WOW!

(b) Necessary Actions.--The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation:

(1) appointing such employees as may be required to carry out the authorities in this Act and defining their duties;

(2) entering into contracts, including contracts for services authorized by section 3109 of title 5, United States Code, without regard to any other provision of law regarding public contracts;

(3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them;

This is a bad deal for Americans. Rather than protect depositors it protects creditors. That would be China, Russia, Saudi Arabia...

I don't have even a basic understanding of the fundamental underlying problems. But what I sense is that everything we are seeing is designed to protect investors (shareholders), and possibly corporations who rely on the free flow of credit to operate. Nobody's talking about protecting depositors.

Investors take risks in hopes of rewards. Sometimes they win, sometimes they lose. They know the game. If they are investing in things that are too complicated for anyone to understand and end up losing, too bad. If they invest in predatory sub-prime mortgage contracts and lose, too bad. Karma's a bitch. If investors were lied to by sub-prime lenders, they should go back to them and somebody should go to jail.

Banks who lost deposits making bad loans should be be left on their own to work them out or fail or file bankruptcy or whatever. Depositors who had no involvement or control over the bad loans should be made whole, either through sale of the bank's assets, FDIC insurance, extra government funding or whatever combination it takes to protect depositors.

The banks and investors can go back to the borrowers who leveraged their homes to 125% to buy vacations and jet skis and then didn't pay. They should be held accountable to the extent they can. They knew what they were doing, and so did the banks and mortgage companies who made these loans. In the few provable cases of loans to, say, illiterate people who in fact were deceived and had no clue what they were signing, those people should be let off the hook.

Everybody else should have to pay up or file bankruptcy, and some of them should probably go to jail.

As for the free flow of credit, I guess we can borrow more from China.

And everyone who listened to and voted for the idiot manchild telling them for eight years that the economy is great and getting better so don't worry and go out and buy buy buy and mortgage your house to buy a boat because it's the patriotic thing to do should be ashamed and hopefully learn a lesson. (Preview of act 3: "The fundamentals of our economy are sound.")

And all the freemarket liberpublicans should apologize for pushing deregulation. Even when there are rules, nobody wants to follow them. It's a very frustrating thing that in business, consumer, government, and political affairs, nobody seems to think rules matter any more. I guess society is just following the example of ethics and morality set by our leaders.

Shorter version: What whitescreek said while I was typing. And Metulj is right. This is getting blown up by election year politics.

Or maybe it's not getting blown up and the fuse has just been lit.

By way of WhitesCreek read this and be afraid.

Also somewhat related, folks who have moved out of the stock market into "cash" should check their "cash" accounts which are probably "money market mutual fund" accounts:

(link...)

Unlike actual "Money Market" accounts at a bank, these accounts are NOT insured (well they are now temporarily as part of the big bailout). Money market accounts at banks are FDIC insured up to $100,000 per depositor ($250,000 per depositor for certain types of retirement accounts).

They probably shouldn't be allowed to call them "money market mutual funds" or "money market" anything. They're just a lower risk type of investment. They should be called "short term investment mutual funds" or something.

Last week, investment companies were pumping hundreds of millions into these funds to keep people from losing principal in these "safe" "cash" accounts.

Added to the Greenwald snip:

[The Bush plan, in draft form] authorizes Hank Paulson to transfer $700 billion of taxpayer money to private industry in his sole discretion, and nobody has the right or ability to review or challenge any decision he makes.

The proposal usurps the appropriations authority of Congress and gives it to Treasury.

____________________________

the distance between black & white is much further than i would like until now i never noticed that fascism has many disguises -d. boon, 1981

Do you think the bailout plan shoud be approved as written?

No. I can grant that drastic action is necessary. But to give that much authority to the Treasury Secretary w/o any oversight at all is criminal.

So the Ds will probably go along with it.

I recommend calling Congressman Duncan's Knoxville office at 523-3772. (Send him an email and you get a message that it may not get read for some days). You'll have to wait till tomorrow because there's no voice mail at this #.

Obama comes out with six points that fly in the face of the financial lobbyists.

According to the Wall Street Journal:

...finance industry lobbyists are already giving orders to Republican hill staffers not to allow any meaningful reforms or protections for taxpayers.

They termed protecting taxpayers and homeowners "a Deal Killer."

Really? Now Obama shows what happens when you refuse to take lobbyist money. You are free to do what is right for Americans.

I think the whole idea that there's some "action" that will forestall a crisis is rather foolish. It's quackery, like eating buckets of oranges in hopes of staving off the onset of flu when the first symptoms appear.

The economy has the flu; there's no getting around that. The time for prevention has long since passed. It will get worse before it gets better. Perhaps a lot worse.

The government's focus should be on 1) preparing to mitigate suffering, 2) creating a plan to nurse the economy back to health through prudent Keyesian spending, and 3) implementing regulatory measures that will prevent a relapse.

Blowing the entire fiscal wad on Paulson's quackery will make the first two steps impossible and the crisis will be much, much deeper and longer.

As a believer in the free market, and what one would call a fiscal conservative, I am entirely uncomfortable with the level of intervention that the government is proposing here. I don't yet understand the root causes myself, but I am pretty sure that the blame does not rest completely with one individual or group, and likely can be traced to many factors. The best synopsis I have read yet was on the NY Times Freakonomics blog.

As a believer in the free market, and what one would call a fiscal conservative, I am entirely uncomfortable with the level of intervention that the government is proposing here.

You would have loved the Depression. Too bad you didn't get to experience it.

Actually, while nobody is saying it, the whole intent of these actions is too avoid a complete meltdown. Like the Great Depression? No, not quite. A 2008, somewhat modified version.

Credit is all linked together. If all the subprime and creative mortages go into default and credit tightens, and I mean tightens like shrinkwrap, up, the real economy will suffocate.

Right now, it's mainly a financial crisis. If it's allowed to turn into a real economic crisis, it's another ballgame. Think about it.

If 3/4 of the economy is retail, what happens when that credit dries up? What about small businesses that buy inventory with credit, businesses you may frequent, businesses you may like, what happens to them?

As strange, and dumb, as this may sound, what happened last week, was preemptive.

When those Congressmen who met with Paulson came out of the meeting looking like they had just been told they all had three months to live, it's because that's basically what they had been told.

If we stop buying from China, think they'll keep financing us? Think the U.S. dollar is low now?

Conservatives are either calling for no bailouts, because 1) they don't understand the situation, or 2) they don't have a political interest in the matter, other than sounding conservative.

Politically, this could cost McCain Florida, as the retirees realize their retirement savings may be at risk.

Small business people and others in industry will probably move towards Obama, in my opinion, if they remember the relative stability and growth of the Clinton era.

Overall, this should help Obama. If the Democrats can't make the greatest financial disaster since the Great Depression work in their favor...then they're in a lot of trouble.

When those Congressmen who met with Paulson came out of the meeting looking like they had just been told they all had three months to live, it's because that's basically what they had been told

Yeah, just like they were told Iraq was preparing to rain down anthrax on Central Park with aerial drones.

The Dems are setting themselves up for the blame by even seriously entertaining the notion that there's a magical cure for this clusterfuck. If they don't pass a massive bailout, they'll be blamed when the economy continues to tank. If they do pass it, they'll be complicit - just like they were with Iraq - when the economy falters and there aren't anymore apples left in the government cupboard to help people in need.

It's time for a little straight talk. Prepare people for the worst, and assure them that we can weather the storm, if we keep our heads.

I've seen this Bush stampede action against Congress before.
Several times actually.
And it worked each time.
Big mistake each time.

And what's this about 2.5 billion comp going out the door to Lehman execs? For failure?

What about the required credit counseling like poor folks must take when they fail at finances? Rich people, or Bush's base, too good for that? Will they have to cut back on the caviar now?

Eat the rich!!

"When the going gets weird, the weird turn pro."
Hunter S. Thompson

Now's the perfect time to renew the debate regarding privatization of Social Security, don't you think?

"The Treasury plans to buy these mortgages for pennies on the dollar anyway"

Just how many pennies on the dollar are we talking about Russ? Who has or will determine that amount? By what methods?

____________________________________
"Whoever corrects a mocker invites insult; whoever rebukes a wicked man incurs abuse."

it's an historic swindle

on the meltdown

Prepare people for the worst, and assure them that we can weather the storm, if we keep our heads.

Great campaign line, but what's your plan?

Justice can, to some extent, help prevent this in the future. Reforms will be important too.

But seeing as how I haven't seen a Democrat roll their eyes about what the Administration is asking for, I assume they know what's at stake.

Sure, you can look for the perfect plan that addresses every interest group's desire, but I think this is a global issue, and without substantial action on the part of this country that shows it is concerned about the current state of affairs, the results could be dramatic and quite unpredictable.

Whatever parallels you want to draw between the Administration's calls for action before invading Iraq and this situation are weak, when we know that three of the five largest investment banks in the nation have failed, the world's largest insurance company is kaput.

What's happening on the world's markets is not anyone's imagination; it's real, and it has to be stabilized first.

(Summarized from another story):

Among those instruments which Phil Gramm's Commodity Futures Modernization Act (CFMA) sheltered from regulatory scrutiny was something called the "credit default swap." A kind of insurance one bank could exchange with another, credit default swaps supposedly made it safe for banks to take on ever riskier forms of debt. The Act didn't invent these swaps, though they were relatively new. Instead, by placing them in a state where they were not only unregulated but almost perfectly opaque, credit default swaps were turned into the perfect vehicle to fuel a Wall Street revolution. No one had any idea what these things were actually worth, they were traded "over the counter" without being administered by any exchange, and even the SEC could monitor their existence only indirectly.

From the beginning, there were plenty of people in the financial community whose opinion of these unregulated credit swaps was not as rosy as that of Gramm, Greenspan, and McCain. Chief among those speaking in opposition was SEC Chairman, Arthur Levitt. Levitt argued that what the industry needed was more transparency, especially when it came to complex instruments like default swaps, and he testified to this before Gramm's Senate Banking Committee,.

"In my judgment, the risk of this regulatory approach is simply
unacceptable for America's investors."
--Arthur Levitt, 1999

The encouragement and "safety" that credit default swaps provided made the sub-prime mortgage market possible. Just as with the deregulation of S&Ls in the 1980s, the market was suddenly flooded with easy credit. The result was a real estate boom, soaring home prices, and a plague of "Flip that House!" shows on cable.

As the banks piled up crappy mortgages, they heaped on ever more of the credit default swaps -- and they still had no idea how to value the things. Worse, they began to trade the swaps themselves as if they were an investment, treating them like something worth holding instead of a big bundle of cartoon bombs whose fuses were already lit. Since very few loans were falling into default at the time, owning a default swap seemed like a way to collect fees without ever paying out. Banks wanted more, and more, and more.

A secondary market for trading swaps exploded into existence, and swaps were traded with absolutely no consideration for the nature or quality of the underlying investment. Swaps changed hands a dozen or more times, growing in "value" as they went. Worse still, no one regulated who could *buy* a swap, so it was (and is) perfectly possible for a company to acquire swaps that theoretically cover billions of dollars in loans, even if that company doesn't have a red cent on hand to cover those swaps should the loans default.

How big did this market become? Here's business correspondent Bob Moon and host Kai Ryssdal on American Public Media's Marketplace from back in the spring.

BOB MOON: OK, I'm about to unload some numbers on you here, so I'll
speak slowly so you can follow this.

The value of the entire U.S. Treasuries market: $4.5 trillion.

The value of the entire mortgage market: $7 trillion.

The size of the U.S. stock market: $22 trillion.

OK, you ready?

*The size of the credit default swap market last year: $45 trillion.*

As in three times the whole US gross domestic product, Bob. And the truth is that Moon probably underestimated. The unregulated and poorly reported credit default swaps may have actually passed $70 trillion last year, or about $5 trillion more than /the GDP of the entire world/.

Um, sirs? Is it altogether a good idea to run up debts exceeding all the assets it's even possible to hold?

"Can we trust the Bush mortgage bailout plan?"

No.

This has been another edition of simple answers to simple questions.

"When the going gets weird, the weird turn pro."
Hunter S. Thompson

We're bailing out foreign banks too:

On Sunday, the Treasury secretary, Henry M. Paulson Jr., indicated in a series of appearances on morning talk shows that an original proposal introduced on Saturday had been widened. “It’s a distinction without a difference whether it’s a foreign or a U.S. one,” he said in an interview with Fox News.

The prospect of being locked out of the bailout set off alarm bells among chief executives of overseas banks whose American affiliates also hold distressed mortgage-related assets, like Barclays and UBS. The original text provided access to the $700 billion bailout for any financial institution based in the United States.

And Phil Gramm had nothing to do with it, I'm sure.

Hey, Phil - it's just a "mental recession."

____________________________

the distance between black & white is much further than i would like until now i never noticed that fascism has many disguises -d. boon, 1981

Latest news:

Goldman Sachs and Morgan Stanley have managed to get themselves reclassified as banks literally overnight.

(link...)

This lets them setup banks and take deposits to raise cash, and also gives them access to emergency loan programs. I heard somewhere else that they can also restructure their accounting using different rules for banks to make their books look better.

Back on topic, I am convinced that Paulson doesn't have a clue what's going on or what to do about it. This "proposal" is outrageous and unprecedented and designed to reward GOP cronies, and as Metulj notes the political pressure and subsequent political blowback for Democrats if it isn't passed is a no-win situation for everybody.

Somebody needs to take a deep breath, step back, gather together the best economic minds from inside and outside government (i.e. people who actually understand the situation, maybe some lower level career civil service people who don't have a political dog in the hunt, analysts, college professors, etc.) into a non-partisan war council to put forth some real emergency proposals.

Best quote I've heard so far (don't remember who or where but I think it was one of the Sunday talk shows):

"Capitalism without bankruptcy is like religion without hell."

Out of curiosity, what's the record for the biggest transfer of wealth from the government to a single entity in US history?

Latest update:

Proposed bailout plan will give U.S. government equity in affected companies. Our banks are being nationalized!

(link...)

The stupidity present in the posts here is amazing. Those who state that they do not know the issues and still act like this is all about Bush. What this is about is stupid consumers, stupid executives, and lax enforcement of SEC regulations (and that does not mean Southeastern Conference either). Furthermore, unless we all want to be standing in a bread line, we need to be grateful that both the Executive and Legislative branches are working on this together too. Good grief, even your Messiah-elect has said that keeping Paulson on would be smart until this plays out (assuming that the Messiah gets elected)

Had another tin cup of the Kool-Aid there, Nobody (not verified)?

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It's more than a little infuriating to see Republicans, and who I assume to be, Christians, referring to Obama as a Messiah, as if that's how his supporters refer to him. I've never heard an Obama supporter refer to him as a Messiah.

I guess you think that's going to draw people away from him. It's not. It only entertains those who weren't considering him anyway.

Besides, since the Rev.(and I use that term loosely) believes that Gov. Palin is "God's answer," it's clear which party believes that their candidate has God's approval.

Silly Christian commoner me. I always believed that "God's answer" was Jesus Christ, not a candidate of anyone's party. James Dobson is working extra hard to be this era's leading Pharisee.

Chris Dodd makes a better proposal.

The other amazing thing about this is that we already have a nearly $1 trillion bill coming due for the occupation of Iraq that we can't pay that everyone seems to suddenly have forgotten. So yeah, let's add another $trillion and go for broke. Literally. Oh, and let's cut taxes while we're at it, too!

The current bill is actually higher than a trillion for the last six months, if you add in the proposed $700 billion downpayment.

$29 billion for JP Morgan Chase to take over Bear Stearns. It was predicted in March that future costs could add another $25 billion.

Then there's $79.9 billion for AIG, $180 billion in loans the next night to shore up other central banks who were afraid of a run to get out of those Money Market mutual funds, and the score is now (-$25 billion which may cost us for Bear Stearns)...is $288 billion PLUS the $700 billion that they want now.

And yes, $10 billion per month in Iraq (and that's not counting Afghanistan)for over five years is about $700 billion. And I don't think that's counting VA benefits.

The $165 billion dollar loan the government took out for the tax rebate last spring... that was supposed to reinvigorate the economy.

So, if you add that to the $288 billion, and we have to since it was for the economy, the total of six months, or so, comes to $453 billion.

Now you can add the $700 billion.