According to Jason Linkins'

Dirty Secret Of The Bailout: Thirty-Two Words That None Dare Utter, consolidation of power in the Treasury Dept is written into Section 8 of the new bill to bailout Wall Street. 

A critical - and radical - component of the bailout package proposed by the Bush administration has thus far failed to garner the serious attention of anyone in the press. Section 8 (which ironically reminds one of the popular name of the portion of the 1937 Housing Act that paved the way for subsidized affordable housing ) of this legislation is just a single sentence of thirty-two words, but it represents a significant consolidation of power and an abdication of oversight authority that's so flat-out astounding that it ought to set one's hair on fire. It reads, in its entirety:

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 short, the so-called "mother of all bailouts," which will transfer $700 billion taxpayer dollars to purchase the distressed assets of several failed financial institutions, will be conducted in a manner unchallengeable by courts and ungovernable by the People's duly sworn representatives. All decision-making power will be consolidated into the Executive Branch - who, we remind you, will have the incentive to act upon this privilege as quickly as possible, before they leave office. The measure will run up the budget deficit by a significant amount, with no guarantee of recouping the outlay, and no fundamental means of holding those who fail to do so accountable.

Is this starting to sound familiar? Robert Kuttner cuts through much of the gloss in an article in today's American Prospect:

The deal proposed by Paulson is nothing short of outrageous. It includes no oversight of his own closed-door operations. It merely gives congressional blessing and funding to what he has already been doing, ad hoc. He plans to retain Wall Street firms as advisors to decide just how to cut deals to value and mop up Wall Street's dubious paper. There are to be no limits on executive compensation for the firms that get relief, and no equity share for the government in exchange for this massive infusion of capital. Both Obama and McCain have opposed the provision denying any judicial review of decisions made by Paulson -- a provision that evokes the Bush administration's suspension of normal constitutional safeguards in its conduct of foreign policy and national security.

Linkins points out widespread lack of media attention on this dangerous bill: 

One cannot overstate this: Section 8 is a singularly transformative sentence of economic policy. It transfers a significant amount of power to the Executive Branch, while walling off any avenue for oversight, and offering no guarantees in return. And if the Democrats end up content with winning a few slight concessions, they risk not putting a stop-payment on the real "blank check" - the one in which they allow the erosion of their own powers.

 

Over in the Senate, Christopher Dodd has proposed a bailout legislation of his own, which critically calls for "an oversight board that not only includes the chairman of the Federal Reserve and the SEC, but congressionally appointed, non-governmental officials" and would require the President to appoint an "independent inspector general to investigate the Treasury asset program." In Dodd's legislation, Section 8 is effectively stripped from the bill.

Nevertheless, the fact that Section 8 of the Paulson plan seems to strike few as a de facto dealbreaker can and should astound...

But if we make it through this week with nobody in the press specifically informing the public about the implications of this single sentence - in the middle of a complicated bill, in the middle of a complicated time - then right there, you have the single largest media failure of this year.

by Rady Ananda (182 articles, 374 quicklinks, 49 diaries, 1718 comments [201 recommended, 2 rejected]) on Monday, Sep 22, 2008 at 11:01:03 PM

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The guy is rude, and think he is so smart, when he is merely parrotting the right wing and libertarian talking points. Feh on him.

Klein makes him look like a much lower species, far down the evolutionary tree. 

Sullivan cites Adam Smith, the republican way-- which is dishonest and inaccurate. 

by Rob Kall (952 articles, 4177 quicklinks, 374 diaries, 2087 comments [45 recommended, 3 rejected]) on Tuesday, Sep 23, 2008 at 9:38:18 AM

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his arrogance was apparent when he asked Naomi Klein if she had read Adam Smith. Klein is a former Miliband Fellow at the London School of Economics. What are Sullivan's credentials?

by Rady Ananda (182 articles, 374 quicklinks, 49 diaries, 1718 comments [201 recommended, 2 rejected]) on Tuesday, Sep 23, 2008 at 12:17:52 PM

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If the laws, business owners of large scale, the wealthy had not jimmied our economy since Reagan declared Morning in America, the average citizen would not have had to resort to using equity loans, personal loans and credit cards as income. Low and falling wages, relative to the rest of the economy forced people to make unpalatable choices they likely would not have made otherwise. To blame people who are in two worker families, or hold multiple jobs or both, is simply ridiculous. Sullivan just can't face the reality of the mess a philosophy such as his generated.

And I am not so sure that this will fall on the next administration and Congress. If we fight hard enough against the bailout, Bush could impose the continuity of government laws against us, can the election and stay in office for life.

This sounds as though I do not want to fight the bailout. I do, most emphatically.  Obama and the Democrats are not going to rescue us. If we want change, we are the ones who have to stand up and demand it. It starts with us.

 Klein is correct though. The bomb, the real bomb, has yet to detonate. It is ticking there, about to take out Main St and the middle class. What we are seeing here are the major tenets of Milton Friedman's capitalism coming home to the US.

Please start writing or calling your national representatives and demand they not support a Main St bailout for Wall St mismanagement and greed. Time is of the essence. It starts with us.

by Jack Harrington (0 articles, 0 quicklinks, 0 diaries, 675 comments [70 recommended, 0 rejected]) on Tuesday, Sep 23, 2008 at 2:10:56 PM

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Hi Rob

 So nice to see you use "feh".  I have never seen anyone use it recently but me.  And it so fits so many of our situations today.  Perfectly used by you here.  As well as your first line.

 Sheila Parks, Ed.D.

Hand-Counted Paper Ballots (HCPB) activist

by Sheila Parks (5 articles, 0 quicklinks, 0 diaries, 27 comments [1 recommended, 0 rejected]) on Tuesday, Sep 23, 2008 at 6:43:21 PM

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I was told by my life coach about this back in March. So what is so new

about this?

Brother Wolfie

by Wolfie (9 articles, 0 quicklinks, 33 diaries, 1208 comments) on Monday, Sep 22, 2008 at 11:01:19 PM

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there is NO reason that the economic bomb wouldn't force Obama to do the same things that McCain would do. If he didn't want to, Congress could force him to and override his veto. We only have a mere handful of Congressmembers who aren't in favor of the predatory disaster capitalism that they've been voting for and profiting from, and those few mavericks don't even have enough votes to get their own legislation out of committee.

Obama might regret, might weep, might tear his hair, but faced with the coming economic bomb, he would have no choice but to do the same things that McCain would do.

And that's not to mention that Obama has Chicago Boys-type economic advisors on his team and would probably only be feigning regret to fool the public. If he was sincere, he wouldn't have predatory and disaster capitalists as economic advisors, wouldn't be planning to increase the defense budget by expanding the war in Afghanistan and replacing U.S. military troops in Iraq with more costly private military corporations, and wouldn't have gotten a major party nomination in the first place.

Don't vote! This is the Congress whose deregulation got us into this mess. Not Bush. He couldn't have done it without Democratic votes and support. Both major candidates are Members of that totally corrupt Congress, and the election is rigged--if you vote for a third party or independent candidate, not only will they not win, but your vote can be flipped by the central tabulators to the candidate you most loathe.

They're robbing us blind. But they couldn't do it without our consent. Your vote is your consent. Don't vote!

(Not you, Rady -- I know you don't plan to vote. But the people reading this who think Obama would be free to act any differently from McCain, or who still think that their votes count.)

by Mark E. Smith (21 articles, 30 quicklinks, 100 diaries, 1325 comments) on Tuesday, Sep 23, 2008 at 12:07:13 AM

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Gotta love these bastards that blame the people for this disaster. As though it was them that made the rules.

I can remember when all the talk was "ownership society", how they were making it possible for everyone to own their own home, and they started this big campaign to get people to buy homes and tore down all the safe-guards and rules that would normally protect both the banks and people from going where no sane person dare.

"Come on in, here's the keys to your new house. Don't go in the cellar though, because there's no foundation."

And the worst part is that they dangled this carrot in front of people that never had anything to begin with. It's like opening a buffet to a starving person and expecting them not to pile food on their plates till it spills over the edges. The temptation is too great and you're preying on people that don't understand complexities of capitalism and money.

It's taking people that have been walking all their lives and allowing them to purchase a Rolls-Royce for the price of a Chevy, than as they drive it the costs go up and when it breaks down they point at the contracts fine print that says all repairs, costs and tha actual work of repairing it, are the responsibility of the driver.

This whole thing is a scam hundreds of years in the making and there's now only one way to set things right and I see neither the awareness nor the courage coming from the people of this country to do what's necessary to rid us of the cretins that put us where we are.

Things are going to get a whole lot worse before they ever get better, if they ever do. If we don't strike now, and we won't and can't, because as I've mention the awareness just isn't there, the cretins have a lot more in store for us than just poverty. They have Eugenics, CODEX Alimentarius, with it's mass starvation planned, pandemics they're getting ready to unleash, FEMA camps with their forced inoculations to kill us, and long with their wars and police state to complete their plan of eliminating 7 billion people from this planet.

And for those of you that say this is crazy, go research the Georgia Guidestones, they've put this plan in granite.

What we're looking at is a forced self-fulling prophesy of the End Times. It's as though people read the Book of Genesis and "fixed the facts around the prophesy" in order to achieve it's goal.

To what end this life was all for I do not know, but to see such loss of life just to satisfy a few pathological, megalomaniac, sociopaths tears at ones soul and questions the existence of a God.

by Mr M (8 articles, 0 quicklinks, 66 diaries, 2845 comments [654 recommended, 27 rejected]) on Tuesday, Sep 23, 2008 at 8:32:45 AM

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I'd like to know in which way not voting is going to help our country.  I can understand not voting for either Democrat or Republican and going Green but failing to perform one of our most important duties of citizenship is somewhat counter to a positive result.  I earned the right to vote the hard way, perhaps if that right had cost everyone something it would seem more valuable.

Veteran '66-68

by Roger (0 articles, 0 quicklinks, 0 diaries, 465 comments [22 recommended, 1 rejected]) on Tuesday, Sep 23, 2008 at 8:43:49 AM

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by Jim Eldon (0 articles, 0 quicklinks, 0 diaries, 253 comments [15 recommended, 0 rejected]) on Tuesday, Sep 23, 2008 at 9:31:23 AM

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Not casting a ballot helps the country by not lending credibility to an electoral system thoroughly lacking in credibility.  The system is managed from the top:  Our candidates are chosen for us; our voting districts are gerrymandered by a collusion of Dems and Repubs behind closed doors; our voting machines and tabulators count ballots secretly using proprietary software; we don't have the right to vote directly for president/V.P.; we don't have the power to remove legislators once they're seated; and so on.  Changing the system by systematically removing our consent may be difficult, but changing the system by casting ballots is impossible.  

by Jim Eldon (0 articles, 0 quicklinks, 0 diaries, 253 comments [15 recommended, 0 rejected]) on Tuesday, Sep 23, 2008 at 9:52:16 AM

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One: your vote has a 90% chance of not counting, either by not being tabulated or switched.

Two: we have a totally corrupt government. Voting validates that corruption.

Three: we're way beyond the point where voting for people that don't represent us is going to make a damn bit of difference. When you have candidates where neither one of them have any relationship to the people the govern, what's the point? And as pointed out, as long as votes are placed on machines that give no possibility of validating your vote actually counted what's the point of voting for a third party candidate when that vote could be switched?

Point being, until we have a proper paper-trail, publicly counted voting system we can not trust what we have now and voting in it validates a corrupt system.

If you fought for the right to vote you didn't fight for a false premise, the fight was worthy, it's just that the system has stolen your vote.

There might be only one election worth voting in and that's Sheehan against Pelosi, and that would be only to prove just how corrupt our election system is.

Currently CS is polling 90%, if this continues to hold true and Pelosi still winds-up winning it will shine a bright spot-light on just how deep this corruption is.

But, right now, November seems a long way away. With the collapse of the collapse of the economy, a very real possibility that bush&co will start another war, that any election can be easily stolen or even canceled for "national security reasons".

If voting could change things, they'd make it illegal.

by Mr M (8 articles, 0 quicklinks, 66 diaries, 2845 comments [654 recommended, 27 rejected]) on Tuesday, Sep 23, 2008 at 9:33:43 AM

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Naomi Klein makes her points, but then it's dominated by the other guy insisting the problem is the American people for taking out irresponsible loans. It is not refuted.

by Maxwell (0 articles, 0 quicklinks, 0 diaries, 409 comments [85 recommended, 0 rejected]) on Tuesday, Sep 23, 2008 at 8:53:39 AM

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the way it's supposed to be.. both make their points and I think - am pretty sure but have not counted - that Naomi spoke longer than Sullivan.

by Rady Ananda (182 articles, 374 quicklinks, 49 diaries, 1718 comments [201 recommended, 2 rejected]) on Tuesday, Sep 23, 2008 at 12:04:54 PM

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As I write this, George W. Bush, The First Fool, is addressing the United Nations General Assembly for what will mercifully be the last time.

What is happening to our once-great nation is this: the American people are in the process of relearning a lesson they should have learned nearly a century-and-a-half ago during the Grant administration. The lesson is this:

CONSERVATIVE PHILOSOPHY OF GOVERNANCE DOES NOT WORK - PERIOD.

It never has. It never will.

Three times in our history, the "plutocracy" (Today we refer to it as the looney right wing) has seized control of all three branches of the government. Three times in our history they drove our beloved, once-great nation in the economic dirt.

Well, what the....It's happened again!

Go figure.

Tom Degan

Goshen, NY

www.tomdegan.blogspot.com

by Tom Degan (23 articles, 0 quicklinks, 2 diaries, 45 comments) on Tuesday, Sep 23, 2008 at 9:31:38 AM

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Was lit many years ago when we fell for Ronald Reagan and all of that de-regulated trickle down BS.

Rady is right about the 32 words. They need to be erased and quickly.That paragraph is obscene in its' blatant promotion of dictatorial whimsy and disregard for the Consitution. Frightening and almost beyond my conception that someone would actually write that. This Bush/Paulsen combo is heretical to life in the USA.

Yes the bomb is set to explode soon and Obama alone won't be able to stop it, but some new blood can lessen the impact. And somebody has to try. The McCain Reign will perform exactly as outlined by Ms. Klein.

Mark, you are very consistent. While I admire that trait very much, the only problem is that you are also ALWAYS WRONG.

Not voting solves nothing, the guy on the video had a problem with being an automaton and having his mouth stuck on open. It is hard to refute or push back hot air. Why bother.  Naomi did fine.

Mr. M, as much as like most of what you say, and I really hate to tell you this, but God didn't have a damn thing to do with any of this. 

by Ivan Hentschel (12 articles, 0 quicklinks, 10 diaries, 302 comments [4 recommended, 0 rejected]) on Tuesday, Sep 23, 2008 at 9:36:03 AM

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I'm not saying God had anything to do with any of this, other than man is a creation of God, after that man is on his own. This is all man's doing.

It's that it strains my belief in a God that would make beings that would be so evil as to cold heatedly plan the murder of 7/8ths of the people on this planet and stand a very good chance of pulling it off and getting away with it.

I'm not going to get into whether there is a God or not, I've had things happen in my life that defy any Earthly explanation that I can explain, so I leave myself open to the possibility.

My premise is that given our situation, being that there are people who have cold and calculatedly over a vast period of time planned to exterminate billions of people for no other reason than for their own sense of supriority and entitlement makes it hard to believe in a God when it looks as though they may indeed succeed in their sick plan.

About the only thing that would validate His existance is that because of what one can see of the workings of these cretins, I'm sure there is a Devil, and with one there must be the other.

But if than the Devil's work is so evident, where is God's? For if there ever was a time for divine intervention this would certainly be it.

by Mr M (8 articles, 0 quicklinks, 66 diaries, 2845 comments [654 recommended, 27 rejected]) on Tuesday, Sep 23, 2008 at 10:34:28 AM

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Ivan Hentschel wrote:

Mark, you are very consistent. While I admire that trait very much, the only problem is that you are also ALWAYS WRONG.

Is everything I said wrong, Ivan?

I wrote that "there is NO reason that the economic bomb wouldn't force Obama to do the same things that McCain would do."

If that's wrong, then you should be able to state a reason that the economic bomb wouldn't force Obama to do the same things McCain would do.

I wrote that "If he didn't want to, Congress could force him to and override his veto."

Do you know something nobody else knows, Ivan? Do you know of a way to prevent Congress from overrriding Obama's veto?

I wrote, "We only have a mere handful of Congressmembers who aren't in favor of the predatory disaster capitalism that they've been voting for and profiting from, and those few mavericks don't even have enough votes to get their own legislation out of committee."

If I'm "always wrong," Ivan, then you should be able to name the majority of members of Congress who never voted for deregulation.

I wrote, "Obama might regret, might weep, might tear his hair, but faced with the coming economic bomb, he would have no choice but to do the same things that McCain would do."

If I'm wrong and Obama would have other choices, surely you could mention some of them.

I wrote, "And that's not to mention that Obama has Chicago Boys-type economic advisors on his team and would probably only be feigning regret to fool the public."

The fact that Obama has economic advisors up to their necks in this fiscal debacle isn't a matter of debate, it is fact. I can be wrong in my opinion that Obama would only be pretending to regret doing the same things that McCain would do, but not about his economic advisors. If I was "always wrong," I'd be wrong about everything.

I wrote, "If he was sincere, he wouldn't have predatory and disaster capitalists as economic advisors, wouldn't be planning to increase the defense budget by expanding the war in Afghanistan and replacing U.S. military troops in Iraq with more costly private military corporations, and wouldn't have gotten a major party nomination in the first place."

Do you have any proof that Obama was lying about his intentions with regard to Iraq and Afghanistan? If so, please post that proof.

I wrote: "Don't vote! This is the Congress whose deregulation got us into this mess. Not Bush. He couldn't have done it without Democratic votes and support."

Am I wrong about that Ivan? Could Bush have pushed through his agenda without Democratic votes? If so, please provide an example.

I wrote, "Both major candidates are Members of that totally corrupt Congress...."

Am I wrong, Ivan? Are McCain and Obama not Members of Congress?

I wrote, "....and the election is rigged--if you vote for a third party or independent candidate, not only will they not win, but your vote can be flipped by the central tabulators to the candidate you most loathe."

Is that wrong also, Ivan? Can you show that our elections are not rigged?

I wrote, "They're robbing us blind. But they couldn't do it without our consent. Your vote is your consent. Don't vote!"

Do you think I'm wrong there also, Ivan? Do you believe that our vote is not our consent? What do you think it is?

You wrote that I'm "ALWAYS WRONG" and you put it in capital letters. But you haven't shown a single instance where I was wrong.

If you can show ONE instance in which I am wrong, perhaps it would be possible for people to take you seriously and wonder if I might be wrong about other things also.

Try it.

by Mark E. Smith (21 articles, 30 quicklinks, 100 diaries, 1325 comments) on Tuesday, Sep 23, 2008 at 11:16:41 AM

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Mark,

You wrote: "Is that wrong also, Ivan? Can you show that our elections are not rigged?"  You know that I admire your zeal but in this case it overrode your intellect.  You know full well that neither you, nor me, nor anyone can prove a negative.

Can you, or me, or anyone prove that not voting will impact or influence an election?  I think not.

by Harold Hellickson (15 articles, 0 quicklinks, 8 diaries, 97 comments [8 recommended, 0 rejected]) on Wednesday, Sep 24, 2008 at 11:17:08 AM

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 http://www.counterpunch.org/dubey0923200...

  SOUNDS LEGIT 

by gordon nelson (0 articles, 0 quicklinks, 0 diaries, 40 comments [1 recommended, 0 rejected]) on Tuesday, Sep 23, 2008 at 11:33:28 AM

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didn't work for me.

by Rady Ananda (182 articles, 374 quicklinks, 49 diaries, 1718 comments [201 recommended, 2 rejected]) on Tuesday, Sep 23, 2008 at 7:01:53 PM

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didn't work for me.

by Rady Ananda (182 articles, 374 quicklinks, 49 diaries, 1718 comments [201 recommended, 2 rejected]) on Tuesday, Sep 23, 2008 at 7:04:49 PM

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If true - this article points to an egregious McCain personality. I think that it's very similar to other ex-military of the same age, it's generational. It reminded me strongly of a loved family member who I never talk politics with and who is in his 80's, and retired military.

by Cheryl Abraham (13 articles, 2 quicklinks, 0 diaries, 207 comments) on Tuesday, Sep 23, 2008 at 12:07:59 PM

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by Munich (1 articles, 86 quicklinks, 14 diaries, 1125 comments [86 recommended, 1 rejected]) on Tuesday, Sep 23, 2008 at 12:10:10 PM

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 " No  State  shall  make  or  enforce  any  law  which  shall  abridge  the  privileges  or  immunities  of  citizens  of  the  United  States ;

  nor  shall  any  State  deprive  any  person  of  life , liberty , or  property , without  due  process  of  law ;

  nor  deny  to  any  person  within  its  jurisdiction  the  equal  protection  of   the  laws ."

    ~  http://www.c-s-i.org/  ~

by Keystone (0 articles, 0 quicklinks, 2 diaries, 299 comments [78 recommended, 0 rejected]) on Tuesday, Sep 23, 2008 at 12:36:34 PM

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It was very unusual for me to be watching MSM but  I thought I could do with a little fair and balanced jive.  Dobbs let it go with both  barrels?  He all but called Paulson a crook.  And he put notables on the show to enhance the discussion.

Any thoughts? 

by Margaret Bassett (45 articles, 2909 quicklinks, 42 diaries, 1851 comments [99 recommended, 0 rejected]) on Tuesday, Sep 23, 2008 at 1:05:56 PM

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Margaret, I saw bits of Lou's show.. also on someone else's TV. One of his guests near the end said AIG had $20 Billion in off shore profits.. and why aren't those profits being brought back into this country to pay taxes on. No-one cared to comment.

With that being said and Lou quoting Paulson - "a distinction without a difference to the American people" when Paulson spoke of adding foreign banks to this seizure of capital.... I can hope that some of those who rely on MSM for information would possibly get caught up enough in Lou's 'outrage' and truly listen to what Mr. Paulson said.. which I interpreted as -- "the American people are too dumb to understand the complexity of our monetary system .. therefore we can do what we wish.. so sit down, shut up and give what we take from you" and call their 'elected' officials and raise holy hell.

I agree with Rob's sentiment that NOW is the time to make that contact.. no matter your distaste for our election system. When Paulson tells Congress they have no say in this transfer of wealth -- and we say nothing to Congress -- then we have already appointed Paulson and his managers the dictatorial master of the whole of our monetary system .. and more.

by M. Yeager (0 articles, 0 quicklinks, 0 diaries, 10 comments) on Tuesday, Sep 23, 2008 at 2:48:46 PM

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and now the newly rebellious and contrite mainstream media are redeeming themselves and being totally forthright and asking all the right questions now, like they should have at the onset of Iraq. 

Yet, the mantra of the day was... the bail out, the bail out... making certain the message of

the B A I L   O U T

wouldn't get lost in the din.  The same old machine, just a new spin to re-engage the sheeple.

by bucketslogg (0 articles, 0 quicklinks, 0 diaries, 259 comments [99 recommended, 0 rejected]) on Wednesday, Sep 24, 2008 at 3:00:10 AM

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In their need to control all there is in preperation to make the earth safe for JHVH to return they start here as their base from which to move across the earth to gain dominion over all things. Section 8 would be another part of the dominion they want to gain over us. Mr.M, don't you know that if you eliminated 7 billion people there would be no one left. Even if it was 6.5 billion it would be stupid for them to do that. Just check out what happened when the Black Death (1347-1351) wiped out 2/3rds of the European population. Innovation, better pay, labor saving devices were created and the survivors lived better than they had before. Our would be masters want a large tractable poor population to get cheap short lived labor. They would be fools to do otherwise. One of our most pressing problems is overpopulation. Too many people most of which live poorly. It is the rich countries that are hogging the wealth. If the rest of the world lived the way we do we would need at least five more earths to accommodate them. I can see the Codex Alimentarius (control of all food-see Monsanto) and even eugenics (though used in a poor racist way) by them but genocide of the human species? It would be suicidally stupid on their part. That would mean they would have to deal with a small labor force they would be forced to pay well and educate well. That or build robot or gene splice a worker species or some hybrid of such. Having too many people is a logical choice by them for a cheap ready made labor force. So Mr.M you point (as others I have seen on this subject) fails the logic and logistical tests. It sounds to me like a way of fooling people into going down blind alleys to keep them away from the real reasons they want to take over. Just like those that think the UN has any real power or is a separate independent entity (which it isn't.) There may be a soul but there is no god except in what you and billions of others believe. It won't be a dei ex machina it will take a homo ex machina or nothing. We are due for a culling anyway by disease naturally at any time. That is how nature works. Too many is as bad as too few.

by nightgaunt (0 articles, 0 quicklinks, 0 diaries, 448 comments [27 recommended, 0 rejected]) on Tuesday, Sep 23, 2008 at 2:31:21 PM

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Starting with the TLFs, Bear Stearns, AIG, and everything else, I have us at 1.8 trillion bail out or loans backed up by toxic waste. Thats money pumped in at the top.

The real economy is cash starved at the bottom. Exactly what happened in the last Depression with the RFC loaning money and buying stocks with money borrowed from the Fed, while the those at the bottom could not get loans .

The Feds job was to ensure price and market stability. It failed, and has failed repeatedly throughout it's history.

Volcker created the S&L crisis with his support for the Monetary Control Act of 1980 which also allowed the Fed to monetize 3rd world debt (turn the toxic debt into money to bail out the big banks who made these loans). His interest rate increases during the Carter years gave us a terrible recession, although he is today credited by some as beating inflation.

But the inflation was due to oil price hikes and not an overheated economy, and due to the high interest rates which made projects in the real economy more expensive to finance. In the end, they caused many manufacturers to move their operations overseas where the high cost of financing allowed them to offset it with lower labour costs.

Volckers main objective, or at least the result,  was in making 3rd world nations default on their loans which were variable interest rate loans. This allowed the IMF to strong arm them into opening up their markets and resources. Any big banks holding bad loans got bailed out by the Fed.

Greenspan is the father of the derivative bubble which started following the stock market crash in 1987. The Fed intervened into the market through Greenspans former company, JP Morgan, using the newly created Derivative which proved it's value in manipulating markets (it's likely they caused the crash as well). Greenspan resisted all calls for regulation of Derivatives, which today are known as Financial Weapons of Mass Destruction.

Greenspan refused requests by Congress to intervene in the DOT.Com bubble by increasing margin rates, which the Fed has the sole authority to do. The bubble was being inflated by borrowed money, and the money supply was increasing, rapidly. Margin debt hit 265 billion, up 45% in the 4 months before the bubble was popped.

The Fed bailed out LTCM under Greenspans watch as a reward for their help in bringing down the Russian economy in 1997.

On June 17, 1999, 5 years into an obvious bubble, Greenspan told Congress "Bubbles can only be determined after the fact.... Betting against the markets is precarious at best."(trust the investors, they know what they are doing). The bubble burst in Clintons last year in office in response to Greenspans interest rate increases that began shortly thereafter.

In 2001, when explaining why he did not lower interest rates when it was apparent we were entering a recession as a result of the stock bubble bursting, he said he wanted to make sure the bubble was over with . Remember he said in 1999 he could not determine when a bubble existed or not, but that we should trust the investors.

He also led the support the bipartisan repeal of the Glass Steagall Act in 1999 which led to ENRON and the sub-prime crisis, and refused to intervene in the housing market by tightening credit (you can do this w/o raising interest rates), saying it was a good thing and recommending ARM's when interest rates were at a 50 year low in 2003. Then he started raising interest rates over concerns on inflation that the lie that is CPI did not show much of, knowing full well what this would mean to the housing market bubble which was by then well inflated, and to those who took his advice on ARM's.

He was concerned about deflation to inflate the bubble, then he was concerned about inflation which the lie that is CPI said did not exist. The inflation we had was due to rising oil prices and cartel/monopoly pricing practices in markets w/o significant competition.

Greenspan jumped ship in 2006 allowing Helicopter Ben to be the fall guy. Bens expertise is the Great Depression, his mission is either to keep us out or get us in one. My bet is the latter, but maybe he is just an innocent, I will give him the benefit of the doubt.

The Fed is obviously in the business to make bubbles which they pop and their shareholders can profit from (even if some of the little fish get eaten up). Their mandate says otherwise, their job is to help maintain price stability and full employment. The discussion should be about it's demise. When you do the opposite of what your boss asks of you, and get caught, you get fired. We should fire the Fed, not reward their shareholders.

Greenspan of course got knighted for his good work. Sir Bubbles should be sent to Gitmo, as should Paulson, but that won't happen.

In the perfect world, going forward:

1. Fanny and Freddie would be nationalized and operated as the public utility that they were intended to be and were until 1968 when thye were privatized.

2. Glass Steagall would be reinstated.

3. The Fed would be nationalized, but the commercial banks that made up the system would stay privatized and be regulated by the states.  Congress would then create money through a publicly owned corporation (like the RFC in FDR's time but w/o having to borrow the money) that is required for public infrastructure and social welfare, and make low interest loans to key industries (clean renewable energy, small farmers, railroads).

4. Derivatives would be banned, and any debt obligations related to derivatives not recognized.

5. Economic sanctions placed on all tax havens.

6. Usury laws reinstated.

7. Those banks and corporations that are too big to fail should be broken up into smaller companies under anti-trust laws

8. Fixed Exchange rates need to be agreed on among the major currencies (US, Euro, Yen, RMB)

9. WTO abolished

10 UN security council abolished . Decisions made in general Assembly- 80% required to pass (votes population adjusted).

But you won't find anyone running for President who will do any of this.

by pft (0 articles, 0 quicklinks, 0 diaries, 601 comments [7 recommended, 0 rejected]) on Tuesday, Sep 23, 2008 at 8:44:22 PM

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