Socialism "Rescues" What's Left of Capitalism

Stirring tales of our existence within the Right-wing American corporo-fascist state

Well it's all official now, U.S. Taxpayers. We're all co-partners in the 2008 banking industry meltdown, and our supposedly "recovering" alcoholic president just issued the Treasury Department and the Federal Reserve (U.S. Bankers' Union) a blank U.S. Treasury check by quietly signing the Fannie/Freddie bailout bill into law this morning. Here's the gist, from the ever-reliable Raw Story website (Don't forget to read the reader comments):

In a seeming effort to blunt attention to the fact he was signing a bill he once rebuked as socialistic, President George W. Bush quietly approved a massive mortgage rescue bill shortly after 7 a.m. in the Oval Office and announced his signature by email.
"Only a few aides and administration officials were present, including Secretary of Housing and Urban Development Steve Preston and James B. Lockhart III, the Director of the Office of Federal Housing Enterprise Oversight (OFHEO)," Politico's Mike Allen remarked. "The White House announced the signing by e-mail moments later."
A senior Bush official told Allen the Administration had no desire to herald the Democrats who shepherded the bill through their congressional committees, Sen. Christopher Dodd (D-CT) and Rep. Barney Frank (D-MA).

And no... we're not about to completely blame the approval of this bill on the current pack of Congressional democRATS who ushered this bill through a compliant Congress without amendments.

This nitwit neoCON Bush had a hand in it too.

Yes. It's the Republicans in Congress who allowed the "mortgage problem" to fester during their inattentive watch.

But it's the recently elected congressional democRAT majority who adopted the "socialist solution" -- with the help of our neoCON president, of course...

Food for thought for our gentle readers, as the congressional Demos usher in a new era of American high taxes and hyper-inflation.

Having said this... we hope our gentle readers won't let their cat get their tongues.

The Big Bailout: America as a Full-Spectrum Kleptocracy

First class Fannie/Freddie Bailout rant from LewRockwell.Com

Last week, Congress went on record regarding its priorities: With a handful of noble exceptions (conspicuous among them the stalwart Rep. Ron Paul of Texas), they demonstrated a willingness to ruin what remains of the dollar and destroy the Middle Class in order to rescue – temporarily – the über-rich Robber Class

LewRockwell.Com
The Big Bailout: America as a Full-Spectrum Kleptocracy
July 29, 2008

First class rant this morning on the Fannie/Freddie bailout topic from William Norman Grigg, of LewRockwell.Com. This is one our readers surely won't want to miss:

The Big Bailout: America as a Full-Spectrum Kleptocracy

Reader comments are invited, as per usual.

More Thoughtful Commentary on the Fred/Fan Mess

Fannie and Freddie: Bail 'em out, then bust 'em up

Thoughtful well-crafted guest commentary in yesterday's Salt Lake Tribune, by the Heritage Foundation's J.D. Foster. Mr. Foster offers a proposed solution to the impending Fannie/Freddie bailout mess, and frames his opinion piece like this:

News that the Treasury is preparing plans to bail out housing finance giants Fannie Mae and Freddie Mac (FM2) has infuriated the American people. And rightly so: It's their money, after all, on the line. If they understood the whole truth, they'd be even angrier - but they should vent their fury at the guilty parties.

Foster then launches into a nice mid-article rant about entities which are deemed "too big to fail," and the all too obvious "seeds of trouble" (enormous size, inadequate capitalization, single industry focus, heavy political involvement) which were blindly ignored by the one governmental body which had the political power to have prevented the Fan/Fred problem from descending into its current crisis condition. Anger's OK, says Mr Foster, so long as it's properly directed:

Americans should direct their anger at Congress, which for years refused to heed the warnings, even as it worked to protect its gravy train of political contributions.

And finally Foster arrives at his proposed solution:

Anger isn't enough, however. As Congress readies a bloated housing bill, Americans should demand Congress ensure this kind of financial threat never looms again. Strengthening the federal regulator for FM2 is fine, but we really need to break these financial goliaths into many, much smaller and truly private companies. Unfortunately, there isn't time now to scheme the breakup of FM2 properly. Instead, Congress should separately task the General Accountability Office and the Federal Reserve with producing a study with its recommendations on how FM2 might be restructured into a variety of private, separate companies. Once cut down to size and properly regulated, these new companies would pose little risk in and of themselves, would never become too big to fail, and so would lose their implicit guarantee of a future bailout. It's not enough to call in the ambulance. We need to catch the mugger who perpetrated this crime-and make sure he never haunts the neighborhood again.

Not a bad editorial all in all; and definitely worth a read. This is the kind of mental exercise recommended to shake out the weekend cobwebs on a Monday morning, we think.

And what think our gentle readers about all this?

Congress Finalizes the Fan/Fred Bailout

U.S. Taxpayers became full partners in the mortgage market melt-down mess under an hour ago

Chalk up another victory for American "nanny government." The Fannie/Freddie bailout, which we've railed about recently here on Weber County Forum, just cleared the U.S. Senate by a 72-13 vote. All that's lacking now is the president's signature. We incorporate CNNMoney's lead paragraphs below:

NEW YORK (CNNMoney.com) -- The Senate on Saturday overwhelmingly passed a landmark housing bill that will offer up to $300 billion in loans for troubled homeowners and establish a government rescue plan for mortgage finance giants Fannie Mae and Freddie Mac.
The House passed the bill on Wednesday just hours after President Bush reversed his long-standing vow to veto the bill. Bush is expected to sign it soon.
The legislation, one of the most far-reaching housing bills from Congress in decades, marks the centerpiece of Washington's efforts to address the nation's housing meltdown.

This bailout legislation is so knuckle-headed that even the Voice of Wall Street, The Wall Street Journal, condemned it in a strong editorial yesterday, rightly labeling it the "scandal" that it is.

Hold on to your wallets, folks. If you think inflation is bad now, just wait. You ain't seen even the beginning of it yet.

In closing, we've embedded an instructive YouTube video below, featuring an interview with commodities guru Jim Rogers, who provides a clear and succinct analysis of the economic downside to this unprecedented act on the part of Congress, to make U.S. taxpayers full partners in the banking industry melt-down mess:

As an added bonus, true gluttons for punishment can also visit this site, for an outlook (and an additional video) even more gloomy than Mr. Sinclair's. (And be patient, gentle readers... this last page [and the incorporated video] takes a few extra seconds to load -- although it's most definitely worth the wait.)

Our readers' ever savvy comments are invited as per usual.

The Standard-Examiner Opines on the Fannie/Freddie Bailout Dilemma

Added bonus: an instructive supplementary article and a revealing video piece

The Standard-Examiner this morning finally weighs in on the Fannie-Freddie bailout situation, which has dominated world financial news since the past weekend. And the editorial board gets it mostly right, with savvy observations such as these:

America, you just bought giant ownership stakes in two privately held companies that hold and/or guarantee half of all U.S. home mortgages. How does it make you feel?
Over-extended? Sick to your stomach?
Us, too. This home-foreclosure crisis was getting scary long ago. Now it’s getting worse. [...]
The Freddie and Fannie watchers are growing nervous because it is suspected the companies don’t have adequate cash reserves to weather this housing trough. According to a report by The Providence Journal newspaper, the $83 billion Freddie and Fannie hold in reserve is a pittance of a rainy day fund when stacked against the companies’ combined $5 trillion in debts.
So, the federal government — the White House is taking the lead, but the movie is supported by congressional Democrats — is stepping in to buttress Freddie and Fannie against anything like a collapse. Congressional Republicans have so far been reluctant to go along, calling the plan “socialism” and worse.

So far, so good; but then the Std-Ex goes "soft in the knees":

We wonder, though. Allowing Freddie and Fannie too close to default could damage financial markets around the world, not to mention perhaps a cascading smashup of the U.S. markets.
In a situation that could potentially be so grave, we wonder: What other option is there?

The other option, of course, would be to allow market forces to solve the problem, which is what's supposed to happen in a so-called "free market economy."

And granted, the failure and market liquidation of Freddy and Fanny would cause serious short-term disruption, as these entities moved through bankruptcy court, where viable assets would be efficiently identified and liquidated, and the nonviable ones written off. And yes, this would be a severe blow to G.E.S. stockholders and other financial institutions who hold all these entities' hokey $5 trillion in debt paper.

The aftermath of the mortgage market meltdown will however be painful, regardless of which approach becomes public policy.

So once again we ask the question: Is turning the American taxpayer into what's known in investment circles as "the bagholder" the better of the solutions?

Just for kicks, we'll segue into another solution offered by one of our favorite financial sites, "The Onion": Recession-Plagued Nation Demands New Bubble To Invest In

As an added bonus we provide this humorous and topical video clip, which was contributed by Gentle Curmudgeon in one of our lower comments sections last night:


We thought it would be useful to launch into the coming weekend with something light.

Consider this an open topic thread, if you like.

The G.S.E. Bailout Plan Redux

More blowback from the U.S. mortgage industry meltdown

On Monday we commented about the proposed G.S.E. bailout plan, which was hastily cobbled together over the the last weekend by officials of the Federal Reserve and U.S. Treasury Department, with an object of expanding FED authority to provide rescue taxpayer funding, to prevent the twin public/private hybrid mortgage industry entities, Fannie Mae and Freddie Mac, from further sliding into financial oblivion.

We watched FED Chairman Ben Bernanke's testimony before the Senate Banking Committee yesterday, during which he made his first pitch to congress for expanded FED financial and regulatory authority.

We've been scouring the web for one particular video segment of yesterday's committee hearing, and the one we were searching for finally popped up on YouTube about an hour ago. We hope you'll share our delight, as Kentucky Senator Jim Bunning tears FED Chairman Bernanke "a new one." (WCF Disclosure: We have no idea who the Arab guy is who rattles on in the left frame, or why he chose to mug and comment on camera. Fast forward to 1:42, and you can skip most of the guy's blathering, and get to the real red meat):

As an added bonus to those political wonks among us whose eyes don't glaze over when presented with discussions involving economics issues, we'll also link two highly instructiive articles on the topic of the government's percipient intervention in this matter, and what it all possibly means for the U.S. economy: The Financial Tsunami: The Next Big Wave is Breaking Fannie Mae, Freddie Mac and US Mortgage Debt Freddie, Fannie, and Curses on FDR
Don't let the cat get your tongues.

The Federal Reserve Crosses the Rubicon

US taxpayers to increase their stake in the 2008 banking industry meltdown

As the world economy continues its inexorable slide into recession, we receive news this morning which, once the situation plays out, will likely make the March 2008 Bear Sterns bailout look like small potatoes. In this connection, we'll spotlight a couple of news items from bloomberg.com this morning.

First, from Paulson Puts Treasury's Weight Behind Fannie, Freddie:

July 14 (Bloomberg) -- Treasury Secretary Henry Paulson put the weight of the federal government behind Fannie Mae and Freddie Mac, the beleaguered companies that buy or finance almost half of the $12 trillion of U.S. mortgages.
Paulson, speaking yesterday on the steps of the Treasury facing the White House, asked Congress for authority to buy unlimited stakes in the companies and lend to them, aiming to stem a collapse in confidence. The Federal Reserve separately authorized the firms to borrow directly from the central bank. Fannie and Freddie shares rose in New York trading.
The steps would bring the U.S. closer to giving an explicit guarantee for the debt sold by the shareholder-owned, federally chartered companies. That reflects a need for the government to bail out an economy that's been rocked by the worst housing recession in 25 years, the credit crisis, and soaring energy costs.
"They appear to be crossing the Rubicon," Sean Egan, president of Egan-Jones Ratings Co., a credit-rating company based in Haverford, Pennsylvania, said, referring to Caesar's invasion of Rome to set up a dictatorship.

Next, we get something from commodities investment hawk Jim Rogers: Fannie Mae, Freddie Rescue a `Disaster,' Rogers Says:

July 14 (Bloomberg) -- The U.S. Treasury Department's plan to shore up Fannie Mae and Freddie Mac is an "unmitigated disaster'' and the largest U.S. mortgage lenders are "basically insolvent,'' according to investor Jim Rogers.
Taxpayers will be saddled with debt if Congress approves U.S. Treasury Secretary Henry Paulson's request for the authority to buy unlimited stakes in and lend to Fannie Mae and Freddie Mac, Rogers said in a Bloomberg Television interview. Goldman Sachs Group Inc. analyst Daniel Zimmerman predicted the mortgage finance companies' shares may fall another 35 percent.
"I don't know where these guys get the audacity to take our money, taxpayer money, and buy stock in Fannie Mae,'' Rogers, 65, said in an interview from Singapore. "So we're going to bail out everybody else in the world. And it ruins the Federal Reserve's balance sheet and it makes the dollar more vulnerable and it increases inflation.''
The chairman of Rogers Holdings, who in April 2006 correctly predicted oil would reach $100 a barrel and gold $1,000 an ounce, also said the commodities bull market has a "long way to go'' and advised buying agricultural commodities. [...]
"These companies were going to go bankrupt if they hadn't stepped in to do something, and they should've gone bankrupt with all of the mistakes they've made,'' Rogers said. "What's going to happen when you Band-Aid and put some Band-Aids on it for another year or two or three? What's going to happen three years from now when the situation's much, much, much worse?'' [...]
The U.S. economy is in a recession, possibly the worst since World War II, Rogers said.
"They're ruining what has been one of the greatest economies in the world,'' Rogers said. Bernanke and Paulson "are bailing out their friends on Wall Street but there are 300 million Americans that are going to have to pay for this."

US taxpayers can surely thank their lucky stars that the kindly folks at the FED and the US Treasury Department have the foresight to rescue the banking industry from the results of their own recklessness and perfidy. And as continuing infusions of hundreds of billions of US dollars continue to stream into our already inflationary economy, and the purchasing power of the our currency continues to descend into the realm of "play money," remember... they're doing it all for us.

Comments???

Fed Fright: Bernanke Sets Up Multibillion-dollar Emergency CDO Bailout

The U.S. Government sets the stage to trade $billions in U.S. government bonds for worthless mortgage paper

By Dorothy

Interesting article this morning on Agora Financial's website. When you read today's article it becomes obvious that the Federal Reserve has just nationalized all the banks who are bankrupt because of greedy speculation in the subprime mortages - which means that you and I are going to pay off the banks' debts just like we taxpayers were forced to do when the Savings and Loans went belly-up for making bad housing loans in the '70's & 80's. Here's the skinny:

You have to admit, widespread panic at the Fed is entertaining.

One week after calling Mulligan” on the entire mortgage bubble, Bernanke is suggesting we pass the entire mess onto the next generation. God forbid the baby boomers ever take responsibility for their own actions.

The Federal Reserve announced this morning that it will make an additional $200 billion available to strapped lending institutions. But instead of firing up the printing presses and going about business as usual, the Fed has unveiled a whole new plot, and a handy acronym to go with it: Term Securities Lending Facility (TSLF).

The new initiative, like the old Term Auction Facility (TAF), will provide short-term loans to distressed financial institutions. But instead of enticing banks with cheap interest rates, the Fed is now offering to swap mortgage-backed securities for U.S. Treasuries.

Thus, a bank swelling with Fannie Mae and Freddie Mac paper and other “AAA” mortgage-backed assets can unload it on the Fed for the next 28 days. The Fed wants banks to take that money and lend to the masses, thus stimulating the economy. No word yet how much additional debt it will take for the government to absorb this mess.

The new TSLFs will begin on March 27.

The painful part is that the Federal Reserve is not part of our government, but a private consortium of investors, many of whom are in Europe and other parts of the world.

The bigger - worst - part is that our President and Congress do not have a clue about what has just been done to all of us including them and their heirs. How stupid can we get as a nation?

We are now in the process of trading U.S. government bonds for worthless mortgages in the billions that the banks cannot get an investor to take off their hands... The day of reckoning will eventually arrive for this.