Hi friends.  I’ve decided to take much of the financial and political commentary out of my personal blog and move it to a new venue, TheGreatUnwind.com. I hope to make TGU a venue for a wider audience to participate in a sharing of knowledge to counter the disinformation society.

Anyhow, please pick up the feed if you are an RSS junky like me (and if not, you really should be), and visit me at TGU for my thoughts on the struggle against corporatism and debt slavery! I’ll continue to post here on matters more personal and about my thoughts on the green revolution and such. -JP

Please call/write/fax your senators now!  A consensus of academic economists have arrived at a workable plan, but Congress is ignoring them and the will of the people.  Our representative democracy is fighting for its life because entrenched special interests are now dictating public policy.

http://www.senate.gov/general/contact_information/senators_cfm.cfm

OPPOSE PAULSON BAILOUT

Dear Senator,

As an Oregonian and a concerned citizen, I am outraged at the Paulson bailout plan.  I recently watched a panel discussion at Princeton University by some of the nation’s top economists- all are as confused as I am about why the administration is insisting on executing a bailout via the purchase of assets rather than the historically proven methods of bankruptcy and nationalization:

http://www.youtube.com/watch?v=Wj_JNwNbETA

I watched a House member on CNBC yesterday, Rep. Brad Sherman, talk about how the bailout has been carefully structured to allow for the purchase of bad assets from foreign investors:

http://www.cnbc.com/id/15840232?video=873682522&play=1

I wish I could dismiss Rep. Sherman’s opinions as paranoia, but this is a scenario that we have all seen before from this Administration. We are planning to bailout those who CAN AFFORD to suffer the losses, and importantly, who made investments with the understanding that they were assuming RISK.

NO PAULSON BAILOUT.  We are witnessing another disingenuous and fear driven Bush Administration tactic to ram through dangerous and costly legislation. Please, do not vote for this plan.

WE DO NEED TO ACT. We need to follow the nationalization model, for which we have ample historical precedence as well as the institutional knowledge to ge the job done.  This will ensure the taxpayers have sufficient stake in any upside, avoids the moral hazard of rewarding corporate risk, and limits the bailout to failing firms that are facing insolvency.

Wow, just wow!  Hopefully they will stay in Washington and implement a plan that has a chance in hell of working.

This is a rare victory for democracy, folks!  Now they need to get it together, consult real economists who aren’t owned by Wall Street, and come up with a plan that makes sense.

So far, very bad. Suspends mark-to-market pricing (not surprising, as it would BK many banks), allows banks to maintain ZERO percent reserves as of Oct. 1 (are they encouraging a bank run? From the comments of another blog: “Can it still be called Fractional Reserve Banking if there’s a zero in the numerator?” - Hilarious). No taxpayer stake in firms that sell less than $100M. All discretion is left with the Treasury Secretary.

SEC. 128. ACCELERATION OF EFFECTIVE DATE.
Section 203 of the Financial Services Regulatory Relief Act of 2006 (12 U.S.C. 461 note) is amended by striking ‘‘October 1, 2011’’ and inserting ‘‘October 1, 2008’’.

Financial Services Regulatory Relief Act of 2006 - Section 203.

Interest on Reserves and Reserve Ratios

“Federal Reserve Banks are authorized to pay banks interest on reserves under Section 201 of the Act. In addition, Section 202 permits the FRB to change the ratio of reserves a bank must maintain relative to its transaction accounts, allowing a zero reserve ratio if appropriate. Due to federal budgetary requirements, Section 203 provides that these legislative changes will not take effect until October 1, 2011.”

113(d)(3) - Anyone who sells less than $100 million of toxic waste to the govt is “de minimis” and exempt from the equity participation requirement.

It is getting difficult to find this picture anymore:

From a press conference held on June 3, 2003 — Pictured are Bush Administration officials from four of the five government agencies responsible for financial supervision using tree shears (the fifth representative, James Gilleran of the Office of Thrift Supervision is wielding a chainsaw), to symbolically destroy financial regulation.

If you plan to vote, please remember that this reckless deregulation, and the current bailout, has been brought to you by the new Republican par-tay. This started with the 1999 repeal of the Glass-Steagall Act by current McCain economic adviser and former Texas Sen. Phil Gramm. Take a moment to read this excellent US NEWS piece on the SEC, Enron & the last battle over deregulation:

But here’s the howler: The number of enforcement personnel, the people who go after the financial engineers, is expected to decline. That’s right. Despite the trillion-dollar meltdown now underway, the number of SEC enforcement personnel will decline from 1,209 this year to 1,177 in 2009. In all, the SEC expects to have 3,771 employees next year. For comparison, the Smithsonian Institution budget for 2009 includes funding for 4,324 employees.

That’s not meant as a slap at the Smithsonian. It houses a myriad of the nation’s most treasured objects. But the SEC actually guards the nation’s treasure. And yet, Congress treats it like a bastard stepchild. Indeed, Congress doles out more than five times as much money for corn subsidies ($4.9 billion in 2006, the most recent year for which data are available) as it does for the SEC.

We are at a critical juncture in our country’s history.  Congress is being pressured to pass a bailout package that will cost the taxpayers trillions of dollars and create runaway inflation.  We can’t afford it, and the people asking for the money know it.

It is important to recognize that the Treasury Secretary, Henry Paulson is not asking Congress for ‘just’ $700,000,000,000.00, he is asking for unlimited spending ability, with a ceiling of holding $700B at any one time:

Sec. 6. Maximum Amount of Authorized Purchases.

The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time

We are being fed a straw man argument by the President, the Congress and the media; that we can avoid a recession if we go along with the bailout plan. In reality, insolvent banks will absorb this money and hold onto it, the recession will come, and we will all suffer. The Federal Reserve has already taken on over $700B in securities (PDF) from troubled firms through open market operations, and it hasn’t solved the problem.

Independent economists are tagging the actual cost of an effective bailout at $5 Trillion (that’s $5,000,000,000,000.00). Our current national debt stands at $9.8 Trillion. Not only is $700B not enough to make a dent, but you can bet that the banking industry will be back asking for more once this initial infusion has been exhausted.

And we will give it to them. The Federal Reserve Bank and the Treasury are staffed by Wall Street insiders. We have let the fox into the hen house and we are being bloodied… badly. This can only end in a fiscal crisis for the U.S. Government, and it MUST be stopped.

Independent economists such as Luigi Zingales, Bill King, Paul Krugman and others across the country are putting forward well thought out alternatives to the current giveaway schemes that are being debated in secret by Congress. These ideas should be debated openly, and explained to the public honestly before passage.

WRITE YOU CONGRESSIONAL REPRESENTATIVES AND SENATORS TODAY, before it is too late. The message must be unequivocal:

Given the overwhelming public opposition to this bailout, a vote for any bill resembling the Paulson Plan, or an abstention, is a clear message that Congress is not working for the American taxpayer. I will vote for your opponent. No other issue is going to change my mind.

Please read this, Petition: Economists against the Paulson Bailout Plan.

This outrageous but true statement was made by John McCain in the Sept./Oct. 2008 (PDF) issue of Contingencies, the magazine of the American Academy of Actuaries.

Opening up the health insurance market to more vigorous nationwide competition, as we have done over the last decade in banking, would provide more choices of innovative products less burdened by the worst excesses of state-based regulation.

-Sen. John McCain
Sept./Oct. 2008 issue of Contingencies

Here’s the text of what I’ve been mailing and faxing to my Senators and Representatives in Congress.  Feel free to co-opt all or part of this message for yourselves.

OPPOSE THE BAILOUT

America can literally NOT AFFORD the cost of the Bush Administration’s proposed bailout. The unfortunate reality is that residential real estate prices are still too high in many areas, and that other collateralized debt such as credit card, auto loan and commercial real estate securities will turn out to be as problematic as residential mortgage securities have been thus far.  The eventual scope of losses in the credit markets will be beyond the ability of the government to guarantee.  Please do not let our Federal Government continue the same risky leveraging gamble that has already bankrupt Countrywide, Bear Stearns, Lehman, AIG and so many others.

If treasury pays unrealistic prices for these assets, the consequences for the credit worthiness of our nation will be severe, yet this is exactly what FED Chairman Bernanke and Treasury Secretary Paulson have pledged to do. Taxpayer losses, a devalued dollar and inflation appear to be the likely result. This risk to the taxpayers is unacceptable.

Bailout or no, asset depreciation, an insolvency crisis and a prolonged recession are now the unavoidable consequences of a decade of reckless Congressional deregulation and a failure by the FED to maintain prudent fiscal policy.  The sooner we recognize these inevitable truths, the sooner we can put the current crisis behind us.

The proposed bailout, insofar as it delays the realistic pricing of these troubled assets, will only serve to prolong our present circumstance, and threatens to hasten the larger federal debt crisis by undermining our nation’s creditworthiness, and therefore must be opposed.

Ok, gentle readers, this is THE moment we have to stop the largest fraud our Government has ever attempted to perpetrate on the taxpayers. I have many thoughts on the Treasury Secretary’s power grab, but I can’t say it any better that Yves Smith has over at Naked Capitalism, so I will direct you to read his article here.

Write, call, email and fax your Senators and Representatives. Demand to be represented in these negotiations and exercise your rights as the ultimate guarantors of this plan to bail out Wall Street.