PETER'S NEW YORK, Oct. 2, 2008--The so-called financial "bailout" package making its way through the halls of Congress could end up tanking the economy, warned maverick Republican Congressman Ron Paul in a televised appearance today.
“We’re trying to prop up bad debt,” said Paul of the now famous bailout bill, a version of which was rejected by the House of Representatives earlier this week, but which passed the Senate last night, and which is headed for a vote in the House again. Paul made his remarks in a brief telephone interview aired on Starting Bell, a morning program on the Bloomberg cable financial news network
The bailout bill was introduced in both houses of Congress to stave off what proponents claim is an unprecedented banking crisis caused by the drying up of credit. The government has spent hundreds of billions of dollars presiding over the rescuse or dissolution of of several major financial concerns in recent weeks, including brokerage and investment banker Bear Stearns; the two major players in the mortgage market; Fannie Mae and Freddy Mack; the giant insurer AIG; and, in what became the largest rescue of a commercial bank in U.S. history, Washington Mutual. In the meantime, there have been several corporate reorganizations in the financial sector involving billions of dollars in new investment, much of it from overseas or from private sources in the United States. All of this activity points to a major hazard facing the financial sector, reportedly triggered by a crumbling of the real estate investment sector over the past year.
The charge on behalf of the bailout bill is is being led by U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke. It is designed to stave off financial collapse, proponents contend, by injecting upwards of $700 billion in liquidity into the banking sector through the purchase of poorly performing assets from banks' balance sheets, courtesy of the American taxpayer.
But Congressman Paul argued that a bailout does not address the underlying problems that caused the current crisis.The bad debt should be “wiped off the books” rather than purchased by taxpayers, Paul argued. The Texas congressman said he would vote against the bill, citing a response of 9-1 against it by his constituents.
On a more ominous note, Paul warned of lean economic times ahead. “We will have our recession,” he said, warning that it could turn into a major "depression" if the bailout bill in its current form was signed into law. "We built this problem by...irresponsible spending," Paul said. He said the bailout bill would make the economy worse. "It's propping up bad debt with more spending," he said. "As long as you can create new money, you create more inflation" he said, making an oblique reference to the power of the Federal Reserve to introduce new money into the banking system.
Before the late 1960s, the Fed had to keep a percentage of gold on hand for every Federal Reserve note it issued. These constraints were removed by Congress in the mid to late 1960s during the administration of President Lyndon Johnson, thus giving the Fed a blank check on how much currency it could put into circulation. It forced Johnson's successor, President Richard Nixon, to remove the final restraint pegging the dollar to a fixed gold price. This created an inflationary spiral that was not quashed until the mid-1980s due to the restrained monetary policy of then-Fed Chairman Paul Volcker. Paul's remarks indicated that he believes the economy could be headed for a similar inflationary spiral.
But Paul had a few good things to say about the current version of the bailout bill. "I think there have been a few improvements," Paul said, citing tax breaks and cuts tacked on to the $700 billion in taxpayer-funded buyouts that could make the bill more appealing to legislators. "Maybe the markets will like that for a little while."
www.petersnewyork.com
Born in New York, March 14, 1949. Staff writer for the New York City Tribune, Economic Growth Report, Register-Star. Presently publish on the websites "Peter's New York," 911blogger, and OpEd News.
There is much i disagree with concerning the good Dr., BUT--
--I appreciate his vote and voice agains this bailout. A quick call to my local GOP Rep., Trent Franks, shows he too is against the bailout and will once again vote no.
As for Ron Paul, i think the best assessment of his positions is this compedium of his voting record originally posted on David Neiwert's Ornicus blogsite:
“The revised bailout legislation is the same $700 billion piece of burnt toast, with some window dressing, sugar coating, and $150 billion of pork tax cuts covering everything from casinos to coal.
But this isn’t even the main course that Senate is serving up for Congress on Friday. The main course is on page 92 of the 451 page document:
‘BORROWING LIMITS TEMPORARILY LIFTED. - During the period beginning on the date of enactment of this Act and ending on December 31, 2009, the Board of Directors of the Corporation may request from the Secretary, and the Secretary shall approve, a loan or loans in an amount or amounts necessary to carry out this subsection, without regard to the limitations on such borrowing under section 14(a) and 15(c) of the Federal Deposit Insurance Act (12 U.S.C. 1824(a), 1825(c)).’
Translation: Bush, McCain, and Obama want Congress to co-sign off on the mother of all blank checks, paving the way for a sinking dollar and higher interest rates.”
by
Jim Eldon (0 articles, 0 quicklinks, 0 diaries, 138 comments)
on Friday, October 3, 2008 at 12:50:41 PM
This will fail. And when it does they'll come back with even more Draconian measures.
On August 28th bush extended National Emergency Act. Why?
I can tell you. This planned implosion of our economy is right on time. We're going to see across the board bank failures and a shut-down of our government (other than our police state), energy cut-offs, food shortages and this is why bush extended NEA.
The time for polite intellectual blogging is over. Phone calls to representatives that neither represent or matter is over.
We have two choices now, submit or fight.
by
Mr M (4 articles, 0 quicklinks, 18 diaries, 1762 comments)
on Friday, October 3, 2008 at 2:12:07 PM
Another excellent interview with Ron Paul is available in text form - much better for actual review of what has been said and not said - is available at CNN done before the Senate and 2nd House vote that now, with Bush's signature, has been made the $700Bn taxpayer paid bailout official. A sample of his suggestions for what should be done:
Roberts:OK, OK. So we recognize all of the things that got us here. But, right now, today, what would you do, if not this bill?
Paul: You have to liquidate those mistakes. Those mistakes were made due to monetary policy. So you have to allow the market to adjust prices downward. And that's what we're not allowing to do.
If there are too many houses and the prices are too high, the sooner we get the prices down to the market level, as soon as we quit trying to encourage more housing -- this is what we're doing. They're trying to stimulate houses and keep prices high. It's exactly opposite of what we should do.
So, we should get out of the way and not buy up bad debt. There's illiquid assets, but most of those are probably worthless. They're mostly derivatives. And we're sticking those with the taxpayer. So we have to recognize that the liquidation of debt is crucial. And if we did that, we would have tough times, there's no doubt about it, for a year. But if we keep propping a system up that's not viable, we're going to have a problem for decades, just like we did in the Depression. That's what we're on the verge of doing.
There's more that's well worth reading to examine against what has actually been passed by both Houses and hurriedly signed by Bush.
Hopefully all voters who already - or come now to - understand that the government has been the real culprit in this mess will remember this when they vote next month. All those Senators and Congressional Reps who voted for these newest measures ought to lose the vote of all voters who understand that they will now be held in (increased) bondage for many many years. What would have been a moderate downturn in spending for a few years will become a lengthy and deep recession - likely to rival that of 1930-1940 - even to be called the 21stCentury Great Depression.
The one possibility out of this Depression on the brink is to elect a majority of representatives next month in both Houses of Congress who have more understanding of the real causes and some real backbone to sponsor and vote in a reversal bill of this sell-out of the US population. It can be done - if there are enough Ron Paul like representatives to be found in the majority of the states.
I won't hold my breath on a reversal possibility, so I am prepared to continue and even increase my strong self-sufficient measures - and I recommend that everyone else do so too.
**Kitty Antonik Wakfer
MoreLife for the rational - http://morelife.org Reality based tools for more life in quantity and quality Self-Sovereign Individual Project - http://selfsip.org Self-sovereignty, rational pursuit of optimal lifetime happiness, individual responsibility, social preferencing & social contracting
by
Kitty Antonik Wakfer (22 articles, 4 quicklinks, 7 diaries, 128 comments)
on Friday, October 3, 2008 at 2:45:54 PM
Ron Paul: "Bailout" bill could trigger a major depression"
That what experts say, if the bill didn't pass. That it would destory are economy as well as the worlds economy. That why it passed. Congress did admit that we are in a recession.
by
Greg Patrick (0 articles, 0 quicklinks, 0 diaries, 3 comments)
on Friday, October 3, 2008 at 5:52:22 PM
7 comments
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