The Economic Mess

Inhofe might have a point or two about Paulson, but he is full of shit about unemployment benefits.

If people who aren't currently working aren't given money to survive and pump MORE money into the economy as a result, the ECONOMY doesn't do better.

Jesus, dipshit, Friedmanism is deader than a doornail. Quit drinking the Kool Aid.
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Political Commentary

The pigs are still feeding at the trough, and they are using the mess on Wall Street as an excuse to destroy federal programs almost all of us depend on, including Social Security and Medicare, which was the intended goal all the time:

On the same day that he allocated the first $125 billion to the banks, Secretary Paulson announced the largest federal budget deficit in U.S. history. Buried in his statement was a preview of the next phase of the financial disaster. The deficit numbers, he declared, reinforce the need to "pursue policies that promote economic growth and fiscal responsibility, and address entitlement reform." He was referring to Americans who feel entitled to receive Social Security in their old age and Medicaid when they are sick. Those programs, Paulson implied, might not be able to survive the budget crisis he is currently creating for the next administration.

This is why the stakes of the bailout are so high: Unless we get a good deal, there will be nothing left over after the banks are done feeding to pay for the meager services now provided in exchange for taxation, let alone for the more ambitious initiatives promised on the campaign trail. The spiraling cost of saving Wall Street from its bad bets is already being used as an excuse for why we can't solve our many other crises, from health care to climate change.

There is a better way to fix a broken financial system. Treasury's plan to buy up the toxic debts never made sense and should be immediately scrapped - a move that would also handily get rid of most of the crony contractors. As for purchasing equity in banks, the next round of deals - and there will be more - has to start from the premise that the banks are bankrupt and will therefore accept whatever terms we choose to impose, including real regulatory oversight. The possibilities of what could be done if a chunk of the banking system were genuinely under public control - from a moratorium on home foreclosures to mandatory investment in green community redevelopment - are limitless.

Because here is what George Bush and Henry Paulson are hoping we won't figure out: When a society no longer has enough money to pay for its most pressing needs, there are worse things than discovering you own the banks.

Wall Street Bailout

Henry Paulson declares class warfare by saying there should be no limits on CEO pay.

Paulson, the former CEO of Goldman Sachs whose wealth is estimated at $700 million, argued that including any such provision would result in banks refusing to participate in the program.

As the New York Times reported Monday, “Mr. Paulson said that he was concerned that imposing limits on the compensation of executives could discourage companies from participating in the program.

It figures.

And just who is Henry Paulson? The right crony at the right time, it seems:

Prior to being selected as treasury secretary, Paulson was a major individual campaign contributor to Republican candidates, giving over $336,000 of his own money between 1998 and 2006.

Since taking office, Paulson has overseen the destruction of three of Goldman Sachs’ rivals. In March, Paulson helped arrange the fire sale of Bear Stearns to JPMorgan Chase. Then, a little more than a week ago, he allowed Lehman Brothers to collapse, while simultaneously organizing the absorption of Merrill Lynch by Bank of America. This left only Goldman Sachs and Morgan Stanley as major investment banks, both of which were converted on Sunday into bank holding companies, a move that effectively ended the existence of the investment bank as a distinct economic form.

In other words, this is like having Al Capone oversee the U.S. Treasury.

Banks are racing to get a share of the bailout.

If there was ever a doubt Obama is nothing but a Republican, this should do the trick.

No wonder Wall Street loves him:

The decisions being taken this week in Washington on the Wall Street bailout have rendered the November election virtually irrelevant. The Democrats and Obama, no less than the Republicans and McCain, have lined up behind what amounts to a vast new transfer of wealth from American working people, the vast majority of the population, to a tiny, obscenely wealthy layer at the top.

I don't expect Congress to do a damned thing that will benefit people despite the skepticism on both sides of the aisle.

Wall Street Bailout

There are many good reasons to oppose the $700 billion bailout, not least of which is the fact the people who have been screwed over by Wall Street and Washington, you and I, will have to foot the bill.

And there's this:

It states that the secretary—currently Henry Paulson, the multi-millionaire former CEO of Goldman Sachs—is “authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the secretary, mortgage-related assets from any financial institution...”

This is followed by a provision stipulating that the Treasury secretary’s authority under the act is “without limitation.”

A further provision authorizes the Treasury secretary to enter into contracts with the banks “without regard to any other provision of law regarding public contracts.” In other words, to ignore established law concerning public contracts.

The proposal states that the government will designate “financial institutions” to operate the bailout program. This means that the government will hand over management of the program to some of the very corporations that are responsible for the crisis and which stand to profit directly or indirectly from the bailout.

Bill Clinton is being blamed for the current crisis although it was a veto-proof Congress which set the stage for the mess.

More explanation of the Gramm-Leach-Bliley Act can be found here.

Typical Republican deregulation bullshit for which the taxpayers will pay dearly.

Henry Paulson will become a despot, something we sure as hell don't need in this country:

Noted Neocon (and terrorist) fundraiser Grover Norquist once succinctly expressed the goal of the Neocons to be to cut our government "down to the size where we can drown it in the bathtub." The Henry Paulsen plan to bail out stock and real estate speculators is the final throw in their efforts to bring this plan to fruition by so badly draining the United States Treasury that it will be generations to come before our government can undertake any further programs to improve the lives of the American people.

This plan is genuinely absurd, a power grab by the people in power intended to ensure that we become a society with only two classes, an inherited economic aristocracy made up of about one-half of one percent of our population, with the rest of us toiling out our lives in serfdom, never rising above bare subsistence at any point between our education, which will be devised to teach trades to serve the state's purposes, and our final death and burial in the ground.

If Paulsen gets his wishes here, he will become the economic, financial and monetary czar of the United States, with greater power than the rest of the executive branch, the Fed, Congress, or the courts. He will have REAL power over our lives to an extent not seen since despots ruled the nations of the east. Can you IMAGINE the parties to which he will be regularly invited, in hopes of currying his favor?

Paulsen's plan is to buy up all this mortgage-derived paper at face. Why is this the way to go here? The whole problem is bad mortgages. If the government wants to deal with this problem, why not a Federal guarantee on ALL mortgages up to 80% of its paper value. That way, the government must pay only when actual foreclosure occurs, and will take over the foreclosed properties. The mortgage lenders will have significant incentive to bargain on these mortgages because they will lose their 20% if foreclosure occurs. The Treasury will only be on the hook for properties that are actually foreclosed upon, and will then own the asset to sell to recoup all or part of its losses.

The bad paper will have its "goodness" restored, and the markets should resume functioning normally.

This wouldn't cost any $700 billion (the Paulsen plan will more likely between $1 and $2 TRILLION -- the costs have been systematically understated by Paulsen). Indeed, it would probably cost less than the ridiculous takeover of AIG last week. That a joke that is! They're an INSURANCE company, fer cryin' out loud!

What on earth about Henry Paulsen's performance to date brings anyone to the conclusion that he is the right man for this job? He is a crony bred of cronyism, certain to favor those with whom he has been in bed all along. He has been wrong about every other thing he's done, from the bailout of Bear Stearns to the present time. And why would we even THINK about this ridiculous plan, which serves to benefit only those whose heinously grasping greediness put us into this pickle without offering even a crumb to those of us hurt by this fiasco?

This is not an unprecedented problem. Panics like this used to happen to us all the time, and they happen all over the world on a regular basis. The cure, and there are only two ways to cure it, is either devaluation or a systematic strengthening of our dollar. These are the only ways we or any other country affected like this has ever dug out from under this kind of mess.

I hate devaluation. It rewards borrowers while penalizing savers, elevating the grasshopper above the ant. I LOVE the idea of strengthening the dollar, although this requires very painful steps to achieve. The two most painful of these steps are increases in interest rates, drawing capital into this country without selling off assets, and increasing taxes. The latter here can be done fairly and with a certain degree of rough justice by restoring STEEP progressivity to our income tax structure, taxing harmful industries (like oil and tobacco) heavily, and instituting new taxes on such things as corporate flight and savings held in offshore banks. And, of course, ending the tax favoritism received by capital gains.

If we did these things, we might be back on our feet before the 2012 election. If we follow Paulsen's plan, we can kiss our hopes for health care, education and infrastructure improvements goodbye until long after many of us are dead.

I don't mind being governed by a government. I HATE being ruled over by a despot, but it is clear that our current government is not run in a way designed to benefit folks like me.

Is this ever true. And yes, this is another anti-government scheme by the radical right to drain the Treasury so the government cannot pay for programs helping people. That's the whole aim in a nutshell.

Paul Krugman has criticism along similar lines.