text of the proposed bailout plan..

we are SOOOOOOOOOOOOO FUCKED!!!!!


http://www.globaleconomicanalysis.blogspot.com/

Weep For The Unites States of America

The New York Times has the Text of Draft Proposal for Bailout Plan. Given this is legislation, under fair use terms, here is the complete draft. My thoughts follow.

Weep For The Taxpayer

Notice that this bill raises the national debt. Notice that the bill is supposed to take into consideration "protecting the taxpayer".

The reality is this bill does not and cannot protect the taxpayer. Rather this bill only promises to take the taxpayer into consideration. The Treasury will indeed take the taxpayer into consideration, then immediately discard any such ideas.

Inquiring minds are also noting "The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time."

The idea behind the above statement is to allow for a continual dumping ground such that there will always be $700 billion in toxic garbage held under this program. As soon as any asset can be unloaded by the Treasury at cost, another toxic loan is eligible to be assumed on the books of the Treasury. This process can last for as long as two years.

Unconstitutional Provisions

Pay particular attention to section 8.

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.

Essentially the law will state that whatever the Treasury does it is above the law. Such a provision is undoubtedly unconstitutional.

Weep For The Free Market

It's time to Weep For The Free Market (or rather what little free market the US had left).

Weep For The Unites States of America

At taxpayer expense, Bernanke and Paulson are willing to bail out their banking buddies at enormous expense to the average taxpayer of this country. Bernanke and Paulson should both should be fired. Instead Congressional sheep will baa yes to this bailout and Bush will baa yes when he signs it. It is a sickeningly sad that day for America that Congress will go along with this proposal that makes the US Taxpayer A Giant Dumpster For Illiquid Assets.

$700 billion will be wasted by this program and it is $700 billion the US does not have to waste. I ask that everyone vote against any congressman who votes for the passage of this bill.

Mike "Mish" Shedlock

 

Don't tell that to the know-it-alls. As long as they're making money and can afford their nice cars and cheaply made Chinese goods, they're going to just laugh and say you're crazy.

 

I agree, this doesn't even touch on preventing the excesses that lead us into this mess, and no one's acts should be unreviewable. I have a funny feeling this is only going to compound today's problems at a future date.

 

Until the Republican Party is dealt with as the terrorist group that they in fact are- and its leaders treated accordingly- they're just going to keep screwing us.

 

sun lion, i would like to agree with you however i will abstain from that until i see who all votes for this proposed "bailout" plan..
my guess is nearly EVERY DEMOCRAT in the house and senate will vote for approval of this garbage legislation. and if and when that happens i will have no choice but to once again laugh at your blind party line rhetoric...

because if that happens the DEMOCRATS will be just as guilty of "SCREWING US" as the republicans..

 

OHHHHHH HOLD THE PHONE SUNLION.. DEMOCRATS not only SUPPORT this legislation,they want to EXPAND this garbage piece of legislation!

Bush Administration Seeks "Dictatorial Power"



Bloomberg is reporting Treasury Seeks Authority to Buy Mortgages Unchecked by Courts.

Unreviewable Dictatorial Power

Notice how everyone wants to rush this through even though it is the biggest financial crisis in history. One might think that something this big should be carefully considered but no... Bush says: "This is going to be a big package because it's a big problem" and "We need to get this done quickly and the cleaner the better."

It seems the bigger the problem the quicker and cleaner it can be fixed. Indeed Congress will argue more over the cost of toilet seats than they will over this $700 billion (and counting) bailout.

Democrats Want To Expand The Bailout

My Comment: Barney Frank is an incompetent socialist fool. Buying mortgages in and of itself will not prevent a single foreclosure. All buying mortgages will do is bail out the banks holding those mortgages. And one thing you can be most certain of is that it will be a selective bailout with no oversight as to who gets bailed out or why.

My Comment: The odds of Congress not rubber stamping this are very slim.

My Comment: Hells bells why not? Let's throw in credit cards, auto loans, boats, and casino debts? Why stop at credit cards and housing? Let's just have the government guarantee every debt in the country.

My Comment: Why stop at two? Why not four? Hell, let's just give everyone $1,000,000 and be done with it.

My Comment: Hard headed approach? What are these clowns smoking? Paulson asks for $700 billion and idiots like Frank and Dodd are clamoring for more already.

Perfectly Avoidable

Martin Baily is another fool. This was perfectly avoidable. All we had to do we eliminate the Fed and fractional reserve lending. And that is what still needs to be done.

Instead Congress is lining up to give "Unreviewable Dictatorial Power"to the Treasury while increasing the size of the already ridiculous proposal.

Contact Your Senator Today!

It's time to contact your senator. Here is contact information for Senators of the 110th Congress.

Phone or Email your Senators today. Tell them in your own words

• Urge your senator to Filibuster any bailout legislation.
• Emphatically state you do not want a bailout of any kind for anyone.
• No Dictatorial power for Paulson or Bernanke
  
• Taxpayers should not have to bail out banks making bad loans
• Tell them that "The Fed" and Paulson are systemic risk".

Email AND Phone Senators Shelby, Bunning, Kyle, Hagel

Whether Senator Shelby is your Senator or not, flood him with calls and emails asking for a filibuster and to stop the insanity. Senators Shelby, Bunning, and Kyle might be sympathetic to the cause, based on past statements. I am taking a stab at Hagel.

Please email and phone the following. Specifically ask for a filibuster and tell them to vote no to any bailout.

Shelby, Richard C.- (R - AL)
110 HART SENATE OFFICE BUILDING WASHINGTON DC 20510
(202) 224-5744
E-mail: senator@shelby.senate.gov

Bunning, Jim- (R - KY)
316 HART SENATE OFFICE BUILDING WASHINGTON DC 20510
(202) 224-4343
Web Form: http://bunning.senate.gov/public/index.cfm?FuseAction=Contact.ContactForm

Kyl, Jon- (R - AZ)
730 HART SENATE OFFICE BUILDING WASHINGTON DC 20510
(202) 224-4521
Web Form: kyl.senate.gov/contact.cfm

Hagel, Chuck (R - NE)
248 RUSSELL SENATE OFFICE BUILDING WASHINGTON DC 20510
(202) 224-4224
Web Form: hagel.senate.gov/public/index.cfm?FuseAction=Contact.Home

Please email and phone both of your senators as well.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

 

my comment on this,
first of there is so little detail in this legislation that it to me would instantly cause me to be against it. it at best vaguely spells out the feds intent.

secondly,if the democrats really cared about "the people", they would NOT sign off on this legislation and instead would push through a package for the people to better be able to weather the storm when all these banks and corporations fail due to there own greed and mismanagement.(there will be a market and dollar crash whether this legislation passes or not)

to put a petty aid package on the backside of this legislation for "the people" is meaningless because ultimately its "the people" who will not only be responsible for the debt of the proposed stimulus package but for the trillion dollar bailout as well..

its ludicrous to suggest that the democrats are for "the people" but yet they sign our own death warrant by passing this legislation and in return we get a whole 600 dollar check in the mail.. wooo hoo, heres your 600 dollars,you now owe the federal government 80 grand along with every man woman and child in america.. yeah,,that makes a lotta sense..

"for the people" my ass....

 

"Keep the numbers small: Your audience doesn’t know how trillions and billions differ. They know these numbers are large, but not how large nor how many billions make a trillion..."
-From a talking points document issued by the White House Office of Communication, to all Republican legislators of both houses.

The Republicans sure do understand their "audience."

I don't like it even as much as you do, HB, but the gun is to our head. And don't think for a second they aren't fully prepared to fire without so much as a wince.

my guess is nearly EVERY DEMOCRAT in the house and senate will vote for approval of this garbage legislation.

I'm sure they will. As a powerless little minority party in all three branches of government, the only way they can even attach any safeguards that might prevent this from happening again three years from now is to comprimise.

I don't like Dems working cooperatively with the kind of people who, in my opinion, deserve nothing less than to be buttraped by Satan till they bleed out. But my view stands zero chance of prevailing, so I will have to live in the real world, like it or not.

People chose the greater of two evils in the last election (or to stepped aside to permit evil), and now I hope some of them realize just how badly they fucked up.

if the democrats really cared about "the people", they would NOT sign off on this legislation

They have no say. They can pretend to like it, and try to get a few things nailed down to prevent a recurrance (though they'll be laughed at, given a few token courtesies, and nothing solid, I predict). But they don't have the power to stop it, and I think you'll agree that if there's any hesitation among legislators, even a few days of feet-dragging he'll do this anyway be executive decree. He's made pretty clear that it's a done deal.

 

Tiny minority party??? This isn't the Greens we are talking about!! The libertarians are a tiny minority party, the dems are not.
I'm sorry, minority or not, the dems could still vote NO! Yes they may be outvoted, but to somehow believe that they are any better is silly. The dems want big handouts for there corporate interests just as much as the repubs.

 

SunLion is just a heavy koolaid drinker. He's probably paid by the Democrats to come in here and spew this propaganda.

 

SunLion is just a heavy koolaid drinker. He's probably paid by the Democrats to come in here and spew this propaganda.

For someone who doesn't even know how a bill becomes law in this country, you're making a pretty stupid comment. And no, I am not an employee or formal member of any political party.

the dems could still vote NO!

Do you know how a bill becomes law?

 

Doesn't it upset you , that your the only one NOT getting paid ?

 

Yes, I do.

I don't have to like it though. Its like saying "gee Sunlion, I had to let them shoot you and torture your family, because that bill had a rider that provided for food for starving African kids."

Or I could stand up and say NO! This is wrong we have to find a better way.

I blame both dems and repubs both for this. Trust me I don't want McCain any more than I want Obama.

And your argument that dems are a tiny minority is still ignorant.

 

Sorry I was so short with you, busmama, I was at lunch at work (I work insane hours) and had only a minute or so left on my break. I shouldn't post when I don't have time to be more clear. There's a theme that repeats itself in this forum, and goes something like this...

Rat and perhaps others ask "Why hasn't the Democratic controlled Congress passed any useful legislation?!"

So then I point out that the president's signature is required for it to become law, unless overridden. The override requires a two-thirds vote to accomplish, and must be successful in both houses. That leaves them about 58 votes short of override in the House (I could be off by a few, it could be as I think there are a few vacant seats, not sure).

In the Senate, it's closer, but they still don't have the votes to even pass it in order to send it for the president to use to make spitwads. The dems have 50 seats, exactly half. But Lieberman is very open in his support of the Republican Party, so that makes it 49 on game day, and remember too that on a tie vote, the vice-president can vote.

So the notion that the Dems can at least pass legislation and then dare the president to veto it is a false one, at least not without Republican support, and their view of bipartisanship goes something like "die in a fire, liberal homo atheist!"

So The Party effectively has the Congress locked down. It holds the entire executive branch, politicizing even the Justice Department. Plus most judges are Republican appointees. Federal appellate courts, of which there are 13, are mostly Republican controlled (10-2-(split)), and they have the final word on nearly everything. If it goes on to the US Supreme Court, well, seven of the nine were appointed by The Party.

I point this stuff out, or at least say "damnit, do the math!" but Rat or someone will return a month later with the same question/pronouncement. As if we didn't already settle this.

Putting that monstrous Party machine in the control of McCain/Palin (or any other members of The Party) is a nightmare, absolute worst-case scenario. Obama (or whoever replaces him if some Party loyalist assassinates him) is the only sensible vote this time around. I can respect people with different views, but I have great difficulty respecting good people who refuse to help us stop fascism gone wild.

 

Don't you think its a little hard to believe that all these big banks and their MBA accountants really screwed up this badly? What was the real motive for all this? Was it just plan old greed? Or is there someone making a killing off this even today? From north of the border it looks like the US government is propping its self up by seizing huge amounts or real estate, that it will sell later to pay for the war against Islam. With the added effect of taking the wind out of the sails of political decent amongst the average citizen...just when they are looking for change.

Why are conservatives so bad at managing the economy? Seems to be the way it is everywhere.

 

lol, I waiting for my check from the liberal party before I come on here and put all you guys in your places.

So have fun with the puppet show because the check might get here this week.

Or it could be a while liberals are very under funded. :-/

 

Accurate description of the state of congress today. And in fact the democrats are trying to slow this process down and look at things like oversight. Whereas the republicans wanted the first proposal approved right out of the gate. They're playing the sky is falling card. And I am hoping the democrats and the US public don't fall into that trap. We don't have to act immediately to correct the situation. Sure more will lose more, but there is no guarrantee that by acting prematurely there won't be more losses down the road on an even bigger scale.

I say let's slow down and make well thought out decisions, based on the same sort of formulas the traders in the market use. Let's look at risk, guarrantees, responsibility and most importantly oversight, and regulation to prevent the reoccurrence.

All these vague projections that this tactic will lead to profits for the government down the road sound a little empty to me at the moment.

 

Open Letter To Congress On The $700 Billion Paulson Bailout Plan



Dear Congress

Treasury Secretary Paulson is asking you to rush through a $700 billion package because "we’re literally maybe days away from a complete meltdown of our financial system".

Paulson states that it must be done quickly and that it is better than the alternatives. Fed Chairman Bernanke agrees.

The first question Congress should ask is how would Paulson or Bernanke know?

It was only a month ago Paulson was reiterating to anyone who would listen how sound our banking system is. The fact of the matter is that neither Paulson nor Bernanke saw this coming, yet now Congress is supposed to trust they now "know" the solution.

Problem Defined

Before one can work out a solution, the first step is to identify the problem. The problem is not a lack of liquidity, it is not a lack of trust, it is not lack of consumer confidence, it is not subprime lending, and in fact the problem is not housing at all.

The problem is consumers and corporations are deep in debt with no way to service that debt.

Attempts to bail out banks and brokers at taxpayer expense will do nothing but add to consumer debt, weaken the US dollar, and literally waste $700+ billion dollars that can and should go to more productive uses.

What Caused The Problem?

• The Fed
• Congress
• Fractional Reserve Lending
• The Treasury

The root cause of this problem is the Fed micromanaging interest rates, the Treasury cheerleading every step of the way, and Congressional sponsored spending that went wild. The critical issue that ties everything together is fractional reserve lending allows banks to borrow money (credit really) into existence with insane amounts of leverage.

To top it all off, Greenspan slashed rates to 1% fueling the biggest global housing bubble the world has ever seen. Congress needs to figure out a way to eliminate the Fed.

Fed Uncertainty Principle

I kindly ask of you to please read the Fed Uncertainty Principle written April 03, 2008 before any hint of this meltdown occurred. Here is Corollary Number Two.

Uncertainty Principle Corollary Number Two:

The government/quasi-government body most responsible for creating this mess (the Fed), will attempt a big power grab, purportedly to fix whatever problems it creates. The bigger the mess it creates, the more power it will attempt to grab. Over time this leads to dangerously concentrated power into the hands of those who have already proven they do not know what they are doing.

Why The Paulson Solution Fails

The Paulson solution fails because it does not help consumers or businesses service debt, it does not create any jobs, it increases the national debt, and it encourages more reckless lending by banks. Attempting to bail out banks on the back of cash strapped consumers is simply doomed to fail.

If printing money was the solution to all problems, Zimbabwe would be the most prosperous country in the world.

The Barney Frank Non-Solution

"We're going to be buying up a lot of mortgage paper" said House Financial Services Committee Chairman Barney Frank.

Sadly, that will not do a single thing in and of itself to stop foreclosures. All that will do is bail out banks and brokers at taxpayer expense.

Barney Frank also stated “We should be more willing to write down the mortgages. We’ll become the lender. The government will wind up in a controlling position so that we can reduce the number of foreclosures.”

Congress needs to ask "How much extra will Barney Frank's proposal cost taxpayers?"

Were does the madness end?

As stated earlier the problem is not housing in the first place, and besides taxpayers who pay their mortgages on time should not be subsidizing those who don't!

Banks Need To Recapitalize

Paulson wants to recapitalize banks so they can keep lending. Ironically, one of the problems is lending. The US has been on a credit binge to such an extent that I have to ask what more do we need? More Pizza Huts? More Home Depots? More Houses? More Nail Salons? More Car Dealers? What?

What is the urgent need to lend still more?

We are in this mess because of too much reckless lending. We do not need more lending, we need more saving!

Paulson's idea that more lending is needed is ass backwards. Paulson's proposal cheapens the dollar, and discourages the one thing that is desperately needed: saving.

Alternatives Discussed

In the mad rush to push through this package, Paulson states it is better than the alternatives. That is an interesting statement because no alternative have even been presented to Congress, let alone discussed.

Shouldn't there be a discussion of alternatives before doing a mad dash to sign a $700 billion package?

Paulson is attempting to hoodwink Congress to pass his plan without any discussion of alternatives. I believe the Paulson proposal is the worst of all solutions in that it bails out banks at the expense of the taxpayer and the taxpayer gets virtually nothing out of the deal: no jobs, no tax relief, no health care.

Paulson claims that taxpayer will benefit by the bailout indirectly because one the government owns the debt, servicers will be more willing to negotiate terms. Once again, it will be taxpayers on the hook for any negotiation granted. Paulson conveniently ignores this cost as does Barney Frank.

Taxpayer Gets Nothing From Current Bailout Proposals

The taxpayer gets nothing for this bailout $700 billion. Actually the taxpayer gets a negative benefit because the Paulson and Frank proposals will cheapen the US dollar, increase the deficit, and ultimately cause prices of imported goods to rise for everyone, while saving a relative few.

The solution is to address the recapitalization of banks in a fair way that does not jeopardize the taxpayer but instead puts the onus of responsibility on banks making reckless lending.

Recapitalizing Banks

Banks are undercapitalized. They need funding badly. Here is what I propose.

• Reduce the capital gains tax by 50% for any investor willing to cash out stocks and invest in 5 year bank CDs.
• Eliminate the difference between long term and short term capital gains.
• Eliminate taxable interest on savings accounts, CDs, and US treasuries.

The above would promote saving rather over speculation and provide a big boost in government revenues as well. Stock prices will not be affected over the long haul by these measures.

Jobs, Jobs, Jobs

I am a libertarian. I do not believe in makeshift government proposals. However, I would rather get something than nothing for $700 Billion. Paulson's proposal scores a big fat zero in term of providing an jobs or any real economic stimulus.

It is no secret that infrastructure in the US is decaying and needs to be fixed. A collapsing bridge in Minnesota is one key example. And what out our aging energy grid? Instead of giving $700 billion to banks that deserve to go under, I would rather give half that for jobs programs.

To create as many jobs as possible at the least cost Congress needs to scrap the Davis-Bacon Act. It would be better to create 3 construction jobs at $12 an hour than 1 job at $36 an hour. The idea here is to get as most bang for the buck and create as many jobs as possible for the money spent.

Waste In Iraq

We need to admit the mistakes in Iraq. The public never supported this war and the public was correct. The war in Iraq easily cost $1 trillion dollars if you count future medical bills. That is $1 trillion dollars that could have been spent right here in the US.

I propose we declare the war won and get out, totally and completely. Offer returning veterans first crack at any infrastructure rebuilding jobs. It is the least we can do to those who are likely going to be emotionally if not physically scarred for the rest of their lives fighting a war that never should have been fought.

Congressional Spending

Congress needs to admit its own role in this mess. Congress passed hundreds of programs to make housing more affordable. They all failed including the biggest failure of all: Fannie Mae and Freddie Mac.

It should not be the role of Congress to promote housing vs. renting. The very act of doing so creates an artificial demand for housing. Ownership society madness culminated with many financially unqualified to buy a house buying house anyway because Congress and the White House promoted the idea.

Congress is also directly responsible for deficit spending and that weakened the US dollar. Indeed there was virtually a panic out of dollars for this reason. Adding another $700 billion to the deficit as Paulson is asking you to do is adding insult upon injury. Don't do it.

Instead balance the budget. It can be done.

span style="font-weight: bold;">Who Am I?

Who am I to suggest what Congress should do? I am nobody. However, this nobody and a bunch of fellow nobody bloggers and bunch of nobody fund managers who I respect all saw this all coming 3-4 years ago. Paulson did not, Bernanke did not, and almost everyone in Congress did not.

So the choice Congress needs to make is who to believe. Congress can believe Bernanke and Paulson who have been totally wrong about everything for years, or Congress can listen to people who not only understand what is happening but predicted it.

Desire To Believe

You desperately want to believe that Paulson and Bernanke are telling the truth. You have for years put your faith and trust in them. It is a very difficult thing to do to admit you are wrong.

However, it is critical that you look at the simple facts for what they are.

The fact is Paulson is grasping at straw in a tornado. So is Bernanke. Problems cannot be cured by printing money, and problems cannot be on the backs of already overburdened consumers.

No problem is fixed by madly and blindly rushing into solutions where no alternatives are discussed. You now have alternatives.

I will also offer one more alternative but it is not from me. I kindly ask Congress to consider An Open Letter to the U.S. Congress Regarding the Current Financial Crisis by John P. Hussman, Ph.D., an economist and investment manager whose opinion I trust.

Hussman too has an opinion as to how to address this issue without impacting the taxpayer. For the record, I have no idea what he might think of my proposal.

However, between the Hussman proposal and mine, I am sure there is fertile ground for further discussion and for doing something other than what I believe to be the worst possible alternative, the proposal submitted by Treasury Secretary Paulson.

No problem is too big that a solution has to be rushed into without considering the alternatives. I ask that you consider these alternative proposals either over an extended session or by letting the next Congress tackle the issue.

Heaven help us if recess is more important than taking the time to seriously consider all reasonable alternatives.

Sincerely

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

 

describes my feelings right now:

http://www.reason.com/blog/show/128926.html

If i vote at all it'll be 3rd party, but i dont think there's much of a point any more, we all just got the shaft from the usual suspects and we saw it coming a mile away.

Corporate class in bed with the governing class and somwhow the rest of us get screwed (yes sunlion you partisan hack that includes the Dems, i'm looking specifially at you Dodd)