This is so typical of "financial experts" in the nation's financial press as they literally laugh hysterically at the Cassandra, Peter Schiff, who suggests that the excessive amounts of credit in play will be destabilizing. This is from Fox, but could be from CNBC or Bloomberg.
Schiff: "[Individual] net worth is at an all time high because of the phony real estate value. When housing prices come back down the net worth is gone but the mortgages are still there." Guffaws and chuckles all around.
"In the topsy turvy world of Washington, to combat what is being called the "most momentous financial crisis since the Great Depression," the Republicans have gone socialist and the Democrats are advocating the corporatism of Italian rightist dictator Benito Mussolini.
Fairly unique in U.S. history, the Bush administration has nationalized companies – insurance and mortgage guarantors – that have nothing to do with the war the country is fighting. During World War I, President Woodrow Wilson had the government seize and operate the railroads because they were deemed vital to producing war materiel for the troops. They were returned to private hands in 1920, two years after the war ended. Congress also gave Wilson the authority to seize and operate other industrial plants during the war, but took away this power when the conflict concluded." Antiwar.com
Now it's a RESCUE OF MAIN STREET. Words really are powerful.
Paulson Plan Aimed at Helping `Poorly Run' Banks, Allison Says
" U.S. Treasury Secretary Henry Paulson's proposed $700 billion bank rescue aims to help ``poorly run'' companies and the primary beneficiaries would be Goldman Sachs Group Inc. and Morgan Stanley, said BB&T Corp. Chief Executive Officer John Allison in a critique of the plan.
Treasury ``is totally dominated by Wall Street investment bankers'' and ``cannot be relied on to objectively assess'' the impact of government policy on the financial industry, Allison wrote in a Sept. 23 letter to Congress. The letter was verified by Bob Denham, a spokesman for BB&T, North Carolina's third- largest bank." Bloomberg
“Are you going to watch the debate between Obama and McCain?” my wife asked me last night. “No,” I responded, “why would I watch a glib, smart Marxist debate a dimwitted progressive/militarist about the best way to destroy the country?”
“I’ll miss you,” she said sweetly as she took her Paulaner Hefe-Weizen beer upstairs to our second family room.
Later, she came downstairs, kissed me on the cheek, and joined me in watching the History Channel.
“So, honey,” I asked while sipping a margarita, “did the candidates say how they were going to address the $60 to $90 trillion in unfunded liabilities of the federal government without printing money?”
“No,” she said.
“Did they question the morality of bequeathing our son and other Americans under the age of 18 with a million dollars or so in debt apiece?”
“No.”
“Did they say how many of the 700-plus military bases we have around the world they are going to close?”
“No.”
“Did they promise that our son would never be drafted into the Army and have to risk his life on behalf of Israel or Taiwan, or some other foreign country or religious fable?”
“No.”
“Did they say that there are only two ways of avoiding future economic catastrophes: one, by passing a twenty-eight amendment banning all subsidies, handouts, entitlements, unequal tax rates, and regulations that favor some people over others; and, two, passing a law requiring the Federal Reserve to never let the growth in the money supply exceed the growth of GDP?”
“No.”
“Did they have Rep. Ron Paul’s understanding of monetary policy?”
“No.”
“Did they square their nostrum about the need for people to serve the common good with their policy of using force to extract money from some people for the benefit of other people?”
“No.”
“Did the two statists say how silly it is for the public to worry about greedy corporations instead of greedy government; especially when corporate profits, which keep us from having an economy like Cuba’s, are about six percent of national income and government is about 44 percent of national income?”
“No, but let’s stop talking about the debate and go to bed,” she said with a suggestive look.
No debate from me,” I said with a smile, not knowing or caring if it was the Paulaner or my questions that triggered the suggestion.
"Indeed, Rothbard does no less than portray the Fed as a cartelizing device that limits entry into and regulates competition within the lucrative fractional-reserve banking industry and stands ready to bail it out, thus guaranteeing its profits and socializing its losses. Rothbard further demonstrates that not only bankers, but also incumbent politicians and their favored constituencies and special interest groups benefit from the Fed's power to create money at will. This power is routinely used in the service of vote-seeking politicians to surreptitiously tax money holders to promote the interests of groups that gain from artificially cheap interest rates and direct government subsidies. These beneficiaries include, among others, Wall Street financial institutions, manufacturing firms that produce capital goods, the military-industrial complex, the construction and auto industries, and labor unions." Joe Salerno
Consider what this mess has already cost taxpayers:
$29 billion to buy the rotten paper of Bear Stearns so J.P. Morgan would buy the investment bank; $85 billion for 80 percent of AIG to nationalize it; $150 billion in a stimulus package to flood the nation with cash; perhaps $300 billion to bail out Fannie Mae and Freddie Mac; and now $700 billion to begin taking the toxic paper off the hands of America's big banks.
... the fellows who tell us we face a financial mushroom cloud over every American city if we do not act at once to provide the $700 billion did not see this coming and can make no guarantee that this will succeed and end the crisis.
Nevertheless, it must be done, and done now, as collapse is imminent.
Looking at all the money being ladled out by the U.S. government to prevent a collapse, and the diminished revenue coming in, it is hard to see how America avoids future deficits that reach $1 trillion a year. These will imperil both the dollar itself and the ability of the United States, which saves nothing, to borrow from the rest of the world. The downsizing of America is at hand.
Yes, indeed, we have arrived at the Day of Reckoning for Uncle Sam.
BUSH DOESN'T UNDERSTAND ANY OF THIS, SAYS HIS FORMER TREASURY SECRETARY!
WE'RE SHOCKED - SHOCKED! - TO HEAR IT!
First we gave him the keys to the war machine, now he wants the keys to the currency printing presses!
Former Treasury Secretary Paul O'Neill said today that our nation's leaders -- especially President Bush -- are "in a panic" and haven't thought through the $700 billion bailout plan in a rush to pass it by the end of the week.
"I don't think he understands or knows much about any of this and it shows," O'Neill said, adding that current Treasury Secretary Henry Paulson "knows a lot of about this, and it's good that he's there."
"I think most of what has been said by both campaigns about economic stuff is ill-informed and ill-advised," he said. Asked for specific problems, O'Neill said: "Everything."
"We have spun ourselves into a position where intelligent people don't believe they can tell the people the truth and still get elected, so they pander," he added. "One can only hope that they understand the difference between campaigning and governing, and that their governing will be better than what their campaign said." - ABC News
I GOT AN UNEASY FEELING THE FIRST TIME I HEARD THE U.S. GOV REFER TO THE COUNTRY AS "DAS HEIMLAND!"
Why is a U.S. Army brigade being assigned to the "Homeland"?
Glenn Greenwald: For more than 100 years -- since the end of the Civil War -- deployment of the U.S. military inside the U.S. has been prohibited under The Posse Comitatus Act (the only exceptions being that the National Guard and Coast Guard are exempted, and use of the military on an emergency ad hoc basis is permitted, such as what happened after Hurricane Katrina).
Though there have been some erosions of this prohibition over the last several decades (most perniciously to allow the use of the military to work with law enforcement agencies in the "War on Drugs"), the bright line ban on using the U.S. military as a standing law enforcement force inside the U.S. has been more or less honored -- until now. And as the Army Times notes, once this particular brigade completes its one-year assignment, "expectations are that another, as yet unnamed, active-duty brigade will take over and that the mission will be a permanent one."
To the Speaker of the House of Representatives and the President pro tempore of the Senate:
As economists, we want to express to Congress our great concern for the plan proposed by Treasury Secretary Paulson to deal with the financial crisis. We are well aware of the difficulty of the current financial situation and we agree with the need for bold action to ensure that the financial system continues to function. We see three fatal pitfalls in the currently proposed plan:
1) Its fairness. The plan is a subsidy to investors at taxpayers’ expense. Investors who took risks to earn profits must also bear the losses. Not every business failure carries systemic risk. The government can ensure a well-functioning financial industry, able to make new loans to creditworthy borrowers, without bailing out particular investors and institutions whose choices proved unwise.
2) Its ambiguity. Neither the mission of the new agency nor its oversight are clear. If taxpayers are to buy illiquid and opaque assets from troubled sellers, the terms, occasions, and methods of such purchases must be crystal clear ahead of time and carefully monitored afterwards.
3) Its long-term effects. If the plan is enacted, its effects will be with us for a generation. For all their recent troubles, America's dynamic and innovative private capital markets have brought the nation unparalleled prosperity. Fundamentally weakening those markets in order to calm short-run disruptions is desperately short-sighted.
For these reasons we ask Congress not to rush, to hold appropriate hearings, and to carefully consider the right course of action, and to wisely determine the future of the financial industry and the U.S. economy for years to come. See list of economists who signed this warning.
Don't allow them to railroad this thing through Congress. Call your Congressmen and Senators.
The financial meltdown the economists of the Austrian School predicted has arrived.
We are in this crisis because of an excess of artificially created credit at the hands of the Federal Reserve System. The solution being proposed? More artificial credit by the Federal Reserve. No liquidation of bad debt and malinvestment is to be allowed. By doing more of the same, we will only continue and intensify the distortions in our economy - all the capital misallocation, all the malinvestment - and prevent the market's attempt to re-establish rational pricing of houses and other assets.
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. The president assures us that his administration "is working with Congress to address the root cause behind much of the instability in our markets." Care to take a guess at whether the Federal Reserve and its money creation spree were even mentioned?
We are told that "low interest rates" led to excessive borrowing, but we are not told how these low interest rates came about. They were a deliberate policy of the Federal Reserve. As always, artificially low interest rates distort the market. Entrepreneurs engage in malinvestments - investments that do not make sense in light of current resource availability, that occur in more temporally remote stages of the capital structure than the pattern of consumer demand can support, and that would not have been made at all if the interest rate had been permitted to tell the truth instead of being toyed with by the Fed.
Not a word about any of that, of course, because Americans might then discover how the great wise men in Washington caused this great debacle. Better to keep scapegoating the mortgage industry or "wildcat capitalism" (as if we actually have a pure free market!).
Speaking about Fannie Mae and Freddie Mac, the president said: "Because these companies were chartered by Congress, many believed they were guaranteed by the federal government. This allowed them to borrow enormous sums of money, fuel the market for questionable investments, and put our financial system at risk."
Doesn't that prove the foolishness of chartering Fannie and Freddie in the first place? Doesn't that suggest that maybe, just maybe, government may have contributed to this mess? And of course, by bailing out Fannie and Freddie, hasn't the federal government shown that the "many" who "believed they were guaranteed by the federal government" were in fact correct?
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." Left unsaid, naturally, is that with the bailout and all the money and credit that must be produced out of thin air to fund it, the value of your retirement account will drop anyway, because the value of the dollar will suffer a precipitous decline. As for home prices, they are obviously much too high, and supply and demand cannot equilibrate if government insists on propping them up.
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.
The president also tells us that Senators McCain and Obama will join him at the White House today in order to figure out how to get the bipartisan bailout passed. The two senators would do their country much more good if they stayed on the campaign trail debating who the bigger celebrity is, or whatever it is that occupies their attention these days.
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:
Instead of furthering the inevitable liquidation of the maladjustments brought about by the boom during the last three years, all conceivable means have been used to prevent that readjustment from taking place; and one of these means, which has been repeatedly tried though without success, from the earliest to the most recent stages of depression, has been this deliberate policy of credit expansion.
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? Oh, and did you notice that the bailout is now being called a "rescue plan"? I guess "bailout" wasn't sitting too well with the American people. The very people who with somber faces tell us of their deep concern for the spread of democracy around the world are the ones most insistent on forcing a bill through Congress that the American people overwhelmingly oppose. The very fact that some of you seem to think you're supposed to have a voice in all this actually seems to annoy them. I continue to urge you to contact your representatives and give them a piece of your mind. I myself am doing everything I can to promote the correct point of view on the crisis. Be sure also to educate yourselves on these subjects - the Campaign for Liberty blog is an excellent place to start. Read the posts, ask questions in the comment section, and learn. H.G. Wells once said that civilization was in a race between education and catastrophe. Let us learn the truth and spread it as far and wide as our circumstances allow. For the truth is the greatest weapon we have.
Grab a pitchfork now, or we'll all end up living in government housing!
The Paulson wealth tranfser scheme has met with more than a cold shoulder from the public. It has been generating outright hostility. And it should. This in an act of theft so brazen as to leave one breathless!
The losses in the real estate mortgage meltdown are real. They have already taken place. Another Fed bubble has popped, and under the guise of reflating it, this act seeks to transfer the losses from the institutions that willingly undertook the risk of loss, to you.
Both wings of the Washington Party are enabling this massive fraud. But it can be stopped!
Mish (Michael Shedlock) was a regular weekly guest on The Charles Goyette show. Because of his ability to cut throught the fog and doubletalk of what passes for economic thought from the governing classes, he is emerging as a prominent voice in the public debate. After speaking with Mish a few time in the last couple of days, I believe the Paulson giveaway plan can be stopped.
Mish is leadng the charge. He has made his blog a convenient resource for you if you wish to help, with updates, sample letters to officials, fax numbers, and other suggestions.
"There used to be a habit of framing old Tsarist bonds and putting them on the wall. Lenin's decision to renege on the Russian imperial debt meant that it became mere paper, interesting only as a historical relic. In the light of the recent financial crisis in the USA, could the same thing happen now to the bonds issued by the American government, and could the country which has dominated the world for the last half century now enter history as a bankrupt state? And what can Russia do in the circumstances?
The decision by the US government to inject $700 billion into the financial system means that the already gigantic annual budget deficit of the American state (previously some $450 billion a year) will now rise by a factor of three. The total state debt of the USA will rise to well over $11 trillion. It is obvious that such a colossal debt can never be repaid. Instead, it will be serviced by more debt in the future. The contrast with Russia, which has painstakingly sanitised its state finances to the point that it now has more money to lend than the IMF, could hardly be greater."
The common sense critique of government-complicit Ponzi schemes illustrates the real American class warfare that pits the fleecers against the fleeced.
Who will succeed? Which side will win? What new forms of government will emerge from the ongoing moral and financial crisis? These questions may be answered politically, for example, via Ron Paul’s historic press conference rejecting America’s single party political system, celebrating the massive yet hidden majority in the country, and calling it to action.
Let's help Gary North with this important project.
"Your assignment, if you accept it. . .
Help me compile statements by every so-called expert on how the financial markets were safe, the stock market was going to rise, and "people should not panic and sell stocks."
For months, high-level government officials assured us that America's financial markets were safe. They continued to assure us right up until Treasury Secretary Henry Paulson on September 18 said a $700 billion bailout is required to save the economy from a collapse comparable to the Great Depression.
Our leaders, including Paulson, did not have a clue as to what was going on.
The World Wide Web has preserved their assurances. It is now time to collect them in one place. I propose to call this place The Gallery of the Clueless." Gary North
U.S. Gov should pay above-market values, says Ben ("The Wiz") Bernanke! No point paying less, says bankers' banker!
(Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke signaled that the government should buy devalued assets at above-market values to make its proposed $700 billion rescue package most effective in combating the financial crisis....
The Fed chief said paying prices higher than the bad assets would fetch in the open market would help ``unfreeze'' credit markets and aid the economy.
"The political left always aims to expand the permeation of economic life by politics. Today, the efficient means to that end is government control of capital. So, is not McCain's party now conducting the most leftist administration in American history? The New Deal never acted so precipitously on such a scale. Treasury Secretary Paulson, asked about conservative complaints that his rescue program amounts to socialism, said, essentially: This is not socialism, this is necessary. That non sequitur might be politically necessary, but remember that government control of capital is government control of capitalism. Does McCain have qualms about this, or only quarrels?" George Will
BEIJING (Reuters) - Threatened by a "financial tsunami," the world must consider building a financial order no longer dependent on the United States, a leading Chinese state newspaper said on Wednesday....
"The world urgently needs to create a diversified currency and financial system and fair and just financial order that is not dependent on the United States."
Not since the ’30s has the United States seen such sweeping reorganization of its economic institutions. Not since Roosevelt...and the New Deal.
But wait, the United States was supposed to be a leader in freedom. We were so adamant about it we practically forced it upon the poor Arabs and Afghanis... But now that people are losing their houses and Wall Street bonuses are in jeopardy...freedom is the last thing we need. Ban short selling! Nationalize the mortgage lenders! Nationalize the insurers! Take on the bad debts and bail out the bad investments of the whole financial industry! Spend a billion. Fifty billion. A thousand billion!
"How fabulous," writes Brian Reade in the British tabloid The Mirror. "Thanks to the way it props up the USA’s two biggest mortgage firms, more than half of American homes are now effectively owned by the state...
Who’d have imagined that when the most right-wing of neo-cons leaves office 50% of the Land of the Free will effectively be [public housing]"?
"Counterparty risks in the $60,000bn credit default swap market pose greater potential threats to banks and dealers than other over-the-counter derivatives markets such as interest rate swaps, according to a report by Moody's Investors Service.
The ability of securities dealers such as Goldman Sachs (NYSE:GS) , Morgan Stanley (AMEX:MWD) and UBS (NYSE:UBS) to manage the risks related to credit derivatives was a "particular area of focus" in assessing the dealers' credit ratings, Moody's said.
Alexander Yavorsky, assistant vice-president on Moody's finance and securities team, said: "It is not the size of the market that is of concern but the interconnected nature of the CDS market." More...
"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."
"In reading about the federal bailout of all those financial wheeler-dealer outfits that are supposedly "too big to fail," the layman may be forgiven for failing to comprehend the intricacies of the arcane financial instruments currently backfiring on their whiz-kid inventors. Such exotic creatures as "credit default swaps" may elude the understanding of the hoi polloi, but one thing the man in the street does know: he'll never be "too big to fail," of that he can be sure.
He's just not the Bear-Stearns type, and Congress would never shell out a penny before he loses his savings and his home, which – due to the propaganda of Panglossian economics, whereby houses stopped being homes and became investments – amount to pretty much the same thing. The paper-pushers of Wall Street made untold trillions out of a policy that was doomed to fail [.pdf] in advance, and whose critics have long predicted would end in precisely the manner our tale of economic woe is unfolding." Raimondo
"What caused this? It is a simple question, and yet answers are all over the map, as you might expect. Here's mine in two words: fiat money. The word fiat means: out of nothing. Money out of nothing is money that is eventually worth nothing. The possibility of precisely that happening emerged on August 15, 1971. Since Nixon severed the last tie of the dollar to gold, the world's monetary system has not been restrained by anything physical. We've depended on the discretion of central bankers. We can't trust that, and this crisis shows precisely why.
"These words appeared at the bottom of the screen for the entire morning segment on the stock market in the opening few minutes of The Today Show on Monday morning, September 15. This was the message conveyed to millions of housewives 80 minutes before the New York Stock Exchange was scheduled to open. The words were entirely appropriate. By the end of the day, the Dow was down by over 500, and the S&P 500 was down by over 50.
At long last, the media are scared. I watched CNBC in the afternoon. I tuned in to see the looks on their perma-bull faces. They were visibly scared. I don't blame them." Gary North
After several days of violent fluctuations, the world’s stock markets registered a massive increase in share prices on Thursday afternoon and on Friday, September 18 and 19, 2008. Why? As the Associated Press put it, “investors stormed back into the market, relieved that the government plans to restore calm to the financial system by rescuing banks from billions of dollars in bad debt. The Dow Jones industrials rose about 365 points, giving them a massive gain of about 775 over two days.”
Other stock markets also rose tremendously: on Friday the S&P 500 closed up more than 49 points, or about 4 percent; the Nasdaq closed up almost 75 points, or 3.4 percent.
Exactly what the government will do remains to be determined. Officials from the Treasury and the Fed and members of Congress intend to spend the weekend hammering out the details. Be afraid, be very afraid. More...
Paulson, Bernanke, and Congress are conspiring to make the US taxpayer the fall guy for financial stupidity by banks and brokers. Congress is now willing to ram through legislation at the last moment, even though Senate Majority Leader Reid Says "No One Knows What to Do".
"U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke proposed moving troubled assets from the balance sheets of American financial companies into a new institution.Congressional leaders who met with Paulson and Bernanke late yesterday in Washington said they aim to pass legislation soon. The initiative, which may also insure money-market funds, is aimed at removing the devalued mortgage-linked assets at the root of the worst credit crisis since the Great Depression.
Options under consideration include establishing an $800 billion fund to purchase so-called failed assets and a separate $400 billion pool at the Federal Deposit Insurance Corp. to insure investors in money-market funds, said two people briefed by congressional staff who spoke on condition of anonymity because the plans may change."
"William March is the author of this novel Company K and the movie goes by the same name. My favorite antiwar novel and movie prior to this was All Quiet on the Western Front by Erich M. Remarque, a German soldier who fought in the trenches during World War I. March wrote about his similar experiences as an American Marine in the same trenches. Both authors speak of the horror and brutality of the experience of modern warfare and nothing about individual bravery, patriotism or the "glory of war."
The real name of William March was William Edward Campbell, who was born in Mobile, Alabama and grew up in small towns in Alabama and the Florida Panhandle. He attended the University of Alabama School of Law and worked for a law firm in New York City. When America entered WWI he enlisted in the Marine Corps and saw extensive action in the hardest, bloodiest battles, including Verdun and the Meuse-Argonne. He was highly honored and decorated by both the French and the Americans by being awarded the French Croix de Guerre and by America, with the Distinguished Service Cross and the Navy Cross. He makes no reference in the book to his individual actions or honors..."John V. Denson, LewRockwell.com.
SO... CHENEY LIED TO YOU ABOUT THE WAR, CONGRESSMAN?!!!???!
THAT FALLS UNDER THE CATEGORY OF "duhh!"
A GOP congressional leader who was wavering on giving President Bush the authority to wage war in late 2002 said Vice President Cheney misled him by saying that Iraqi President Saddam Hussein had direct personal ties to al-Qaeda terrorists and was making rapid progress toward a suitcase nuclear weapon, according to a new book by Washington Post investigative reporter Barton Gellman.
The threat Cheney described went far beyond public statements that have been criticized for relying on "cherry-picked" intelligence of unknown reliability. There was no intelligence to support the vice president's private assertions, Gellman reports, and they "crossed so far beyond the known universe of fact that they were simply without foundation."
Armey had spoken out against the coming war, and his opposition gave cover to Democrats who feared the political costs of appearing to be weak. Armey reversed his position after Cheney told him, he said, that the threat from Iraq was actually " more imminent than we want to portray to the public at large."-WashPost
So while Cheney was lying to congressmen, the liar admitted that he was lying to the American people about the lies he was telling Armey!
SO NOW YOU KNOW ABOUT A.I.G. - BUT HOW MUCH MORE...
... IS GOING ON BEHIND THE CURTAIN?
We'll, let's take a peek!
Fed repaid JPMorgan $87 billion for Lehman financing!
NEW YORK (Reuters) - The New York Federal Reserve intervened aggressively to shore up the U.S. financial system this week, providing at least $87 billion to help underpin trades with units of bankrupt Lehman Brothers Holdings Inc, court documents show.
The Fed's action is the latest sign of how U.S. authorities have been seeking to prop up financial markets following the failure of Lehman and as big insurer American International Group fights for survival.
While the government had pledged not to fund a rescue of Lehman, the disclosure on Tuesday showed that authorities were taking other financial steps to prevent markets from descending into chaos.
"One of the major government privileges granted to GSEs is a line of credit with the United States Treasury. According to some estimates, the line of credit may be worth over $2 billion. This explicit promise by the Treasury to bail out GSEs in times of economic difficulty helps the GSEs attract investors who are willing to settle for lower yields than they would demand in the absence of the subsidy. Thus, the line of credit distorts the allocation of capital. More importantly, the line of credit is a promise on behalf of the government to engage in a huge unconstitutional and immoral income transfer from working Americans to holders of GSE debt."
"The connection between the GSEs and the government helps isolate the GSE management from market discipline. This isolation from market discipline is the root cause of the recent reports of mismanagement occurring at Fannie and Freddie. After all, if Fannie and Freddie were not underwritten by the federal government, investors would demand Fannie and Freddie provide assurance that they follow accepted management and accounting practices."
"Perhaps the Federal Reserve can stave off the day of reckoning by purchasing GSE debt and pumping liquidity into the housing market, but this cannot hold off the inevitable drop in the housing market forever. In fact, postponing the necessary, but painful market corrections will only deepen the inevitable fall. The more people invested in the market, the greater the effects across the economy when the bubble bursts."Ron Paul 2003
A vicious cycle is now at play. The US pays Pakistan’s armed forces to attack pro-Taliban tribesmen along the border, and aid the US war in Afghanistan. US and Pakistani warplanes bomb Pashtun villages in FATA. Furious Pashtuns retaliate by staging bombing attacks against government targets (aka "terrorism"). The government and US launch more attacks as Pakistanis demand their government stop killing its own people. Musharraf was detested as an American stooge. If Zardari continues Mush’s failed policies, he will also meet the same fate.
The US is about to kick yet another hornet’s nest by ground attacks on Pakistan. Unable to crush growing national resistance to the US-led occupation of Afghanistan and secure planned pipeline routes, the frustrated Bush White House is launching a new conflict when it lacks the soldiers or money to subdue Afghanistan.
WILL THE NEOCONS WHO TUTORED GEORGE W. BUSH IN THE IDEOLOGY HE PURSUED TO THE RUIN OF HIS PRESIDENCY DO THE SAME FOR SARAH PALIN?
Wasilla, Alaska, is not a natural habitat of neoconservatives!
One ex-White House aide at American Enterprise Institute, asked by Tim Shipman of the Daily Telegraph if AEI sees Palin as a "project," replied: "Your word, not mine. ... But I wouldn't disagree with the sentiment. ... She's bright, and she's a blank page. She's going places, and it's worth going there with her."
Heading home to Alaska to prepare for her interview with Charlie Gibson, Palin was escorted by Randy Scheunemann, McCain's foreign policy guru and, until March, a hired agent of the Tbilisi regime.
Scheunemann's lobbying assignment: Bring Georgia into NATO, so U.S. troops, like 19-year-old Track Palin, will be required to fight Russia to defend a Saakashvili regime that has paid Randy and his partner $730,000.
Reportedly, a phone conversation was held between Saakashvili and Palin, in which Palin committed herself to the territorial integrity of Georgia, though South Ossetia and Abkhazia have declared independence and been recognized by Moscow, which now has troops in both. Also on Palin's plane was Steve Biegun, formerly of Bush's National Security Council, and Scheunemann's choice to tutor her. Of Biegun, Steven Clemens of the New American Foundation says, "He will turn her into an advocate of Cheneyism and Cheney's view of national security issues."
YOU THINK LEHMAN BROTHERS, MERRILL LYNCH ARE PROBLEMS? PREPARE TO MEET...
... WALL STREET'S NEXT BIG PROBLEM!
American International Group, the insurance giant. It poses a much larger threat to the financial system than Lehman Brothers ever did because it plays an integral role in several key markets: credit derivatives, mortgages, corporate loans and hedge funds.
"There is therefore a substantial possibility that A.I.G. will be unable to meet its obligations and be forced into liquidation. A side effect: Its collapse would be as close to an extinction-level event as the financial markets have seen since the Great Depression.
A.I.G. does business with virtually every financial institution in the world. Most important, it is a central player in the unregulated, Brobdingnagian credit default swap market that is reported to be at least $60 trillion in size.
Nobody knows this market’s real size, or who owes what to whom, because there is no central clearinghouse or regulator for it. Credit default swaps are a type of credit insurance contract in which one party pays another party to protect it from the risk of default on a particular debt instrument. If that debt instrument (a bond, a bank loan, a mortgage) defaults, the insurer compensates the insured for his loss. The insurer (which could be a bank, an investment bank or a hedge fund) is required to post collateral to support its payment obligation, but in the insane credit environment that preceded the credit crisis, this collateral deposit was generally too small.
As a result, the credit default market is best described as an insurance market where many of the individual trades are undercapitalized. But even worse, many of the insurers are grossly undercapitalized. In one case in the New York courts, the Swiss banking giant UBS is suing a hedge fund that said it would insure nearly $1.5 billion in bonds but was unable to do so. No wonder — the hedge fund had only $200 million in assets.
If A.I.G. collapsed, its hundreds of billions of dollars of mortgage-related assets would be added to those being sold by other financial institutions. This would just depress values further. The counterparties around the world to A.I.G.’s credit default swaps may be unable to collect on their trades. As a large hedge-fund investor, A.I.G. would suddenly become a large redeemer from hedge funds, forcing fund managers to sell positions and probably driving down prices in the world’s financial markets. More failures, particularly of hedge funds, could follow."
IT'S LOOKING LIKE SOME GRIM FINANCIAL HARMONIC CONVERGENCE!
TAKE A LOOK AT THE FOREBODING ALIGNMENT OF HEADLINES:
Greenspan Says Crisis May Be `Once in Century' Event
Bank of America Said to Reach $44 Billion Agreement to Buy Merrill Lynch
Lehman Prepares Bankruptcy Filing as Bank of America, Barclays Quit Talks
Fed Widens Lending Collateral as Wall Street Braces for Lehman Bankruptcy
AIG May Seek Help From Federal Reserve, Rejects Private-Equity, WSJ Says
Asian Stocks, U.S. Futures, Dollar Tumble on Lehman Bankruptcy; Banks Fall
Asia-Pacific Bond Risk Surges on Concern Lehman May File for Bankruptcy
World Economy May Face `Japan-Like' Stagnation, Singapore Wealth FundSays
Alt-A Mortgages Pose Next Risk for U.S. Housing Market After Subprime Rout
Charles, borrowing from Shakespeare, sez: "The fault, Dear Reader, is not in our stars, but in ourselves, that we have let them get away with this Federal Reserve poppycock and let the R's and D's run wild!"
Iraq: Violence is down – but not because of America's 'surge'
If fewer US troops and Iraqis are being killed, it is only because the Shia community and Iran now dominate
The Independent UK: Iraq is still the most dangerous country in the world. On Friday a car bomb exploded in the Shia market town of Dujail, north of Baghdad, killing 32 people and wounding 43 others.
Playing down such killings, the Iraqi government and the US have launched a largely successful propaganda campaign to convince the world that "things are better" in Iraq and that life is returning to normal. One Iraqi journalist recorded his fury at watching newspapers around the world pick up a story that the world's largest Ferris wheel was to be built in Baghdad, a city where there is usually only two hours of electricity a day.
Another barometer of the true state of security in Iraq is the inability of the 4.7 million refugees, one in six of the population, who fled for their lives inside and outside Iraq, to return to their homes.
BLOOMBERG: "Homeowners lured by low introductory rates to Alt-A mortgages, which typically require little or no proof of a borrower's income, may fuel the next wave of foreclosures and further delay a recovery from the worst housing decline since the 1930s. Almost 16 percent of securitized Alt-A loans issued since January 2006 are at least 60 days late...
Defaults will accelerate next year and continue through 2011 as these loans hit their three- and five-year reset periods, according to RealtyTrac Inc., an Irvine, California-based foreclosure data provider.
About 3 million U.S. borrowers have Alt-A mortgages totaling $1 trillion, compared with $855 billion of subprime loans outstanding... Of the Alt-A borrowers, 70 percent may have exaggerated their income, said David Olson, president of mortgage research firm Wholesale Access in Columbia, Maryland."
... AND MAKES AN ARGUMENT AT LEAST WORTH CONSIDERING!
"The media has all but forgotten him, as it covers what the two aspirants to replace him have for breakfast, lunch, and dinner each day.
But historians will not forget him and the few journalists who are still paying attention to him are asking if he is the worst president in history. Although hard to believe, the answer is probably no."
"On this fundamental issue, not just of oil and energy, but, wider, of morality and economics in general, there is no difference in principle between these two. Both advocate legalized theft, in the expectation of doing good.
Obama thinks he can do good to the oil companies’ customers by depriving the oil companies of the means to expand production, which expansion they would quickly undertake and achieve if not prevented year after year by his leftist, environmentalist cronies in Congress and the courts. It is that gang of cronies that is responsible for the high price of oil and, indirectly, for the very high profits of the oil companies. The more they restrict the supply of oil, and of competing forms of energy, such as atomic power, the higher they drive its price and thus the profits of its producers. Whoever is unhappy about the high price of oil and oil products should blame the leftist/environmentalist bloc in Congress and in the courts, and the environmental movement behind it. These are the parties actually responsible..." Reisman's blog
OF COURSE, WHAT'S REALLY IMPORTANT TO THE VOTERS IS WHO SAID THAT LINE ABOUT THE PIG AND WHAT EXACTLY DID HE MEAN BY IT!
But in case you don't care about that, here are some other news headlines you should care about from ANTIWAR.COM
Petraeus: Iraq War Will Never End in Victory
Pentagon: Afghan Strategy Not Succeeding
General: Afghans Won't Tolerate More Civilian Deaths in Raids
Pakistani Military to Bar Foreign Operations Bush Said to Give Orders Allowing Raids in Pakistan US Eyes More Strikes in Pakistan US Strikes on Pakistan Border May Not Halt al-Qaeda
US Weighing Stronger Action Against Russia Russia Sends Two Long-Range Bombers to Venezuela Conservative US Congressman: US Intelligence Sees It Russia’s Way
COMMENT Seven years on, three big 9/11 lies By Muhammad Cohen
HONG KONG - Dear, sweet Laura Bush told the biggest, baldest lie at last week's Republican National Convention. "Let's not forget," the first lady said, "President [George W] Bush has kept the American people safe."
Mrs Bush, your husband and his administration did not keep the American people safe. On September 11, 2001, nearly 3,000 people died, and more than 6,000 were injured as al-Qaeda hijackers crashed commercial aircraft into the World Trade Center in New York and the Pentagon outside Washington. The Bush people act as if someone else was in charge when it happened. Asia Times
President Bush secretly approved orders in July that for the first time allow American Special Operations forces to carry out ground assaults inside Pakistan without the prior approval of the Pakistani government, according to senior American officials.
The C.I.A. has for several years fired missiles at militants inside Pakistan from remotely piloted Predator aircraft. But the new orders for the military’s Special Operations forces relax firm restrictions on conducting raids on the soil of an important ally without its permission. Pakistan’s top army officer said Wednesday that his forces would not tolerate American incursions like the one that took place last week and that the army would defend the country’s sovereignty “at all costs.”
Details about last week’s commando operation have emerged that indicate the mission was more intrusive than had previously been known.
Fannie Mae and Freddie Mac have squandered every penny of capital they had. Now, "fresh with a $100 billion taxpayer bailout," they officially announce that it's going to be "business as usual!"
Oh, no! Not "business as usual!" That's exactly why we are in this mess in the first place.
The argument that the two parties should represent opposed ideals and policies, one, perhaps of the Right and the other of the Left, is a foolish idea acceptable only to the doctrinaire and academic thinkers. Instead the two parties should be almost identical, so that the American people can ‘throw the rascals out’ at any election without leading to any profound or extensive shifts in policy. - Carroll Quigley – Author of Tragedy & Hope
The coverage of the presidential election is designed to be a grand distraction. This is not new, but this year, it’s more so than ever.
Pretending that a true difference exists between the two major candidates is a charade of great proportion. Many who help to perpetuate this myth are frequently unaware of what they are doing and believe that significant differences actually do exist. Indeed, on small points there is the appearance of a difference. The real issues, however, are buried in a barrage of miscellaneous nonsense and endless pontifications by robotic pundits hired to perpetuate the myth of a campaign of substance. Ron Paul
"St. Paul is a window into our future. It is a future where, as one protester told me by phone, “people have been pepper-gassed, thrown on the ground by police who had drawn their weapons, had their documents seized and their tattoos photographed before being taken away to jail.” It is a future where illegal house raids are carried out. It is a future where vans containing heavily armed paramilitary units circle and film protesters. It is a future where, as the protester said, “people have been pulled from cars because their license plates were on a database and handcuffed, thrown in the back of a squad car and then watched as their vehicles were ransacked and their personal possessions from computers to literature seized.” It is a future where constitutional rights mean nothing and where lawful dissent is branded a form of terrorism." Truthdig.com
