Three particularly interesting items this morning which we'll highlight for those readers who are closely following developments surrounding the U.S. financial market meltdown. We'll post links and short text excerpts below:
The Salt Lake Tribune provides more information on the $700 billion mortgage bailout scheme which Geedubya and Treasury Secretary Paulson will be ramming down the throats of our Congresscritters this week:
"Bailout without precedent":
WASHINGTON - Revealing its plan to rescue the nation's financial system from near-paralysis, the Bush administration is asking Congress for the authority to spend $700 billion and for powers to intervene in the economy so sweeping that they had virtually no precedent in U.S. history.Wasn't it George Bush who told us that his job would be a lot easier if America operated as a political dictatorship? Hmmmm... Looks as though we may be moving one step closer to that.
The proposal, set out in a spare 2 1/2 -page document sent to congressional leaders Saturday, would effectively allow the Treasury secretary to set up a government investment bank to buy up the billions of dollars of the mortgage-backed securities now clogging the arteries of the global financial system.
The dollar figure alone is remarkable, amounting to 5 percent of the nation's gross domestic product. But the most distinctive - and potentially most controversial - element of the plan is the extent to which it would allow Treasury to act unilaterally: Its decisions could not be reviewed by any court or administrative body and, once the emergency legislation was approved, the administration could raise the $700 billion through government borrowing and would not be subject to Congress' traditional power of the purse. [...]
''It essentially creates an economic czar with no administrative oversight, no legal review, no legislative review. And it gives one man $700 billion to disperse as he needs fit,'' said Sen. Dianne Feinstein, D-Calif., referring to Treasury Secretary Henry M. Paulson Jr.
''He will have complete, unbridled authority subject to no law,'' she said. [Emphasis added].
And an enterprising Salt Lake Tribune journalist Pat Bagley has dug deeply into the Trib archives, and provides a morning story with elements which might arguably provide some of the less optimistic among us a strong sense of deja vu:
"1929's Tribune headlines were not so different from today's":
The Friday before the great stock market crash of 1929, Utahns could read in The Salt Lake Tribune that the previous day's market ride had been a thriller. Dizzying early losses were offset a bit by a late-in-the-day rally. [...]We suppose we can find solace in the fact that we haven't heard about any realtors gassing themselves in their kitchens, we guess... not YET, anyway.
The Saturday before the crash, a headline read: "Strong Market Support Sweeps Away Clouds," then curiously led with two items: One about a Mr. Germansky who was last seen near the New York Stock Exchange, muttering to himself and tearing a strip of ticker tape to bits (anyone having information about his whereabouts, please contact Mrs. Germansky); and the second one about how a real estate dealer from Illinois had gassed himself in his kitchen after stock market losses.
At the top of A2 was this: "President Declares Business Structure of Country Sound"
And speaking of deja vu, one Utah blog, Simple Utah Mormon Politics, provides a faith enhancing story angle which we believe will have appeal for our gentle readers of the LDS persuasion:
"The "D" Word: Gordon B. Hinckley is Looking Pretty Prophetic About Now...":
Ten years ago, President Gordon B Hinckley told members of the Church of Jesus Christ of Latter-Day Saints to get their houses in order and begin to get out of debt, because we might be headed for a depression. Few have listened. It looks like, ten years later, that President Hinckley's warning was rather prophetic.There's an actual reason they're called "prophets," you know.
That's it for now, gentle readers. We'll skip the laborsome analysis and instead rely upon our readers to explain the meaning of all this. Be sure to lodge your ever-savvy observations and comments below.
4 comments:
Just watched the Republican minority leader on one of the Sunday talk shows, insisting [in support of the bailout plan]that the plan is about saving everyday Americans and the economy they rely on, that "it's not about bailing out Wall Street," and "this is not about Wall Street," ---- over and over again.
I was reminded of the observation, I forget who first made it, that when you hear someone insisting [usually someone involved in a law suit] that "it's not about the money," you can be absolutely damn certain of one thing: it's about the money.
My take on the mortgage crisis....
Most of these defaulters are not primary homeowners. They are middle class investor second home owners. They refinanced their primary home at an inflated reappraised value to give them the liquidity to purchase a second home as an investment that was also inflated by the reappraisal trend with a creative little-down mortgage. Their investment home mortgage now clicks in the ARM and they are suddenly upside down. This bailout rescues the investors who backed all the foolishness.
Very few actual primary homeowners bought under these circumstances. Those who did paid an unfortunately inflated value fueled by the rest of their neighbors.
Some of us remember the Resolution Trust bailout of the Savings and Loan industry. Also that George W.'s brother was in it up to his ears.
That plan does not begin to compare to this current salvage plan. The Resolution Trust actually took over some assets that had value and those assets were auctioned off over a period of some 6 plus years. Many buyers did make a killing on the assets they bought at a fraction of their worth
The current "fix-it" plan immediately takes all the bad paper and worthless assets off the books of the culprits that caused the disaster so that they can continue in business as usual drawing their astrononical salaries and bonuses, plus retirement bonuses and other perks. The bad debts will be transferred to all taxapayers in this country.
There is something not quite right about this solution. This debacle of the banks is about much more than bad mortgages. It is about losses incurred by the banks in areas other than mortgages.
Why haven't taxpayers heard anything about a plan to prosecute the government officials that neglected to do their job of supervision. That neglect was the basis for this default.
Why are some financial banks getting better treatment than others in this writeoff?
Why is there such a hurry to pass legislation to transfer the worthless junk so that the remaining banks can continue to operate without change to make their millions and billions.
The banks being saved were involved in international trading and speculation. It is not the small local banks that are getting help. It is the huge international conglomerates that are strictly big business financial banks.
It was one thing to bail out Fannie Mae and Freddie Mac that had been operated as quasi-government institutions. We are now bailing out huge institutions that have many foreigners owning part of them.
Congress should pass no legislation making any one person Czar over the banking industry. Sec. Paulson will be out of office in January.
I do not like some of the statements I have heard from Sec. Paulson and others that we must help the rest of the world in this financial crisis.
We have put off the inevitable for too long. Many of the businesses going under at this time should have been allowed to go under long before now.
Having taxpayers assume all the bad debts so that some elite banks will stay in business will only assure that the day of reckoning will be postponed for another day.
Our system is still broken.
Lies From Paulson Keep Stacking Up: What You Can Do About It
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