It’s bad enough that the federal government wants to spend trillions of dollars of your children’s money to bail out financial institutions that should be allowed to collapse for the good of the economy. But under the terms of the proposed bailout plan, the government will be able to rescue bad banks in secret.
Meanwhile the bank failures keep on coming, like aftershocks from an earthquake. Perhaps I shouldn’t have called it a hurricane after all.
Thursday the government took over Washington Mutual and sold it off to J.P. Morgan Chase, completely in secret. Not even the company’s board of directors had any idea the takeover was coming. Though people who read carefully through the last two weeks’ business stories would have expected such a move and would have had plenty of time to close their accounts.
The Federal Reserve, for its part, is making it easier to invest in bad banks.
Which may be why billionaire Warren Buffett has personally bailed out Goldman Sachs, risking $5 billion and making Pollyanna statements to the press about it. Of course, with a 10% dividend on those stocks, the investment is indeed high risk; Goldman Sachs could still go under.
And the Federal Bureau of Investigation has opened an investigation into Fannie Mae and Freddie Mac, Lehman Brothers and AIG to determine if the companies “may have engaged in misstatements in the course of what transpired during this financial crisis,” FBI director Robert S. Mueller III told Congress Tuesday.
And while Congress continues to argue over the $700 billion plus bailout, er, excuse me, rescue package, talks have stalled, in part because of overwhelming public opposition to the plan. A Rasmussen poll last week showed public support for the bailout at only seven percent, and the phone lines of every member of Congress have been jammed with calls opposing any bailout.
The next institution to fall, if reading between the lines is any indication, may well be the Federal Deposit Insurance Corporation itself. That’s right, the FDIC, which supposedly insures bank deposits of ordinary people, is in desperate need of a $150 billion bailout itself, to cover the losses from all the failed banks it will have to pay out on. Interestingly, the FDIC knows which banks are likely to fail; it has a watchlist of 117 banks, according to Bloomberg News, which it thinks are likely to fail even though those banks may be “well capitalized” — at least in theory.
Which means that the headlines are going to be filled with bank failures, bailouts and political posturing for at least several more weeks. And by that time it’ll be time to elect a new President.
The worst part is, the bailout package may allow the Treasury secretary to bail out failing financial institutions entirely in secret, much as it did with Washington Mutual this week.
The bailout bill “would allow the Treasury Secretary to make sweeping decisions while hiding behind a veil of secrecy,” points out Michael Smallberg of the Project on Government Oversight. “We’re particularly concerned with section 2(b)(2), which would grant the Secretary the authority to enter into contracts ‘without regard to any other provision of law regarding public contracts,’ and with section 8, which would make the Secretary’s decisions non-reviewable ‘by any court of law or any administrative agency.’”
No oversight by the courts? No federal procurement rules to prevent wasted money and backroom sweetheart deals? This is going to be a lot more than $700 billion at this rate.
Of course, we can’t be sure, because the bill text isn’t being published officially. That’s something that Ellen Miller, co-founder of the Sunlight Foundation, wants to change. Her site, Public Markup, argues for Congressional legislation to be published online during the markup process where bills are amended or rewritten after introduction and before being voted on.
Now have you started listening to Ron Paul yet?
“We risk committing the same errors that prolonged the misery of the Great Depression, namely keeping prices from falling,” he said at a joint House-Senate hearing Wednesday. “Instead of allowing overvalued financial assets to take a hit and trade on the market at a more realistic value, the government seeks to purchase overvalued or worthless assets and hold them in the unrealistic hope that at some point in the next few decades, someone might be willing to purchase them.”
In an op-ed published by CNN, Ron Paul puts the moral hazard plainly: “Now that the precedent has been set, the likelihood of financial institutions to engage in riskier investment schemes is increased, because they now know that an investment position so overextended as to threaten the stability of the financial system will result in a government bailout and purchase of worthless, illiquid assets.
“Using trillions of dollars of taxpayer money to purchase illusory short-term security, the government is actually ensuring even greater instability in the financial system in the long term.”
If the government owns your mortgage and you can’t afford to pay, will you go to prison? That can’t happen if the bank holds your mortgage, but if the government does, it suddenly becomes possible, even if it seems unlikely now.
Interestingly, the financial crisis and bailout may be helping the libertarian movement, according to aWashington Post article about the Cato Institute’s response to the crisis Thursday: “Far from debunking their faith in lightly regulated capitalism, the feared meltdown confirms it.”
Cato, for their part, seems to have hit on something nobody else has: the regulations which allowed the housing bubble to exist in the first place. According to senior fellow Randal O’Toole, zoning and land use regulations are the culprit. “The housing bubble was not universal. It almost exclusively struck states and regions that were heavily regulating land and housing,” he wrote. “In fast-growing places with no such regulation, such as Dallas, Houston, and Raleigh, housing prices did not bubble and they are not declining today.”
Finally, a transpartisan coalition has started No Cash for Trash where people can get the latest news on the financial crisis and help “stop the taxpayer-funded bailouts.”
For even more on the financial crisis as it developed, check out the Bailout Reader from the Mises Institute.
(3 votes, average: 5.00 out of 5)
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Ultimately, the war supporters in Congress prevailed in the vote on the resolution. Still, the vote was significant because it places every member of Congress on the record as supporting or not supporting the unconstitutional, costly, violent occupation of a country that never attacked us. This vote should serve as an important reminder to the American people of where their representatives really stand when it comes to policing the world, empire building, and war.
Gardner Goldsmith explains why claims by politicians that consumers can become "irrational" and why claims by the same politicians that government can help "fix" markets are both false and misleading. He also explains what the terms Praxeology and Epistemology mean, which is key in understanding how to place free markets in their proper place among human history.
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Never ending BS!!
Sep 26, 2008
We just had the largest bank failure in Us history. Now these jokers want to tie everyone’s tubes and give them vasectomies ect?? IF they cannot even run a bank how can they run someone else’s life?? Damn jokers!! Have a great weekend!! They said they would pay people $1000.00. Woopdie doo!! These people need some mental help!!! Uncle Sam will line thier dirty pockets. Unfair I tell you!!
Mike
Sep 26, 2008
Great reporting. Thanks again, Mike.
Beware
Sep 27, 2008
The worst cops in California are located in Shasta county, Contra Costa county and Orange county. Be very careful in those areas or it could cost you your life. No one can bail you out of death. Damn if only I was a bank CEO lol
Nutcases
Sep 28, 2008
There are more nutcases running around and doing illegal things just because, they have a badge. One way they try to annoy and threaten is by stealing things at houses to try to force people into foreclosure by making tempers flare to get you a big ticket. Do not give into this. These people do not desserve your house for stealing a $1.50 paper off of your driveway. Why reward them by getting angry and doing something to them? They may have stold your hedge clippers or ect.. but, the best thing to do is to lock things up. Try to get your paper early or just go two blocks and buy one from the machine. Your bank will not secretly bail you out form the mess. Keep it cool and win. You worked hard all your life and that is your house. Do not let it be sold at a police auction for some criminal cops to win. Hell no I say!! Have a great week and stay strong!!
Sep 29, 2008
I.O.U.S.A.: One Nation. Under Stress. In Debt. - Homeland Stupidity
purple
Sep 29, 2008
A friend of mine burned his to te ground before they could take it. I say good for him. Over priced by the banks, well make it worth nothing. BURN THEM ALL. No resale the rich banks loose just like you do.No bailouts, let the market adjust itself. They wouldnt bail you out but they will the banks that the elite want to buy up at pennies on the dollar. They wont get mine.
Damn straight
Sep 30, 2008
Purple you kick ass. We will never let them defeat us. Win win win good for you!!
Ray
Oct 03, 2008
We do forget that who we are really “bailing out” is the average tax payers. Those who made these decisions and caused these institutions to get into these situations are totally insulated from the results and if they do go under they would suffer at all. They should be suffering consequences, but won’t. One has to wonder why we hold doctors accountable for just bad outcomes when they did nothing actually wrong, and we don’t hold these individuals at all accountable for their total gross incompetence.
We should be able to retroactively retrieve the bonuses and golden parachutes of the top people at these banks and institutions. They should not be insulated by the corporate vail from the responsibility of their personal actions. But that is not the case.
The only people who will really suffer from these organizations going under are the average tax payers, who have accounts with these places, who work there, or who own part of them as a part of retirement accounts they have no real control over. So these bail out plans are more bailing out the average joe than the big guys.
Now should we also look at insisting that in the future the top decision makers are held responsible for their actions —- definitely. These huge salaries are just not justified. They have certainly proved that. We should insist that Congress address these issues in its next term.
Bob
Oct 03, 2008
Nobody is getting bailed out here, Ray. This is what you call the illusion of a bailout. Nothing is getting fixed. No jobs are being created. No personal bills are getting paid and to make it worse, taxpayers are being put 700 billion dollars deeper in debt. That’s only going to make things worse.
This whole show is just Cowboy Gene riding the herd and singing in a thunderstorm trying to prevent a stampede. The storm is getting closer and out in the middle of that fat, lazy, stupid herd of cattle on a little hump in the ground is an old wrecked car.
An economy car.
Lightning is going to hit that sucker and then Cowboy Gene better get out of the way and ride for the hills because this is one huge mother of a herd.
There is just no way of knowing what is going to be left of our way of life say, five years from now. There are so many variables out there today that can’t be controlled. It might work out okay, but realistically, based on historical study, the odds don’t favor a rosy outcome from this mess.
Personally, I think the ideas of voting and elected decision makers are going to be set aside for awile when this really gets rolling.
Bob
Oct 03, 2008
I watched people I know do the exact same thing that the government is doing now.
They lived beyond their means, ran up unpayable credit card debt, financed this and financed that until they couldn’t pay their bills. Then they borrowed against their house, paid off all of this messy, scattered debt and put it all under one payment to “save money”. Whew! What a relief! Then away they went fresh with their zero balance credit cards until they hit the wall again. Some of them did this two or three times.
YOU CAN’T SPEND YOUR WAY OUT OF THE HOLE! And when you reach the point(like we have) where you have nothing left to borrow against, you’re screwed. What’s worse, the people you owe all this money to have first dibs on all of your stuff. Has anybody thought of that?
Maybe these vacant houses and bankrupt businesses will have new Chinese owners in a year or so. They loaned us the majority of the money that we can’t pay back. You want to fight about that, it’s WWIII. That’s just ONE possible scenario.
There was a point, after the first refinancing of America in the early eighties, where we could have changed our ways, tightened our belts and pulled the country out of the fire.
Unfortunately, our spending habits got worse, not better. Now I think we have to call a spade a spade and wake up to the fact that we are hopelessly bankrupt. It will be possible to start over if we live through the process, but things will be very different.
Bob
Oct 04, 2008
I thought I had another one here.
Bob
Oct 06, 2008
Oh there it is.
GlenGary
Oct 12, 2008
Bob,
Things will be very different from now on and it is a huge psychological adjustment the whole country is being dragged into kicking and screaming. Folks are ill-prepared for the extreme adversity that will befall the nation as a whole as belts are tightened all the way from the basement to the top.
I think myself prepared to a greater extent than 99% of the folks out there yet I am surprised by the toll on my nerves…the way I think. Pure Dread. I have accepted that things will never be the same and that the best to be hoped for is survival in place as is.
But when folks have dreams of how it should be in the future and the reality of how it will change all that, it is hard to shift gears into the real situation.
I bounce between acceptance and yesterday a lot as I struggle to get my mind wrapped around it all. I find working up piles of wood and being more prepared helps me to shut down my head questions and get some peace.
Glen
Jesus Christ
Oct 13, 2008
I fortold of the troubled future and the eventuallity of a one world bank????? Look what is happening now. The end is not far now!!!!
JC
GlenGary
Oct 13, 2008
Jesus, the prophesies have not yet been fulfilled. We have countries working in concert with each other today. But Rome is far from being rejoined and at every attempt to rejoin Rome since it’s fall it has never succeeded.
Then there is the prophesies about Babylon (Iraq) enslaving a tribe of Israel. Nust have slipped your mind.
The end is not near and as your Dad said; “No man will know.” This means precisely that no man will guess so take off the Halloween costume and sober up a bit.
Glen
Bob
Oct 13, 2008
Wow! Your even pissed off with Jesus, Glen. Everybody loves Jesus.
Bob
Nov 20, 2008
I just had a fight with Susan28 and I’m pissed off. And then I read some crap from some experts about the possible bankruptcy of GM and why they should get a bailout and I’m even more pissed off.
The experts say that if GM goes bankrupt(get this), the price of vehicles will go up. UP? They can’t sell them now and make money with no money down and zero interest, but now they think that because there will be fewer vehicles being made, they will be able to jack the price UP?
What about GM’s inventory? Won’t that be liquidated at auction to pay off creditors and suppliers? Won’t that dump a huge number of CHEAP new vehicles on the market and overwhelm the dwindling demand that does exist? Ford and Chrysler won’t be able to sell a car to save their souls because everybody will be driving a $500 dollar Chevy that they got at the auction.
They’ll drive it until they can’t afford insurance and gas anyway.
Which brings me to another point. Why is GM going broke in the first place? Because they can’t sell new cars or because people can’t pay for the cars GM sold them on payments last year and the years before that. Aren’t these same people who can’t make their payments to GM, the same people who are now expected by the GM to fund this huge bailout? With what? Taxpayers have no money and can’t even borrow any more, how are they going to pay for ANY of these bailouts?
Yo! Experts! Hello? Taxpayers are broke! You stupid sonsabitches! Hello?! Knock!Knock!Knock! Anybody home in there? Jesus Christ!
GlenGary
Nov 20, 2008
The mere fact that for the last 10 years the BiG Three have had to rebate vehicles is the clue nobody wanted what they were selling without an incentive to buy it unlike Honda and Toyota that didn’t do rebates until after the shit hit the fan.
There was their clue to change their production to different models like the cars they rarely rebated….cars like that. It was pure stupidity by the managements that have sunk the Big Three and not much else.
Glen
clem
Nov 24, 2008
“The Big Three” Larry, Curly and Moe.
Jesus Christ
Nov 26, 2008
Glen, calm down. Things must get worse before they get better. This world has over sold itself and the greedy bastards at the top have not cared till now. Everyone is all of a sudden taking a very close look at the severance packages, personal jet flights, multiple million dollar homes that these people own and realized they are just greedy SOBs. Now they make you think they want to correct things but in reality they just want the spot light off of them. I read an article yesterday that said the worsening economy is driving alot of people back to the church. Do you think they are there for the right reason. “When the going gets tough the tough go to church”. Then when things get better they say “Oh, never mind church I have it under control now, Thanks, anyway”. I wouldn’t even doubt to see praying reintroduced in schools before this is over with. We all might be praying to the coran but atleast we will be praying :-) Just a little humor there. Things always get worse before they get better. In this case it is probably going to get real bad before you see an improvment. So, don’t sweat a couple trillion dollars. Our great, great, great, great grand children will have it when the time comes to pay it back. As for the auto industry you must do like I have done. Buy the best car/truck possible and drive it till the wheels fall off. Thats the only way to get even close to your money out of it. As for the post before about the one world bank, it was just an observation. I realize we know not the time or place for the return of our lord and we are told not to even speculate but I have watched for years and notice the growing number of banks and now they are all in the trenches. But, around here they are still builing new ones. Life it too short to fret. I am just thankful for my job and hate to hear what a lot of people are going through with the economy in the dumps. Things will get better, and we will rise again.
JC
GlenGary
Feb 16, 2009
JC
Add up all of the GDP of every country in the world and the United States owes far more than that. In this next round of Bailouts to be signed Tuesday the Chinese have refused to buy those bonds and no one else wants them either which means we will now print them with no backing. Think Wiemar Germany or Zimbabwe-today. Think Hyper-Inflation and economic collapse because that is the most likely course-no other.
The world smells that collapse as gold and silver have delinked from oil and the dollar in the last five weeks. Used to be oil up G&S up, oil down G&S down, dollar up G&S down, dollar down G&S up.
Today for instance on the overseas exchanges the dollar was up and oil down but precious metals still went up. This shows the distrust of the dollar. When that distrust becomes universal then the dollar dies and so does your dollar savings and investments and your ability to buy gas, food, utilities. You then get mad which would be the normal reaction to starvation and ruin.
The church is not going to save folks from their ignorance of Biblical Principals. In the Bible gold and silver are THE MONEY, the wise man built his house upon a rock etc and in Revelation it speaks of how to behave in business… So going to church might help in asking forgiveness, but it does not address the mess of not setting one’s path straight life long. It does not cure non-preparation for living life on life’s terms. It does not put gold, silver, food or ammo in the cupboards for your family’s use to survive and it does not impart skill where none was sought.
My friend there are natural laws in economics and we have violated so many over the last 38 years that dodging economic judgment is no longer possible.
Yes, there will be a better day. It is just that if you are in your 40’s it is most probable that you will not live to see it as this will be a culling experience of epic proportions that even the prepared and forewarned will have trouble surviving. Count on it.
The world is running low on food and with starvation you get disease and death…and riots and war and killing. No one starves quietly.
Look at the worldwide drought map. California, Texas, Georgia, Florida, South Carolina dry as a bone, Australia, Africa, swaths of China portions of South America likewise and even parts of Russia.
We have cities great and large. What do you suppose happens when food becomes too expensive? When welfare runs out and unemployment benefits and still no jobs? When the dollar devalues by 60%?
The United States has stockpiled 17lbs of food for every American. That ought to last about a week…then what? A a a a a a DUH. No money, no food,,,a a a a Use your head here.
I have stockpiled over two years of food. Seems I might be around a little longer to work things out then 95% of the herd.
The man with no plan today is not likely to survive much.
While between 2002-2007 most Americans were going deep into debt I was investing in metals and survival techniques and then food stores, weapons and ammo. I saw that the party was ill-fated simply because you cannot borrow income and pretend it doesn’t matter. You cannot send dollars overseas and create jobs here–you destroy jobs here. I got laughed at,but who is laughing now?
I think this is all one huge pathetic mess that was avoidable by facing reality from 1999 to 2002 instead of trying to solve it we had a big party 2002-2006/07/.
Now we get to pay triple and it will be the single most destructive force any country has seen since the Dark Ages.
Minimizing it all will be the last act of delusional humans.
GlenGary
GlenGary
Feb 17, 2009
As for kill the pigs guy….
Folks it’s final! Mad Cow has made the leap from cattle to humans. Swiss Cheese for brains.