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Ok so the bailout was rejected, or whatever (pg. 10)
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| jerZ07002 |
| quote: | Originally posted by MisterOpus1
Quick question to those more knowledgeable in this field - why can't we just bail out those millions subprime lenders who are losing their homes instead of bailing out the banks who's lending practices got us in this mess in the first place? If we bail out the lenders, is it possible the bank mess with better regulations (or at least with better enforcement of those regulations) would take care of themselves and therefore the market would eventually correct and take care of itself?
Or is it more complicated than that? |
i take it you mean subprime borrowers. Theoretically you can attack the problem on two fronts, the lender side or the borrowers side. You say it was the lending practices that got us into this mess in the first place. You should remember that the genesis of the problem is the subprime borrowers inability to actually pay the mortgages. The problem starts with delinquent payments.
The way i see it a bailout of borrowers would be a true bailout in the traditional sense. We would be giving borrowers money with no expectation of seeing any return. The 700 billion would simply go to pay mortgages of borrowers, and the banks would make get their entire profits. Thus, we would be bailing out both the borrowers and the banks. By purchasing the assets from the banks instead, we are truly rewarding either party because the mortgages are being purchased at huge losses for the banks, and the borrowers are still paying what they can. This plan isn't a true bailout in the traditional sense because there is an expected return, and neither party is getting anything for free. The governments role is to put itself in the shoes of the banks. Because the government has the timeline to wait for the value of the CDOs to increase, the plan shouldn't really be seen as a bailout, but rather a strategic purchase of assets (on a macro and micro level) with some expected return. |
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| Shakka |
| quote: | Originally posted by MisterOpus1
Quick question to those more knowledgeable in this field - why can't we just bail out those millions subprime lenders who are losing their homes instead of bailing out the banks who's lending practices got us in this mess in the first place? If we bail out the lenders, is it possible the bank mess with better regulations (or at least with better enforcement of those regulations) would take care of themselves and therefore the market would eventually correct and take care of itself?
Or is it more complicated than that? |
The problem being addressed now is one of trying to get credit to flow again. Thanks to poor oversight and horrible standards in the underwriting and securitization processes, banks and other institutions (insurance agencies for one) have balance sheets that are riddled with tainted/toxic assets (MBS, ABS, just think BS!). The government wants to buy up the bad assets (the trick is at what price, and how undercapitalized an institution might be as a result of selling assets at deeply discounted levels) and take them out of the system and dispose of them over time (hopefully as the situation improves, the values will also improve and taxpayers will win, yay!). Think of the government as using it's own balance sheet as a parking lot for piles of so that the can't get all over the rest of us).
The result is hopefully that banks will trust eachother more and will be more willing to extend credit again at favorable terms and that will get the economy moving again. As of now, with credit markets frozen, the economy is on the verge of crumbling and coming to a halt).
As I see it, there will still be problems as people's mortgages reset, affordability remains tough, and housing inventory levels remain excessive. We have lots of problems, but the hope is that getting credit to flow again will really help to get things moving (i.e. unclog the plumbing...).
Also, since mortgages have been sliced, diced cut up and divvied up into so many tranches of CDOs, MBS, ABS, etc., it is almost impossible for someone to go out there and actually buy a whole mortgage and restructure it or work it out, etc. |
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| Jabberwocky |
| So what's happening now? I understand changes were made to the initial plan, and now a vote will supposedly be cast again this Friday? |
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| Shakka |
| What's happening now is the bill is unfortunately getting loaded up with pork and being "Christmas Treed" in an attempt to get more people on board to pass it. Politicians make me sick. This is probably one of the most important (if not the most important) pieces of legislation they'll ever vote on and they still have to play politics with it, despite promising us all that they would move swiftly and in a bipartisan manner. |
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| jerZ07002 |
| quote: | Originally posted by Shakka
What's happening now is the bill is unfortunately getting loaded up with pork and being "Christmas Treed" in an attempt to get more people on board to pass it. Politicians make me sick. This is probably one of the most important (if not the most important) pieces of legislation they'll ever vote on and they still have to play politics with it, despite promising us all that they would move swiftly and in a bipartisan manner. |
i love the attachment of 115 billion in tax breaks. What a ing joke! Congress keeps digging the hole deeper and deeper. there needs to be rules about how much content can go into a bill and what can be attached. a bill that has the primary goal of dealing with a certain issue shouldn't have an unrelated rider provision. it's getting sickening. |
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| pmoisse |
Now, while the more I read about the "bailout" thing makes me think it's not such a good idea, how in the can they just quietly pass a bill on domestic satellite surveillance that has almost the same pricetag without so much as a whisper?
wtf is this ? I don't have any direct vested interest in anything that happens, though I know that like everyone else, I will be misted with once it really hits the fan. But come on, is this really immediately necessary?
LINK
Satellite-Surveillance Program to Begin Despite Privacy Concerns
By SIOBHAN GORMANArticle
The Department of Homeland Security will proceed with the first phase of a controversial satellite-surveillance program, even though an independent review found the department hasn't yet ensured the program will comply with privacy laws.
Congress provided partial funding for the program in a little-debated $634 billion spending measure that will fund the government until early March. For the past year, the Bush administration had been fighting Democratic lawmakers over the spy program, known as the National Applications Office.
The program is designed to provide federal, state and local officials with extensive access to spy-satellite imagery -- but no eavesdropping -- to assist with emergency response and other domestic-security needs, such as identifying where ports or border areas are vulnerable to terrorism.
Since the department proposed the program a year ago, several Democratic lawmakers have said that turning the spy lens on America could violate Americans' privacy and civil liberties unless adequate safeguards were required.
A new 60-page Government Accountability Office report said the department "lacks assurance that NAO operations will comply with applicable laws and privacy and civil liberties standards," according to a person familiar with the document. The report, which is unclassified but considered sensitive, hasn't been publicly released, but was described and quoted by several people who have read it.
The report cites gaps in privacy safeguards. The department, it found, lacks controls to prevent improper use of domestic-intelligence data by other agencies and provided insufficient assurance that requests for classified information will be fully reviewed to ensure it can be legally provided.
A senior homeland-security official took issue with the GAO's broad conclusion, saying the department has worked hard to include many layers of privacy protection. Program activities have "an unprecedented amount of legal review," he said, adding that the GAO is seeking a level of proof that can't be demonstrated until the program is launched.
Homeland Security spokeswoman Laura Keehner said department officials concluded that the program "complies with all existing laws" because the GAO report didn't say the program doesn't.
Addressing the gaps the agency cited, Ms. Keehner said current laws already govern the use of intelligence data and the department has an additional procedure to monitor its use. The department will also work with other intelligence agencies to "ensure that legal reviews and protection of classified information will be effective," she said.
In response to the GAO report, House Homeland Security Committee Chairman Bennie G. Thompson of Mississippi and other Democrats asked Congress to freeze the money for the program until after the November election so the next administration could examine it.
But the bill Congress approved, which President George W. Bush signed into law Tuesday, allows the department to launch a limited version, focused only on emergency response and scientific needs. The department must meet additional requirements before it can expand operations to include homeland-security and law-enforcement surveillance.
The restrictions were "the most we could have required without a complete prohibition," said Darek Newby, an aide to Democratic Rep. David Price of North Carolina, who heads the House homeland-security spending panel.
But California Rep. Jane Harman, who heads a homeland-security subcommittee on intelligence, said that even limited funding allows the department to launch the program, providing a platform to expand its surveillance whether or not privacy requirements are met.
"Having learned my lesson" with the National Security Agency's warrantless-surveillance program, she said, "I don't want to go there again unless and until the legal framework for the entire program is entirely spelled out."
Rep. Thompson vowed to fight expansion of the program until privacy issues are further addressed.
Write to Siobhan Gorman at [email protected] |
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| Jabberwocky |
| quote: | Originally posted by Shakka
What's happening now is the bill is unfortunately getting loaded up with pork and being "Christmas Treed" |
:stongue:
I thought there were regulations to deter rider provisions? Hell, what do I know. Thanks for the responses guys. |
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| Shakka |
Fantastic!
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| pmoisse |
| ^ LOL! That's great |
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| pmoisse |
Sorry if this was posted already. Good read on potential conflicts of interest if actually true (I don't honestly know what to believe at this point though I lean more towards believing that greedy bastards like this are the rule rather than the exception)
LINK
The unexpected rejection by the US Congress of the Bush Administration financial rescue plan, TARP on September 29 has opened up the spectre for the first time of a 1931-style domino wave of worldwide bank failures. That is already underway across the US banking spectrum with the failure, nationalization or forced liquidation in the past two weeks of Fannie Mae and Freddie Mac, of the giant Washington Mutual mortgage lender, of the nation’s fourth largest deposit bank, Wachovia. That was on top of a wave of smaller bank failures that began with IndyMac in the spring. For some it is appealing and more simple to grasp the magnitude of these titanic events in the US-centered financial world by assuming it is all part of a pre-planned grand conspiracy by the Money Masters, what in the 1920s in the USA was termed the Money Trust, to control the entire financial world.
As the details of the present crisis reveal, there are huge ideological fault lines making for chaos and a potential meltdown of the Laissez Faire financial system. That present system, which was built on the back of Wall Street financial and banking deregulation since 1987 when Alan Greenspan, a devout follower and close friend of radical individualist Ayn Rand, became Wall Street’s man at the Federal Reserve for almost 19 years, is over now with the failure of the Henry Paulson $700 billion bailout scheme. Governments worldwide now face no alternative but to begin the painful process of putting the financial genie back in the bottle and re-regulating an out-of-control financial system. The failure of the UK Government and the US Government to address that fundamental issue is behind the present crisis of confidence.
A brief look at history
The Great Depression in Germany in 1931 began with a seemingly minor event—the collapse of a bank in Vienna, Creditanstalt, that May. For readers interested in more on the remarkable parallels between that crisis and that of today, I recommend the treatment in my earlier volume, A Century of War: Anglo-American Oil Politics and the New World Order.
That Vienna bank collapse in turn was triggered by a political decision in Paris to sabotage an emerging German-Austrian economic cooperation agreement by pulling down the weakest link of the post-Versailles system, the Vienna Creditanstalt. In the process, Paris triggered a series of tragic events that led to the failure of the German banking system over a period of several weeks. The post-1919 Versailles System, much like the post-1999 US Securitization System, was built on a house of cards with no foundation. When one card was removed, the entire international financial edifice crumbled.
Then, in 1931, there was an inept Brüning government in Germany, which believed severe austerity was the only solution, merely feeding unemployment lines to pay the Young Plan German reparations to the new Bank for International Settlements in Basle.
Then, in 1931 George Harrison, a Germano-phobe, was the inexperienced Governor of the powerful New York Federal Reserve. Harrison was a member of the anglophile Skull & Bones, the elite Yale University secret society which also included George H.W. Bush and George W. Bush as initiates. Harrison, who went on to coordinate the secret Manhattan Project on the development of the Atomic bomb under fellow Skull & Bones member, War Secretary Henry Stimson, believed the crisis had started not from abroad but with German bankers trying to make a profit at the expense of others.
Within weeks of rumor and jitters, the New York Bankers Trust, ironically today a part of Deutsche Bank, announced it would be forced to cut the credit line to Deutsche Bank and by July 1931 began to pull its deposits from all big Berlin banks. Harrison insisted the Reichsbank dramatically raise interest rates to stabilize things, only turning bad into worse as a credit crisis across the German economy ensued.
The Bank of England Governor, Montagu Norman, while somewhat more supportive of Luther argued that his friend Hjalmar Schacht was better suited to manage the crisis. On July 13, 1931, a major German bank, Darmstädter-und Nationalbank (Danat) failed. That triggered a general a depositors’ run on all German banks. The Brüning government merged the Danat with a weakly capitalized Dresdner Bank, and made large state guarantees in an effort to calm matters. It didn’t.
New York Fed governor, Harrison, who was personally convinced it was a ‘German’ problem, barked orders to Reichsbank chief Hans Luther on how to manage the crisis according to archival accounts. A foreign drain on Reichsbank gold reserves ensued.
The rest is history, the tragic history of the greatest most destructive war of the 20th Century, with all the suffering that ensued. At that time in history, the American banking elite saw itself, despite a stock market crash and Great Depression in America, as standing at the dawn of a new American Century.
The decline of the American Century
Today, in 2008, some 77 years later, a German Finance Minister stands before the Bundestag announcing the end of that American Century. Today the German government encourages a fusion of Dresdner with Commerzbank. Today Deutsche Bank, which some years ago acquired Bankers Trust in New York in a merger wave, appears to be in a stronger position than its American counterparts as Wall Street investment banks, some more than 150 years old as the venerable Lehman Bros., simply vanish in a matter of days. The American financial Superpower crumbles before our eyes.
In March 2008 there were five giant Wall Street investment banks, banks which underwrote Mortgage-Backed Securities (MBS), corporate bonds, corporate stock issues. They were not deposit banks like Citibank or Bank of America; they were known as investment banks—Morgan Stanley, Merrill Lynch, Goldman Sachs, Lehman Brothers, Bear Stearns.
The business of taking deposits and lending by banks had been split during the Great Depression from the business of underwriting and selling stocks and bonds—investment banking—by an act of Congress, the Glass-Steagall Act of 1933. The law was passed amid the collapse of the banking system in the United States following the bursting of the Wall Street stock market bubble in October 1929.
That Glass-Steagall act was a prudent attempt by Congress to end the uncontrolled speculative excesses of the Roaring Twenties by New York finance. It established the Federal Deposit Insurance Corporation to guarantee personal bank deposits to a fixed sum that restored consumer confidence and ended the panic runs on bank deposits.
In November 1999, after millions spent lobbying Congress, the New York banks and Wall Street investment banks and insurance companies won a staggering victory. The US Congress voted to repeal that 1933 Glass-Steagall Act. President Bill Clinton proudly signed the repeal act with Sandford Weill, the chairman of Citigroup.
The man whose name is on that repeal bill was Texas Senator Phil Gramm, a devout advocate of ideological free market finance, finance free from any Government fetters. The major US banks had been seeking the repeal of Glass-Steagall since the 1980s. In 1987 the Congressional Research Service prepared a report which argued the case for preserving Glass-Steagall. The new Federal Reserve chairman, Alan Greenspan, just fresh from J.P. Morgan bank on Wall Street, in one of his first speeches to Congress in 1987 argued for repeal of Glass-Steagall.
The repeal allowed commercial banks such as Citigroup, then the largest US bank, to underwrite and trade new financial instruments such as Mortgage-Backed Securities (MBS) and Collateralized Debt Obligations (CDOs) and establish so-called structured investment vehicles, or SIVs, that bought those securities. Repeal of Glass-Steagall after 1999, in short, enabled the Securitization revolution so openly praised by Greenspan as the "revolution in finance." That revolution is today devouring its young.
That securitization process is at the heart of the present Financial Tsunami that is destroying the American credit structure. Citigroup played a major part in the repeal of Glass–Steagall in 1999. Citicorp had merged with Travelers Insurance company the year before, using a loophole in Glass-Steagall that allowed for temporary exemption. Alan Greenspan gave his personal blessing to the Citibank merger.
Phil Gramm, the original sponsor of the Glass-Steagall repeal bill that bears his name, went on to become the chief economic adviser to John McCain. Gramm also went on to become Vice Chairman of a sizeable Swiss bank, UBS Investment Bank, in the USA, a bank which has had no small share of troubles in the current Tsunami crisis.
Gramm as Senator in 2000 was one of five co-sponsors of the Commodity Futures Modernization Act of 2000. A provision of the bill was referred to as the ‘Enron loophole’ because the it was later applied to Enron to allow them unregulated speculation in energy futures, a key factor in the Enron scandal and collapse. The Commodity Futures Modernization Act, as I described in my earlier piece in May, Perhaps 60% of Today’s Oil Price is Pure Speculation, allowed investment bank Goldman Sachs (coincidentally the former bank of Treasury Secretary Paulson), to make a literal killing in manipulating oil futures prices up to $147 a barrel this summer.
Paulson’s impressive interest conflicts
The actions of Treasury Secretary Paulson since the first outbreak of the Financial Tsunami in August of 2007 have been directed with one apparent guiding aim—to save the obscene gains of his Wall Street and banking cronies. In the process he has taken steps which suggest more than a mild possible conflict of interest. Paulson, who had been chairman of Goldman Sachs from the time of the 1999 Glass-Steagall repeal to his appointment in 2006 as Treasury head, had been one of the most involved Wall Street players in the new securitization revolution of Greenspan. Naming him to head the Government agency now responsible for cleaning up the mess left by Wall Street greed and stupidity was tantamount to putting the wolf in charge of guarding the hen house as some see it.
Paulson showed where his interests lay. He is by law is the chairman of something called the President's Working Group on Financial Markets, the Government’s financial crisis management group that also includes Fed Chairman Bernanke, the Securities & Exchange Commission head, and the head of the Commodity Futures Exchange Commission (CFTC). That is the reason Paulson, the ex-Wall Street Goldman Sachs banker, is always the person announcing new emergency decisions since last August.
Two weeks ago, for example, Paulson announced the Government would make an unprecedented $85 billion nationalization rescue of an insurance group, AIG. True AIG is the world’s largest insurer and has a huge global involvement in financial markets.
AIG’s former Chairman, Hank Greenberg—a close friend of Henry Kissinger, a former Director of the New York Fed, former Vice Chairman of the elite New York Council on Foreign Relations and of David Rockefeller’s select Trilateral Commission, Trustee Emeritus of Rockefeller University—was for more than forty years Chairman of AIG. His AIG career ended in March 2005 when AIG's board forced Greenberg to resign from his post as Chairman and CEO under the shadow of criticism and legal action for cooking the books, in a prosecution brought by Eliot Spitzer, then Attorney General of New York State.
In mid September, in between other dramatic failures including Lehman Bros., and the bailout of Fannie Mae and Freddie Mac, Paulson announced that the US Treasury, as agent for the United States Government, was to bailout the troubled AIG with a staggering $85 billion. The announcement came a day after Paulson announced the Government would let the 150-year old investment bank, Lehman Brothers, fail without Government aid. Why AIG and not Lehman?
What has since emerged are details of a meeting at the New York Federal Reserve bank chaired by Paulson, to discuss the risk of letting AIG fail. There was only one active Wall Street banker present at the meeting—Lloyd Blankfein, chairman of Paulson’s old firm, Goldman Sachs.
Blankfein later claimed he was present at the fateful meeting not to protect his firm’s interests but to ‘safeguard the entire financial system.’ His claim was put in doubt when it later emerged that Blankfein’s Goldman Sachs was AIG’s largest trading partner and stood to lose $20 billion in a bankruptcy of AIG. Were Goldman Sachs to go down with AIG, Secretary Paulson would have reportedly lost $700 million in Goldman Sachs stock options he had, an interesting fact.
That is a tiny glimpse into the man who crafted the largest bailout in US or world financial history some days ago, the failed TARP—Troubled Asset Relief Program—a proposed $700 billion financial stabilization scheme which, in Paulson’s original version would have allowed him or his Treasury successor to use $700 billion, with no oversight or accountability, to buy bad or worthless assets from financial institutions he deems worthy of help.
As respected economist, Nouriel Roubini pointed out, in almost every case of recent banking crises in which emergency action was needed to save the financial system, the most economical (to taxpayers) method was to have the Government, as in Sweden or Finland in the early 1990’s, nationalize the troubled banks, take over their management and assets, and inject public capital to recapitalize the banks to allow them to continue doing business, lending to normal clients. In the Swedish case, the Government held the assets, mostly real estate, for several years until the economy again improved at which point they could sell them onto the market and the banks could gradially buy the state ownership shares back into private hands. In the Swedish case the end cost to taxpayers was estimated to have been almost nil. The state never did as Paulson proposed, to buy the toxic waste of the banks, leaving them to get off free from their follies of securitization and speculation abuses.
Paulson’s plan, the one essentially rejected on September 29 by the House of Representatives, would have done nothing to recapitalize the troubled banks. That recapitalization could cost an added hundreds of billions on top of the $700 billion toxic waste disposal.
Serious conservative banker friends I know who went through the Scandinavian crisis of the 1990’s are scratching their head trying to imagine how crass the Paulson TARP scheme was. That crass and politically obvious bailout of Wall Street by the taxpayers, what some refer to as ‘Bankers’ Socialism—socialize the costs of failure onto the public, and privatize the profits to the bankers—is a major factor behind the defeat of the TARP compromise version.
But there is an added element. John McCain decided to boost his flagging Presidential campaign by trying to profile himself as a ‘political Maverick’ one who opposes the powerful Washington vested interests. He flew into Washington days before the TARP was to be approved by a panicked Congress and conspired with a handful of influential Republican Senate friends, including Banking Committee ranking member, Senator Shelby, to oppose the Paulson TARP. What emerged, with McCain’s backing, was a political power play that may well have brought the United States financial system to its knees, and McCain’s Presidential hopes with it.
Power and greed are the only visible juice driving the decision-makers in Washington today. Acting in the long-range US national interest seems to have gotten lost in the scramble. As I wrote last November in my Financial Tsunami five part series on the background to today’s crisis, all this could be foreseen. It is what happens when elected Governments abandon their public trust or responsibility to a cabal of private financial interests. It will be interesting to see if anyone in Washington realizes that lesson. Whatever next comes out of Washington, however, one thing is clear, as reflected in what German Finance Minister Peer Steinbrück told the Bundestag. This is the end of the world as we knew it. The American financial Superpower is gone. The only important question will be what and how will the alternative be.
F. William Engdahl is author of A Century of War: Anglo-American Oil Politics and the New World Order (Pluto Press Ltd.) and Seeds of Destruction: The Hidden Agenda of Genetic Manipulation (www.globalresearch.ca). He may be contacted through his website, www.engdahl.oilgeopolitics.net. |
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