Chrstmas With The Devil.

While I never really supported the Government bailing out big business I was pleased that they were demanding the big carmakers and their bosses curtail big bonuses and fancy perks. There were many questions and demands made by the panel when the Big Three’s leaders were in Washington begging for help for their mismanaged companies. The big boys from Detroit seemed willing to appease the Wahsington crowd with offers of small salaries and giving up using the corporate jets and such in exchange for the billions of dollars they wanted to keep their companies going. Sounds fair. If the taxpaying general population is going to help you you can’t continue to live above OUR means. But that is the automaking industry, not Wall Street.

In this holiday season when so many are homeless and living without so much because of the mis-deeds of those financial geniuses of the banking/mortgage industry it is appalling that they are still living the high life. On the backs of those they hurt so much. Their salaries are still high. The year end bonuses are still huge. $1.6 billion huge. Their corporate jets are still flying. The take home pay didn’t decrease a nickle. Their stock option bonuses are worth more this year than ever before. The only thing that has changed is that the taxpayers are footing the bill.

Santa Claus must be real in the eyes of the bankers. But if you look closely under the fur trimmed suit the pillows show and the skinny face of Uncle Sam is partially visable under that fake beard.

We, the taxpaying Americans are the elves fixing all of the problems.

And the only folks “Santa” is visiting are the already rich.

Here is Judith Owen and Harry Shearer doing that old Spinal Tap Christmas classic.

Happy Holiday with wishes of a better 2009 to all.

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Poor Wall Street: Back To Scratchy Toilet Paper

Pictured is Mona Mond, a Wall Street housewife (photo: Carolyn Cole, Los Angeles Times).  In an article from the Tribune organization published in the Los Angeles Times, titled “Wall Street wives had the richer now they’re a bit poorer“, by Geraldine Baum, Wall Street wives lament their reduced circumstances, yet they still do not seem to understand or want to accept that the lavish life as exemplified by their exaggerated version of the American dream is not the norm for most of the American people.

The article does not focus on the Fat Cats at the top of the heap on Wall Street, which in all likelihood will weather the storm just fine and return to their piracy on another day, but on the vast majority of mid-level Wall Street employees, who, when compared, in our eyes, to the much larger majority of middle class Americans, are also relatively fat and happy as Baum writes:

About 185,000 people work in the securities industry in New York — the hard-core Wall Street world of investment firms, banks and hedge funds. The average income is about $365,000, although top-flight managers typically make many millions more. (In New York’s broader financial community of banks and insurance firms the average is $228,000.)

It’s hard to have sympathy for people who make that much money when the average New Yorker makes $85,000.

Hell, it’s hard for many people on the distant (from Manhattan) sides of the Hudson and East rivers to have sympathy for any New Yorker when according to the 2005 census the average American earns roughly $32,000 a year, lives in a household with an income of $46,000 with $24,000 of gross annual income per member (source, U.S. Census Bureau). (Personal income changes considerably over the life-time of the average American, from $28,000 at age 25 to about $42,000 at the age of 65 [Wikipedia].)

In the context of all of this, we learn from Baum’s article about Amar and Mona Mond:

She’d [Mona] married a man with a career on Wall Street, and at the very least she was going to live in a house, preferably brand new, with a Jacuzzi in her bedroom and a pool in that yard. There’d be a maid — and no skimping, no worrying that any day Amar, her husband, would lose his job.

The Monds would retire early with $10 million to $12 million in a rock-solid retirement account that would spew off enough interest to keep them going until . . . well . . . they actually got old.

Because that’s how it goes during good times on Wall Street…

For the last two years, Amar, 36, has run a technology unit in the capital markets division for Lehman Bros. until it went bankrupt and was bought in part by Barclays. He’s still there, adjusting with the change in management. His salary at Lehman’s was $400,000, including a bonus and restricted stock options. Amar’s base salary, about $200,000, remains the same, but there are no reports yet on what will happen to 2008 bonuses and options.

Only a base salary of $200,000 with bonus and options uncertain. And she laments that they sold their home back in the “good times” and cannot afford to buy a home on their paltry income. How then do the vast majority of American home owners who did not fall victim to the housing bubble and stuck with conventional financing, and did not borrow beyond their means, and who do not have a $200,000 income, still manage to make their mortgage payments?

Baum also tells the story of Carlos and Fran Alvarez:

Fran Alvarez rarely spent lavishly, as she describes it, during the five years her husband, Carlos, 43, was making $250,000 writing software programs for Credit Suisse. He will be earning half that [$125,000!] in his new job away from Wall Street. It was either that or sell the house with its $3,000 monthly mortgage.

At 41, Fran is the caretaker of their daughters, Gabriella, 6, and Isabella, 4. In the last five months she has gone back to her daughter-of-a-mechanic mentality. She canceled magazine subscriptions and expensive cable — and stopped buying soft toilet paper.

“Growing up, my mom used to buy the scratchiest toilet paper, and when we complained she would say, “When you get your own job, you buy the expensive type,’ ” Fran says. “Well, we’re back to the scratchy stuff.”

Scratchy Stuff??? She laments having to downgrade her toilet paper, but still manages to stay in a house with a $3,000 note. Suggestion to Mrs. Alvarez: Don’t want to give up the soft stuff? Just tough it out for a year or two (and if you need to, spend some time visiting high end public restrooms, say in hotels, or check in to those mid-level hotels and motels while on vacation) then when real estate values have stabilized, and possibly recovered, somewhat, sell the house that you paid too much for in the first place, buy something you can afford, and get a conventional loan, at reasonable, realistic terms. And thank what ever entity that is sacred to you that your family is no longer a part of the unrealistic greed of Wall Street.

News flash for the Wall Street strivers (a sub-species of the American Conspicuous Consumer) — Eventually there is a price that has to be paid for every thing, quit your whining and accept it like the rest of us and make greed in your life a distant memory.

On another, but somewhat related subject:

Speaking of toilet paper, get ready for the 2008 Loo Of The Year Awards brought to us by our always practical cousins across the pond. For more on the Loo Awards faithful readers may take a gander at the post at BFD Blog! about the 2007 awards.

Perhaps the poor Wall Street refugees can check out the Loo Awards when they come out this year and find themselves some nice clean, restrooms, with plenty of soft toilet paper that meets their standards.

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Some very smart people:

The stock market opened strongly yesterday after having a short breather over the weekend. Some really smart people did not take the weekend off, however. Dozens of financial ministers, Grand High Poobahs and the rich and famous who made it into government, converged on Washington to decide what to do about the current world wide economic crisis. The U.S. will buy stock in banks, as Asia and Europe’s strong leadership raised overseas stock markets’ confidence.

European Leaders Meet as More Measures Extended: Government leaders from the major European Union members gathered in Paris on Sunday to discuss their collective response to the financial crisis — from Newsgator What every leader in the world is dealing with is a staggering amount of debt being piled up the United States. We cannot get our minds around the magnitude of each new set of figures brought forth in each new day’s news. So I have been doing some reading, as perhaps many of you have, also. Todays’ post is to share what I have discovered, thanks to surfing. and thanks to my regular contributor, Jon’s e-mail links (marked:#).

During tough times it is natural to look for wisdom from people smarter than we are. That is why Paul Krugman and others like him have been writing and speaking to hungry audiences swirling in insane headlines. This is a happy headline: Economics Nobel is won by Paul Krugman trumpets the New York Times abut their Op-Ed star. The blogosphere’s progressives seemed happy as clams, for example, (Krugman Wins Nobel in Economics by egregious 10/13/08 at Firedoglake.

We also look to really smart people who know how to write to our sad souls. To these “worst of times,” as Garrison Keillor# calls them, comes one of my favorites. Keillor, my prairie home companion, said on October 8, 2008:

We are a stalwart and stouthearted people, and never more so than in hard times. People weep in the dark and arise in the morning and go to work. The waves crash on your nest egg and a chunk is swept away and you put your salami sandwich in the brown bag and get on the bus. . .

If you could only read one article on the current economic crisis, I recommend this one. “States warned about impending mortgage crisis#– Bush administration, financial industry thwarted efforts to curb greed” at Business Week (via MSNBC - 10/10/08), by Robert Berner and Brian Grow. This is a must read 3-page article for all of us trying to find out what was behind such a massive meltdown of governance. To quote just a bit:

A number of factors contributed to the mortgage disaster and credit crunch. Interest rate cuts and unprecedented foreign capital infusions fueled thoughtless lending on Main Street and arrogant gambling on Wall Street. The trading of esoteric derivatives amplified risks it was supposed to mute.

One cause, though, has been largely overlooked: the stifling of prescient state enforcers and legislators who tried to contain the greed and foolishness. They were thwarted in many cases by Washington officials hostile to regulation and a financial industry adept at exploiting this ideology.

The Bush Administration and many banks clung to what is known as “preemption.” It is a legal doctrine that can be invoked in court and at the rule-making table to assert that, when federal and state authority over business conflict, the feds prevail - even if it means little or no regulation.

One of the most important reasons for my reading has been to try to put some mental borders around the size of the problems we face. In this article, five prominent economists share their thoughts on what’s happening and how bad the situation really is. It is titled, “The End of American Capitalism#? — 5 Short Takes on Where the Financial Crisis Might Be Headed.” AlterNet published this great article from Aljazeera, (10/7/08). I am fascinated, by the way, that we have to read about our own country in Aljazeera.

A few years ago, I was also fascinated when Francis Fukuyama has his miraculous conversion to being smart again, from being in Neocon World. Here’s his latest and it is just wonderful. He begins, “Along with some of Wall Street’s most storied firms, a certain vision of capitalism has collapsed. How we restore faith in our brand: In “The Fall of America, Inc.,#” by Francis Fukuyama, from Newsweek (10/4/08), he concludes,

The unedifying response to the Wall Street crisis shows that the biggest change we need to make is in our politics. The Reagan revolution broke the 50-year dominance of liberals and Democrats in American politics and opened up room for different approaches to the problems of the time. But as the years have passed, what were once fresh ideas have hardened into hoary dogmas. The quality of political debate has been coarsened by partisans who question not just the ideas but the motives of their opponents. All this makes it harder to adjust to the new and difficult reality we face. So the ultimate test for the American model will be its capacity to reinvent itself once again. Good branding is not, to quote a presidential candidate, a matter of putting lipstick on a pig. It’s about having the right product to sell in the first place. American democracy has its work cut out for it.

Trusting that I will not offend anyone, I cannot help but include this little snippet in a post about very smart people. It is headlined, “Maybe We Should Blame God for the Subprime Mess#,” and written by David VanBiema (10/3/08) at Time, Inc. To quote the opening:

Has the so-called Prosperity gospel turned its followers into some of the most willing participants - and hence, victims - of the current financial crisis? That’s what a scholar of the fast-growing brand of Pentecostal Christianity believes. While researching a book on black televangelism, says Jonathan Walton, a religion professor at the University of California at Riverside, he realized that Prosperity’s central promise - that God will “make a way” for poor people to enjoy the better things in life - had developed an additional, dangerous expression during the subprime-lending boom. Walton says that this encouraged congregants who got dicey mortgages to believe “God caused the bank to ignore my credit score and blessed me with my first house.” The results, he says, “were disastrous, because they pretty much turned parishioners into prey for greedy brokers.”

To conclude, it seems logical to assert that we will need some very smart people to get us out of this mess, starting with Barack Obama. The following brutally honest article makes my point that we need the smartest person we can find to lead us forward. “Bush binges; his successor will pay,” by Jim Vandehei and Mike Allen at Politico.com (9/28/08). To quote, a bit extensively:

Barack Obama says a John McCain victory would amount to a third term of the Bush presidency. What he doesn’t say: an Obama victory would, too.While both nominees love to talk about their big agendas for change, whoever wins will take office with his obligations defined and options constrained by what Bush dumps on his lap.

The focus right now - and probably for many months to come - is the bailout binge aimed at saving our financial system. All told, the government will likely put more than $1 trillion on the line (with hope that the money will be recouped down the road).

Then there are the two wars, in Iraq and Afghanistan. Their combined cost is fast approaching $1 trillion, too - and both will eat up the time and budgets of the next president.

Then there is also the prescription drug benefit Bush added to Medicare. It carries a projected price tag of nearly $700 billion over 10 years and serves as a powerful reminder of how big - untenably big, many experts say - our entitlement programs have grown.

None of that spending was cooked into the federal budget when Bush took office eight years ago, leaving a budgetary hole almost too deep to comprehend. It will tie the hands of President McCain or President Obama in ways neither candidate has reckoned with yet on the campaign trail.

“It’s really a federal fiscal catastrophe in coming years,” says Chris Edwards of the Cato Institute, a libertarian-oriented think tank. “With all this stuff coming up now, it’s massive, big decisions the next president is going to have to make.”

(Cross-posted at The Reaction.)

My “creativity and dreaming” post today is at Making Good Mondays.

Technorati tags: news news and politics politics international economy bush

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Activists still in a box

“We are in a box. The United States’ current economic crisis has four corners, just like any regular box,” was how I framed it in my Friday post, “Squaring off.” Again today, activists — people who are trying to influence what Congress does about the financial crisis — are boxed in by fears#, by anger, by confusion, and by disappointment. Today’s post examines how those prevailing emotions are driving what Democrats, Republicans, plain citizens and the power elites are doing to respond to the Bush administration’s demands*. Activists may have set new records this week, as they called* and e-mailed their Representatives.

Of two minds, with an uncomfortable feeling of ambivalence – I really like what Rep. Dennis Kucinich (D-Ohio) said in his recent e-mail about what really should be done: “We are told that we must stabilize markets in order for the people to be protected. I think we need to protect peoples’ homes, bank deposits, investments, and pensions, to order to stabilize the market.” I also like what Rep . Chris Shays (R-Conn) said in an e-mail on the other side of the argument: “While this is not 1929 all over again, it could be if we step aside and let the wonders of the market work its will in this environment. We can’t let the foolishness and greed on Wall Street bring down Main Street; at least I don’t intend to.” Perhaps this ambivalence is what kept me from trying to call members of Congress. But a huge unknown number of people had no such problem with mixed feelings. Their fierce opposition meant that, as reported by by Paul Kiel, ProPublica - 9/30/08, “Despite Lobbying, Popular Opposition Sinks Bailout Bill”. And now there is a desperate GOP spin going on to shift the blame.

Democrats in the Senate did not let disappointment immobilize them. An article atPolitico.com headlines an edgy reality: ”Bailout not dead yet,” by Ryan Grim & Martin Kady II, 9/30/08. To quote:

Senate leaders have decided to take up the failed House version of the $700 billion economic rescue bill, and plan to add a widely supported change in the Federal Deposit Insurance Corp. caps.

In what is shaping up to be yet another historic vote, presidential candidates Barack Obama and John McCain will return to Washington tonight for a late night vote.

Sen. Charles Schumer (D-N.Y.), embraced the idea as well, but sought to give Reid credit for attaching the FDIC measure and a widely popular tax extenders bill to the bailout.

“I’m getting to the point in my life where I can’t start over“ signals a kind of resignation in the story of how fast the situation has evolved in just a few hours. Now people are looking at “a second chance (and thoughts) on the House bail-out vote,#” in Time (10/1/08). To quote:

Representative Elton Gallegly, 64, a California Republican . . . says he doesn’t regret his “No” vote. Gallegly is adamant that the House must pass a bill to stabilize the nation’s fragile financial markets. Whereas phone calls to his office were once running 40 to 1 against the bill, now they’re “a mixed bag . . .”

It’s amazing what a 778-point drop in the Dow Jones Industrial Average, wiping out $1.2 trillion in equity, can do to change public opinion. An ABC News/Washington Post poll taken following the failed vote showed that 88% of Americans are concerned that the collapse of the bill could worsen the economic turndown and that 51% are confident that a bill will eventually pass. And where the people go, politicians very quickly follow. Most members explained their votes opposing the bill Monday as a reflection of their constituents’ anger about a rescue package for Wall Street. “Since the vote, it’s about half and half,” Representative Tim Murphy, a Pennsylvania Republican who voted against the bill, says of the calls coming into his office. “Half say, Do something - I’m worried about my business or my retirement; and the other half still say, Don’t vote for the bailout.”

Though we plain citizens remain anxious, angry, confused and disappointed, I am not sure that we can change now. I feel that the weight of influence has now shifted to the power elites, the investor class, such as the U.S. Chamber of Commerce, etc. Regarding who’s likely to get the second chance, I conclude this post with a comment from Pseudocyants from my yesterday’s post at S/SW, that presents a logical prediction by this reader, along with some good advice. To quote:

Barron’s is attempting to set-up a soft-landing for the Republicans who will end up voting for the next version of the bail-out:
—————-[
After the House of Representatives Monday dramatically rejected legislation to establish a $700 billion rescue package for the financial system and helped to trigger more than $1 trillion loss in the value of U.S. stocks, Congress worked Tuesday to put together a bill that could gain passage, perhaps by the end of the week.

What changed? Reports say that House members, who previously had been besieged with messages from constituents who reacted with blind anger over the prospect of laying out $700 billion in what they saw as a bailout for Wall Street fat cats, heard a very different tune Tuesday. America's investor class reacted just as angrily at the losses suffered in their retirement and college-savings accounts as what they saw as the result of the House defeat of the bill.

Randall W. Forsyth , "Congress Reads the Returns -- of Minus $1 Trillion", Barron's, October 1, 2008
]—————-

Mighty broad definition of the “investor class”, if you ask me. In reality, the investor class are those who are pissed off about how big a percentage of their wealth now needs to be expended purchasing their monocle polish.

A great number of the persons opposed to the bail-out lost money in their 401-Ks and children’s college funds. It ain’t gonna be the Democrats would walked after the ACORN initiatives were excluded from the package who will return with a yea vote, because ACORN is off the table. It just won’t do for the “investor class” if po’ folk get a piece of the bail-out pie.

The Barron’s article goes on to describe the mark-to-market accounting rules required by Sarbanes/Oxley as a “relatively esoteric matter”. Really? A financial institution having to mark their assets to present day valuations is called transparency, and if this passes, there will be more trouble down the road, guaranteed.

My prediction is that there will be a bail-out passed by no later than next Monday, and that many of the Republicans who voted no previously will be onboard. It will be billed as bipartisan cooperation. Whenever the word bipartisan is mentioned in the same sentence as $700 billion, go and put on your best pair of steel trousers, because politicians are about to tear you a new one.

The proper way to handle this crises is to force all corporations who need government funding to completely and honestly mark down their bad debt publicly, forcing their share price to tank down to the real market value. Then whatever monies they receive, the Federal Government should receive stock warrants on a dollar for dollar basis at that value. As soon as the market stabilizes, and the Government is able to realize a profit from these warrants, they should be sold to the highest bidders at open auction, and the monies derived from these sales to be placed directly into the treasury, not siphoned off into pet projects. If Congress played free-market hardball with the financial corporations, most would suddenly discover new avenues of previously untapped investment capital, and would no longer be crying for a hand-out. Never extend credit to a lousy gambler. It’s like giving money to a junkie.

Additional References:

• “Breaking on the web – Wall Street crisis edition.” From ProPublica
• “History of U.S. government bail-outs” a fascinating “cloud” chart in color, fromProPublica
• “18 Tough Questions and Answers#” from Time Magazine
• “American financial crisis sparks German schadenfreude#” from The Local

Hat Tip Key: Regular contributors of links to leads are “betmo*” and Jon#.

(Cross-posted at The Reaction.)

My “creativity and dreaming” post today is at Making Good Mondays.

Technorati tags: news news and politics economic crisis congress wall street

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Democrats will not always be successful

. . . in cleaning up Republican messes. There are times when the stinky pile is too high, too wide and too deep. This was the case with the Wall Street Bail-Out Bill, that was defeated yesterday by reluctant Republicans, according to the Memeorandum lead from the NYT. Stocks plunged at the news the WSJ reported: ” The Dow Jones Industrial Average plummeted 777.68 points, its biggest one-day drop in history.” The vote in the House was 205-228. To quote further from Congressional Quarterly, 

Despite intensive lobbying by congressional leaders and the White House, the House rejected an unprecedented $700 billion bailout plan for the financial system.

The 205-228 vote torpedoed a bipartisan compromise and sent the U.S. stock market down sharply. But the immediate falloff was not as severe as some had feared; the Dow Jones industrial average was off roughly 500 points about 15 minutes after the vote.

The startling rejection of the financial rescue proposal was a stunning defeat for the White House and congressional leaders from both parties. It was assured when House Republicans dug in their heels, refusing to support the plan.

House Democratic leaders had long insisted that a majority of both parties would be required to pass the bill, and House Republican leaders proved unable to deliver of their caucus’ majority. Instead GOP members voted against it by a 2-to-1 ratio.

There is plenty of blame to go around. Senator McCain gets blame from pundits for his negotiations grand-standing. Senator McCain blames Senator Obama. House Republicans blame Speaker Nancy Pelosi for hurting their feelings in her floor speech before the vote. Our current president said he is “very disappointed.” House Democrats blame Republicans for not scuffling up their share of necessary votes. Among the pundits you can find ones of every stripe to side with each one of the blamers, depending on their biases. David Sirota was prescient about the bill’s failure.

House members who voted against the bill, speaking on the floor later, largely avoided blaming. Rep. Marcie Kaptur (D-Ohio) credited the people and the Constitution, saying that’s how democracy is supposed to work. Many had felt that it was a mistake all along, including Rep. Dennis Kucinich. Several mentioned alternative interventions that the government could take with tools already present in the law. Several said that the SEC should revamp their accounting rules to accomodate the actual value realities of the troubled instruments. Others suggested ways that the taxpayers could be held much less at risk, and still solve the credit freeze.

Almost all those voting “no,” the pundits reported, were in very tough political races. For some reason they got the idea that the people of the United States disapproved of the measure with good reason. I was always of two minds on the question. On the one hand the economic arguments were powerful warnings that some things were terribly wrong that would quickly trickle down to all of us. And on the other hand there were several things inherently erroneouswith the Bush administration’s approach. Paulson’s 3-page package consisted of demands rather than requests; announced terms, rather than consulted; and made assumptions about the amount of money the American public could stomach as a bail-out for “those high-flying rich guys from Manhattan.” What Paulson and Bernanke thought would be a decent offer of help to Wall Street, felt like an obscene amount to hurting people on Main Street, to use the cliche.

Not everybody knows what they will do next, though Ian Welsh at Firedoglake says, “Give Paulson 150 Billion and Come Back In January and Do it RIGHT (And here’s how to do it right).” Makes sense to me. Professor James Petras has a number of good ideas also.

(Cross-posted at The Reaction.)

My “creativity and dreaming” post today is at Making Good Mondays.

Technorati tags: news news and politics politics congress

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Protest against the Bailout in NYC..with pictures!

First, as of today, Weathervane McCain had NOT read the bailout plan he now says he doesn’t support. Its all of two and a half pages!

Next Jeremy Scahill has the photos below up on Alternet of todays protest held on Wall Street.

CNN has the following article up about todays protests:

The public backlash against the Bush administration’s proposal to use tax dollars to bailout Wall Street spilled into the streets Thursday.

“People all over the country are up in arms about this,” said David Elliot, a spokesman for grassroots advocacy group UsAction. “Our members are livid, and they’re hitting the streets.”

TrueMajority.com, an online forum for activists, said its members had organized 251 events in more than 41 states to protest the bailout.

Several other grassroots organizations were involved in the protests, including Democracy for America, the Association of Community Organizations for Reform Now (Acorn) and labor unions.

A rally organized by the New York Central Labor Council took place this afternoon on Wall Street near the New York Stock Exchange. That was followed by a more informal protest that began to take shape on Wall Street shortly after the financial markets closed.

I love a good protest. Hat tip to Betmo for the 411 on the Wall Street rally/protest.

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A phenomenal nine days

The deal between the administration and Congress is far from set – Even though it truly feels like the sky is falling, lawmakers need to resist the pressure that will be enormous to make an agreement. If a solution is to be found to end the crisis, it must be able to pass Congress. But some members of Congress have their backs up. The assumptions under which the financial sector and the administration are operating have been and continue to be seriously flawed, exhibiting a sense of entitlement that is amazing. “Democrats battling to add restrictions to $700 billion bailout” at McClatchy today. To quote:

“The Bush administration has called on Congress to rubber-stamp its bailout legislation without serious debate or efforts to improve it. That will not happen,” said Senate Majority Leader Harry Reid, D-Nev.

People close to the negotiations said that at least three areas of disagreement remained: limits on executive compensation at troubled firms, the terms of oversight of the Treasury’s management of the bailout and whether taxpayers would gain an equity stake in companies that benefit from the bailout so that taxpayers could share in the firms’ later profits.

Perhaps at the end of the week something will have happened, but many urge that the administration’s plan has serious policy deficits, lacks accountability and likely badly underestimates what the actual bailout cost will be. “As Hill Debates Bailout, Wall St. Shifts Continue — Paulson, GOP Oppose Democrats’ Proposal to Limit Executive Pay.” The Washington Post (9/23/08) has the story, from which I quote:

Senate Banking Committee Chair Christopher Dodd says it might be possible may meet approve the bailout by Friday, but it might take longer. . . . Congressional Democrats considering the Bush administration’s emergency plan to shore up the U.S. financial system countered with their own demands yesterday, presenting draft legislation giving the government power to cut salaries of chief executives at firms that participate in the bailout and slash severance packages for their top management.

As an example of what some people in Congress are saying, I quote from an article Rep. Bernie Sanders wrote a few days ago (9/19/08) at The Huffington Post: ”Billions for Bailouts! Who Pays?#” To quote:

The current financial crisis facing our country has been caused by the extreme right-wing economic policies pursued by the Bush administration. These policies, which include huge tax breaks for the rich, unfettered free trade and the wholesale deregulation of commerce, have resulted in a massive redistribution of wealth from the middle class to the very wealthy.

In my view, we need to go forward in addressing this financial crisis by insisting on four basic principles. . . Specifically, to pay for the bailout, which is estimated to cost up to $1 trillion, the government should:

1) The people who can best afford to pay and the people who have benefited most from Bush’s economic policies are the people who should provide the funds for the bailout.

a) Impose a five-year, 10 percent surtax on income over $1 million a year for couples and over $500,000 for single taxpayers. That would raise more than $300 billion in revenue;
b) Ensure that assets purchased from banks are realistically discounted so companies are not rewarded for their risky behavior and taxpayers can recover the amount they paid for them; and
c) Require that taxpayers receive equity stakes in the bailed-out companies so that the assumption of risk is rewarded when companies’ stock goes up.

(2) There must be a major economic recovery package which puts Americans to work at decent wages. . . (3) Legislation must be passed which undoes the damage caused by excessive de-regulation. . . (4) We must end the danger posed by companies that are “too big too fail,” that is, companies whose failure would cause systemic harm to the U.S. economy.

A little heads up about what the Republicans will argue about the cause of the crisis comes from Josh Marshall* at TPM: Quote: “Democrats created the crisis by forcing banks to give too many loans to black people and other minorities.” And Think Progress points out that the McCain Campaign Has Strong Ties To Corporate Lobbyists At Center Of Bailout.

This bears repeating as Congress and the White House negotiate – “Meltdowns and Morality” by Ed Kilgore from The Democratic Strategist newsletter of 9/15/08. To quote:

As we all watch anxiously to see what the various maneuvers of the Fed and the Treasury and Wall Street mean for the rest of us, Matt Yglesias has made a simple but profound point that tends to get lost at times like these:

Unlike the guy who runs Lehman Brothers, the guys who clean the bathrooms in the Lehman Brothers office have, as best one can tell, been doing an excellent job. And yet if the company going under results in everyone involved losing their jobs, the guy who runs Lehman will wind up being better off than the guys who clean the bathrooms. This is because in the United States of America, hard work is the way to get ahead.

“Confronting Economic Meltdown” a forum – The Washington Note’s Steve Clemons is moderating a meeting this morning on at the New American Foundation. Participants include Congressman Walter Jones, former Senator Fritz Hollings and a panel of experts. (Link to streaming live). At the same time Ben Bernanke and Hank Paulson are testifying about the economy before the Senate Banking Committee.

Background Stories — a couple of analytical pieces fro those who need to know a bit more.

• “Global financial meltdown#” comes from Global Research (9/19/08).
• A Yahoo! News story headlined - “Radical bailout plan has a jawdropping price tag#.”

Hat Tip Key: Regular contributors of links to leads are “betmo*” and Jon#, who said, “The changes that Phil Gramm et.al. put in place are responsible for all this financial mess. . . Since we all are part owners of AIG, do we get a discount on our insurance?”

(Cross-posted at The Reaction.)

My “creativity and dreaming” post today is at Making Good Mondays.

Technorati tags: news news and politics economy congress meltdown finance

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Where were the regulators?

Wow! Last weekend will surely go down in the economic record books. According to the New York Times yesterday, a group of major banks is pooling $7 billion each to offset crises similar to the Lehman Brothers expected bankruptcy, indicating that,”Washington officials and Wall Street have grave concerns about future losses.” The U.S. Treasury and the Federal Reserve appear to be taking a harder line and temporarily relaxing some regulations at the same time. The Fed will accept more high risk collateral, “potentially putting more taxpayer money at risk.” The Federal Reserve has loosened the emergency loan standards for Wall street investment banks. In a stunning related story to that of the fall of Lehman Brothers, Merrill Lynch has agreed to be purchased by Bank of America.

The question on many lips is, where were the regulators? The answer is “lais·sez faire n.” Welcome to the wonderful world of rule by corporatocracy, begun by Ronald Reagan’s era of deregulation decades ago. What disappeared more recently under the Bush administration was the bedrock of ethics and plain common sense. According to About.com., laissez faire means:

An economic theory from the 18th century that is strongly opposed to any government intervention in business affairs. Sometimes referred to as “let it be economics.”Investopedia Says:
People who support a laissez faire system are against minimum wages, duties, and any other trade restrictions. Laissez faire is French for “leave alone.”

1. An economic doctrine that opposes governmental regulation of or interference in commerce beyond the minimum necessary for a free-enterprise system to operate according to its own economic laws.

Where was the Department of Justice hiding for all these years? For a while it was headed by Bush crony Alberto Gonzales, who was busy helping our current president expand his unitary presidency ambitions. Meanwhile nobody was watching the store. For example, an investigation by Paul Kiel from ProPublica was published on 9/8/08, with this headline: “DoJ: Credit Suisse Brokers Lied About Subprime Securities.” To quote (author’s links):

In one case, according to an SEC complaint against the pair also filed last week, they used $20 million of a client’s money to buy a security backed by mobile home loans. But in an e-mail to his client, Bulter changed the name of the security from “Greenpoint Credit” to “Greenpoint Student Assistance.” . . .

This is the second criminal case on Wall Street involving the subprime meltdown. Earlier this summer, the Justice Department filed its first major indictment, accusing two Bear Stearns hedge fund managers of misleading investors. The FBI is currently investigating 22 corporations involved in the subprime mortgage industry, FBI spokesman Bill Carter said. The FBI hasn’t named them. (See our overview of subprime-related investigations.)

Ethics violations* were in abundance in the Bush administration, where government regulation was an anathema. Investigative journalist from ProPublica, Paul Kiel wrote this on 9/10/08: “New Report Details Wide-Ranging Ethics Scandal at Interior Dept. Quote, “According to a series of reports sent to Congress today by the department’s inspector general, Interior employees rigged oil contracts, took money as oil consultants, had sexual relationships with oil and gas company representatives, and engaged in other misconduct.” The same story by Amanda on 9/11/08, was posted on AlterNet “Bush Administration Officials Rewrote Ethics Rules to Accommodate Partying#.” To quote:

According to the new Interior Department Inspector General (IG) report, nearly a third of the Denver Minerals Management Service’s 55-person office “received gifts and gratuities from oil and gas companies.” Several employees have tried to claim that they were unaware of federal ethics guidelines.

. . . RIK officials often bragged about the “RIK way of doing business,” which aimed to “be a part of industry.” In the summer of 2006, RIK employees wrote up a document titled, “Initiative to Clarify Guidance for RIK Interaction with Industry,” which would codify their “uniqueness.” In short, RIK officials wanted to rewrite the ethics rules to cover up their misdoings.

. . . In a statement today, House Speaker Nancy Pelosi (D-CA) criticized “how cozy the relationship between Big Oil and the Administration’s regulators have been,” which has “cheated the American taxpayer out of billions of dollars owed them by the oil companies.”

The ripple effect is being felt all over the country and will ultimately impact the upcoming presidential election, says Politico.com. You can bet that Senator McCain would continue with the cozy corporatocracy, despite any protestations to the contrary. Those of us who are a bit older remember McCain’s involvement with the Charles Keating scandal that resulted in the government bail-out of the savings and loan industry. My belief is that Senator Obama will demand much more accountability. By Mike Allen, the opinion is headlined, “Bank meltdown wallops campaigns.” To quote:

America’s banking instability could upend the final 50 days of the presidential campaign, with both candidates forced to confront a calamity that has gotten only glancing attention during the first 20 months of the race for the White House.

Red flags about the nation’s economic infrastructure have been popping up at least since the collapse in March of the investment bank Bear Stearns. But neither Sen. John McCain (R-Ariz.) nor Sen. Barack Obama (D-Ill.) has talked in detail about the potential consequences for voters and the government.

Until now, the crisis seemed like a confusing Wall Street story. That all ended with the fast-moving events of Sunday, which The New York Times called “one of the most extraordinary days in Wall Street’s history.” A CNBC special report on Sunday night called it “a complete realignment of Wall Street.”

A few senators are still plugging away trying to make things better. The news from The Raw Story (9/10/08) is that, “Sen. Feingold to hold hearing on ‘Restoring the Rule of Law’#.” Several planned witnesses include various experts, law professors, historians and advocates to provide input as to what remedial actions the next president and Congress should take. The hearing will be held September 16, so watch for it tomorrow. To quote:

Senator Russ Feingold (D-WI), Chairman of the Senate Judiciary Committee’s Constitution Subcommittee, has announced a hearing on how to best prepare the next president to foster an environment of accountability and responsible use of power seen lacking in the years President Bush and Vice President Cheney have been in office.

Next week the Subcommittee will hear testimony from legal and historical experts on what actions the next president and Congress need to take in order to “repair the damage done by the Bush Administration to the rule of law.” The purpose of the hearing is to give the next president the “full range” of proper guidance in restoring and maintaining checks and balances in areas such as wiretapping, interrogations, government secrecy, violations of privacy, detention policy, proper use of executive power and efforts to not mislead Congress.

The country will be watching and holding its breath that the Wall Street woes will not end in a complete meltdown of our financial system. Would that the regulators and ethics watchdogs had made appearances long ago when problems were apparent. It did not have to reach this level of crisis. Credit Republicans for this, as you are holding your breath — and your nose.

Hat Tip/Key to regular contributors Jon-# and “betmo“-* for the marked links.

(Cross-posted at The Reaction.)

My “creativity and dreaming” post today is at Making Good Mondays.

Technorati tags: news news and politics politics bush mccain wall street financial economics

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