This should come as no surprise to anyone used to Bush Administration tactics over the past 16 years (I include his two terms as Governor of Texas). On top of that, they wait until the last minute before Congress goes on recess and there cries for the need for this legislation to me are the equivalent of yelling "fire" in a crowded theater. Again this should be no surprise to watchers as this is how we got ourselves into Iraq, the Patriot Act, the Protect America Act, allowing Gittmo.......the list goes on. All of these great results were rammed through without forethought, scrutiny, or discussion. As a result of the unbridled Bush/Cheney reign, America has suffered both at home and abroad. We are at a point we don't trust one another and the world wants nothing to do with us. So the Bush/Cheney crew try one last desperate power play before they leave office to satisfy their corporate cronies before they leave office having not quite plundered the people's bank account of quite everything.
Yes we have financial problems, yes the value of the dollar is declining, and yes our national debt is rising to a staggering cost that truly can't be imagined. The solution? More of the same policies that have gotten us to where we are today. Think about it for a moment then read on.........how do we come up with this $700 billion to 1 trillion dollars. We borrow it from China, thereby increasing the debt we already are having troubles paying down because of its ever increasing interest rate. Don't like that solution then simply print more money, except then the value of the dollar drops like a lead balloon to the point the U.S. dollar's worth is no more then that of it's equivalent in a third world nation (funny don't these two issues seem to reflect the current mortgage/financial crisis we are in?).
In addition, this Administration still seems to want to continue it's "Imperial" legacy and not allow any oversight from Congress, the courts, you or I (hey we're footing the bill here) and I question whether or not there isn't a hidden clause in there saying God has no oversight authority. I know if I gave my son $700.00 to purchase some necessities for school I would want to know what exactly he was purchasing. ("No Jaime, pizza and beer are not school supplies"). Bush and Company want 700 billion, without an explanation of yours and my money, and they then hand it out to those individuals who have limousines and chauffeurs, that created this mess and tell us it's ok they will be responsible. Yeah, and there really is a Kung Fu Panda.
In my piece I referenced earlier (Will the Dumbing Down of America Continue) I said I would always listen to both sides, yet my view point and most favored considerations are both Progressive and liberal. With respect to this so called "bailout" plan. I find myself siding with the Republicans (yes the world will end tomorrow at noon). It seems as soon as Nancy Pelosie (D-Calif) and Speaker of the House heard Georgie Boy say he had a crisis she was as has been her pattern right there by his side to give him whatever he needs. Sure she might want a few controls, but one trillion of the taxpayer's dollars? No big deal. She has gone so far to say they would get some form of legislation passed by the end of the week with only four to five days to examine the issues surrounding this historical expenditure. To this I can only hope Cindy Sheehan soundly kicks Madam Speaker's ass this election. I know the fall recess break comes next week, and Lord knows the national disaster that not giving Congress it's time off would create (apparently this disaster would be greater then the current financial disaster). But you know I have decided since you folks in Congress work for me and have partially abetted this crisis, you need to work a little longer and give more careful and thoughtful consideration of this blood money request.
Questions need to be asked. Here's one no one seems to want to ask but damnit I want it asked, and a proper explanation given to me. If, as Henry Paulson asserts we don't give these wealthy investment bankers our hard earned dollar, the tax burden on us will be "greater" then the tax burden will be if we do give them the money? How the hell is that? We might have to refund welfare programs for all those hot shot gamblers? We can handle that.
Secondly, everyone (and you can hear this in current brokerage ads on TV) says that Wall Street and the stock market is a gamble, why should I throw money away on a risky proposition like that? You know the House always wins when gambling. Translation, those same fat cats who squandered our pensions and assets want another go at the track for this "sure thing" and the Champaign and caviar can flow for them again. Sorry guys your rich Uncle Sam has been tapped out by you already.
Third, I bought a house in 2001 right before the big housing boom. It was affordable and met our needs. We looked during the boom but realized no matter how much our property had increased, the cost to get the same or a little better would cost as much and in most cases much more. So how were we getting ahead? Back then combined my wife and I earned a little over 100K a year. I knew then a half million dollar house was way beyond our means despite what the banks and real estate brokers said. Others, not so forward thinking took the bait and now cannot pay their mortgages. Many have abandoned their homes, hence the banks are stuck with property they didn't want, and hence the crisis. The banks and others who created this mess, the very same people who in the past told us to spend carefully and not live beyond our means now are finding themselves in the same situation they had for years warned us we'd be in if we didn't stay within a budget. So what do they do? They call all their government buddies together and say "save us from our misdeeds!" Remember now these were our financial leaders, the one's who created the conditions and ultimately the crisis and should be bailed out without consequences; despite the fact their misdoings had such a horrible impact on the population of the United States and the world. They deserve this bailout, but do Joe and Jane America, who believed their bankers and lost their homes and everything deserve nothing? Congress you really need to think here. Who do you think vote's en mass? Whose money are you about to appropriate? Who are you leaving out in the cold? Most of all though who caused this hurt? The homebuyer chasing the American dream? Or is it the masterminds behind this debacle, the snake oil sales men who lied, hid their records and bamboozled a nation. If this were the 1890's would you prosecute a wife for buying an elixir from this same snake oil salesman to give to her husband dying of cancer, in the hopes he would get better, and he died two weeks earlier? Or would you punish that very same snake oil salesman for costing a family everything and hope they had?
Fourth, and before this last question remember the last part of the proceeding question, this is how a majority of Americans feel about these charlatans who created this mess. According to Paulson again if you in the passage of this expenditure seek to impose regulations or any form of punitive measure to those who gambled away our investments, they will be reluctant and may not participate in this program. If the crisis is so dire, and the future so bleak, please explain to me how the hell they cannot take an amended deal? This question most of all I want answered, truthfully. Invite me up their and let me ask it (hey it's my money right?). I won't allow an evasive answer. There can only be one answer, any others are exclusive to their response. Either this isn't such a bad crisis, and is only a continuation of Wall Street's version of Animal House, or we are drowning so badly that those who flooded us are trying to drag the rest of us down too, which means we have to find another answer to this crisis.
I hope for you dear readers, that after reading this pontification, you will pass it on to a friend, family member, enemy or whomever, just pass it on. Let us quit being fleeced and demand answers. Big election coming and frankly I do understand finances, but I am tired of politicians acting as if I was a complete idiot who still believes rabbits come from top hats.
Interest rates on the debt are not ever increasing either. If you look at treasury issuances, the yields have been falling along with interest rates. Treasury also published what the average rate is on the debt and it is down. And it will be down more considering how many panicked folks are fleeing to US Treasuries. Though that changes every day.
Second, Pelosi has not rolled over. She has been briefed on this problem by two very knowledgeable individuals who sit atop institutions with a great deal of information about financial markets. She isn't giving Bush what he wants either, no bill is currently being debated on the floor. So, I would cut her some slack. And frankly, I know she will mop the floor with Cindy Sheehan and I will be happy when she does.
Third, what Paulson was saying is that the burden on American families will be much greater should Congress do nothing. The reason this will be in his estimation will be a severe contraction in the credit market. The credit market (many times larger than the equity market) makes the economic world go round. A small business needs their line of credit to fund regular operating expenses like bi weekly payroll, oops their banker has cut that line of credit. A big corporation needs to borrow money for a large capital expenditure, oops their banker is no longer interested in lending them the money. And even worse, what Paulson and Bernanke, are trying to resolve is financial institutions not doing business with one another. The result of a credit market contraction will be a more pronounced recession. That will have a cascading impact on the mortgage bad debt problem. And could lead to a further contraction in credit.
Also, on Paulson's point, all of these securities on financial institution's balance sheets are not worthless. They are illiquid because no one will trade them for fear that they contain a massive default exposure. But not every homeowner is being foreclosed on. And not all of these instruments have collapsed and pay no interest. So, it's not casino gambling. We just need to discover what is good and what is bad. The market can't do that because we are having a panic attack. The government will likely make much of this money back because not all of these instruments are junk.
The other thing is that it's not just fat cats. The entire payroll of Wachovia or Washington Mutual or Morgan Stanley or Citigroup or AIG is not made up of "fat cats." These places go out of business and the fat cats will be okay regardless. It will be the other people down the payroll that will be really hurt.
Fourth, you can't just blame this on the financial institutions. There were two parties involved in every one of these mortgage originations. Yes, the mortgage originators and underwriters were hard selling mortgages without a lot of controls. But the people on the other end of this transaction were not all stupid. The actual Note of your home purchase documentation is the shortest and the easiest (in my opinion anyway) to understand. I cannot understand how anybody failed to understand when they signed an adjustable rate note that stated pretty clearly that your rate can adjust 2% or maybe more 1 year, 3 year, or 5 years out. Whatever index it was based on, that is publicly available information. They don't even have to do the loan amortization to know that if the first year payment is just barely affordable, it's certainly not going to be affordable if the rates go up. If they bought a home most places, at settlement, they would be sitting in a room with an attorney. If they didn't understand what was in front of them, why in the heck would they have signed it? I can't believe that anyone would sign a loan document for over $100,000 that will last 30 years of their life and not give it some serious thought. And if they did, why she would be on the hook for their folly anymore than we should be on the hook for the folly of these bankers? If you don't want to bail-out the banker, you shouldn't want to bail-out a lot of individuals who made bad decisions.
To your last question, as a basis, the legislation if any is developed will contain restrictions on executive pay for those who participate. Paulson has changed his tune on this. And I disagree with his earlier position. Executives may balk initially, but if the board of directors is worth anything they will force executives to take the deal especially if their firm is in a dire situation.
And by reference, I incorporate everything I discussed with Ron1 the other day on this same topic.