The American Spectator

aware| 7.14.09 @ 7:04AM

“The wealth of the country, its capital, its credit, must be saved from the predatory poor as well as the predatory rich, but above all from the predatory politician.” .... posted earlier but thought it worked here too.

It is obvious too that individual liberty requires a lot more diligence to preserve than the last 3 or 4 generations have shown. A terrible disaster is coming and we so deserve it. It is already too late to prevent it. That cold north wind is warning of an approaching blizzard, you had better be storing away some nuts cause it will be worse than you think.

The trolls will spout nonsense, but soon even they will see what little and petty men our "big" men really are(kudos to Will Rogers). Soon CIT, the largest small and medium sized business lender, will go belly up and come begging for an 80 billion dollar "bail out". And that 80 is to stand for 300 billion in loans(!!!??). Too bad banksters and investors didn't take a few basic math classes in their ivy covered "higher education centers".

If you think the worst is behind us, think again. As with the 1st depression this is a slow motion train wreck with one stupidity compounding another, like rail cars piling up on top of each other.

Robert Rosencrans| 7.14.09 @ 7:29AM

You ask a good question to which the answer is simply another question. You ask "Can the party of Lincoln resist substantial tax increases in its quest to keep the nation from bankruptcy?"

Hopefully they will try, but there's another looming question and the answer isn't good. The question is can anything or anyone stop the economy from lingering in a mailaise which will see the DOW down significantly and personal wealth destroyed as an after effect of out of control spending in Washington by poltical baboons with no conscience or perhaps they are just stupid people. It's a question and a prediction.

Over the next four years, the ratio of U.S. government debt will rise to somewhere between 71% and 80% of GDP. This is up from 41% at the end of 2008. The 71% figure, which is from the CBO and is probably understated. . None of these projections have incorporated the tsunami after effects of either the proposed health care bill or cap and trade which would raise the debt and or leverage the height of the economic disaster and GDP ratio considerably.

Then there are the coming expirations of the Bush tax cuts in 2010 and 11.

Ironically the lemmings in our society have been led to believe if they sit back and use their remotes, the automatic effect of government stimulus spending will make their TV's work and they will be happy.

Combining the two terms of government and stimulus creates an oxymoron which was put forth by actual morons.

An article I read recently went into great detail about how study after study indicates that government spending has zero to less then zero effect on the economy. Extensive research on tax multipliers is found in a paper written at the University of California Berkeley entitled The Macroeconomic Effects of Tax Changes: Estimates Based on a new Measure of Fiscal Shocks, by Christina D. and David H. Romer (March 2007). (Christina Romer now chairs the president's Council of Economic Advisors). This study found that the tax multiplier is 3, meaning that each dollar rise in taxes will reduce private spending by $3.

There's an opportunity here then to use some of the stimulus money to open a Moron Museum in Washington, D.C. filled with was figures of the members of Congress clutching fiat currency in their hands while they smile.

The American economy is overleveraged and is going through Japan Malaise II, simply shadowing the Japanese economy after it's meltdown. They are still suffering over 20 years later.

The overleveraging in our economy is not only continuing but the federal government is actually endorsing it.

Courtesy of the Three Stooges of Wall Street, Geithner, Summers and Bernake, there are several policies behind the scene hell bent on keeping the mavens of Wall Street wealthy, while promising financial Armageddon if their plans aren't followed.

In a speech to the Boston FED on June 10, 2008 Bernake claimed he was done with the bailouts and was worried about inflation. In the year since the bailouts have continued through the Treasury Department and the Obama administration, and the perfect climate for deflation may be approaching.

Part of the problem is that there are too many insiders inside the Obama administration gaming the taxpayers for anything they can get away with.

It's old news but according the Summers financial disclosure forms:

" Lawrence H. Summers, one of President Obama's top economic advisers, collected roughly $5.2 million in compensation from hedge fund D.E. Shaw over the past year and was paid more than $2.7 million in speaking fees by several troubled Wall Street firms and other organizations. . . .

Financial institutions including JP Morgan Chase, Citigroup, Goldman Sachs, Lehman Brothers and Merrill Lynch paid Summers for speaking appearances in 2008. Fees ranged from $45,000 for a Nov. 12 Merrill Lynch appearance to $135,000 for an April 16 visit to Goldman Sachs, according to his disclosure form."

Normally, you would expect an expert to take a position in government but with all that cash floating around, what expertise has been purchased and what did it arrange?

That brings us to Tim Geithner who tells us to have patience with the economy. Forget the fact that politicians ask you to have patience when they haven't got a clue what's going on.

Tim Geithner is busy gaming another financial disaster with PPIP, another four letter term which may be coming to a news stand near you when it falls apart.

Here is an article which describes it in detail.

Suffice it to say a plan was hatched in which several Republicans took part, the misnamed stimulus. Several of these Republicans were the part of the group who didn't impeach Bill Clinton. The Democrats in the U.S. Senate didn't need Al Franken to reach their 60 vote thresh hold. They already had it. And that's why where we are today. Incompetent legislators leading to idiotic laws which are trashing the economy now and for some time to come, perhaps decades.

http://market-ticker.denninger.net/archives/894-Open-Letter-To-The-FDIC-Ombudsman.html

The FDIC will provide oversight for the formation, funding, and operation of new public-private investment funds (“PPIFs”) that will purchase loans and other assets from depository institutions. The Legacy Loans Program will attract private capital through an FDIC debt guarantee and Treasury equity co-investment. Private market equity investors (“Private Investors’) are expected to include but are not limited to financial institutions, individuals, insurance companies, mutual funds, publicly managed investment funds, pension funds, foreign investors with a headquarters in the United States, private equity funds, and hedge funds. The participation of mutual funds, pension plans, insurance companies, and other long term investors is particularly encouraged.

There is a potential problem here.

Let's say that I am a bank ("financial institution") with $100 billion in "toxic assets". I have them on my balance sheet at 80 cents on the dollar. The market has them marked at 30 cents. We do not know what the held-to-maturity performance will be, since that requires knowing the future, although for the moment let's assume that they are cash-flowing at the present time.

What I (the bank) do know, however, is that if I sell them at 30 cents I take a monstrous loss - perhaps enough to force me under Tier Capital limits and thus render me subject to an FDIC enforcement action. I therefore will not sell for 30 cents so long as I have any belief whatsoever that the cash flow - or any government subsidy - will exceed that value.

If I, as a "financial institution" can participate as a bidder in these auctions I can foist off my loss onto the taxpayer. Here is how I can rig the game so as to avoid an otherwise-inevitable loss:

*
I become a "bidder" and "bid" on my own assets at 75 cents.
*
I am providing 5 or 10% of the money. The rest is covered by Treasury, The Fed and the FDIC via guaranteed bond issuance.
*
The loan, ex my contribution, is non-recourse. That is, I can lose 5 or 10% of the total portfolio purchased, but nothing more.

Now the "assets" (a passel of CDOs?) turn out to be worthless. I lose 5% of $75 billion, or $3.75 billion that I put up, plus the other nickel on the original mark, but that's all.

The taxpayer gets hosed for the remaining $71.25 billion dollars.

This can and will be done if the "sellers" of these assets are allowed to bid either directly or indirectly as it provides a means for banks to intentionally dump bad assets at a certain loss that is much smaller than their expected realized loss over time, shifting the rest of the loss to the taxpayer.

This program has the potential to shift literally $500 billion or more in losses onto the taxpayer, not through the operation of "bad luck" but rather through what amounts to a bid rigging operation.

Be aware that I, along with many others, have figured this out. Also be aware that as taxpayers and your ultimate boss, we do not intend to sit still and allow the public treasury to be looted in such a fashion.

The FDIC's job is to prevent that sort of looting operation by prohibiting the sellers of these assets from having any financial interest in the bidding side of the equation, directly or indirectly, and I along with many others intend to hold you to that obligation.

I like the outline of this program if and only if it cannot be gamed in this or similar fashion. Provided that does not occur, this program has the potential to provide great benefit to both the banking system and our economy.

If, however, the financial institutions that created this mess in the first place are allowed by the FDIC and Treasury to use it as a looting operation to intentionally shift their bad assets onto the Taxpayer you can expect that we the people will hold our government to account.

Howard| 7.14.09 @ 8:43AM

A key mistake Bush made was not using the veto pen. That "compassionate conservative" moniker did nothing. The liberals still despised him, and the conservatives did not trust him. A good kick in the rear was what the slobs in Congress needed and still need.

Bill Hussein O'Stalin| 7.14.09 @ 8:45AM

Howard:
You have my permission and authorization to go and start kicking legislators in the rear.

ObamaShow| 7.14.09 @ 9:08AM

You have...um...an interesting blog here. Way to Signify! When you have a moment, visit my blog @ whitehouse.gov. Some very insightful stuff there, providing clues on my intentions for every single last American. Check out just one of my Visions-->"A New Vision for Urban and Metropolitan Policy". The site is filled to the brim with visions. But enough about me.

Appleby| 7.14.09 @ 9:42AM

The only two individual solutions left are (1) bunker down and (2) let it crash.

The unfortunate side effect, as we women found out when we started breaking through that glass ceiling, is that the spectacular failure of the First Black President will, er, queer the pitch for the next 20 guys in line. As they used to tell us when we were Girls, *We tried a woman in that job once but she got pregnant and quit.* The answer this time will be, *We tried a Black guy in that position once, and we're still digging out from under.* Live by Identity Politics, die by Identity Politics.

WeR1| 7.14.09 @ 10:12AM

The inherent vice of capitalism is the unequal sharing of the blessings. The inherent blessing of socialism is the equal sharing of misery. – Winston Churchill

Inflation will arrise| 7.14.09 @ 11:36AM

Paulson Plan. 700 Billion Bail out, along with Bernanke, and George Bush. Republican Bailout.

Cities and states vied with each other to slash property taxes, replacing them with income and sales taxes that fall mainly on labor and consumers. The upshot is that wealth has polarized to an unprecedented degree. According to statistics collected by the Congressional Budget Office, the wealthiest 1% now own 57% of the nation’s returns to wealth (interest, dividends and capital gains) and the richest 10% own no less than 77%.

With this background in mind, it looks like the Paulson-Bernanke plan for the Wall Street investment banks and other predatory lenders – and insurers such as A.I.G. – to “earn their way out of debt” will be at the economy’s expense. The bailout is to be achieved by letting Wall Street’s post-Glass-Steagall financial conglomerates charge their customers exorbitant financial charges. As Britain’s Conservative Party leader Margaret Thatcher put it in her favorite phrase, TINA: There is no alternative. And as Lady Macbeth said, if the deed is to be done, let it be done fast. After all, it is a once-in-a-lifetime chance for every financial institution in America to cash out with a fortune!

For Mr. Paulson this means not giving Congress a chance to represent the public interest in designing the terms of this giant bailout. Sec. 8 of the Treasury plan bans any Congressional review, giving him unprecedented power by: “Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.” Under cover of emergency force majeur conditions, the plan is to take the money and run, preferably without permitting any Congressional debate.

It is bad enough for the government to buy $700 billion of bad bank investments at prices that no private-sector investor has been willing to approach. This itself is an undeserved giveaway to the financial institutions that caused the problem by living recklessly in the short run. But making them – and indeed, helping them – pay back this gift with the aid of favorable tax and deregulatory policies will simply shift the cost off their shoulders onto those of bank depositors, credit-card users, mortgage borrowers and hapless pension-fund contributors to the money managers who have taken most of the current income in the form of commissions, salaries and bonuses to themselves. This will sharply add to the price of doing business in the United States, and specifically to the economy’s debt overhead by the banks making even more predatory loans.

It gets worse. In order for the existing junk mortgages to be “made good,” real estate prices must be raised further above the ability to pay for this year’s five million homeowners in arrears and facing default. Is this a good thing? Is it good to raise access prices for housing even more, forcing new homebuyers to go further into debt than ever before to gain access to housing? Mr. Paulson has directed the Federal Reserve, Fannie Mae, Freddie Mac and the FHA (Federal Housing Authority) to re-inflate the real estate market. They are to pump nearly a trillion dollars into the mortgage market.

Tim| 7.14.09 @ 11:37AM

One read, "Aubrey Maturin in '08–Not a moment to lose!" alluding to the two famous characters from the Patrick O'Brian sea-faring novels.

From the Niles crane school of humor. ;)

Roy| 7.14.09 @ 11:48AM

The author wrote:
--The Democrats, as much as the Republicans, are complicit in a disaster which has been decades in the making --

"As much as" the Republicans?
OK, it's fun to open a can on the RINOs. I like it too at times. But the fact is that Democrats are 1,000,000,000,000(just to pick Obama's favorite number out of a hat) more responsible.

Democrats belonging to the Democrat party created Social Security, Medicare and Medicaid due to Democrat politicians justified by Democrat economists pandering to Democrat constituencies. These same Democrats demagogue these programs to the point at the slightest excuse, and often with no excuse. Democrats created the Department of Education and compete to out-demagogue each other over who can spend more on it; similarly with farm bills and other pork. The Medicare prescription drug benefit commonly cited as evidence of Republican perfidy on spending may have been that, but had Democrats been given the chance to funnel even more taxpayer money to the AARP they would have. Hmph. To rephrase that: Now that Democrats have been given the chance to funnel even more taxpayer money to the AARP(and the SEIU, and ACORN, and the UAW, and...) they will.

Now the people who got all kinds of emotional satisfaction by claiming there was no difference are finding out that yep - there still is. Does it suck when Republicans act like "Democrat lite"? Yeah, it does, but when the public is determined to get drunk, there is a difference between lite beer and the genuine article.

Blame Bush & Paulson& Bernanke| 7.14.09 @ 11:55AM

If Obama and America wants to end the debt culture, they have to make drastic change.

The first thing is to end the war culture, because it cost money America does not have. Want to balance the books end the war get out of Iraq out of Afghanistan.

Two start to let what led up to the Iraq war and Afghanistan war, and Sept 11th out of the bag. Leak it if necessary, have an inquiry if people have to go to jail so be it to save the country from bankrupcy.
Obama needs to encourage foreign investments, that will create Jobs.

The old Neo Con war agenda is only making money for Haliburton and friends namely Dick Cheney's gang of war mongers, they get the contract for rebuilding in war tourn areas.

Policy changes to prevent future corruption, where VP can provoke wars to profit their own private companies. And companies they have shares in. It's insider trading. Introduce a code of conduct in public life.

But I am assuming Obama or any one following him is interested in anything except self interest.

Bush made his money when Oil went to 147 USD per barrel Cheney made his money out ot government contracts awarded to Haliburton Dick Cheneys company, Rumsfeld is making his out of Tammyflu, Swine flu out break that they help put these viruses out their to kill people.

What America is, it's a corrupt out of controle country. Run by Rich Bankers fraudsters, and corrupt politicans. How do you clean that up without a revolution.

Pro People| 7.14.09 @ 12:07PM

Roy

If you can't beat them join them, you become a President, you go put there and tell people no more social security, no more medicaid, no more education, all schools should close down including fire department, no to prescription drugs, just shut down the system.

And tell the people that is your intentions and watch how much votes you would get.

It's better to spend your tax dollars on American people. Stop giving it away to Banks and fraudsters, and corrupt governments and congress men and women. Stop the heavy investment in the arms industry invest in people, reduce crime, promote a good standard of living for all Americans, invest in a country to be proud of.

xman09stlouis| 7.14.09 @ 12:14PM

i only studied 15 hours of undergraduate business school economics courses - macro, micro, labor, money and banking, and fiscal policy - not enough to qualify as an expert economist, but a lot more than most overeducated 'political science' majors who never had to add 2 + 2 as they drank and fornicated their way to a diploma...but i learned one thing, and that is keynesian stimuli must be throttled into play to have any hope of jacking economic activity...obama's over-managed, heavily delayed package of select bailout funds have actually shown the anti-stimulative effects of causing delayed business and consumer behavior. producers, employers and purchasers are effectively on strike, hording their cash and avoiding new marginal activity for now, expecting that the stimuli won't occur until 2010 or 2011, if then...if obama's minions had just cut payroll, energy and income tax rates effective today, the stimulus idea would have been worthy...more proof that all these leftists have in mind is to push for more mindless income redistribution and silly attempts to manage selected favorite industries (like unproven solar rather than cheap nuclear energy) and companies (such as gm, rather than just letting toyota and ford eat gm for lunch) into some kind of a pipedream recovery...ultimately, decentralizing that effort and allowing individuals to shape the recovery...

James Glasscock| 7.14.09 @ 3:18PM

I learn much from the posts. Knowledge is essential to survival. The stock market is treading water. The U.S. Dollar is moribund [or almost so]. Community banks and even larger regional banks are lending but holding their breath, because one cannot tell when the OCC or Treasury or some federal agency will fly in and offer to help.
Their is a proposed bank in the Piney Woods of East Texas. The young man has lined up sufficient capital to get the bank off the ground, but the OCC big wig rules it out. The feds would agree to the charter if the new kid on the block will assumed ownership of tottering banks and their defunct balance sheets. New bank, hamstrung out of the gate. Insanity in the bureaucracy is rampant, and begins with the Community Organizer in Oval Office.
Or perhaps Obama is on time. He wants to destroy the U.S., the middle class, and our capitalism.
I anticipated Fidel and Hugo I in office. He is moving swiftly to emulate both dictators,
We have been had!
Longdrycreek Ranch
Texas Panhandle

megapotamus| 7.14.09 @ 6:06PM

Word to Roy. Yes, the fractional blame is heavily weighted to the Democrats but this is what one expects from a Democrat. Bush was supposed to be something else, at least marginally. The Dems at least have the excuse that they actually believe and always have in such stuff. The dumbest and worst thing W ever said was that he abandoned free market principles to save the free market system proving he knew not the meaning of most of those words. Yet he cannot hold a candle to Obama, who of course during the election lambasted W for his deficits. Many, many otherwise fine and worthwhile people fell for this bilge. How they could come to voting age and not know, even after Bush, that Democrats cure spending like a bullet cures cancer is a terrifying mystery. Oh well. They won't forget it now.

Goldman Sach God's Banker| 7.14.09 @ 6:28PM

Roberto Calvi was known as "God's Banker" for his links with the Vatican Bank. He was the chairman of Banco Ambrosiano in Milan and a central figure in a complex web of international fraud and intrigue.

Fraus In AMERICAN BANKING system who will be exposed? who will end up in JAIL.

Who are the Players this time.

In May 1981, Mr Calvi was arrested, found guilty, and sentenced to four years' imprisonment, but released pending an appeal.

Roberto Calvi was to be tried for alleged fraud involving property deals with Sicilian banker Michele Sindona, who was himself serving 25 years in the U.S. over the collapse of the Franklin National Bank in New York in 1974.

On June 19, 1982, he was found hanging from Blackfriars Bridge in London with 2 bricks in his pocket. Naturally his death was ruled a SUICIDE

JamesJ| 7.14.09 @ 8:48PM

To Blame Bush. Very naive thinking. Isolationism brought on WWI and WWII. Exit both Afghan and Iraq too early and we'll have another 9/11 (but worse) in 3 years. Clinton's cutting the military and intelligence brought us 9/11

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Johnba| 7.15.09 @ 11:30AM

Tracy, Are you the same Tracy that worked with me in Danforth's 1976 Senate campaign?
In any event, I am outraged by the lack of any fiscal disciple in this country - Republican as well as Democrat. That's what the "Tea Parties" were really all about. Why cannot someone clearly articulate to the common man where this folly is leading our country? This is not just an economic issue, but a national security one. The lack of a firm and independent fiscal foundation will leave this country unable to defend its interests around the globe (Citi writ large?).
I fear for my country.

Missing Trillions ask Bush | 7.15.09 @ 4:54PM

Estimate $3.3 Trillion
Missing From U.S. Treasury

By Buddy Grizzard
authenticpress.net
August, 02
4-7-6

While Americans worry about the disastrous effects on our economy of the accounting scandals at Enron, WorldCom and elsewhere, an even larger accounting scandal has somehow escaped the public consciousness. According to estimates, the Department of Defense and the Department of Housing and Urban Development cannot account for over $3 trillion allotted to them by Congress, amounting to thousands of dollars of missing money for every man, woman and child in the country.

This story hasn' gone completely unreported. In a Jan. 29 article titled "The War on Waste," CBS News quoted Secretary of Defense Donald Rumsfeld as saying, "according to some estimates we cannot track $2.3 trillion in transactions." The article went on to quote retired Vice Admiral Jack Shanahan, former commander of the Navy's 2nd Fleet, as saying that while President George W. Bush's 2003 budget proposal calls for $48 billion in new Pentagon spending, "with good financial oversight we could find $48 billion in loose change in that building, without having to hit the taxpayers."

One of the most knowledgeable and effective critics of this epidemic of fiscal mismanagement by our government is Catherine Austin Fitts, former managing director of Wall Street investment bank Dillon, Read and former HUD assistant secretary in the first Bush administration. At HUD, Fitts worked to improve accounting practices before leaving the government to start Hamilton Securities, a firm which saved taxpayers billions by efficiently handling HUD mortgages. Now a resident of Hickory Valley, Tenn., and president of Solari, Inc., a community-based investment firm, Fitts writes in her article "The Missing Money Why the Citizens of Tennessee Are Working Harder and Getting Less"

9/11 Clean up, early Christmas| 7.15.09 @ 9:01PM

Bush 1st planned 9/11, Bush 2nd carried out the plot. Any on in the business of demolition knows how the twin towers was brought down.

Those building was due to be demolished, because of health and safety. They had been built with Asbestos. Bush made a killing out of it in insider dealings with his friends, got his war to finish clean up in frauds.

People wake up, America is a grat country but it's full of too many idiots.

Fred| 7.28.09 @ 5:24PM

In light of his recent "stupidly" comment... I kinda like the bumper stickers that says "Stupidly Elected - Smarly Impeached"... and the one that says "Are you better off than you were four trillion dollars ago." You can find these and many more at http://www.FRedStates.com/

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