen. Dianne Feinstein 202-228-3954Sen. Ron Wyden 202-228-2717Sen. Evan Bayh 202-228-1377Sen. Barbara Mikulski 202-224-8858Sen. Bill Nelson 202-228-2183Sen. John Kerry 202-224-8525Sen. Daniel Inouye 202-224-6747Sen. Hillary Clinton 202-228-0282Those inclined should also fax their own senators as well.

Sorry folk, that would be just one more variant of “let my kids pay my debt”. You may think thousands of those. Your kids will not like any of them.I can assure you. I live in Italy. This trick has been used in the ’70s and the ’80s. It genuinely sucks to be paying the debt your own parents unloaded on you to make nicer holidays.

The Science of Saturation MacroeconomicsThe advantage of science of time course quantum fractal asset valuation macroeconomics over classical macroeconomics and even the great Mises, is that this new science quantitatively predicts the inexorable time course of asset valuation growth saturation evolution and saturation decay and hence the money supply and hence historical economic contractions. A bailout proposal will have no have effect on the deterministic asset valuation events that are about to occur in a very predictable and specific time course. The parallels of the financial institutions’ promises to their stockholders, pension funds, and hedge fund investors, and interbank loan agreements exactly mirror the world government’s entitlement promises to its citizens which can not be kept in a contracting economy. Much social-political chaos lies ahead.

JaneDoe,Strength of currency has less to do with its fundamental economy, has more to do with its money supply relative to another currency..fiat currency now is like commodities in themselves..mrskeptical

@MISH:Bill Bails OUT Foreign Investors: You Americans are SOooo Nice: Thank you and,Now you know why Australia’s guy who thinks he is a Prime Minister is desperately calling every Congressman in the USA to lobby for the Bills’ successful package: Australia Banks have all their toxic waste ready to send the the Federal Reserve in exchange for US Treasuries…We (er, they) are saved…Ho hum

As for the credit card companies, I guess the business model of producing debt slaves by spoon feeding credit to the masses is obsolete anyway, just like is has been for the subprime mortage sector, so their demise (in their current form) is only a matter of time IMO.

Before the coming day has turned into night I hope you Americans will come to understand and to appreciate the great essence of your Constitution.1. You will understand that it uniquely disallowed the control of the United States of America’s currency by third Party Banks and did not, intentionally, provide for the Federal Reserve Bank or its Authority for very good reason.2. You will understand the basic fundamentals of any and all socio-economic systems where no man can be trusted and that the acknowledgment of this fact alone was America’s greatest strength – now gone. You will come to understand that this fact was uniquely provided for within this originating Constitution.3. You will understand why the American forefathers allowed for the right to bear arms and stated the need for internal revolution every twenty years or so and the fact that the true enemies of this once great Nation, are / were within.4. You will understand just who your “representatives” really represent! And that you are not even on any list…I really hope that you come to these understandings this evening…Ho hum and good luck

Yes PLEASE!Instead of doing away with mark-to-market they should be mandating that all banks and raters use a universal modeling system in which Home Price Indexing was done on a zip code basis. This way everybody’s securities and loans are priced using the same valuation methods and metrics. You would have instant transparency and can actually build a bustling market for these assets.Standardized valuation might put some underwater but is a fair price to pay to restore trust.

Check this out:http://www.nakedcapitalism.com/2008/09/mussolini-style-corporatism-in-action.htmlApologies if already posted here. Link to and notes from a Treasury call about the bailout:1. The tranching is a mere formality, and the Treasury boys as much as said so. They could take the $700 billion max as soon as the bill has passed,2. However, they do not plan any action immediately, will wait a couple of weeks. They want to focus their efforts on stronger companies but also made noise about protecting the financial system. This, by the way, is the Japanese convoy system all over.3. There seemed to be a lot of tap dancing about what price they will pay for assets and no straight answer about their policy on warrants. They did say that if the amount sold was greater than $100 million, they would take warrants. FYI, the current draft allows them to pay up to the price at which the assets were initially booked (yikes) . I wonder if this is obfuscation, if they have an idea of what the plan to do but will not admit it in any public forum.4. As the person who listened to the call stressed, DealBreaker wasn’t clear on the bifurcated process. If you come to the Treasury and you are in trouble, you get reamed. Bear/AIG style treatment, execs probably fired. But if you participate on a voluntary basis, the intent is to make it very user friendly. That is consistent with Paulson’s position during the negotiations.5. The exec comp provisions sound like a joke, They DO NOT affect existing contracts, they affect only contracts entered into during the two years of the authority of this program and then affect only golden parachutes. More detail on that point, but I don’t need more detail to get the drift of the gist.Further below are the notes, admittedly somewhat cryptic at points, but hopefully helpful. But if you have time, listen to the download. Be warned I may revise and add to the post once I have done so.Update 12:30 AM: Have queued up recording of conference call but not yet listened to it. But reader and sometime contributor Lune provides a useful take. Hoisted from comments:1) If even the Treasury is saying tranching is a formality, then it really is nothing. Not sure why Dems fought so hard for a fig leaf.2) Waiting a couple of weeks because no one has any idea when or where the next bomb will blow up. In other words, all their doomsday scenarios about Black Monday were B.S. They screamed the check had to be written by Monday, but now they’re saying they actually have a few weeks before they need to cash it. Plus, this will allow them to “seek guidance” from GS, JPM, and other selfless public servants about where the money should be funneled.3. The tap dancing is because they don’t want it to get out that they’ll be giving a sweetheart deal. The public won’t be following each individual transaction to see exactly what price is being paid. So ridiculously overpriced asset sales can be hidden in the details, and by the time some reporter (or blogger combs through and analyzes the transactions, the deed will have been done. But if Paulson makes a statement that assets will be bought at par before the bailout’s even begun, that will be reported and might kill the deal.4. In other words, we need to sweeten the pot to encourage banks to come “voluntarily”. Pardon my ignorance, but why the hell should we be begging banks to borrow from us? I thought a bailout should be the absolute last option for a bank. I.e., it should be so unpalatable, so unprofitable for a bank and its executives that they exhaust every private means of survival before coming for their public “reaming”. I wonder if foreclosed homeowners would rate their foreclosure process as “user friendly”.5. Of course the exec comp provisions are a joke. Who do you think is going to be hiring all those banking cmte staffers and newly retired congresspeople next year during the inevitable post-election turnover? Do you really think they’re going to vote to limit their salaries? Remember that for lots of people on the Hill (including elected reps), govt work is merely time you spend accumulating credentials in preparation for your real life’s work in the vastly richer private world.

Excellent point, Dr. Taylor. Well said.SWK

They say by 80-90 votes, too.SWK

Very scary, indeed!SWK

Let’s enjoy our misery. The RFC of the Great Depression will make a comeback in the next administration. When we were peasants it was easy to see the King’s castle and therefore know our enemy. Now he’s cloaked in the paper of the Constitution. Arm the proletariat.

Toss in Kevin Phillips.

american economy will overcome this one…..it always does. people are too dramatic about it, giving it the dimension it doesn’t have….a 15 trillion dollar economy ,the largest in the world, present in all continents..c’mon….gimme a break and stop trumpeting the chaos!!!! in 3 yrs we will look back and laugh about it. america still sets the tone for the world, and it will remain so. china is what it is because of america’s intervention on wto to get them in! they were shut in their own “village” until america went there and brought them back to the “free market “world. don’t underestimate this economy…..u will fail on doing so.let’s change the vibes from negative to positive. change the way you visualize this thing.

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