Kill the Bailout

[kg_veteran]

Kill the Bailout

By Robert Tracinski


link


The House of Representatives deserves praise for taking swift action to avert a growing economic crisis--by not approving the trillion-dollar financial bailout plan.


The bailout bill was blocked Monday by a rebellion among House Republicans, who voted two-to-one against a plan they consider a step down the "slippery slope to socialism," in the words of Texas Representative Jeb Hensarling.


They are absolutely correct, and the 133 Republicans who voted to stop this coup against the financial markets--not to mention some of the 95 Democrats who may have balked for similar reasons--need to find the courage to stand firm. That's especially true since the Senate has voted to approve the bailout.

The Senate is supposed to serve, in James Madison's analogy, as the "cooling saucer" for the hot tea served up by the House--but in this case, it is the House that has remained cool and refused to panic. That's because the hysterical demand for a bailout didn't come up from the people; it came down from the elites in Washington and Manhattan. The House is reflecting the sensible skepticism coming up from the folks on Main Street who don't want to pay the bills for bailing out Hank Paulson's former colleagues on Wall Street.


Some cold, realistic scrutiny of the bailout is desperately needed because this plan is not just an attack on the free market. It is an attack on reality. The financial crisis was caused by more than a decade of using government power to rewrite the facts of reality and override the judgment of the market, and the bailout just offers more of the same fantasy economics.


Congress wanted everyone to be able to get a mortgage to buy a home, regardless of income, credit history, or ability to save for a down payment. The name for this contradiction was "affordable housing," an initiative aimed at providing the benefits of home ownership to those who could not, in fact, afford it. So when the market concluded that low-income borrowers could not meet the credit requirements for mortgages, the Clinton administration invoked trumped-up charges of racism to expand enforcement of the Community Reinvestment Act, bullying banks into dropping as "arbitrary" such old-fashioned credit standards as proof of income. And when the market balked at the increased credit risk created by these loans, Congress backed the expansion of Fannie Mae and Freddie Mac, government-sponsored enterprises that used federally guaranteed money to buy up the increasingly risky mortgages.


At every point, when the market sent the message that reality would not support the higher level of risk being taken on by mortgage lenders, the government used its power to override this message.


The vigorous government-created market for riskier "sub-prime" loans masked the real dangers, creating the illusion that increased profits could be obtained without increased risk--an illusion that encouraged some private lenders to follow Fannie and Freddie's lead. To be sure, some of this private risk-taking was part of the normal process of failure in a capitalist economy. A large part of the current financial upheaval originated with high-risk investment banks and hedge funds that held large amounts of mortgage-backed securities. These securities were carefully balanced against one another according to mathematical formulas that were calculated to cancel out their risks. But the mathematical formulas were new and hadn't been tested in a bear market. When the downturn came, they failed.


This is a normal part of the rough and tumble of capitalism. All of the current talk about the "failure" of the free market ignores the fact that the process of failure is a crucial benefit of the free market. In a capitalist system, high-risk firms are always trying out new and untested ideas, and failure is the messenger that tells the market which strategies work and which strategies don't. It is also an indispensable corrective mechanism that moves capital from enterprises with failing strategies to those with successful strategies.


But the Treasury Department and the Federal Reserve have repeatedly short-circuited this mechanism by trying to outlaw failure. When the market sent the message that too many bad loans had been made and that this needed to be corrected by a contraction in the amount of available credit, the government wanted to avoid the unpleasant consequences of such a contraction. So the Federal Reserve papered over the facts--with a flurry of paper money--by artificially reducing interest rates and loosening up credit just when it needed to be tightened.


But that didn't change the underlying facts, and the bad investments still went bad. Yet as the market has sent the message that some firms have become over-extended and are no longer solvent, the government has still tried to avoid letting the market face the facts. The Treasury and the Fed kept trying to rewrite reality by orchestrating a series of government-backed bailouts.


Over at RealClearMarkets, Joseph Calhoun points out a crucial part of this assault on facts:

There has always been a stigma attached to borrowing directly from the Fed and for good reason. If a bank can't get other banks to lend it money, that tells the market something about the condition of the bank in question. Last August, Bernanke convinced three large banks to borrow at the discount window in an effort to remove that stigma. When that didn't work, he concocted a scheme to allow banks to borrow from the Fed in anonymity via a mechanism he called the Term Auction Facility. When Bear Stearns blew up, he added the Term Securities Lending Facility for investment banks. By removing the stigma of borrowing from the Fed and hiding the identity of the borrowers, Bernanke removed important information from the market.

So the Fed's approach to potential bank failures was to try to help failing banks pretend that they weren't failing.


Or consider the SEC's ban on short sales for a list of about 700 stocks--with more companies lobbying to get themselves put on the list. Again, the whole approach of the SEC is not to prevent companies from failing, but to help them pretend that they are not failing, by outlawing trades that would tend to drive their stock prices down.


In fact, all that this sort of policy has achieved is to expand business failures. When Lehman Brothers went bankrupt, for example, it had been in negotiations with several major financial institutions who were considering investing billions in a private buy-out of the firm. But they balked at making the deal because they were waiting for the Fed to offer incentives and guarantees. Thus, the Fed's yelping about how each bankruptcy of a Wall Street firm poses a risk of "systemic failure" turns out to be a self-fulfilling prophecy, because the prospect of an open-ended series of bailouts is blocking all of the mechanisms by which a free market actually prevents widespread failure.


The bailout package would have the government buy out up to $700 billion worth of bad loans. But this is merely delaying the re-pricing of those loans to their proper value. Left to themselves, the holders of these loans would eventually find it necessary to sell them at pennies on the dollar; Merrill Lynch sold its bad loans at 22 cents on the dollar. Private companies could then recognize the magnitude of the loss and start to rebuild their businesses with the remaining assets they possess. But now no firm has an incentive to sell off its bad loans. Why dump them for 22 cents on the dollar when the government might buy them, a few weeks later, at 50 or 80 cents?


So instead what is going to happen is that the federal government is going to go into the financial markets and dictate which securities are worth how much. It is still unclear exactly which loans the government will buy or how much it will pay for them, so no private investor can say whether an investment will pay off or not. This is how the prospect of a government bailout blocks the private buyouts that would actually clean all of the bad debt out of the system.


Instead, this plan transforms the US Treasury into a trillion-dollar hedge fund, making investments in securities whose proper market value is unknown and promising its shareholders--us--that unlike the best Wall Street investment banks, Treasury bureaucrats really know how to make a profit on sub-prime mortgage loans. That's why probably the best comment on the bailout is an e-mail making the rounds on Capitol Hill presenting Paulson's pitch for the bailout deal--in the style of a Nigerian banking scam. "I need to ask you to support an urgent secret business relationship with a transfer of funds of great magnitude," it begins. Time to hit the "delete" button.


The bailout represents more of the same problems that got us here because it is backed by all of the same people who created those problems. And I'm not just talking about Treasury Secretary Hank Paulson and Fed Chairman Ben Bernanke, who organized the series of ad hoc bailouts that spread uncertainty through the financial industry. Much worse is the fact that a chief negotiator for the bailout is House Financial Services Committee Chairman Barney Frank, the chief sponsor of the "affordable housing" scam. And as for Barack Obama, Stanley Kurtz exposes the role played by ACORN, Obama's former employer as a "community organizer." It turns out that a big part of ACORN's "community organizing" was to use thug tactics and the threat of government regulation to intimidate banks into making high-risk mortgage loans.


Fortunately, the public has the good sense to smell that something is rotten. I just got an e-mail recounting what Virginia Representative Jim Moran told Fox News: that calls from constituents commenting on the bailout were running 50-50--50% "no" and 50% "hell, no."


The House should not simply delay the bailout bill or mitigate its worst features; that will prolong the uncertainty in the financial markets. Instead, they need to make sure that the bailout meets with firm and repeated rejection over the next week, preferably by a growing margin of votes.


It is time for the House to kill the bailout and kill it decisively.


It is time for Congress to stop the government from rewriting reality, so that the market can be free to recognize the facts, pick up the pieces of failing firms, and begin rebuilding.

[DelNegro]

The Senate bailout bill passed becaue they lumped another $100 billion in tax cuts / tax incentives on top of it. Everything from renewable energy credits to suspension of the Alt Min tax and all kinds of irrelevant stuff inbetween. There's even some special tax exemptions specifically designed for the District of Columbia. Gee, who lives there?

So unfortunately I think we're fixing to find out that the problem the House had with the first bailout bill was not that it did not protect the American taxpayer, it just wasn't expensive enough.

Here's the bill the senate passed last night. If you feel like pissing yourself off go take a look at some of the crap that's in it. http://senateconservatives.files.wor...o08c32_xml.pdf

[Arne]

Nice article but the role of the Fed's manipulation of interest rates was not covered at all. You can't discuss housing without looking at what the Fed does.

[kg_veteran]

Originally Posted by Arne

Nice article but the role of the Fed's manipulation of interest rates was not covered at all. You can't discuss housing without looking at what the Fed does.

Actually, it was mentioned:

But the Treasury Department and the Federal Reserve have repeatedly short-circuited this mechanism by trying to outlaw failure. When the market sent the message that too many bad loans had been made and that this needed to be corrected by a contraction in the amount of available credit, the government wanted to avoid the unpleasant consequences of such a contraction. So the Federal Reserve papered over the facts--with a flurry of paper money--by artificially reducing interest rates and loosening up credit just when it needed to be tightened.

[Arne]

Originally Posted by kg_veteran

Actually, it was mentioned:

Oh my god, I'm kind of sleepy right now. Thanks for pointing that out.

[DirkFTW]

In your defense, Arne, that was a really long article.

[Murphy3]

I know. I really enjoyed the first two paragraphs. I do have a 2 paragraph limit... Anything longer, I can't read. So, if someone would re-format the article into a 2 paragraph article, I'll finish it up.

[Mavdog]

the writer fails to understand that the government didn't write these loans, didn't approve the borrowers for the loans, and didn't dice and slice the loans up to sell.

it's not "affordable housing" that is causing the hemmoraging at the banks. the term "sub-prime" does not mean cheap housing, which is what affordable housing is defined as.

the cra didn't cause poor loan underwriting and fraudulent mortgage lending. the cra does not mandate a lender give a loan to an person who is unable to repay the loan.

there is mechanisms for the plan to create a market for these securities, government will not be "dictating" their worth. the sellers will dictate what they are worth by the sellers agreeing to sell at a certain negotiated price. that is the definition of a market.

lenders wrote more sub-prime loans because they made more money doing those type mortgages than conventional loans, and they were able to move the sub-prime mortgages out the door rather than suffer the defaults that the current holders are faced with.

can the us treasury make a profit or break even on these securities? frankly nobody can say yet, it is a function of what discount the securities are bought for (and they will undoubtedly be sold at a discount) and the level of defaults the loans suffer in the future.

one thing is for certain, there will be a higher percent of defaults if the country goes thruough a severe business recession, a recession that will be much, much more severe if nothing is done to provide liquidity to our financial system.

[kg_veteran]

When your response starts with "the writer fails to understand", I know that the rest of your post is not worth reading. You may disagree with his position, but I don't think you can question his understanding of the subject matter.

[Mavdog]

when a response to one of my posts is two sentences long and doesn't speak to a single item addressed, I can pretty much expect that it's a waste of bandwidth and isn't worth reading....

[kg_veteran]

Originally Posted by Mavdog

when a response to one of my posts is two sentences long and doesn't speak to a single item addressed, I can pretty much expect that it's a waste of bandwidth and isn't worth reading....

And yet, you did!

[Mavdog]

yes, and I was right.

[mary]

the writer fails to understand that the government didn't write these loans, didn't approve the borrowers for the loans, and didn't dice and slice the loans up to sell.

I agree with your point here. We rail on individuals all the time for blaming the government for their own sorry circumstances. And yet, it seems somewhat acceptable for the banking industry to point their fingers at the government, or freddie and fannie, and effectively say, "But they made me do it!". Its hogwash. And yeah, the CRA excuse is ridiculous. I knew that the second I realized it had been a law nearly the entire time I'd been alive.

[kg_veteran]

Fine, I'll fisk your non-response:

Originally Posted by Mavdog

the writer fails to understand that the government didn't write these loans, didn't approve the borrowers for the loans, and didn't dice and slice the loans up to sell.

Actually, it's clear that he DOES understand. He understands that the government pressured lenders to write the loans and to approve borrowers that they otherwise would not have. He understands that Fannie and Freddie Mae were expanded as quasi-government entities to buy up these bad loans. With Fannie and Freddie there buying them up, and government pressuring them to make the loans, you're faulting the lenders for writing the loans in the first place? That's nonsensical.

As for dicing and slicing the loans up to sell (i.e., mortgage-backed securities), I agree, that was greed on the part of the banks/institutions involved. And they should have been allowed to fail. That's what the market would have dictated (as the writer states). But by refusing to allow failure, the government created non-market conditions whereby the banks could make such risky moves without the ordinary fear of risk that would have existed under true market conditions.

In other words, without the government nullifying market forces, the whole scenario can't unfold.

it's not "affordable housing" that is causing the hemmoraging at the banks. the term "sub-prime" does not mean cheap housing, which is what affordable housing is defined as.

So what do you think is causing hemmorhaging at the banks?

the cra didn't cause poor loan underwriting and fraudulent mortgage lending. the cra does not mandate a lender give a loan to an person who is unable to repay the loan.

While most of this is technically true, I think you're blatantly ignoring the role Congress (in particular, the Democrats) played in this whole debacle.

there is mechanisms for the plan to create a market for these securities, government will not be "dictating" their worth. the sellers will dictate what they are worth by the sellers agreeing to sell at a certain negotiated price. that is the definition of a market.

This is nonsense, and you know it. Who is going to be able/willing to outbid the government? What has been proposed is the furthest thing from true market conditions.

lenders wrote more sub-prime loans because they made more money doing those type mortgages than conventional loans, and they were able to move the sub-prime mortgages out the door rather than suffer the defaults that the current holders are faced with.

Move the sub-prime mortgages out the door -- who bought them?

can the us treasury make a profit or break even on these securities? frankly nobody can say yet

You know, aside from the whole principle of the matter, this is one of the scarier truisms of this whole sham of a proposal. No one is even guaranteeing that it will WORK!

one thing is for certain, there will be a higher percent of defaults if the country goes thruough a severe business recession, a recession that will be much, much more severe if nothing is done to provide liquidity to our financial system.

If nothing is done -- yes. But this bailout isn't the only solution. And in fact, you've just admitted that it's not necessarily even going to help!

[kg_veteran]

Originally Posted by mary

I agree with your point here. We rail on individuals all the time for blaming the government for their own sorry circumstances. And yet, it seems somewhat acceptable for the banking industry to point their fingers at the government, or freddie and fannie, and effectively say, "But they made me do it!". Its hogwash. And yeah, the CRA excuse is ridiculous. I knew that the second I realized it had been a law nearly the entire time I'd been alive.

I don't absolve the banking industry at all. They should suffer the consequences and be allowed to fail -- or, they should work their own way out of it. But to deny the role government played in both coercing the banks to make such loans and in nullifying the effect of true market forces is to deny reality.

[mary]

The Community Reinvestment Act, passed in 1977, requires banks to lend in the low-income neighborhoods where they take deposits. Just the idea that a lending crisis created from 2004 to 2007 was caused by a 1977 law is silly. But it’s even more ridiculous when you consider that most subprime loans were made by firms that aren’t subject to the CRA. University of Michigan law professor Michael Barr testified back in February before the House Committee on Financial Services that 50% of subprime loans were made by mortgage service companies not subject comprehensive federal supervision and another 30% were made by affiliates of banks or thrifts which are not subject to routine supervision or examinations. As former Fed Governor Ned Gramlich said in an August, 2007, speech shortly before he passed away: “In the subprime market where we badly need supervision, a majority of loans are made with very little supervision. It is like a city with a murder law, but no cops on the beat.”

http://www.businessweek.com/investin...ity_reinv.html

[ocelot_ark]

Originally Posted by Mavdog

the cra didn't cause poor loan underwriting and fraudulent mortgage lending. the cra does not mandate a lender give a loan to an person who is unable to repay the loan.

I'm pretty familiar with CRA because of my job. Those of you who remember me talking about my job search might imagine what one of my periodic tasks is.

CRA doesn't mandate loans, but it DOES punish banks (via increased regulation and a negative public rating) if they were to be found lacking in their lending to borrowers in low-to-moderate income tracts. Who resides in those areas?

If a particular census tract that's included in a bank's specified assessment area just happens to have 40% low-to-moderate income households, the bank's going to need some luck in satisfying the reg. When regulators go in and pull a statistical sample of a certain number of loans for each primary lending type (be it consumer loans, commercial, commercial real estate, 1-4 family, etc), they'll compare where those loans were extended. If the sample shows that the bank only made loans to 15% low-to-moderate income households, the bank's going to have to effectively explain why their lending didn't mirror the demographic data. It's up to those mitigating factors, basically. Lack of affordable housing is the main reason I've seen them explain such scenarios. If there's simply a lack of cheap housing, the people who would qualify for them (low income) just don't have the supply that would lead to applications. So while they don't HAVE to make these loans, they better have a good, verifiable reason for their shortfall.

And CRA is not solely based on lending to individuals, families, and small businesses. Bank's can also get credit for qualified investments and community development loans. Community development loans are basically those that are made to provide affordable housing, community services, provide jobs, etc, etc, etc, to low-to-moderate census tracts. Qualified investments are those whose primary purpose is community development (see above).

[ocelot_ark]

Originally Posted by mary

The Community Reinvestment Act, passed in 1977, requires banks to lend in the low-income neighborhoods where they take deposits. Just the idea that a lending crisis created from 2004 to 2007 was caused by a 1977 law is silly. But it’s even more ridiculous when you consider that most subprime loans were made by firms that aren’t subject to the CRA. University of Michigan law professor Michael Barr testified back in February before the House Committee on Financial Services that 50% of subprime loans were made by mortgage service companies not subject comprehensive federal supervision and another 30% were made by affiliates of banks or thrifts which are not subject to routine supervision or examinations. As former Fed Governor Ned Gramlich said in an August, 2007, speech shortly before he passed away: “In the subprime market where we badly need supervision, a majority of loans are made with very little supervision. It is like a city with a murder law, but no cops on the beat.”

http://www.businessweek.com/investin...ity_reinv.html

That's one thing that kills me. Mortgage brokers are the biggest reason for the subprime thing. Those guys are crooks. No-doc/low-doc/stated income loans were common options when I was mortgage shopping. They all offered some variation. And the underwriters for their companies aren't going to care when they KNOW the GSE's are just going to turn around and buy these whether they're strong, documented credits or not. That whole industry needs oversight.

[Mavdog]

Originally Posted by kg_veteran

Actually, it's clear that he DOES understand. He understands that the government pressured lenders to write the loans and to approve borrowers that they otherwise would not have. He understands that Fannie and Freddie Mae were expanded as quasi-government entities to buy up these bad loans. With Fannie and Freddie there buying them up, and government pressuring them to make the loans, you're faulting the lenders for writing the loans in the first place? That's nonsensical.

no, the government pressured the lenders to make loans in areas they otherwise would not have. the cra says nothing about making loans to non-creditworthy borrowers.

if freddie and fannie were the ones "buying them up", why are these loans now owned by the banks, who are the ones the bill is intended to allow to now sell to the government? it's NOT freddie and fannie who will be selling these securities!

As for dicing and slicing the loans up to sell (i.e., mortgage-backed securities), I agree, that was greed on the part of the banks/institutions involved. And they should have been allowed to fail. That's what the market would have dictated (as the writer states). But by refusing to allow failure, the government created non-market conditions whereby the banks could make such risky moves without the ordinary fear of risk that would have existed under true market conditions.

In other words, without the government nullifying market forces, the whole scenario can't unfold.

the loans aren't all worthless, these lenders are not all failing, and they likely won't all fail either. what these lenders will do is not have liquidity to make new loans, which is why we are facing a contraction. no loans, little economic expansion. they will just sity on these portfolios until the portfolios either mature or prove to not be as low quality as the current owners feel they are.

the conditions were created by the market. the rating agencies (non-government btw), the lenders (non-government too).

So what do you think is causing hemmorhaging at the banks?

the underwriting of the securities was wrong. the values the banks have on their assets had to be marked down. the banks however don't want to accept pennies on the dollar for these assets that they believe are worth much more. there is a disconnect between what sellers will accept and what buyers want to pay.

While most of this is technically true, I think you're blatantly ignoring the role Congress (in particular, the Democrats) played in this whole debacle.

both parties voted to allow what to happen to happen.

This is nonsense, and you know it. Who is going to be able/willing to outbid the government? What has been proposed is the furthest thing from true market conditions.

the government plan has the sellers competing with each other to see who will sell the assets cheaper than the other. that creates a market.

Move the sub-prime mortgages out the door -- who bought them?

all these entities that are now writing them down. what brought down lehman? bear stearns? have you read about fortis?

You know, aside from the whole principle of the matter, this is one of the scarier truisms of this whole sham of a proposal. No one is even guaranteeing that it will WORK!

tell me anything that is guaranteed to work? it is an effort to "lubricate" the marketplace so economic growth can resume.

If nothing is done -- yes. But this bailout isn't the only solution. And in fact, you've just admitted that it's not necessarily even going to help!

no, I can't guarantee it is a panacea, but I can guarantee that it will help.

[ocelot_ark]

Originally Posted by Mavdog

the loans aren't all worthless, these lenders are not all failing, and they likely won't all fail either. what these lenders will do is not have liquidity to make new loans, which is why we are facing a contraction. no loans, little economic expansion. they will just sity on these portfolios until the portfolios either mature or prove to not be as low quality as the current owners feel they are.

Banks are NOT without liquidity options. The discount window is still wide open and the terms there have never been better.

[Mavdog]

ocelot, isn't the discount window only for short term borrowing by the bank?

[ocelot_ark]

Originally Posted by Mavdog

ocelot, isn't the discount window only for short term borrowing by the bank?

Yes, 90 days max at this point.

[Arne]

Wall Street’s Hostile Takeover of Main Street

Posted by Karen De Coster on October 12, 2008

Over the past several months, we have witnessed an unprecedented financial storm stirred up by the irrationally exuberant, Wall Street welfare parasites and their Fed-God, Ben Bernanke, and the usual enablers who roam the halls of the regime in power. It’s no fluke that according to the Chinese system of astrology, we’ve entered The Year of the Rat.

The federal bailout of negligent Wall Street firms is analogous to the government enacting laws that enable certain people to visit a casino, spin the roulette wheel, and pocket gobs of cash when they win—and if they lose, get subsidized so they can go back and do it all over again.

After two votes in Congress, and a week of disinformation, scare tactics, and threats, the glitterati of Wall Street have finally realized their ambition: They have managed a coup that enables them to occupy the halls of power, overseeing and manipulating the very financial markets that either make them or break them. Consider them “made” and the rest of us broke.

On Monday, September 29, the House originally rejected the bailout bill, with 228 brave “nays” stopping Bush & Co. in their tracks. As the week went on, congressmen were bought and bullied, and many lost their nerve. Tons of pork was tossed in to buy votes. Representative Gabrielle Giffords voted “nay” on Monday, but then her vote was purchased with some solar tax credits, which were added to the final version. Other morsels include auto-racing tracks, tax benefits for fishermen, welfare for rum producers in Puerto Rico and the Virgin Islands, and a healthcare provision forcing insurance companies to provide for specified mental health coverage.

When pork didn’t work, ultimatums were issued. Congressman Brad Sherman, a Democrat from California, whose a speech was captured on C-Span, noted that the Bush administration was “creating and sustaining a panic atmosphere.” Accordingly, he stated that members of Congress were brought in line with fear tactics, including prophesies of economic chaos and a crashing stock market if the bill was turned back a second time. Some members of Congress were even told they’d see martial law in America if the bill wasn’t approved.

After the disquieting rejection of the first bailout attempt, the fearmongers from government, Wall Street, and assorted special interests went to work on the public. Pro-establishment analysts turned out in packs to appear on FOX, CNN, BubbleVision, and Bloomberg to circulate their scare tactics and frighten people into supporting the bailout. They sold the rescue of Wall Street’s financial class as a measure that would benefit America’s working class. Middle-class folks were told that there would be no cash available for small businesses, and this would lead to business owners being unable to make payroll, workers being laid off, and capital investments stalling in an illiquid market. Furthermore, a non-bailout scenario would imperil our 401k accounts and our pensions, leaving us penniless in old age. There were also the “experts” who told Americans they would no longer have easy access to cash for everyday household purchases due to credit markets clamping down.

The strategy was to convince Americans that a non-bailout would take away our free-spending standard of living and result in a series of catastrophic events that would destroy our families and the futures of our children.

Legislators everywhere declared that America was in a state of emergency, with sound evidence neither offered nor expected. The bailout and takeover of the financial system had to happen now, before the public had the time to form an educated opinion and assess the long-term consequences of such action.

In addition, Herr Bush has played a prominent crisis-mongering role. The president told us that the financial world would implode without his bailout, and worse, he stressed that the pact was beneficial for all of us on Main Street. You see, in BushSpeak, the bailout bill is actually an “investment,” something that will benefit the taxpayers who are robbed to supply Washington’s welfare stream. Bush has implied, on numerous occasions, that the tax dollars “invested” in shoddy assets owned by big banks will be paid back because this bailout will be a success. Since no profit or loss can be calculated in terms of a government redistribution of wealth, and because there’s no way to calculate a return of “investment,” how can “success” be quantified?

Bush, who often treads in the fog of the unknown, is explicitly suggesting that a compulsory redistribution of wealth will benefit the victims of the theft rather than the recipients of the booty.

But if the Fed’s bailout proposal is such a great idea, why are there no private investors who are willing to take on this exceptional opportunity? Why aren’t they lining up at the doors of big banks going belly-up?

As a part of the bailout scheme, Bush’s Treasury Secretary “Hank” Paulson, a former head of Goldman Sachs and an unelected cabinet secretary, has been granted unchecked powers to manipulate the financial markets. He named Neel Kashkari to head the new “Office of Financial Stability.” Kashkari is a Treasury guy and before that was a Goldman Sachs guy. Goldman Sachs is bailing out Goldman Sachs & Friends, and the Wall Street Elites are building a stronghold from which they will create all of the ground rules and hand out the goodies to preferential parties. When players play the game and make the rules as they go along, they don’t tend to lose. As a result, those who are empowered by favorable intervention will get richer, and the powerless middle class and poor can only get poorer.

The slicksters on Wall Street subsist by separating the folks on Main Street from their money. And now, with the bailout and unparalleled grab of power, Henry Paulson and his Wall Street posse have the full authority of law to commence unconstitutional actions, with no one to obstruct their arrangements. America’s founders, who believed that a system of checks and balances was necessary to deny potential despots, would have considered this to be tyranny.

http://www.takimag.com/blogs/article...f_main_street/

[Arne]

Amazingly funny parody about the bailout. Nacy Pelosi, George W. Bush, Barney Frank, Hedge Fund Managers and housing speculatos explaining the bailout:

http://www.youtube.com/watch?v=oLEiWVBO-lQ