Maine Owl

"They don't call him President Bush in Venezuela anymore."

Obviously people try to build and protect financial assets in our society. Is it time to rethink how we do that? Is paper wealth enough? With the challenges very apparently facing 21st century global civilization, maybe it's time to re-balance provision of human needs with provision of financial power through electronic-numerical computation. Our ride on THIS beast should be enough to convince us that great change way beyond anything Obama has yet described is becoming necessary sooner rather than later.

It's panic time when something must be passed--afterward, when the markets keep melting down, the cure is "not going to happen overnight" and it's time for things to be "well thought out"


Rep. Brad Sherman (D-CA) Wed. Oct. 1, bailout bill debate

Sherman: Many of us were told, in private conversations, that if we voted against this bill on Monday [Sept. 29], the sky would fall, the market would drop two or three thousand points the first day, and another couple thousand the second day, and a few members were even told there would be martial law in America if we voted no.

Avedon, Simbaud, and Boing Boing linked to this clip. I actually recorded the whole October 1 presentation by the "Skeptics Caucus"--Rep. Sherman, Rep. Kucinich, and Rep. Kaptur among others. Apart from Rachel Maddow, Amy Goodman, and Laura Flanders, the skeptical approach to this bailout has gone right over the collective media head.

We'll see, but I think after the last few days' events (Dow about -1000, that's -10%, since the bill passed), it looks like we can agree that the root cause of the panic was not cured by whatever medicine was supposed to be in there.

Here is an indication of how confusing the situation has become: U.S. Treasury bills and notes are taking a hit as the Fed massively injects "liquidity" into commercial banking under "emergency" conditions:

Treasuries Decline as Fed Agrees to Purchase Commercial Paper
By Dakin Campbell and Daniel Kruger - Bloomberg

Oct. 7 (Bloomberg) -- Treasuries fell, snapping the longest rally in a month, after the Federal Reserve announced a plan to buy commercial paper in an effort to thaw short-term lending markets, sapping demand for the haven of government debt.

Two-year notes fell for the first time in five days as the Fed invoked emergency powers to support the financing needs of corporations. ...

The full article is very confusing. Is it a "good" thing that the Fed is riding into these markets on a white horse? Or does it portend the breakdown of U.S. Treasuries as the haven of safety? Whatever the case, the market moves are violent in response, "A measure of volatility in the Treasury market reached an all-time high yesterday. Merrill Lynch & Co.'s MOVE index, an options-based gauge of changes in prices for Treasuries, surged to 217.3, the highest since its creation in 1988." Hmmm. After all this borrowing, who's beginning to think that the weight is at least weakening the legs of the empire itself?

That's how Rome fell, right? They couldn't pay the bills for all their far-flung armies and their decadence. Their marker became no good in places they needed it to be. As their forces hollowed, others no longer were as afraid of them.

Meanwhile, here's Bush (at some office products company).

President Bush: It's going to take time for these actions that I've described to you in the bill to have full effect. You want to make sure that when we move, we move effectively. You want to make sure that the plan is well thought-out and well delivered. Thawing the freeze in the financial system is not going to happen overnight, but it will be a process that unfolds over several stages. And obviously the first stage began last Friday, when I signed the rescue package into law.

Say what? First stage?? I thought the panic last week was only fixable--instantly so--by oh great Bailout Bill. Now we're told that we just have to wait for the smart, deliberate Bush process.

As Dennis Kucinich said, this smells. We're in a lot of trouble now.

Did I just hear Rahm Emanuel on CNN tell Wolf Blitzer that all the pork in the bailout bill was the fault of those members of the House of Representatives who voted against the bill?

Mike held fast. Tom Allen again voted--this time along with Susan Collins--to punt the taxpayers. This would have been a great chance for Tom Allen to demand a progressive alternative to the Collins-Bush bailout. Squandered.

Their conduct should be like it was for a funeral


Only Barney Frank has an appropriate scowl.

Not that I think Rush Limbaugh does much besides ramble stupidly, but he had one good observation a little bit ago--the Democratic leadership in Congress was seen celebrating the bailout bill in an unseemly fashion. I concur that such whooping over a taking of taxpayer scalps is completely inappropriate, even if you figure this medicine was for the good of the country.

House Approves Bailout on Second Try
By DAVID M. HERSZENHORN - NY Times - October 3, 2008

WASHINGTON — The House of Representatives gave final approval on Friday to the $700 billion bailout for the financial system, reversing course to authorize what may be the most expensive government intervention in history.

At 1:21 p.m., applause and cheers echoed through the House chamber as the number of "aye" votes crossed the threshold needed for passage with just seconds remaining in the official 15-minute voting period. The vote was 263 to 171.

This morning on Democracy Now!, Robert Johnson, former chief economist of the Senate Banking Committee had this to say:

Johnson: I think this bill, five weeks before an election, is illustrating for the American people, when there are two currencies of power—votes and money—that even at this time, when the power of votes is at its cyclical high, meaning just before the election, they are almost laughing at the American people, in the—by the nature and structure of this bill. This is a very sad result.

Later Johnson says he himself would have voted for it if it was the only thing offered to address the grave situation, but that in crafting the bill the way it was crafted--in fact a senate provision will increase for distressed mortgagees the difficulty in getting workouts--incumbents in Congress who voted for this thing are "daring" voters to turn them out of office in five weeks.

Ms. Owl saw this come over A & E at about 3:15 this afternoon:


I would never say anything other than that these guys are 100% on the up-and-up. (Note: The ad. refers to the "Housing and Economic Recovery Act of 2008" see update below.) Can't quite make out the fine print, but I assume there would be a fee for the job loss and default "protection." Still, surely it is legal to offer over the teevee money loans with whatever terms like these. Yet I do wish our crack-shot journalists would ask crisis doomsayers how all this easy money can be flowing with all the credit seized up, when supposedly no one can buy a car, and the Great Depression is just around the corner.

At any rate, Chris Dodd approves so it must be okay.

But isn't "subprime lending" the supposed trigger problem in the economic "crisis" requiring the political class in Washington to drag the taxpayers kicking and screaming into a $trillion mud hole? What the hell is going on here?

Let's speculate. The lenders have learned something very important--The president and Congress will back up any lending practice with a taxpayer bailout, taking "toxic" paper off the books as deemed fit by officials owned by the industry. It's a nice arrangement that the political class is loathe to change in order to provide support for distressed people. This leads to the belief of many tuned to the teevee during the daytime that the types of loans you see here are their best option to keep their little middle class existences alive for one more day. Hence, these strange fee-eating "privatized" loan companies spring up to direct this business to the money flows insured against loss by taxpayer-sponsored bailout.

I haven't bitten on one of these loans yet, but I oughtta know because I resemble that remark. Is there a real day of reckoning on the horizon? I'd have to think so. But for now the political class prefers just to punt us into an increasingly uncertain future.

Update: HERE is a summary of the legislation referred to in the ad. The concept of the Bill claims as one of its principles, "No investor or lender bailout." Also, the borrower must pay back part of any benefit of the workout. Mmmmm. How would the current bailout interact with this program? Maybe someone could help explain. It seems to me the "privatized" aspect of promulgating this program, as seen in the ad., should raise some questions about just how the taxpayer is supporting it.

Update 2: Upon reflection, I suppose conceptually this somehow could fulfill what is discussed HERE: mortgagee bailout, not fat cat bailout, or what Dennis Kucinich discussed HERE. If so, why doesn't anyone mention this FHA legislation already passed? And why the need for the teevee loan hawking? Am I right about the fees involved?

Needless to say, the Sanders Amendment did not become part of the bailout package that passed the Senate last night. Nevertheless, I am posting its text below. If there was a single iota of thought (beyond Bernie & ilk) within our political class that this would be the just, right, and moral thing to do, I'd be much more likely to believe any of 'em have the public interest in mind.

Text of the Sanders Amendment follows:

Even after reading THIS sober explanation and somewhat more spirited exchange of what might be going on underneath the "zero reserve requirement" provision in the bailout bill, I'm not convinced there are no dangers of abuse. I still think Pam Martens was onto something when she characterized this bit of de-regulation as a "Trojan Horse embedded by Wall Street lawyers."

That, my friends, is the change we need: McCain, "aye"; Obama, "aye"; Collins, "aye"; Snowe, "aye".

The proper term is "sweeteners." Gerald has some righteous indignation going HERE.

FOR GOD SAKES, CALL MIKE MICHAUD AND TELL HIM TO VOTE "NO"!!

Ask them to support the Sanders amendment.

Snowe: 202.224.5344
Collins: 202.224.2523

Kucinich: "It kinda raises the question of what a Democrat is."



This is Bailout 101. I'll update this with the transcript link when it becomes available. (Update: Transcript HERE, now correct.) I want to thank MSNBC for putting up the best mainstream cable news show--ever.

The bailout solution: accounting tricks, make under-capitalized banks even MORE under-capitalized

Many Republicans think valuation fantasy games might be just the thing to save the banking system:

Focus turns to 'mark to market' accounting rules
Some in Congress want to lift a requirement that mortgage securities be reported at market value. Opponents worry that values would be overstated. A U.S. accounting board considers the issue today.
By Tom Petruno, Los Angeles Times Staff Writer - October 1, 2008

An angry debate over accounting rules for banks may be coming to a head.

All year, many bankers have said it was unfair that accounting standards required them to use market value when reporting the value of mortgage securities they own. The frazzled market, they said, was unrealistically pessimistic about the assets' long-term worth.

Markdowns of mortgage assets have devastated the balance sheets of leading banks.

Some in Congress now want to suspend "mark-to-market" accounting altogether and give lenders much more leeway in valuing mortgage securities at levels that, in theory, more realistically reflect what the assets would return over time.

Accounting purists say a rule change would raise the risk that the banks would resort to fantasy accounting -- "mark to make-believe" -- that would overstate the value of their assets to investors. ...

Also, as I wrote yesterday, a piece by Pam Martens in Counterpunch pointed out that the bailout bill would allow banks immediately to operate with zero reserves. In other words, you could have a bank filled with worthless assets that could continue to make loans against them.

Fantasy accounting? Worthless assets? Sounds like more of the same. What does Obama have to say about that? Oh, he's for it. Oy.

I've been reading cranky tech/business writer and blogger John C. Dvorak for longer than I can remember. His post yesterday on the bailout ...

The Bail Out Stinks — Give the Money to the Public Instead
Published on September 30th, 2008 - John C. Dvorak

The administration talks a big game about economic stimulus packages and claims that the public is the winner when taxes are low or they are simply given a handout to spend. So take $600-plus billion and give each man, woman and child $2000 each. ...

Why not let the public buy up the mortgages at these low-ball prices and move in? Why can’t that be arranged? ...

You just have to go over there and see what he has up with this great column. ROFL!