Paulson's Reasons for Delaying Day of Reckoning

Paulson's Reasons for Delaying Day of Reckoning
Jonathan Weil
Oct 02, 2008

http://www.bloomberg.com/apps/news?pid=20601039&
refer=columnist_weil&sid=aMaWyNFImi4o

If you think this bailout is expensive, just wait until you see the next one.

The $700 billion rescue plan approved by the U.S. Senate won't fix the core problem with the nation's ailing financial institutions. And it almost guarantees that you and I will have to pony up for an even costlier bailout someday, maybe soon, if the House of Representatives passes it tomorrow.

Treasury Secretary Hank Paulson has correctly identified the quandary: Lots of shaky banks and insurance companies are showing strangely high values for assets that aren't worth squat in the market. Many need more capital and can't raise it. And he's right in saying the outlook is grim if we don't get this fixed.

What's stunning is how little the taxpayers would get in return for their money under Paulson's package, and how illusory much of the banks' newly minted capital would be.

Under the plan, Treasury would buy some companies' troubled assets at above-market values. To boost their capital, Paulson would have to pay the companies more than what their balance sheets say the assets are worth. Then other companies would use the rigged prices to write up, or avoid writing down, the values of similar holdings on their own books.

So, the taxpayers get hosed on the asset purchases. Other banks use the trumped-up prices to cook their books. And investor confidence supposedly is restored.

That brings us to this question: Why would a smart guy like Hank Paulson -- the former boss of Goldman Sachs -- advance such a dumb, shady plan? Let us count the reasons:

No. 1: It delays our national reckoning until after the presidential election.

No. 2: The reckoning will be worse than you can imagine.

No. 3: He's helping his friends.

No. 4: There's an excellent chance the Congress will pass it. Leave someone else to figure out the costs another day.

Spoonamore Reveals The Plan To Steal The Next Election

Spoonamore Reveals The Plan To Steal The Next Election
Mark Crispin Miller
Sep 29, 2008

http://markcrispinmiller.blogspot.com/2008/09/
spoonamore-reveals-plan-to-steal-next.html

Here, in this shattering new interview, Stephen Spoonamore goes into harrowing detail about the Bush regime's election fraud, past, present and--if we don't spread the word right now--to come. Since he's the only whistle-blower out there who knows the perps themselves, and how they operate, we have to send this new piece far and wide.

Here Spoon tells us that McBush's team--i.e., Karl Rove and his henchpersons-- have their plan in place to steal this next election: by 51.2% of the popular vote, and three electoral votes.

He also talks about the major role played by the Christianist far right in the electronic rigging of the vote.

And he defines our electronic voting system as a major threat to US national security, calling for it to be junked ASAP, in favor of hand-counted paper ballots.

Since Spoon is a Republican and erstwhile McCain supporter, as well as a noted specialist in nosing out computer fraud, his testimony is essential--not only for its expertise, but, no less, for the impact that his views will surely have on those Republicans who have been loath to see what Bush & Co. has done to our election system.

Check out this extraordinary interview here.

http://www.velvetrevolution.us/prosecute_rove/images/SpoonIntvw3.wmv

CBS News: New Study Details Massive Voter Roll Purges Underway in At Least 19 States

CBS News: New Study Details Massive Voter Roll Purges Underway in At Least 19 States
Brad Friedman
Sep 30, 2008

http://www.bradblog.com/?p=6453

Tonight's CBS Evening News finally covered what may well be the November Surprise that we've been trying to warn about for months here at The BRAD BLOG: Massive voter roll purges being done in secret, with little or no oversight, and often under federal Justice Department cover, in states and counties around the country.

And the Democrats, who likely have the most to lose via such secret purges, are doing little or nothing about it.

We've yet to read this Brennan report, but the brief coverage from tonight's Evening News notes 10,000 voters purged in Mississippi, 21,000 in Louisiana and "to top it off, another new study discovered 19 states are ignoring federal law (the National Voter Registration Act), banning systematic purges within 90 days of a federal election."

Among those 19, are a number of battleground states. The report lists: Alabama, Colorado, Connecticut, Delware, Hawaii, Illinois, Iowa, Kansas, Maryland, Masachusetts, Nebraska, Nevada, New Jersey, New York, Ohio, Oklahoma, Rhode Island, Texas and Washington, as places where massive purges have recently taken place.

CBS' coverage doesn't even note that many states have now contracted the same private companies who did such a crappy job on their voting machines (companies like Diebold, ES&S and Sequoia) to manage, with the same lack of oversight, entire newly computerized state voting rolls. Names will be dropping from rolls this year by error or by evil...

This likely November Surprise may be just one of many. There is so much front-end voter suppression going on, at this point, it has all but obscured the massive problems that will occur with voting machines around the country when they break down, denying voters the ability to even cast a vote, much less have it counted accurately or verifiably. In Pennsylvania, for example, where almost the entire state votes on unverifiable touch-screen voting machines, the Democrats in charge of the state have recently declared that paper ballots needn't be given to voters until all voting machines in a particular precinct break down. Why isn't Obama and the DNC raising holy hell about that?

Once again we urge you --- even if you've voted in a recent primary election --- to check to make sure you are still registered! Here is a very handy link to do exactly that!

http://www.votersunite.org/info/RegInfo

Loose Money And the Roots Of the Crisis

Loose Money And the Roots Of the Crisis
Judy Shelton
Sep 30, 2008

http://online.wsj.com/article/SB122273029076687929.html

The world is not ending. Despite the wrenching turmoil in global financial markets and morbid allusions to the death throes of capitalism, it ain't over.

But the whimpering is real, and justified, because it hurts to have your world come crashing down. And global financial markets are definitely crashing, even when the impact is momentarily softened through massive injections of artificial money -- "artificial" because the fiat money does not represent a store of genuine value but rather an airy government claim to future wealth yet to be created.

It is the money that is broken.

Mr. Greenspan is also the man who was awarded the Presidential Medal of Freedom and whose honorary titles include Knight Commander of the British Empire and Commander of the French Legion d'honneur.

So how does such an accomplished central banker turn out to be a monetary doofus?

Think of it: Nothing is more vital to capitalism than capital, the financial seed corn dedicated to next year's crop. Yet we, believers in free markets, allow the price of capital, i.e., the interest rate on loanable funds, to be fixed by a central committee in accordance with government objectives.

Whatever well-intentioned reasons existed in 1913 for creating the Federal Reserve -- to provide an elastic currency to soften the blow of economic contractions caused by "irrational exuberance" (and that will never be conquered, so long as humans have aspirations) -- one would be hard-pressed to say that the financial fallout from this latest money meltdown will have less damaging consequences for the average person than would have been incurred under a gold standard.

The entire world has been affected by the breakdown of the U.S. financial system, thanks to the globalization of investment capital. But the free flow of capital -- along with free trade -- is a good thing, the best path to global prosperity. The problem is that the role of the dollar as the world's primary reserve currency has been called into serious question, both by allies and adversaries.

Fed Pumps Further $630 Billion Into Financial System

Fed Pumps Further $630 Billion Into Financial System
Scott Lanman and Craig Torres
Sep 29, 2008

http://www.bloomberg.com/apps/
news?pid=20601087&sid=ahwz_k5JvuB8

The Federal Reserve will pump an additional $630 billion into the global financial system, flooding banks with cash to alleviate the worst banking crisis since the Great Depression.

The Fed increased its existing currency swaps with foreign central banks by $330 billion to $620 billion to make more dollars available worldwide. The Term Auction Facility, the Fed's emergency loan program, will expand by $300 billion to $450 billion. The European Central Bank, the Bank of England and the Bank of Japan are among the participating authorities.

The Fed's expansion of liquidity, the biggest since credit markets seized up last year, came hours before the U.S. House of Representatives rejected a $700 billion bailout for the financial industry. The crisis is reverberating through the global economy, causing stocks to plunge and forcing European governments to rescue four banks over the past two days alone.

European governments have rescued four banks in two days and the Federal Deposit Insurance Corp. said today it helped Citigroup Inc. buy the banking operations of Wachovia Corp. after its shares collapsed. The Standard & Poor's 500 Index fell 3.8 percent and the cost of borrowing dollars for three months rose to the highest since January. The rate for euros hit a record.

The Bank of England and the ECB will each double the size of their dollar swap facilities with the Fed to as much as $80 billion and $240 billion, respectively. The Swiss National Bank and the Bank of Japan will also double their dollar swap lines, while the central banks in Australia, Norway, Sweden, Denmark and Canada tripled theirs.

With Wachovia Sale, the Banking Crisis Trickles Up

With Wachovia Sale, the Banking Crisis Trickles Up
Eric Dash
Sep 29, 2008

http://www.nytimes.com/2008/09/30/
business/30citi.html?ref=business

The crisis gripping the nation’s banks took a troubling turn on Monday as investors’ confidence in even the largest and strongest institutions spiraled lower.

Financial shares plunged 16 percent on one of the darkest days for the American stock market since the 1987 crash.

After the House of Representatives rejected a rescue for the financial industry Monday, fears grew that more banks, particularly small and midsize lenders, could run into trouble unless a new plan emerged quickly.

Even shares in the three banks that have survived the crisis as the largest in the industry — Bank of America, JPMorgan Chase and Citigroup — fell more than 10 percent Monday as anxiety gripped markets. Goldman Sachs and Morgan Stanley, which transformed into bank holding companies last week, fell more than 12 percent.

Regional banks were punished even more severely as investors scrambled to figure out which of them might fall next in the absence of a bailout plan. National City Corporation, Downey Financial Corporation and Sovereign Bancorp, lenders pressured by substantial exposure to soured mortgages, were especially hard-hit, falling 63 percent, 48 percent and 36 percent respectively on the heels of the government’s seizure Thursday of Washington Mutual, the largest savings and loan.

A great example of how we got to the credit-market meltdown

A great example of how we got to the credit-market meltdown
Ed Morrissey
Sep 25, 2008

http://hotair.com/archives/2008/09/25/a-great-
example-of-how-we-got-to-the-credit-market-meltdown/

It’s one of the hidden success stories of the Clinton era. In the great housing boom of the 1990s, black and Latino homeownership has surged to the highest level ever recorded. The number of African Americans owning their own home is now increasing nearly three times as fast as the number of whites; the number of Latino homeowners is growing nearly five times as fast as that of whites.

Under Clinton, bank regulators have breathed the first real life into enforcement of the Community Reinvestment Act, a 20-year-old statute meant to combat "redlining" by requiring banks to serve their low-income communities. The administration also has sent a clear message by stiffening enforcement of the fair housing and fair lending laws. The bottom line: Between 1993 and 1997, home loans grew by 72% to blacks and by 45% to Latinos, far faster than the total growth rate.

Requiring banks to serve their low-income communities. That’s shorthand for taking on more risk and lowering what had been standard prerequisites for purchasing homes. Normally, lenders would have demanded at least 10% down, and preferred 20%, and demonstration of stable income, of which the mortgage payments would not exceed 30%. Under threat of prosecution for bigotry, lenders had to start taking less-qualified borrowers as clients.

But the government had a way for them to spread that risk throughout the investment community:

In 1992, Congress mandated that Fannie and Freddie increase their purchases of mortgages for low-income and medium-income borrowers. Operating under that requirement, Fannie Mae, in particular, has been aggressive and creative in stimulating minority gains.

Congress told the two government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, to buy up the paper and transform these marginally-qualified loans into what’s known as mortgage-backed securities (MBS). The purchase of these loans made them much more attractive to lenders, who rushed to create more of them. Fannie and Freddie then kept buying the paper and turning them into MBSs and selling them to investors, who assumed that the government would back the GSE securities Congress mandated into existence.

Thanks to this massive intervention in the lending marketplace, what followed was utterly predictable for anyone who had ever completed Econ 101 at a junior college:

The massive influx of new home buyers drove up housing prices.

The rising prices pushed borrowers and lenders into adjustable-rate mortgages to allow the purchase of homes for no down, on the premise that the rising prices (which reacted to massive new demand) would allow them to refinance before the ARMs adjusted to their maximum, at which point borrowers would refinance with the new-found equity as their down payment to get better rates and lower monthly payments they could afford.

Housing prices rose so quickly that builders invested in new houses on a massive scale to produce inventory to meet the demand.

As long as prices continued to rise, and as long as the two GSEs kept issuing the MBSs, investors kept buying them - with their government backing.

White House Claims Bailout Will Pay For Itself

White House Claims Bailout Will Pay For Itself
Ali Frick
Sep 25, 2008

http://thinkprogress.org/2008/09/25/bailout-payback/

To justify the exorbitant cost of the bailout for the financial industry, Bush administration officials have been repeating the dubious claim that American taxpayers should expect to recover much, if not all, of the proposed $700 billion:

PAULSON: This is not an expenditure. … Money will come back in.

BERNANKE: What’s clear is that the $700 billion is not an expenditure. There’s going to be a substantial amount of recovery.

BUSH: Money will flow back to the Treasury as these assets are sold, and we expect that much, if not all, of the tax dollars we invest will be paid back.

White House spokesmen Ed Gillespie and Tony Fratto appeared on Fox News, repeating that “a lot of that money, and maybe all of it, will come back.”

As Paul Krugman writes, “The premise of the Paulson plan — though never stated bluntly — is that these assets are hugely underpriced, so that Uncle Sam can buy them at prices that help the financial industry a lot, without big losses for taxpayers. Are you prepared to bet $700 billion on that premise?”

Krugman concludes, “The whole premise of the bailout push has been ‘We’re the grownups, we know what we’re doing, just trust us.’ Sorry, but that’s how Colin Powell sold the Iraq war. Fool me once, shame on you, fool me twice … you shouldn’t get fooled.”

My Answer to the President

My Answer to the President
Ron Paul
Sep 25, 2008

http://www.campaignforliberty.com/blog/?p=616

Dear Friends:

The financial meltdown the economists of the Austrian School predicted has arrived.

Last night the president addressed the nation about the financial crisis. There is no point in going through his remarks line by line, since I’d only be repeating what I’ve been saying over and over - not just for the past several days, but for years and even decades.

Still, at least a few observations are necessary. [..]

Then come the scare tactics. If we don’t give dictatorial powers to the Treasury Secretary "the stock market would drop even more, which would reduce the value of your retirement account. The value of your home could plummet."

It’s the same destructive strategy that government tried during the Great Depression: prop up prices at all costs. The Depression went on for over a decade. On the other hand, when liquidation was allowed to occur in the equally devastating downturn of 1921, the economy recovered within less than a year.

F.A. Hayek won the Nobel Prize for showing how central banks’ manipulation of interest rates creates the boom-bust cycle with which we are sadly familiar. In 1932, in the depths of the Great Depression, he described the foolish policies being pursued in his day - and which are being proposed, just as destructively, in our own.

To combat the depression by a forced credit expansion is to attempt to cure the evil by the very means which brought it about; because we are suffering from a misdirection of production, we want to create further misdirection - a procedure that can only lead to a much more severe crisis as soon as the credit expansion comes to an end: It is probably to this experiment, together with the attempts to prevent liquidation once the crisis had come, that we owe the exceptional severity and duration of the depression.

The only thing we learn from history, I am afraid, is that we do not learn from history.

The very people who have spent the past several years assuring us that the economy is fundamentally sound, and who themselves foolishly cheered the extension of all these novel kinds of mortgages, are the ones who now claim to be the experts who will restore prosperity! Just how spectacularly wrong, how utterly without a clue, does someone have to be before his expert status is called into question?

Ireland officially in recession

Ireland officially in recession
Press Association
Sep 25, 2008

http://www.independent.co.uk/news/world/europe/
ireland-officially-in-.htmlssion-942071.html

Ireland has officially fallen into recession, new figures revealed today.

According to the Central Statistics Office, the country's once-aggressive economy contracted by 1 per cent in the first six months of the year.

Dubbed the Celtic Tiger during massive growth in the late 1990s, the Irish business sector is now facing its most difficult period since high unemployment and emigration hit the 1980s.

The Department of Finance pointed to the crumbling property market and the international credit crunch for the alarming figures.

The figures support predictions from some of the country's leading financial experts, including those at the state's influential think-tank the Economic and Social Research Institute (ESRI).

It warned earlier this year that Ireland was facing its first recession since 1983, unemployment would rise and 20,000 people would emigrate.

The Budget, traditionally held in December, was moved forward six weeks by Taoiseach Brian Cowen in an attempt to reduce the knock-on effects of the now shrinking economy.

Correction on Sarah Palin

Correction on Sarah Palin
Glenn Greenwald
Sep 25, 2008

http://www.salon.com/opinion/greenwald/2008/09/25/palin/

Sarah Palin isn't Dan Quayle. She is extremely smart -- much smarter than the average media star who will eventually be interviewing her -- and she is very politically skilled as well. She didn't go from obscure small-town city council member to Governor to Vice Presidential nominee by accident. She'll be more than adequately prepared for the shallow, 30-second, rote exchanges that pass for political interviews in our Serious mainstream discourse. Anyone expecting her to fall on her face or be exposed as some drooling simpleton is going to be extremely disappointed. That might (or might not) happen with real questioning, but she's not going to face that.

I still think Palin is probably perfectly smart. And in this age of dynastic and nepotistic political power centers in both parties, I admire the fact that she created her political career out of nothing, with no parental connections or vast family wealth assisting her (the fact that Barack Obama did the same thing was, in my view, one of the very few meaningful differences between him and Hillary Clinton). I still think her selection was a very politically shrewd move by the McCain campaign. And I remain largely unbothered by her so-called "lack of experience" for the same reason that this has never bothered me about Obama -- someone's judgment, intellect and views are infinitely more important than how long they've held various political posts, and the fact that someone largely exists outside the Washington establishment is, in my view, a positive -- the further away the better. In fact, one of the most disappointing (though not surprising) aspects of Obama's candidacy is how quickly and completely he's morphed into a standard Washington establishment candidate.

But Sarah Palin's performance in the tiny vignettes of unscripted dialogue in which we've been allowed to see her has been nothing short of frightening -- really, as I said, pity-inducing. And I say that as someone who has thought from the start that the criticisms of her abilities -- as opposed to her ideology -- were much too extreme. One of two things is absolutely clear at this point: she is either (a) completely ignorant about the most basic political issues -- a vacant, ill-informed, incurious know-nothing, or (b) aggressively concealing her actual beliefs about these matters because she's petrified of deviating from the simple-minded campaign talking points she's been fed and/or because her actual beliefs are so politically unpalatable, even when taking into account the right-wing extremism that is permitted, even rewarded, in our mainstream. I'm not really sure which is worse, but it doesn't really matter, because with 40 days left before the election, both options are heinous.

What seems most likely is that she's perfectly conversant in the exceedingly narrow and parochial range of issues she's concerned herself with as Wasilla Mayor and Alaska Governor -- oil drilling on the North Slope, specific local budget items, corruption issues inside the Alaskan State GOP, and evangelical and religious matters. She really doesn't seem to have any thoughts about anything outside of that -- or if she does, she is suppressing them -- and is thus capable of spouting little more than empty right-wing slogans. That's what makes all the issues raised by the excellent on-scene reporting by Salon's David Talbot more significant than it otherwise might be -- she could be a religious fanatic with an extremist agenda, or a power-crazed, vendetta-fueled, secrecy-obsessed Cheney-ite, or something else altogether. She may not even know what she is, and we're clearly not going to find out.

Mark Cuban on the Financial Crisis

Mark Cuban on the Financial Crisis
Greta Van Susteren
Sep 25, 2008

http://www.foxnews.com/story/0,2933,427644,00.html

Self-made billionaire and entrepreneur Mark Cuban went "On the Record" about the economic crisis facing the nation.

VAN SUSTEREN: All right, Mark, I want to start at the end and work backwards. What happens after the bail out?

MARK CUBAN, DALLAS MAVERICKS OWNER: Boy, that's a good question.

Let's just say we put $700 billion into the economy, we increase liquidity, and it all goes according to plan--except there's one problem. The people who will do the lending after the money is injected were the ones that were doing the lending before. These were guys who don't know how to bank the right way.
Related

So my guess is that they are going to be afraid to lend money. You're not going to see the effect of anybody being able to walk in, even with good credit, to borrow money for a house, to borrow money for a car.

VAN SUSTEREN: Does this financial crisis, for lack of a better word, that we're in--I know how it affects people who are lower income and middle income, but how about the rich guys? Does this have really any impact on you?

CUBAN: Oh, of course it has an impact, but we can rebound a lot more quickly. I had money in Lehman, and it's just gone.

VAN SUSTEREN: One of the things that sort of bothers people is it seems like the people that have a lot of responsibility in this are getting the bailout. Is there any other alternative that see instead of a bailout?

CUBAN: No. You're going to have to bailout, you're going to have to inject liquidity, you're going to have to take the bad loans and all the bad instruments off people's balance sheets.

All the social networking we talk about--we need to make sure that every transaction that takes place, wherever there is money injected, wherever there is a purchase made, all that is made available for all the citizens of the country to see.

Because it's not going to be an oversight board that catches problems. It's going to be the citizens of this country that go online and on a second by second basis that catch problems.

Because, I have to tell you, Wall Street is too smart. They can stay ahead of any board that any political entity appoints, but you are not going to be able to stay ahead of pure transparency, because the people of this country will get involved, pay attention, will realize $700 billion is at stake. And they'll also want to see if they're making money, because I think the second part of the fear is, yes, we may make money, but just like we don't know exactly where our tax money goes today, this money will go right in to the Treasury and somebody will earmark it, and it will be gone.