I admit being more than a little concerned at the timing of this "financial crisis" which can allegedly destroy free markets and the "sudden" need to give Paulson and the Executive Branch of the US gov't extraordinary powers. We can only hope that Congress does not give the Executive a "blank check", because doing so would effectively amount to Congress abrogating its responsibilities under the Constitution to levy taxes and pass budgets and give that power to the Executive.
There is no question that most bloggers now see the Constitutional danger in the proposed bailout, here's a sample:
Overnight, the U.S. Treasury and Federal Reserve have radically changed the character of American capitalism. It is nothing less than a coup d’ętat for the class that FDR called “banksters.” What has happened in the past two weeks threatens to change the coming century – irreversibly, if they can get away with it. This is the largest and most inequitable transfer of wealth since the land giveaways to the railroad barons during the Civil War era.
http://www.counterpunch.org/hudson09202008.htmlOther writers say its time for Americans to realize that we are all Americans and revolt against this coup by the bankers.
The other option, the one I have long prayed we would never need to even consider, is a total revolution. But, If Congress won't act in its own self-defense, in the defense of democracy, in defense of us - the people who have elected them to protect us from this very danger - then what is left for us to do? I don't want to see it come down to this, but I fear that it will. Put your party politics aside right now. We are in a crisis so dangerous that should these people succeed in their coup, your party affiliation will no longer matter, your American flag will be a nice collectible item of something that once was, and your version of God will be worshiped in secrecy because your freedoms will be owned by the few.
You are no longer Republicans, Democrats, or any shade of voter. You do not live in a swing state or a solid colored state. You are simply this: an American. That is the only side that matters. So call your members of Congress and demand, no, declare that unless they do their duty to the Constitution and to us, we will move to the streets - not because we want to, but because our founding fathers demanded this duty of each and every citizen in the face of such a domestic enemy. Demand - as is your right - that this bill be voted against and demand - as is your right - that the people plotting this treachery be held to account. We are either a nation of laws or we are no longer a democracy. Pick a side, because there won't be another time, another moment, another chance to be a patriot.
http://www.huffingtonpost.com/larisa-alexandrovna/welcome-to-the-final-stag_b_127990.htmlEven mainstream news reports the bailout will make Paulson a "financial dictator."
Treasury Secretary Henry Paulson “is in effect becoming the dictator of the American financial system for a few months, subject to congressional oversight,” said Wall Street historian John Steele Gordon, author of a book about the national debt.
http://www.financialweek.com/apps/pbcs.dll/article?AID=/20080921/REG/809219995/1036Who would have thought that in America, we would ever refer to someone in our gov't as a financial dictator? Well, Paulson isn't elected, so maybe the title fits. At any rate, this is unprecedented. I hope people fully appreciate the Constitutional significance of unfolding events.
If the bailout is approved and we witness a coup, was the usurpation of our Constitution a "plan" and or was it simply a reaction to unforeseen changing financial conditions? To answer this question, let's start with where we are and work back. Right now, Paulson and the President say we need a bailout to avoid a major financial collapse. So, what caused the financial collapse? The financial collapse was caused by a collapse in housing. This is admitted by the White House.
Remember that the root of this problem is the housing correction.
http://www.whitehouse.gov/news/releases/2008/09/20080923-6.htmlThe housing bust began with the bust of "liar" loans. What are "liar loans"? A liar loan is a home loan that loans 100% of the value of the home, not requiring the buyer to pay anything down and not requiring the buyer to prove his income.
http://en.wikipedia.org/wiki/Stated_income_loanBasically, with a liar loan, any adult could buy a home. That was unprecedented. At no time in US history were people allowed to buy a home with nothing down and no documentation of income. Its no wonder that people bought more than they could afford and that the default rates are now so high. The liar loans were prevalent during the boom years of 2004 and 2005. They were adjustable rate loans, meaning the buyer paid interest only usually for anywhere from 2-5 years. Then, the loan would reset (some would say set to blow), the interest rate would adjust to a higher rate and principal would be added to the payment, meaning, the borrower's monthly payment could go up significantly. So, a great number of these loans were set to blow before Bush left office - a significant fact.
The problem is, once the defaults set in, instead of "trickle down" economics, the water began to boil up, and now our credit markets are seared shut, causing an unprecedented credit crisis which will require extraordinary powers for the Executive to deal with.
The question is, who was responsible for the massive number of liar loans? To answer to this question, look back at this speech by President Bush.
I set an ambitious goal. It's one that I believe we can achieve. It's a clear goal, that by the end of this decade we'll increase the number of minority homeowners by at least 5.5 million families. (Applause.)
Some may think that's a stretch. I don't think it is. I think it is realistic. I know we're going to have to work together to achieve it. But when we do our communities will be stronger and so will our economy. Achieving the goal is going to require some good policies out of Washington. And it's going to require a strong commitment from those of you involved in the housing industry.
http://www.whitehouse.gov/news/releases/2002/10/20021015-7.html#What policy of the gov't could possibly suddenly qualify 5.5 million minorities for home loans? Answer, unregulated Liar loans. Simply loan 100% on the home with no documentation of income. The housing boom and liar loans would not have been possible without the low interest rate policy of Greenspan. Now, one might think that Alan Greenspan was just a fool and had no idea the low interest rates would cause a housing boom and bust, but, he was no fool. In fact, his doctoral thesis was on housing cycles which end in bust. Here's a snippet:
We were tickled to find that the work's introduction includes a discussion of soaring housing prices and their effect on consumer spending; it even anticipates a bursting housing bubble. Writes Greenspan: "There is no perpetual motion machine which generates an ever-rising path for the prices of homes."
http://online.barrons.com/article/SB120917419049046805.html?page=1Greenspan, an expert in housing booms and bust, first lowered rates which allowed the massive surge of liar loans, but then began raising rates in 2006 to cause a slow down, aka bust.
EXPECT ECONOMIC GROWTH TO CONTINUE IN 2006, although at a slower pace, as the housing market dials down and interest rates rise, predicted experts at the National Association of Home Builders' (NAHB's) Construction Forecast Conference in Washington, D.C., in October.
After years of locomotive-like momentum, the housing market is "seeking out a peak," and there is some evidence that the Federal Reserve's quarter-percentagepoint incremental rate hikes will finally have the desired effect of cooling some of housing's fire . . .
"[Federal Reserve Chairman Alan] Greenspan has discovered it's no longer as easy to slow down housing as it used to be, and the Fed has run into difficulty in taking some of the steam out of a boom that it believes has been running too hot and cannot be sustained," said Seiders.
http://www.allbusiness.com/finance/3596691-1.html?yahss=114-3470923-3596691&siap=1Even back in 2006, everyone knew a potential housing "crisis" was brewing. Check out this quote from the above article:
Greenspan appears to be determined to leave monetary policy in a neutral statewhere it is neither a source of stimulus nor a drag on the economy, in order to afford his successor the flexibility to loosen or tighten as needed in the event of a crisis, ...
And back in 2006, everyone knew which markets were "juiced up" and destined for a crisis. Check out this quote yet again from the same article.
However, Mark Zandi, chief economist of Economy.com, ... warned that housing has become "increasingly overvalued," especially in metro areas throughout California and Florida and in "juiced-up" markets such as Washington, D.C., and Boston.
The above article clearly shows that the current crisis in housing was anticipated and that Greenspan was leaving his successor "room" to deal with it. Interesting, Greenspan, the expert in housing booms and busts, was replaced by Bernanke, a specialist on the Great Depression. He was replaced in 2006 just as housing peaked and began its downslope.
Bernanke is particularly interested in the economic and political causes of the Great Depression, on which he has written extensively.
Another interesting 2006 appointment was the appointment of Paulson, CEO of Goldman Sachs, as Secretary of the Treasury. Paulson's appointment was the "icing on the cake" to use the very foreseeable housing crisis to the benefit of a few investment banks, like Goldman Sachs.
Think of Paulson as Mr. Risk. He's one of the key architects of a more daring Wall Street, where securities firms are taking greater and greater chances in their pursuit of profits. By some key measures, the securities industry is more leveraged now than it was at the height of the 1990s boom. It has also extended its global supremacy since then.
According to an individual close to Paulson, the President told the Goldman chief he wanted a "very senior person" from Wall Street. He also said he wanted Paulson to play a broader role in his Administration than had previous Treasury secretaries, taking on the role of Bush's "principal adviser" on economic matters and driving economic policy.
Within Goldman, Paulson is known as an exceedingly effective communicator. If he can translate Wall Street's language of speculation into something the public and politicians understand, the President's gamble in appointing him will pay off for everyone.
The key appointments of Greenspan, Bernanke, and Paulson, and their timing, show that the housing boom to bust to bailout were all a part of Bush' "strong policy" administered by these three men. This "strong Washington policy" of lending to unqualified minority buyers using liar loans, set to blow before Bush left office, would and did create a foreseeable crisis n the highly leveraged mortgage markets (of which Goldman Sachs was a leading participant), and threaten to take down the entire world's financial system, and thus open the door for Paulson to become an "economic dictator" to deal with it.
Congressman Ron Paul also believes that Washington is responsible for this mess:
We are told that "low interest rates" led to excessive borrowing, but we are not told how these low interest rates came about. They were a deliberate policy of the Federal Reserve. As always, artificially low interest rates distort the market.
Entrepreneurs engage in malinvestments - investments that do not make sense in light of current resource availability, that occur in more temporally remote stages of the capital structure than the pattern of consumer demand can support, and that would not have been made at all if the interest rate had been permitted to tell the truth instead of being toyed with by the Fed.
http://www.doomers.us/forum2/index.php/topic,26063.0/topicseen.html][http://en.wikipedia.org/wiki/Ben_Bernanke/url]
There is more evidence that this was preplanned failure. Back in March of 2008, Congress held an extraordinary "closed session" meaning it wasn't open to the public and all attending representatives had to sign an oath of secrecy not to divulge the discussions.
[url=http://en.wikipedia.org/wiki/Closed_session_of_the_United_States_Congress]http://en.wikipedia.org/wiki/Closed_session_of_the_United_States_CongressWhat was said at that closed session will forever be left to speculation. Ostensibly, the session was called by the GOP to update for Foreign Intelligence Surveillance Act,
http://blog.washingtonpost.com/capitol-briefing/2008/03/house_may_hold_rare_closed_ses.html; but several blogs reported "leaks" from that extraordinary session which were extraordinary in and of themselves. I previously dismissed those supposed leaks as unsupported conspiracy theory, but in light of recent events, in particular, the events of this month, the leaks are much harder to dismiss. For example, one of the leaks was that the US economy would crash in September of 2008. At the time, that sounded crazy. However, its now September 2008 and Paulson and Bernanke are each testifying to Congress that if they don't pass this bailout, the entire world's economy will fail. Another leak was that the crash would require the imposition of martial law. Coincidentally, this very month, the Army assigned the first troops ever to the dedicated mission of responding to emergencies on US soil.
Northcom gets a dedicated Army Combat Brigade.
http://www.armytimes.com/news/2008/09/army_homeland_090708w/If these are coincidences, their timing is uncanny. Everyone should review the "leaks" and decide, based on recent events, whether these leaks were actually discussed back in March of 08 by Congress.
1. the imminent collapse of the U.S. economy to occur by
September 2008,
2. the imminent collapse of US federal government finances
by February 2009,
3. the possibility of Civil War inside the USA as a result of
the collapse,
4. advance round-ups of "insurgent U.S. citizens" likely to
move against the government,
5. the detention of those rounded-up at "REX 84" camps
constructed throughout the USA,
6. the possibility of retaliation against members of Congress
for the collapses,
7. the location of "safe facilities" for members of Congress
and their families to reside during expected massive civil
unrest,
8. the necessary and unavoidable merger of the United States
with Canada (for its natural resources) and with Mexico (for its
cheap labor pool),
9. the issuance of a new currency - THE AMERO - for all three
nations as the proposed solution to the coming economic
armageddon.
Members of Congress were FORBIDDEN to reveal what was discussed.
Several are so furious and concerned about the future of the contry, they
have begun leaking info.
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=125x197846Further, the White House says Paulson's bailout was not a kneejerk reaction and was in fact, months in the planning. In a Whitehouse press briefing, press Secretary Fratto said this about how long they had to get this bailout plan together:
MR. FRATTO: No, well, look, I think I would reconcile it this way: This is -- this was not a program that was conceived of or put together hastily. There was an enormous amount of analysis and debate and discussion before we came forward with this program. I think we have anticipated a lot of the questions that members of Congress would naturally have about taking this step, but we have had -- some of the policy staff have had months to think about what a program like this would be like and how it would work.
http://www.whitehouse.gov/news/releases/2008/09/20080923-6.htmlhttp://www.dailykos.com/storyonly/2008/9/23/15463/3802/393/607783Based on the fact that Bush wanted to make these loans to millions of previously unqualified buyers, based on the fact that these millions of loans were made using unprecedented liar loans which would not last beyond his term and would not have been possible without low interest rates, based on the fact that there was a closed door session of Congress, based on new evidence that Paulson's plan was months in the making, and based on the fact that I and every other American give Bush the lowest rating in presidential history (because we no longer trust him), its hard for me to believe that this economic tsunami was not a preplanned event set to go off right at the end of Bush's presidency. At a minimum, the timing of this crisis going into a presidential election is suspect.
Keep in mind this thought also - Paulson is proposing the bailout under the auspice that a bailout is needed to stablize the housing meltdown. Well, this writer, writing back in April of 2008, says that bailouts can't possible help a crisis of liar loans.
But there's one piece of the mortgage-meltdown tale that virtually every article or television program dances around without ever quite confronting. It's the simplest aspect of the crisis to understand and also the most troubling, because it's not about complicated financial dealings and can't be fixed with bailouts. It's about an astounding breakdown of social norms.
So, do we need a bailout or not? No matter what, Paulson is asking to become an "economic dictator" and that should be worrying to anyone living in a free market American democracy.
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