I recently read about the gubmit's plans to offer about $700,000,000 to failing financial institutions in order to stop the bleeding of the economy. This move amounts to corporate socialism, imo. Another term would be fascism. The burden will fall squarely on the shoulders of American tax payers; trickle down economics at its worse.
Meanwhile the taxpayers are stuck footing the bill under the guise that its the only move to free up credit for future use. But just how much into debt does the country want to go? I believe the practice of borrowing money is too rampant in the first place. Many countries in Europe frown on borrowing to fuel purchases. Our economy has been over extended due to our addiction to credit purchases. And its time to stop that practice. Allowing the financial institutions to live with the consequences of their greedy ways would do more in the long run to fix our ailing economy than attempting to get us back to the place/mind set that created this mess in the first place.
lw
We know a family that decided to move to California a couple of years ago. They were living in a house in Iowa valued at $150,000. Their annual income never topped $55,000. (I did their taxes.) He managed computers and she was a part-time waitress. They have three kids.
Anyway, the family managed to secure a bridge loan for $90,000 to help them move before their house sold. (They were really in a hurry to leave Ioway.) They also procured a loan for a house valued at $750,000 in Berkeley. Their plan was to move to CA and have the man start selling real estate while the mom stayed home with the kids. Never mind that this fellow had never sold a house in his life. That was two years ago. Their house in Iowa finally sold a month or two back. I have no idea how things are going in CA. They stopped talking to us soon after I told them I thought the plan was a bad idea.
According to them, the financial institution never asked them how much money they made, nor how they planned on making a living after the move. As this guy had NO outside sales experience, I had a tough time believing a bank approved almost $850,000 in loans for a family never making $60,000 per year and a breadwinner getting into a tough field with no experience, high failure rates and no pay unless houses were being sold.
That financial institution deserves to go under. No if's and or buts about it.
lw
This is what we are going through:
Japanese Asset Price Bubble (//http://en.wikipedia.org/wiki/Japanese_asset_price_bubble)
It's a short entry on Wiki so it is really worth reading. Here are the results of that particular economic crisis...
December 29, 1989
Nikkei index topped @ 38,957.44
April 2003
Nikkei index bottomed @ 7603.76
Lost 80.48% over 14 years (which earned it the title "The Lost Decade" of Japan)
As of 2008 Japan still has a national debt which is 195.5% of the total GDP. In 2007 the USA had a national debt which is 60.8% of the GDP. One thing the Japanese have to say about our current crisis is that when it happened to them, no amount of government intervention in the form of monetary softening worked as every measure they took to ease lending completely struck out.
Case in point, we just increased the national debt by about 8% to invest taxpayer money (in VERY high risk securities) to prop up the financial industry and yet the Dow drops nearly 2%...
The good news is that this is making McCain and Palin look really ignorant.
Thanks for the link, caul.
Just found this...
http://www.independent.co.uk/news/busin ... 37560.html (http://www.independent.co.uk/news/business/news/fury-at-25bn-bonus-for-lehmans-new-york-staff-937560.html)
Fury at $2.5bn bonus for Lehman's New York staff
By David Prosser
Monday, 22 September 2008
Up to 10,000 staff at the New York office of the bankrupt investment bank Lehman Brothers will share a bonus pool set aside for them that is worth $2.5bn (£1.4bn), Barclays Bank, which is buying the business, confirmed last night.
The revelation sparked fury among the workers' former colleagues, Lehman's 5,000 staff based in London, who currently have no idea how long they will go on receiving even their basic salaries, let alone any bonus payments. It also prompted a renewed backlash over the compensation culture in global finance, with critics claiming that many bankers receive pay and rewards that bore no relation to the job they had done.
A spokesman for Barclays said the $2.5bn bonus pool in New York had been set aside before Lehman Brothers filed for chapter 11 bankruptcy in the United States a week ago. Barclays has agreed that the fund should continue to be ring-fenced now it has taken control of Lehman's US business, a deal agreed by American bankruptcy courts over the weekend.
Barclays is paying $1.75bn for the US operation of Lehman and is keen to retain its best staff. It said it had made no promises to individual staff members about how much they will receive but that the bonus fund would be paid out. In addition to the $2.5bn cash pool, Barclays is also in negotiations with about 30 executives it considers to be Lehman's best assets and plans to offer them contracts worth tens of millions of dollars. British employees of Lehman described the bonus payments as a "scandal" as they waited anxiously yesterday to see whether a deal could be struck with buyers circling the bank's European operations.
Many of Lehman's UK staff are particularly angry about the US payouts because it has emerged that in the days running up to the bankruptcy, some $8bn in cash was transferred out of the account of the bank's European business into accounts at the New York head office.
There is no suggestion any of this cash was used to supplement the bonus fund, but partly as a result of the transfers, PricewaterhouseCoopers (PWC), the administrator to the European business, initially found it impossible to guarantee salaries would be paid. The September wages of thousands of European staff were only secured in the middle of last week, when PWC negotiated a £100m loan to fund the payments. PWC wrote to Lehman Brothers' head office in New York last week, requesting the repayment of the $8bn, but a spokesman said yesterday that the administrator had received no formal response.
The row will increase pressure on the Government to tackle perceptions that City pay is out of control. Speaking on The Andrew Marr Show on BBC1 yesterday, Gordon Brown said Britain would review financial services awards following the credit crisis. "There's been a great deal of irresponsibility," the Prime Minister said. "There's an element of the bonus system that is unacceptable."
However, Adair Turner, who formally takes over today as chairman of the Financial Services Authority, the UK's chief City regulator, warned it would be very difficult to police individual pay deals.
"I think it would be really exceptional in any industry to have direct regulation on what different people are paid, I don't think that's appropriate and I don't think that would be workable," he said.
"What is appropriate for regulators to do, is the need to ask searching questions about the nature of people's remuneration and to ask questions of institutions as to whether they are paying out bonuses before they are really sure whether the profits are really there."A spokesman for the TUC said the US payouts were unfair. "It looks like those that will suffer the most from the Lehman Brothers' collapse are those at the bottom of the corporate chain while many of those at the top will be looked after," he said.
Critics of the UK's attitude towards City pay also pointed out that the US has much stronger litigation laws. For example, advocates acting for Lehman creditors in the US said over the weekend that they might sue Richard Fuld, the investment bank's chief executive, who was paid $34.4m last year, in an attempt to force him to return some of the money.
It's a bailout of the rich bankers. Homeowners will end up screwed under the Bush plan. The demos want to throw a bone to the borrowers but their main concern is that they get some of the loot themselves. There will be more stealing and corruption here than ever before.
Interest payments on the national debt will soon be our biggest expense. How long after that before other countries refuse to buy our bonds and we become insolvent?
Quote from: "Stonehenge"Interest payments on the national debt will soon be our biggest expense. How long after that before other countries refuse to buy our bonds and we become insolvent?
Thank you for adding that question! If only MORE people would ask it of our leaders and politicians...
2017 is the current timeline for our debt to officially overwhelm us as the corruption of and false promises we initiated to Social Security triggered by the Baby Boomer retirement will decimate the US dollar.
I know it is a controversial standpoint for me to cry out against something as fundamental as Social Security of our citizens, but because we have NEVER found any way to control the cost of healthcare in this country, we have only ourselves to blame.
Social Security as it currently exists was initally designed as nothing more than a petty pyramid scheme supported by a rising population and a growing GDP. Because of this it is often used as a soapbox for politicians to promise things we cannot afford when approval ratings fall (like Bush and Medicare part D) or when people complain about the sorry state of our privatived healthcare system...
On top of this, the government has been unfairly using money from the generated surplus (which is dwindling). They put the surplus into a "Trust Fund" to invest in for the benefit of the US citizens and their future. So what do they invest it in? Treasury securities... So now Uncle Sam has the right to use the money from the sale of those government bonds however it sees fit.
I think in any other corporate arena such a practice would be called money laundering... But go figure.
God bless America!
I know Andrew Jackson is infamous for his cruelty to Native Americans, but two quotes by him really ring true today...
"The bold effort the present (central) bank had made to control the government ... are but premonitions of the fate that await the American people should they be deluded into a perpetuation of this institution or the establishment of another like it."
"Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves."
Years ago, Steinbeck wrote The Grapes of Wrath to protest against the enslavement of the US citizen to the banking system as Washington turned a blind eye and supported corporate America. When the fog finally clears from this economic catastrophe, I hope another writer has the balls to stand up and do the same for all of us...
If we do not do our duty to crucify our politicians, revolt against our current system, and DEMAND some real changes, then the next generations will do it for us... But instead of crying out against our leaders and our government, they will blame us for being a generation of worthless, greedy, self-centered, ignorant people who lived far beyond their means, charged the bill on credit, and passed the debt on to our children.
I truly hope it does not come to that.
Peace all.
Right on, caul.
But it sure appears we are headed in that direction. (Do nothing.)
I'm not real optimistic that the current, backward trend is going to reverse any time soon. Authoritarianism is on the rise in this country, imo. And the mainstream media is helping propagate the necessary mindset to the masses.
As it stands, an effort is required extract oneself from the current reality being sold to the people. Spiritual children are being allowed to set the precedent and make laws inhibiting real personal (spiritual) growth. The symbolic has replaced the active for most. The only hope I see is in the potential for a psychedelic revolution, where the active sacrament is returned to It's rightful place in the act of worship.
lw
It really boggles the mind to think about this stuff eh?? I mean, it's not as if the public at large is unaware of the ever more present signs of economic duress... Gas prices/milk/taxes/yadda yadda... I'd make a bit of a guesstimate and say that the US will end up steadily dwindling its assets until we are merely another country instead of the actual economic superpower of the globe.......
Quote from: "senorsalvia"the US will end up steadily dwindling its assets until we are merely another country instead of the actual economic superpower of the globe.......
The facts below are collected from Wikipedia reflecting data as of 2007 estimates:
China
National debt = 18.4% of GDP
Current account balance = $372 billion (Ranked #1)
Russia
National debt = 5.9% of GDP
Current account balance = $93 billion (Ranked #4)
USA
National debt = 60.8% of GDP
Current account balance = -731.2 billion (Ranked #164)
None of the data above takes into account the current economic crisis, the upcoming recession which will affect our GDP, or the incoming flood of liabilities stemming from Social Security obligations and the interest on our debts. If you want to know what the economic landscape will look like within the next 20-50 years, there is a brilliant document known as the BRIC thesis written by a Goldman Sachs analyst which theorizes that the collective economies of Brazil, Russia, India, and China will in the next few decades eclipse the rest of the world.
Part of the reason the US dollar and our economy is artificially propped up by foreign interests is that for years we have forced the world to value oil in US dollars. Iran and Russia have implemented alternatives however for an increasing number of interested nations. Because of this, countries by the handful have been unlinking the value of their currency as a hard proportion of the USD causing it to fluctuate with increased volatility.
Add to this the fact that China and Russia invited India to join the SCO (the East Asian counter to NATO) and granted Iran observer status (which they DENIED to the USA), and it is very little wonder why we spend so much on our military and wage so much war... It is the last vestige of our dying greatness.
One factor working in our favor is the fact the usa is too big to fail. If even a relatively small country like France failed, it could drag down the world economy and produce a world wide depression. Even more so with a big country like ours. Everybody's economy is intertwined with everybody else's.
The trouble is that the recession has spread world wide and even China is feeling the pinch. I'm afraid we could be in for another great depression. This time, instead of cash being king, gold and other commodities will be king. You have to eat so food producers will be strong. You need ferts to produce food so fert producers will be strong. You also need fuel so the middle east will always be strong. China may fail if the world can no longer afford it's products.
If the federal bailout fails and other countries don't prop us up, the result could be disasterous for the whole world. Unemployment could go above 25% here and over 50% in some parts. There could be wide spread starvation. The do gooders will have a hard time feeding themselves. All the children we saved in africa will die and it'll be our fault.
Speaking of economically bleeding the U$ to death........ That's exactly what bin Laden said was the goal when he began waging war on our country all those years ago. Granted, he's had a lot of "inside" help with fucking our economy. (Trickle down economics, corporate greed and deregulation leading to unfettered capitalism, to name a few of the true enemies of the State.)
Capitalism is the survival of the fittest. The current remedy is something completely different. More trickle down, voodoo economics. The same companies wanting the gubmit to stay out of their affairs earlier are now expecting a handout to compensate for the rampant corporate greed that is in the process of taking our economy down. Corporate socialism appears to be live and well in the U$. Meanwhile any gubmit program aimed at improving the lives of those living on the margins is deemed socialism, and by popular definition, insidiously evil.
lw
Privatize the gains ; Socialize the losses...
Doncha love America?!
I acknowledge the validity that the US is "too big to fail", but ascribe to it with a great deal of defensive caution. Due to the death of our industry, our service based economy rooted in the financial sector, our outrageous system of a market driven by insane amounts of internal spending, and a populace enslaved by massive borrowing, many have speculated that we are ill prepared for the days of reckoning to befall our world economies.
Japan, Russia, China, and the UK all have indexes which are suffering due to their links to and investments in the United States economy, but their institutions are not leveraged as riskily as ours are (well, maybe Japan) and they have the infrastructure in exports and trade to tighten their belts and ride through this (well, maybe not the UK).
When the dot-com burst, we rode through it because lending and spending recovered (thanks to Greenspan's foolishness), but now the fundamental workings of our economy are essentially broken. The folks who wish to perpetuate this cycle (for eternity if possible) can now be grateful that we have a government big enough to dig into the gears and tinker about (on our dime). The rest gather on YouTube or at Ron Paul meetups to show off their holdings in gold, trade foreign bonds, and exchange literature by Peter Schiff.
Why is it always a choice between extremes in this country...?
I am neither a libertarian, a Ron Paul cultist, a Peter Schiff fanatic, a doomsday prognosticator, or a conspiracy theorist. I work a nine to five for a 403B which is heavily invested in the S&P. Neither am I a goldbug, but I do accumulate silver bullion to diversify my portfolio. Though I am not a patriot, I do admire a great number of our founding fathers.
So it truly is with a heavy heart that I decry the collapse of the US economy, and I want to believe that Warren Buffet is correct when he states that this too (as all business cycles) shall come to pass.
I think we will come out of it and it won't be as bad as the great depression though in the short run it will likely be bad. I just hope SS doesn't go under and all those retirees end up on the street with nothing. I don't mind if the stock holders lose their shirts as long as the average guy can find a job.
Btw, most most of the folks thinking this crisis isn't going to develop into something too serious are the ones voting for Palin/McLame in the upcoming election, imo.
Any step closer to a fascist state is a dangerous thing at this point. And this bail out amounts to corporate socialism, which is a form of fascism. This is trickle down socialism and it sets a terrible precedent, imo. The act of bailing these fat cats out goes against every principal of capitalism. At least how its been advocated by the very same fat cats looking for a hand out.
This will be a mistake. Mark my words. Printing up a trillion dollars will cause rampant inflation as the value of our currency continues its downward spiral.
These companies NEED to fail. Just like the current administration NEEDS to be impeached. The corporate and political entities are joined at the hip. The systematic looting of our economy by corporate pigs following deregulation granted by our neocon gubmit has directly lead to the crisis at hand, imo. The corporate State is almost in place.
lw
The MSM is reporting some interesting posturing by republican members of congress in regard to the proposed financial bail out. Not sure of their motivation at this time. Old-school republicans would be expected to take free market approach and let the chips fall where they may. But the neocons have proved to be a special breed. Corporate socialism is their specialty.
http://www.ft.com/cms/s/0/cdfbdcb6-89a3 ... fd18c.html (http://www.ft.com/cms/s/0/cdfbdcb6-89a3-11dd-8371-0000779fd18c.html)
GLOBAL FINANCIAL CRISIS
Republican anger at ‘financial socialism’
By James Politi and Daniel Dombey in Washington
Published: September 23 2008 21:45 | Last updated: September 24 2008
00:36
Congressional Republicans on Tuesday voiced their strongest objections to date about the Bush administration’s $700bn financial rescue plans, dealing a blow to White House ambitions for them to be quickly approved.
As Hank Paulson, Treasury secretary, and Ben Bernanke, chairman of the Federal Reserve, predicted grim consequences if the plan were rejected, the Republicans’ Senate leadership called for new provisions on executive pay, which the administration opposes, while others cast doubt on the whole package.
“We are going to advance taxpayers’ dollars, and government ends up in effect taking an equity position in businesses,†Mitch McConnell, Senate minority leader, said. “I think the taxpayers should expect no less than strict limits on the type of executive compensation that might be possible for those involved in these partially government-controlled enterprises.â€
Growing Republican doubts will make it harder for momentum to build in favour of the proposal. Harry Reid, the Democratic Senate majority leader, on Tuesday said the Republicans needed to “start producing some votes for usâ€. Although the Democratic leadership supports the need for a rescue package, many rank-and-file members are wary of pushing through what could be an unpopular $700bn (â,¬480bn, £380bn) intervention in an election year.
The political unrest surrounding the bail-out plan was on display throughout Tuesday’s tense hearing before the Senate banking committee â€" the first since the new authorities were demanded by the administration over the weekend.
Richard Shelby, the top Republican on the Senate banking committee, warned “we could very well spend $700bn and not resolve the crisisâ€. He called on the US to exhaust “all reasonable alternatives†before committing itself to the plan.
Elizabeth Dole of North Carolina said: “I am very sceptical of this proposal and am extremely frustrated that we find ourselves in this position.†Jim Bunning of Kentucky added: “This massive bail-out is not the solution, it is financial socialism, it is un-American.â€
Meanwhile, Democrats pressed the administration to agree that the government should automatically take stakes in the companies it acquires, as well as curbs on executives’ pay and bankruptcy reform that would allow judges to modify the terms of mortgage loans.
Chuck Schumer, the New York senator and chairman of the joint economic committee, suggested the bail-out could be smaller and its effect evaluated in January.
After the hearing Chris Dodd, the Democratic chairman of the banking committee, said the Treasury proposal was “not acceptableâ€. “A lot of reservations have been expressed this morning by Democrats and Republicans on this matter ... This is not going to work.â€
Mr Paulson had argued during the hearing that the full amount was needed to stabilise markets and that limits on executive pay and mandatory government stakes in participating firms could undermine the plan’s effects. “The best protection for the taxpayer, and the first protection for the taxpayer, is to have this work,†he said.
The administration aims for approval of its bail-out plan this week. On Tuesday, Dick Cheney, US vice-president, sought to win over the conservative Republican Study Committee after 31 of its members signed a letter last week decrying the “the increasing propensity, size and frequency of government interventionsâ€.
A second hearing on the plan is scheduled for Wednesday.
This piece pretty much hits the nail on the head, imo.
Quote from below: The only funny part of this whole mess is that Bernanke and Paulsonuvabitch worry that limiting some of the investment officers' and directors' bonuses and income might prevent them from signing on to this contemptible mess of a bailout....
http://www.capitolhillblue.com/cont/node/11350 (http://www.capitolhillblue.com/cont/node/11350)
ARE YOU SHITTING ME? (again?) Paulson and Bernanke deserve 20 to life.
September 23, 2008 - 2:48pm.
By Robert A. Kezelis
This one's short, not very sweet, and based on a cold rage that Pastor Ag has seldom felt before.
DATELINE Washington DC: Last week, Hank Paulsonuvabitch appears in a double secret probationary meeting before select Congress-critters, and claims that the entire financial system of the USA will collapse unless he gets emergency powers, unfettered, unsupervised, and without accountability to the courts, congress, or the American taxpayer . . . oh yeah, and a $700,000,000,000 loan. AND he gets to play with the money for 4 months without oversight until he retires. Whereupon he probably joins one of the recipients of his princely financial gifts and dole-outs. Congress was left speechless. Which may be the only good thing in this whole mess.
(HYSTERICAL HISTORICAL NOTE: For the past 2 yrs, Paulsonuvabitch, The Loan Stranger, and his sidekick "Tonto" Bernanke have repeatedly assured Congress-critters that no new regulation was needed and that the economy was robust, strong, and stable.)
DATELINE White House: Today, the assistant press corpse handler for the President admitted that, despite their denials of trouble for the past several months, in reality the White House, Treasury, and the Fed, were aware of this growing financial abyss, lied to congress, lied to the American public, and had worked out this solution during those months.
(HYSTERICAL HISTORICAL NOTE: Bite me in the ass once, shame on you; Bite me in the ass twice, thrice, etc., with the Patriot Act, IraqNam, AND FISA, and I should be really ashamed of mself; Bite me in the ass with this Mother of all Bailouts, and the only possible honorable reaction from Congress can be to commit group Hari Kiri, unless and until our Congress-critters can find their missing spines and stand up to this illegal, immoral, cheating, unconstitutional collection of political thugs and thieves. You know them as the Bush Administration.)
We now know that that the economy's not "robust", but a bust. The only way it is "strong" is when you compare it to the lovely aroma given off by a mega-farm that concentrates its pig offal directly upwind of you. Stable? only if you compare it to a mountain of jello during an Category 7 earthquake as measured on Sir Richter's magnitude scale.
I don't know which is worse, the fact that today's US economy would look at 1929-1930 with envy, or that our Administration leaders repeatedly, constantly, and deliberately lied to Congress and the American people about the state of the state, or lastly, that I have absolutely zero confidence in our Congress, either party, to stand up, be brave, investigate the hell out of this quagmire, and rationally work to fix ALL problems, not just the liquidity problems of Tonto's and the Loan Stranger's best friends.
The only funny part of this whole mess is that Bernanke and Paulsonuvabitch worry that limiting some of the investment officers' and directors' bonuses and income might prevent them from signing on to this contemptible mess of a bailout. The irony is so rich, that it would set off metal detectors in your local airport.
Technorati Tags: Rob Kezelis Hank Paulson Ben Bernanke George Bush US Congress Mother of all bailouts treason
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Wow, wow, wowser is all I
Submitted by Carl Nemo on September 23, 2008 - 4:09pm.
Wow, wow, wowser is all I can say Rob Kezelis...!
This magnum opus is the finest give'em hell rant I've ever read anywhere ever, regardless of the crisis! :D
I whole-heartedly concur with you sir!
I've contacted both my Dem Senators and rep's office yesterday along with blistering emails to all three of them, but based on my discussions with their aides I get the impression these, spineless, traitorous "republicrats" are going to rollover for the Bushista's like they've done on everything else during the past 7.5 plus years.
The aides said they've received "billions" of calls! Due to the shear volume, I'm sure folks weren't calling in to encourage the handout. The aides confirmed to me they were not, but since my Congressman supported the war in spite of the same volume of opposition, I'm going to use contrarian analysis and assume that my Congressman will giv'em the money!
The MSM is spinning some more lies by saying if the congresscritters don't pass this legislation they'll be blamed by their constituents for not handing over the money thus preventing their engineered "scare depression", when in reality it's the other way around. I've polled all my friends even people in my local Starbucks and Safeway and everyone has a let's get a rope and hang'em high attitude! I haven't run across a single citizen that's whined to me that our Congressmen should go along with this criminally inspired shakedown of the U.S. taxpayer.
Again, great stuff and you've made my day with your smokin', spot-on rant!
Carl Nemo **==
I'm surprised the house and senate are even talking the big game they appear to be below. My guess is that they blow hot air for a few days and then quickly give in and fund the bail out before calling it a session and leaving DC. That way they look tough now and have a bit of time out of the public eye while the peoples forget.
http://www.breitbart.com/article.php?id ... _article=1 (http://www.breitbart.com/article.php?id=080924105541.dzp39wko&show_article=1)
Congress balks at huge US financial bailout
Sep 24 06:56 AM US/Eastern
US lawmakers were digging their heels in Wednesday against the government's 700-billion-dollar financial rescue package, setting the scene for a fierce showdown on Capitol Hill watched anxiously by markets around the globe.
Federal Reserve chairman Ben Bernanke and Treasury Secretary Henry Paulson were facing another day of testimony, after Tuesday's cold-shoulder reception by senators balking at a swift passage of the bailout.
The duo argued that failure to pass the emergency measure quickly would put the entire US economy at risk, but lawmakers appeared unwilling to let Wall Street off the hook at the massive expense of US taxpayers, while the FBI reportedly launched a probe of failed banks and mortgage giants.
"What they have sent to us -- this is not acceptable," Senator Christopher Dodd, chairman of the Senate Banking Committee, told reporters after Bernanke and Paulson testified.
"A lot of reservations have been expressed this morning by Democrats and Republicans on this matter," said Dodd, a Democrat. "This is not going to work."
"They're going to have to come back and work with us," he said.
The two finance chiefs were to face a second round of grilling Wednesday at a hearing of the House of Representatives Financial Services Committee amid rising opposition to what would be the largest government financial intervention since the 1930s Great Depression.
The debate over the proposed bailout was sure to heat up further on news that the Federal Bureau of Investigation is probing allegations of fraud by 26 Wall Street firms, including several investment giants whose collapse sent world markets reeling.
CNN said the FBI has set its sights on investment titan Lehman Brothers, mortgage giants Fannie Mae and Freddie Mac and insurer AIG, in order to determine whether company executives had any responsibility for the institutions' financial woes.
Democratic congressional leaders and some Republican colleagues have insisted the bailout crafted by Paulson, a former president of investment bank Goldman Sachs, should include sweeping safeguards and oversight to protect US taxpayers.
Bernanke told the Senate banking panel that despite unprecedented steps already taken by the Republican administration to confront the crisis, global financial markets "remain under extraordinary stress" and that action was "urgently required to stabilize the situation."
"I believe if the credit markets are not functioning, that jobs will be lost, the unemployment rate will rise, more houses will be foreclosed upon, GDP (gross domestic product) will contract, that the economy will just not be able to recover in a normal, healthy way, no matter what other policies are taken," he testified.
Paulson warned that if Congress did not act quickly, a credit crisis could threaten "all parts of our economy."
The warnings came as President George W. Bush vowed before world leaders at the United Nations that US lawmakers would approve the bailout and avert a financial meltdown.
"I can assure you that my administration and our Congress are working together," he said in his farewell address to the UN General Assembly in New York. "I'm confident we will act in the urgent time frame required."
But the proposal to give the Treasury unprecedented authority to borrow 700 billion dollars to buy toxic mortgage-related assets from struggling financial institutions faced stiff opposition in Congress.
"This massive bailout is not a solution. It is financial socialism and it's un-American," said Republican Senator Jim Bunning.
Another Republican, Representative Jeb Hensarling, said other options must be explored: "We are concerned that the plan will put the taxpayer on the hook for a trillion dollars and still might not solve the problem."
The ranking Republican on the Senate Banking Committee, Richard Shelby, seemed to agree with Dodd.
"I have a lot of concern with the proposal," said Shelby. "Seven hundred billion dollars is a lot of money to me; it's a lot of money for taxpayers."
New York Democratic Senator Chuck Schumer told CNBC television during a break in the hearing: "There are a whole lot of questions and a good deal of skepticism, certainly about a blank check, on both sides of the aisle."
In opening remarks at the Senate hearing, Dodd called the government plan "stunning and unprecedented" in its scale and sweeping powers.
"Before I sign off on something of this magnitude, I would want to know that we have exhausted all reasonable alternatives," he said.
World stocks were mostly higher Wednesday, after a vote of confidence in Wall Street from tycoon Warren Buffett, whose company Berkshire Hathaway agreed to buy five billion dollars of stock in Goldman Sachs.
Hey LW, I read all your posts in The World forum but I wanted to make a tiny suggestion. I think in order to reduce the clutter in a hot thread topic, like this one and the one on global warming, it might be best to omit including the entire article in a post when a link to the source in included.
When there are certain portions in an article I light to highlight for emphasis, I usually just include them below the link in quotes (with personal commentary after).
I am by no means criticizing the validity of the material you present for reference, and only bring this up to keep these important threads presentable in an efficient and streamlined manner.
Peace and keep it up :)
Just as an aside, I was wondering if you good folks here could send me a few tens of thousands of USD???? Ya see, I have inversted in some questionable ventures in the past that did not pan out right.. That, and I have blatantly mis managed what liquid funds have passed through my hands in the last several quarters... I'd send a financial disclosure statement for your purview, but alas, my recordkeping system recently got corrupted and there is no paper trail. I really do promise I'll become financially astute the next go 'round..... How's about it, huh, from one by gum citizen to another eh????--- Oh, and uh, how's about just sending cash in small denominations instead of checks, hmmmm....Thanks, I just knew I could count on you good peoples fiscal responsibility and probity... Don'cha jess luv livin in 'da land of all dat dere milk-n-honey!!!
Dear Sir,
Your loan application for "a few tens of thousands" has been pre-approved. We apologize for the delayed response, but prior to recent government intervention our unscrupulous lending practices were in jeopardy. Please pay no heed to your lack of liquid equity, your less than stellar track record for investments, or your long list of current liabilities. Without any structural oversight in regards to how we utilize this new found equity from the noble and generous taxpayers of America, we find it quite simple to go about business as usual and fill in in numbers for your income, credit, and collateral as we see fit.
The loan will be migrated into tradable securities in the form of bonds anyway, which will be insured by AIG which despite being a private company is backed by the government (not sure how that happened). Financial companies will then buy them from us and use them as leverage to make even more risky investments (just like you did! what a coincidence). If they end up putting their customers' deposits in danger, there is always the FDIC to back them up with Uncle Sam at the helm constantly printing out treasuries and passing the debt on to the wonderfully ignorant citizenry of this fine fine Country!
We thank you for your business.
Sincerely,
Greedie McFatty-Pants
CEO - Supremo Subprimo Savings
Hey, caul.
No problem, mon.
But I'm not sure I agree. Personally, I'll read what's posted in a thread but seldom cilck on links. Maybe I'm in the minority. (It wouldn't be the first time.)
However, if proper netetiquette is to provide a link sans supporting material, I can easily comply with that. :D
lw
Btw, caul...
After having some time to think about it, I don't agree that posting only links in a thread is the way to go. Links become corrupt and information is then not available on the topic at hand. While it might keep the thread more neat and tidy, after a certain period of time, the thread becomes nothing more than a bunch of broken links. By posting the pertinent material a thread maintains its historic significance no matter what happens to materials off-site.
Looks like a bail out has been approved. Hello fascism, good by free market risk to the oligarchy at top. Deregulation allowed these crooks to gut the system from the inside out. And now they want to be in charge of fixing the mess and it has to be done NOW!. A mess that took years to develop. A mess that wasn't even acknowledged by the gubmit or MSM until the walls were coming down around their ears a couple of weeks back.
"The market fundamentals are strong." McLame 2008 campaign slogan uttered for the last time only a few weeks back. What has changed in that time? Nothing.
This current crisis is only a symptom of the real problem. Trickle down economics is a farce.
lw
Quote from: "laughingwillow"After having some time to think about it, I don't agree that posting only links in a thread is the way to go. Links become corrupt and information is then not available on the topic at hand.
Sorry LW, mentioning links was just a suggestion for a larger argument I held in regard to posting an entire article as opposed to referencing particular points of interest. In order to prevent threadjacking I have moved my response to The Site forum.
Quote from: "laughingwillow"they want to be in charge of fixing the mess and it has to be done NOW!. A mess that took years to develop. A mess that wasn't even acknowledged by the gubmit or MSM until the walls were coming down around their ears a couple of weeks back.
Indeed... Home prices have been falling for over a year with people foreclosing at record breaking rates month over month, but only NOW with Wall Street, the big financials, and our system of purchasing national growth on debt and extended credit, is Washington finally concerned. It's really sad.
Quote from: "laughingwillow""The market fundamentals are strong." McLame 2008 campaign slogan uttered for the last time only a few weeks back. What has changed in that time? Nothing.
His favorite US President is professed to be Reagan; A man who arguably gave birth to the current cancer that is our growing public debt with his shortsighted Reaganomics... A man who saw the beginning of the HIV/AIDS pandemic (and could have done something) but did not even mention it in the news (despite pleas from the CDC and WHO) until people close to him were infected... A man who sent hundreds of Marines to their death to fight a civil war that was not ours...
A man who is the exact opposite of what we currently need in this our most critical hour while the country barely clings to life support.
Another Reagan? God help us all...
This just in....
http://news.yahoo.com/s/ap/20080929/ap_ ... l_meltdown (http://news.yahoo.com/s/ap/20080929/ap_on_bi_ge/financial_meltdown)
WASHINGTON - In a stunning vote that shocked the capital and worldwide markets, the House on Monday defeated a $700 billion emergency rescue for the nation's financial system, ignoring urgent warnings from President Bush and congressional leaders of both parties that the economy could nosedive without it. The Dow Jones industrials plunged nearly 800 points, the most ever for a single day.......
.......Bush and a host of leading congressional figures had implored the lawmakers to pass the legislation despite howls of protest from their constituents back home. Not enough members were willing to take the political risk just five weeks before an election.
"No" votes came from both the Democratic and Republican sides of the aisle. More than two-thirds of Republicans and 40 percent of Democrats opposed the bill.
"The legislation may have failed; the crisis is still with us," said House Speaker Nancy Pelosi, D-Calif., in a news conference after the defeat.
"What happened today cannot stand," Pelosi said. "We must move forward, and I hope that the markets will take that message."
.....................Pelosi seems to believe that this proposed bailout is going to fix the current economic crisis. Sounds like a true neocon trickle down economist to me rather than a democratic party leader.
At least WE the people seem to be getting it right. I'm guessing Washington has been flooded with calls by ordinary citizens to scrap the plans for corporate welfare. Heck, I'd rather see the bailout money go directly to those with faltering mortgages rather than the fat cats on top. But I really don't think either should happen. At least not on the taxpayers dime.
lw
Michael Moore's take on the situation at hand... I think his view on why the dems have backed bush and this plan is interesting, indeed.
http://www.michaelmoore.com/words/messa ... php?id=235 (http://www.michaelmoore.com/words/message/index.php?id=235)
The Rich Are Staging a Coup This Morning ...a message from Michael Moore
Friends,
Let me cut to the chase. The biggest robbery in the history of this country is taking place as you read this. Though no guns are being used, 300 million hostages are being taken. Make no mistake about it: After stealing a half trillion dollars to line the pockets of their war-profiteering backers for the past five years, after lining the pockets of their fellow oilmen to the tune of over a hundred billion dollars in just the last two years, Bush and his cronies -- who must soon vacate the White House -- are looting the U.S. Treasury of every dollar they can grab. They are swiping as much of the silverware as they can on their way out the door.
No matter what they say, no matter how many scare words they use, they are up to their old tricks of creating fear and confusion in order to make and keep themselves and the upper one percent filthy rich. Just read the first four paragraphs of the lead story in last Monday's New York Times and you can see what the real deal is:
The problem is, nobody truly knows what this "collapse" is all about. Even Treasury Secretary Paulson admitted he doesn't know the exact amount that is needed (he just picked the $700 billion number out of his head!). The head of the congressional budget office said he can't figure it out nor can he explain it to anyone.
And yet, they are screeching about how the end is near! Panic! Recession! The Great Depression! Y2K! Bird flu! Killer bees! We must pass the bailout bill today!! The sky is falling! The sky is falling!
Falling for whom? NOTHING in this "bailout" package will lower the price of the gas you have to put in your car to get to work. NOTHING in this bill will protect you from losing your home. NOTHING in this bill will give you health insurance.
Health insurance? Mike, why are you bringing this up? What's this got to do with the Wall Street collapse?
It has everything to do with it. This so-called "collapse" was triggered by the massive defaulting and foreclosures going on with people's home mortgages. Do you know why so many Americans are losing their homes? To hear the Republicans describe it, it's because too many working class idiots were given mortgages that they really couldn't afford. Here's the truth: The number one cause of people declaring bankruptcy is because of medical bills. Let me state this simply: If we had had universal health coverage, this mortgage "crisis" may never have happened.
P.S. Having read further the details of this bailout bill, you need to know you are being lied to. They talk about how they will prevent golden parachutes. It says NOTHING about what these executives and fat cats will make in SALARY. According to Rep. Brad Sherman of California, these top managers will continue to receive million-dollar-a-month paychecks under this new bill. There is no direct ownership given to the American people for the money being handed over. Foreign banks and investors will be allowed to receive billion-dollar handouts. A large chunk of this $700 billion is going to be given directly to Chinese and Middle Eastern banks. There is NO guarantee of ever seeing that money again.
P.P.S. From talking to people I know in DC, they say the reason so many Dems are behind this is because Wall Street this weekend put a gun to their heads and said either turn over the $700 billion or the first thing we'll start blowing up are the pension funds and 401(k)s of your middle class constituents. The Dems are scared they may make good on their threat. But this is not the time to back down or act like the typical Democrat we have witnessed for the last eight years. The Dems handed a stolen election over to Bush. The Dems gave Bush the votes he needed to invade a sovereign country. Once they took over Congress in 2007, they refused to pull the plug on the war. And now they have been cowered into being accomplices in the crime of the century. You have to call them now and say "NO!" If we let them do this, just imagine how hard it will be to get anything good done when President Obama is in the White House. THESE DEMOCRATS ARE ONLY AS STRONG AS THE BACKBONE WE GIVE THEM. CALL CONGRESS NOW.
Seems The House of Representatives who voted 228-205 against, agree this is a joke.
This morning the morning newspaper ran a headline to the effect that "We may now be plunged into recession due to the failure of congress to pass bailout bill." Where do we find these leaders of industry?
Greed and reckless fiscal policies have gotten us where are today. I see the local newspaper as an advocate for more reckless, trickle down fiscal maneuvers while attempting to pin the blame for the current crisis on congress for not acting swiftly enough to stop the bleeding. Based on P/E performance, the markets have been long overdue for a correction.
Are these people really that stupid?
lw
Dude from Harvard spells the current mess out out plain and simple like in the link below.
http://www.cnn.com/2008/POLITICS/09/29/ ... pstoryview (http://www.cnn.com/2008/POLITICS/09/29/miron.bailout/index.html?iref=mpstoryview)
quote from above: ..... The fact that government bears such a huge responsibility for the current mess means any response should eliminate the conditions that created this situation in the first place, not attempt to fix bad government with more government.
The obvious alternative to a bailout is letting troubled financial institutions declare bankruptcy. Bankruptcy means that shareholders typically get wiped out and the creditors own the company.
Bankruptcy does not mean the company disappears; it is just owned by someone new (as has occurred with several airlines). Bankruptcy punishes those who took excessive risks while preserving those aspects of a businesses that remain profitable.
In contrast, a bailout transfers enormous wealth from taxpayers to those who knowingly engaged in risky subprime lending. Thus, the bailout encourages companies to take large, imprudent risks and count on getting bailed out by government. This "moral hazard" generates enormous distortions in an economy's allocation of its financial resources.
Thoughtful advocates of the bailout might concede this perspective, but they argue that a bailout is necessary to prevent economic collapse. According to this view, lenders are not making loans, even for worthy projects, because they cannot get capital. This view has a grain of truth; if the bailout does not occur, more bankruptcies are possible and credit conditions may worsen for a time.
Talk of Armageddon, however, is ridiculous scare-mongering. If financial institutions cannot make productive loans, a profit opportunity exists for someone else. This might not happen instantly, but it will happen.
Further, the current credit freeze is likely due to Wall Street's hope of a bailout; bankers will not sell their lousy assets for 20 cents on the dollar if the government might pay 30, 50, or 80 cents.
I agree with Mr. Harvard.
The notion that market indices across the globe will simultaneously collapse if we do not address this NOW before the upcoming election is petty scare tactics. While it is true that something must be done, this bullying of congress for the sake of the S&P 500 is kind of drastic. For the most part, the banks seem to be sorting this mess out pretty well on their own.
True, credit is frozen and lending has stalled...
But we had that coming. Prior to this proposed $700 billion package, we had already committed billions to assist with Bear Stearns, Indymac, Fannie & Freddie. That was enough to get me pretty pissed off, but then we decided to back up AIG and let Lehman fall... And for a MOMENT I thought we were on the right track.
This debacle is starting to resemble our ugly history of meddling in the politics of the Middle East. Everything we do to prevent future catastrophe only ends up costing more because we did not consider the repercussions. From Countrywide to AIG, everything we have committed billions of dollars into saving was to protect the market from (the current) collapse.
But none of that worked, so why should we think THIS will?
The only institution we really need to back is AIG, and Wall Street should be able to sort out the rest on its own. The whole reason the financials got so carried away and regulation became so lax is that capitalism has instructed us to let market forces work themselves out. If we did that on the way up, then we must follow through on the way down. Market forces will see us through this storm, we simply need to bite the bullet and allow them to.
Back when the Dot-Com bubble burst and the NASDAQ fell 75%, Greenspan panicked and set rates to historic lows and left them there for too long , planting the seeds for the current housing crisis.
Why should this turn out any differently?
I would rather suffer now through the pain of a correction than throw fistfulls of money at a looming beast in the shadows hoping that OPTIMISTICALLY, we will have calmed financial instability enough that we may live comfortable lives into old age when we will need to explain to our grandchildren why their taxes are so high and their dollar so weak (and why they need to care for us because Uncle Sam cannot afford it).
Unfortunately, it looks as if the package will pass before the election.
I found this fitting to our situation.
September Madness (//http://consumerist.com/5056965/march-madness+style-bracket-makes-bank-mergers-fun)
Thanks for the link, but for what ever reason, I don't usually click on links in threads. Ever. (Guess its OK to hijack my own thread.)
I'm a big fan of U of Iowa wrestling. There is a forum for fans that I frequent. One dude periodically writes an interesting blog on the topic of wrestling. I often click into his threads, but seldom follow the link if no text is included in the thread. But that's just me.
lw
Quote from: "Syd"I found this fitting to our situation.
September Madness (//http://consumerist.com/5056965/march-madness+style-bracket-makes-bank-mergers-fun)
LoL.
I hope in the end it is Bank of America VS Barack Obama. I think that would be a good game to watch. BofA would prolly win though, because they play dirty.
The FDIC chairwoman, Sheila Bair, has proposed to raise the insured deposit limit.
Yahoo Finance article (Associated Press) (//http://biz.yahoo.com/ap/080930/meltdown_deposit_insurance.html)
I think this is a fairly reasonable idea. So back up AIG to keep the insurance on those toxic mortgage backed securities stable, then raise the limit on insured deposits to prevent any future bank runs, like the ones that hit Bear Stearns and WaMu.
Everything else is really a waste of money though until we get a better grasp on how it will affect immediate lending activity or gain a greater perspective on the actual fallout from the frozen monetary system.
Quote from: "laughingwillow"Thanks for the link, but for what ever reason, I don't usually click on links in threads. Ever. (Guess its OK to hijack my own thread.)
I'm a big fan of U of Iowa wrestling. There is a forum for fans that I frequent. One dude periodically writes an interesting blog on the topic of wrestling. I often click into his threads, but seldom follow the link if no text is included in the thread. But that's just me.
lw
From the linked article.
"TechCrunch has posted this "March Madness" style bracket of the recent financial meltdown. It was reportedly created by a general partner at Sansome Partners named Mark Slavonia, says TC.
We love it. It's like the Worst Company In America Contest, but for real."
I did not want to post the image because I'm no BW thief and I didn't feel like upping it somewhere else. No worries though stone. Its cool if you don't click anything.
The Consumerist (//http://consumerist.com/5057547/bailout-plan-gets-tax-cuts-and-other-sweeteners-to-help-it-pass) says CNN says:
The "sweeteners" in the package include:
# An increase in the amount that the Federal Deposit Insurance Corporation will insure in bank accounts: to $250,000, up from $100,000
# A fix that would prevent middle-class taxpayers from paying the alternative minimum tax
# A number of tax extensions favored by either Republicans or Democrats
# Tax exemptions for renewable energy
# A measure that would require health insurers to treat mental health issues the same way they treat physical illnesses
And no, I still do not agree with it. It's just pulling the wool over our eyes. I'm sure there will be some switchers when this bailout goes to another vote on Friday. Though, I do hope it still fails.