While writing my fax to the Senate last night, I connected a few dots and realized something... we have been maneuvered into a double checkmate here:
- We "can't" simply let housing prices crash, because then all the credit default swaps instantly explode. The only way to clear CDS exposure is to force firms to come clean, but none of them will because they would instantly lose business to their stronger competitors. So in a perverse sense Paulson "needs" extraordinary powers to make these firms talk.
- Foreign investors are pissed at us for selling them piles of "AAA" crap. Even more so because some months ago, Congress passed a bill that just so happened to have a provision preventing foreigners holding fraudulent mortgage bonds from obtaining damages in court. My sense of the foreign reaction to the bailout proposal is "it is the USA's duty and obligation to fix this problem". If we don't give them some kind of recourse, we can probably expect a lot of dumped dollar holdings and a dollar crash, and probably World War 3 soon after.
(Sorry, I know it needs links, but I'm on deadline. Will re-post later.)
My fax to the Senate appears below the fold.
(Formerly titled My bailout letter to my Representative. This is too time-sensitive to wait another day for a new diary. All new material is in the update sections below.)
I just finished writing this and thought some of you might enjoy it. And if anyone is up late and has not pestered your Congress Critter yet, PLEASE DO! Feel free to use this as a template. (Full text after the fold.)
I am also faxing them some recent blog posts I felt were insightful and relevant:
(Update: Section 132 is the one thing that actually addresses the "crisis" and you could delete the whole rest of the bill. More explanation way below the fold.)
First, a scary thought: if the GOP was still in control of Congress, this bailout would have been passed, as originally proposed, last Friday.
Doing my evening Yahoo Finance news dump, and I immediately saw these three articles:
Berkshire buying at least $5 billion stake in Goldman Sachs
Bernanke: US should pay higher prices for troubled housing assets; cites long-term advantages
Dire warnings fail to sway senators on big bailout: Senators push back on bailout plan despite dire warnings from Bernanke, Paulson
The information in these articles alone tells me everything I need to know -- it's a scam with an amazingly simple solution. Of course the White House has been planning this for months... this whole 8 year cycle of S&L bailout v2.0 has been leading up to it.
Much elaboration below the fold.
From the Russian blog Vlad's Daily Gloat:
"Shock Therapy" Hits America Where It Hurts
What a day great, fun today! This will make you laugh (unless you are American): last year, Bear Stearns, one of the pillars of the mighty American investment banking system, was named to Fortune magazine's list of America's "Most Admired" securities company. It won this distinction three years in a row, 2005-2007. We can really trust the American free media to tell us the truth, and we can be sure that Bear Stearns did not bribe Fortune for that ranking. How strange then that today, Bear Stearns is "Most Fucked" securities firm in the entire world. And most corrupt too, along with the corrupt American Central Bank.
A real eye-opener, unless you have read The Shock Doctrine, in which case it will probably give you a grim sense of determination... (more quotes below the fold)
I ran across this post by Dave Lewis over on iTulip, in which he concludes that the raiding of Social Security is ultimately more responsible for our persistently low long-term interest rate environment than any other factor.
If he's right, it would mean that Greenspan helped create his own infamous conundrum. As if we need another reason to dislike the guy.
Quotes from the post, and some thoughts of my own, after the bump.
Originally intended as a comment on this diary but outgrew itself... you know how it is.
It is nice to talk about welcoming everyone who wants to come here, but it is quite another to explain how we are supposed to deal with a rush of new warm bodies that we are not prepared to integrate into our economy or our society. We like to think of America as the melting pot country, but it takes years for new arrivals to adequately melt in.
People are sensitive about illegal immigration for a variety of reasons. For quite some time they have been used to this standoff:
- Bush: let's work something out so that they can all come here to get work
- GOP: let's secure our borders and deport the lot of them to the back of the line
- Democrats: let's make them all citizens so they can join unions and vote Democrat
UPDATE: I don't mean to associate "Amnesty" with the current bill. Stop accusing me of that. Read the original paragraph (below the fold) carefully. I just wanted to make an observation about the bill and then talk about "Amnesty" and why people I know are against it.
Frankly the rabid calls for impeachment are counterproductive, and in a bad way. Remember-- we are dealing with Rove and the authoritarians here. They have no shame and are very skilled at using raw power to keep control.
They are desperately holding the GOP minority together to block the Democrats at every turn, and wear them down while the MSM cooperates to paint the Dems as do-nothings who aren't serious about passing legislation and would rather embarrass Bush.
Bush and Gonzo are smirking because they still think they can hold the GOP minority together longer than the Dem majority will be able to hold itself together. I know everyone would like to believe that the GOP congressmen will jump ship, but that means nothing when they still vote with Bush as they have been doing.
Do whatever you can to give more credibility to the scandals, and to put pressure on vulnerable GOP congressmen. We must crack the GOP minority first, everything depends on it!
I posted this as a comment to another diary but it got buried under 90 comments while I was revising it, so I decided to post an expanded version. Detail after the bump.
- Why Science is not just another opinion
- Why Intelligent Design is laughable as a scientific theory
- Why Evolution the concept is in no dispute whatsoever
- How Evolution the Origin theory disproves Genesis, not God
- How Social Darwinism leads to Eugenics, and Eugenics leads to suf-fer-ing
- Why Murder by Spreadsheet is For-Profit No-Fault Eugenics
- How Murder by Spreadsheet reveals hypocrisy in the "Culture of Life"
Voters hate taxes, and the MSM loves saying "tax and spend Democrats". But the alternative has proven to be far worse -- "borrow and spend Republicans".
Tax and Spend means the government wastes our money that we earned today. It sounds bad, but it is more honest.
Borrow and Spend means the government wastes our children's money that we hope they will earn more of tomorrow, so they can pay it back plus interest. This is a faith-based policy from the party of "family values", and in recent memory, their track record is horrible.
Congress approves spending, but earmarks have never dominated the budget -- the President's policies matter most. Since the dawn of modern lobbying in the mid-1970's, the National Debt improved under Democratic presidents and grew worse under Republican presidents -- whether they were one or two-term presidencies.
So... "growing our way to recovery" isn't working. Why?
I spotted this USA Today op-ed "On U.S. debt, it's all quiet on presidential campaign trail". It breaks almost no new policy ground whatsoever and mostly calls for somebody to do the unpleasant thing -- face the issue head-on. But it's a start! Everyone is afraid to touch this issue in spite of how critical it is.
My personal complaint about most economic politics is that every sector of society panics when their own costs rise and they get squeezed. First they deny it. Then they get mad at whoever "screwed" them. But instead of bargaining to fix the problem through economic means, those with political clout attempt to use government to preserve their "way of life". Everyone is guilty of this: government bureaucracy, regulated businesses, and labor unions.
Once enough political power blocs have fixed costs to protect, and the economy falls on hard times, the fight over the income pie turns into an arms race -- leading to strongarm legislation (minimum wage, BushCo deregulation) and inflation as more and more debt is used to stave off the inevitable.
After the bump... the comment I posted on USA Today's website.
I discovered a great article over on The Nation about how the Globalization establishment may finally be acquiring a conscience in the form of one Ralph Gomory:
The church of global free trade, which rules American politics with infallible pretensions, may have finally met its Martin Luther. An unlikely dissenter has come forward with a revised understanding of globalization that argues for thorough reformation. This man knows the global trading system from the inside because he is a respected veteran of multinational business. His ideas contain an explosive message: that what established authorities teach Americans about global trade is simply wrong--disastrously wrong for the United States.
I think this guy deserves our support. After all, merely getting them to admit that there's a problem is just the first step. And I think he's found a way of describing what the man on the street can sense, in terms that those in the halls of power can understand.
More tidbits from the article, after the bump.
This week has seen a bumper crop of articles about the declining dollar. The Free Trade apologists are spinning it already, but at least one AP writer sees what is relevant:
... the European Central Bank reiterated the likelihood of a June interest rate hike. .... Historic levels of healthier European growth, continuing interest rate increases by the ECB and concern over the strength of the U.S. economy have boosted the euro.
While the loyal Bushies have been fiddling, Europe has been getting their act together, and the Euro is now more popular as international cash, and it is slowly gaining ground as a world reserve currency. A Euro-denominated oil market is now plausible, and BushCo has risked our nation's future to keep it from happening.
Lots of talking points about inflation and the finance industry, and more about blood for oil, after the bump.