The $700 Billion Bailout Plan's Fine Print
A reformed Wall Streeter sifts through the details of the Troubled Asset Relief Program.
What does "at any one time" actually mean to economists? It means that if everything we American taxpayers buy re-evaluates down to zero, we get to buy more. That's hardly taxpayer "protection." With several hundred billion dollars of write-downs already announced this year by the part of the industry compelled to post their losses, it's a safe bet that $700 billion worth of the junkiest assets in existence will be heading to zero the second they are purchased.
But that's not all the bad news. With Sunday's announcement that Goldman Sachs and Morgan Stanley have decided to become bank holding companies, the last pretense of respect for the Glass-Steagall was dropped.
The Bank Holding Company Act of 1956 prevented bank holding companies from engaging in non-consumer oriented banking activities, like investment banking. It also prohibited such entities headquartered in one state from acquiring banks in another state. The interstate restrictions were gutted in 1994, and the 1999 Gramm-Leach-Bliley Act took care of the rest.
At first this meant that commercial banks could buy investment banks and insurance companies, hence Citigroup (which is a combination of Citibank, Travelers Insurance and Salomon Brothers investment bank), and the latest incarnation waiting to post lots of losses, Bank of America-Merrill Lynch. But even with a new name, Goldman Sachs is still an investment bank, in the same way that a horse by another color is still a horse. Changing its status to bank holding company will mean access to the bailout fund, and give it the ability to buy any commercial bank out there. Which it likely will.
Nonetheless, that looming problem wasn't addressed by Congress Tuesday. Instead, Sen. Chuck Schumer (D-NY) responded to TARP with THOR (Taxpayer Protection, Housing, Oversight and Regulation) and warned, "the financial system is clogged, and if we don't react the patient will suffer a heart attack. So we must act and must act soon…"
Somewhere, Former Treasury Secretary Carter Glass, the co-author of the Glass-Steagall Act of 1933 that separated speculative investment banks from consumer-oriented commercial ones, is turning in his grave.
As much press as the TARP vs. THOR discussion is getting, one voice of reason deserves more attention: Sen. Byron Dorgan's. As he has said, "this proposal looks to me like a stampede in the wrong direction…to reward the very people on Wall Street who created this mess, and who pocketed more than $100 billion over the last several years making it."
In 1999, Dorgan had the foresight to vote against the Gramm-Leach-Bliley Act that repealed the financial protections put in place following the Great Depression. He warned then that a 'financial swamp' would result from "the casino-like prospect of merging banking with the speculative activity of real estate and securities, and that the bill will raise the likelihood of future massive taxpayer bailouts."
Dorgan was spot on. Not only are we trapped in the complex deregulated financial system that resulted, but the bailouts are just beginning.
In advocating new protections similar to the Glass-Steagall Act and the need to address this crisis not just quickly, but correctly, he's likely spot on again. If only the rest of Congress felt the same way.
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I'd like some clear, concrete ideas. If you were a big "Wall Street insider" with a conscience and the ability to speak out to media and fellow bankers, what options would you recommend? What do you think an insider could or should do now that could affect better solutions and a system that would benefit more Americans. What specific articles and authors should they read or contact?
The new bailout will surely mean a 20% drop for the dollar, which has already suffered a devaluation of around 50% in the last decade. This has been caused by the money expansion caused by the Fed in order to cover the interest rates and financial gains engineered by the Wall St companies. The inmense profits have been funneled to real assets, like mines, gold, oil, diamons, while the public has left holding devalued money and losing stocks. This is the doing of a clever High Finance group, a zionist elite and their Neocon friends. These people have no limit for their greed and they are in the process of destroying the US economy. The process has been going for centuries, since the emergence of a banking empire directed by the Rothschilds. Other nations have been sacked before but now it is the turn for the US.
Cindy McCain could lose $70 million if the Bailout does not happen!
I know you are right. I have no optimism. I know who runs the congress.
Basically we're being reduced to serfs and at worst slaves.
If there are any kicks left to get, get them. The [deleted] house is burning.
God and Oxycontin will protect her. Don't worry. She's in a safe harbor.
I don't trust ANYTHING george bush comes up with. privatization of social security...this stupid war...tax breaks to millionaire's...etc etc etc. if a democrat called for this bail out, the repub's would be raising holy h**l.
i heard that TARP is only about 3 pages does anyone have any idea where i can read the complete text of this proposal
Here we go again! Once more the working class people are being shovel fed lies and crap.Why is it that these financial geniuses are paid millions for being so incompitant and the poor working man and women are being forced to pick up the tab because these clowns have run our economy? They have made millions from their actions and now they have bet the farm(yours and mine) and driven their respective companies in the ground.Unless in badly mistaken buying stocks and securities is a GAMBLE!!I say seize all the assets of these felons and put it back in the kitty and if that don`t solve the problem then let all of this mess crash and let the chips fall where they lay.Then and only then will this mess straighten itself out.Having been to Vegas and gambled i never gambled with money i didn`t want to lose.I can see it now i lost my rent cause gambled and lost and i ask the casino workers to give me my money back so i an pay my rent,now honestly am i the only one that sees something wrong with this picture?
personally, as a california citizen, i don't see what we need the federal government for anymore. if the people in power are determined to keep swindling us and sending our money overseas, giving it to hired mercenaries, wall street crooks with no strings attached, etc, then why the hell should we keep paying them? we could easily fix a lot of problems if we quit giving the feds our cash and diverted the money back into the state. we could use the money for useful things like healthcare, green energy, fixing our infrastructure, creating jobs, education, etc. there's no reason we can't do that. if we can give 700 billion to rich people then why do i have to fight with my insurance company to get medication? california is one of the largest economies in the world. as a country i'll bet we'd be just fine.
If we keep going in the direction we are going we eventually will have all the criminals and incompetents running the jail house and all the responsible citizens will be locked up.
If you really want to know what the
"neocons " are up to check out the
web site (www.rense.com). In fact,
someone has tried to silence the site.
I don't mean to sound stupid, but who benefits from this bailout and is there a connection to the Bush White House and cronies?
Can anyone immagine the fantastic porgrams we, the people, could establish for the mass of people rather than for a few if we had that 700 billion dollars. We're not gready like some we know, we embrase regulation, and we don't demand that laws don't apply to us. If they can screw it all up we must take it away from them and implement survival ourselves. Even I can do it better than they can.
Let US soldiers come back from unneeded wars and remote bases all over the world: their real enemy is in their own country. In the ringing, still relevant words of Lenin, let us turn the imperial war into a civil one, against the greedy bastards. Instead of charging taxpayers, turn the US into a billionaire- free zone! The billionaires, these greediest rats, gained most from the Great Pyramid; pauperise them. Nullify their bank accounts. The disappearance of trillions of dollars from their electronic bank accounts will drive the value of the greenback up; your salary will become real money again!
If we assume that more than half of all billionaires are proud members of the Israel Lobby, it will also solve the Middle Eastern problem. To be on the safe side, confiscate all the assets of the Pyramid-builders: of Paulson and Bernanke, of Merrill Lynch and Goldman Sachs executives, and of President Bush who allowed it all to happen. Peace will come to Palestine , Afghanistan and Iraq ; Americans will again become proud of their country. Such mass confiscation will restore democracy in the US : the next candidates for the Presidency will not go hat in hand to AIPAC to declare their fealty. The defeat of Greed will turn people back to God; the eliminated ballast will allow for national medical care, social security and free education for all. Instead of being a disaster, the financial collapse offers a unique opportunity to fix all America ’s ills. Do not miss it!
Speaking for the wide world outside America , I’ll tell you this: do not throw good money after bad. Reject the seductive purring from Washington . Consider your funds in the US already lost. If you can still get something, good; but do not waste money and efforts to regain what is gone. There is a most valuable asset you may get for the lost ones; that is your freedom and independence. An undermined dollar means your economy will be safe. The Pyramid collapse will set you free!
From an article by
Isaac Shamir
--------------------------------------------------------------------------------
How does it taste to have a $700 billion ball of crap crammed down your throat
while being held down and your mouth pried open by Henry Paulson, George W. Bush and Ben Bernanke. Well it's leaving a really nasty taste in my mouth. George W. Bush and his criminal clowns crammed the Iraq war down out throats in 2002. We cannot let these political bandits cram this crap down our throats too. The
American people must stand up and make their voices heard. We need to track down each and every criminal involved in this catastrophe, prosecute them to the fullest extent of the law, and lock these clowns away for life.
I blogged about this on http://www.posterspost.com
Check it out.
William O. Douglas said (in U.S. versus Columbia Steel): " ...Power that controls the economy belongs in the hands of elected representatives of the people, not an industrial oligarchy, not subject to the whims of a few self-appointed men..."
There so much to this bailout that I can't wrap my mind around it.
1. Why would the government even CONSIDER giving tax dollars to these scumbags? They have been nothing but irresponsible, greedy, selfish, and careless.
2. Why doesn't the government buy out their contracts for the most reasonable price, let them close their doors, and then renegotiate the terms themselves on the mortgages for the people who are having problems paying? If someone is late on paying a mortgage for a $250,000.00 home, doesn't it make sense to renegotiate their terms to a reasonable rate so that they can afford the payment? The government can takeover this problem and in months, sell the assets for our money back.
3. If the government doesn't want to do this, why don't they let these companies bundle up their mortgages, etc. and sell them to the highest bidder? They can take the loss as a company and close their doors like any other company would have to do if they pulled the crap these companies did. Then I would be OK with the government using some of the $700 billion to give as a short-term loan to these other banks that bought out the mortgages.
4. It's stunning to me that the government should think that WE should have to fund this project of theirs when so many people in this country don't have health care, our education system is a mess and we keep cutting the budget more and more, and they cry poor mouth when it comes to Social Security and Medicare. They gut balls!!!
5. Why, if they say that other countries are directly affected by this problem on Wall Street, aren't these other countries pitching in to help pay for this bailout?
And the fact that they even presented this original plan with no cap for the CEO's and people running these banks and no help for even renegotiating homeowner's loans to a reasonable interest rate is unbelievable to me. Add to it, this bailout will cost every tax paying citizen approximately $3728.00 each. They must really take us for fools. But I guess this is what we get for allowing this government to get away with the B.S. they've been getting away with for years. We have clearly sent the message that they can do whatever they want, when they want, and to who they want. I, for one, am sick and tired of it!!!
I say...no way, no how, no bailout!!!
Yes. At the core is the fact that the electorate will not face. The fiction we are taught in school is that America is a democratic Republic. It is, in fact, a functional oligarchy with institutional arms that enjoy the social, economic and environmental authorities of representative government. We cntinue to vote hand-puppets into office, as if the electoral process had substantive relevance to the Constitution, It should be obvious to the critical observer that we are witnessing another bum's rush like the Patriot Act, etc. The system is deeply corrupted. It didn't get there overnight and can't be returned to a mythical state in the short term without drastic action by the people.
I agree with Michael Bell to an extent, but the point is until the proof that we are in such a snafu (look it up in the dictionary PLEASE) has actually occurred, I will speak up because there are a hell of a lot more of us than them. Make 'em do what WE, the Middle Class that actually own this money, think is RIGHT. G-d, I don't somebody come yelling like Chicken Little when I haven't seen a piece if it yet. I want 'em to show me, I am NOT STUPID!!!
www.Democrats.com has a list of over 100+ Economics who say NO this is not Right. Quite frankly, I probably would take a couple of economists from MIT and Harvard to listen to, rather than Bernecke or Paulson
I think fubar (rather than snafu) might be a better term. Although the late William Buckley usually had a dystopian view, he occasionally got a good quip off. I think he said once that he 'd rather vote for the first 400 names in the phone book than the entire Harvard faculty. In the October issue of the Harvard Review of Business, the rear cover has a full page ad for Merril Lynch, celebrating their business acumen. Look where you may, there seems to be no oasis of common sense.
Hi All,
I'm against the $85,000,000,000.00 bailout of AIG. I'm also against the $700,000,000,000++ bailout being proposed in Congress right now!
Instead, I'm in favor of giving $85,000,000,000 to America in a We Deserve It Dividend.
To make the math simple, let's assume there are 200,000,000 bonafide U.S. Citizens 18+.
Our population is about 301,000,000 +/- counting every man, woman and child. So 200,000,000 might be a fair stab at adults 18 and up..
So divide 200 million adults 18+ into $85 billon -- that equals $425,000.00.
My plan is to give $425,000 to every person 18+ as a We Deserve It Dividend.
Of course, it would NOT be tax free. So let's assume a tax rate of 30%. Every individual 18+ has to pay $127,500.00 in taxes. That sends $25,500,000,000 right back to Uncle Sam.
But it means that every adult 18+ has $297,500.00 in their pocket. A husband and wife has $595,000.00.
What would you do with $297,500.00 to $595,000.00 in your family?
Pay off your mortgage – housing crisis solved.
Pay off credit card debt.
Repay college loans – what a great boost to new grads
Put away money for college – It'll be there for Junior.
Save in a bank – create money to loan to entrepreneurs.
Buy a new car – create jobs
Invest in the market – capital drives growth
Pay for your parent's medical insurance – health care improves
Enable Deadbeat Dads to come clean – or else
Remember this is for every adult U S Citizen 18+ including the folks who lost their jobs at Lehman Brothers and every other company that is cutting back. And of course, for those serving in our Armed Forces.
If we're going to re-distribute wealth let's really do it...instead of trickling out a puny $1000.00 ( "vote buy" ) economic incentive that is being proposed by one of our candidates for President.
If we're going to do an $85 billion bailout, let's bail out every adult U S Citizen 18+!
As for AIG – liquidate it.
Sell off its parts.
Let American General go back to being American General.
Sell off the real estate.
Let the private sector bargain hunters cut it up and clean it up.
Here's my rationale. We deserve it and AIG doesn't.
Sure it's a crazy idea that can "never work."
But can you imagine the Coast-To-Coast Block Party!
How do you spell Economic Boom?
I trust my fellow adult Americans to know how to use the $85 Billion We Deserve It Dividend more than I do the geniuses at AIG or in Washington DC .
And remember, The Birk plan only really costs $59.5 Billion because $25.5 Billion is returned
instantly in taxes to Uncle Sam.
Ahhh...I feel so much better getting that off my chest.
It does my heart good to see so many protests against the American aristocracy. We've been paying for the wealth of these less than moral people since civilization had begun. Now's a good time to end it. The next step in the great American experiment. Bring America one step closer to the Constitution just as these unholy people have stepped up their war on the Constitution and the People. The Fair Elections Act is one good step in that step. Remove big money from politics (legislative branch anyway). Put Congress for once in the control of the voters. Then we can work on media reform. Then the billionaires. This bailout is only a symptom of the problem. Take the legislative power away from the wealthy.
Do the research! We were doing fine until the democrats took control of congress. Everyone puts the blame on Bush, it's like this, the President doesnt make this happen. Congress votes for everything that goes, not the citizens of this country. Everytime the democrats get control of things, they seem to go south. Then they point to the president like its all his doing. Another reason were in this mess is because of lenders lending to citizens that cant afford what theyre buying. i agree shame on them, but the citizens should know better as well. You know if you cant afford something. I'm tired of hearing people wine about the government when they're to blame as well.
The bailout is completely unnecessary. The system will unclog itself given a little time. This is the most horrible, wretched thing they could possibly do to us, the taxpayers. Guess where all that money is going to go? COMMODITIES. You are, essentially, paying them to drive up prices to rip your off even more. The bailout actually makes it all WORSE, not better. MiddleClass2008.com
It's just more corporate welfare, only this time on such a massive scale it threatens to sink the whole beautiful Titanic, and guess who gets the life boats? There ought to be charges of treason brought for chopping up America and feeding her to the wolves.
The worst part of the bailout is that the people and companies who caused it will get away richer. They should be forced to live like normal people, with real bills, no special tax exemptions, and no federal bailouts. Or we could hang them in a public place, which would make some of the people much happier.
I'm not sure if your math is correct here...isn't $85,000,000,000/200,000,000 people =$425 for each taxpayer.....remember the $600 economic stimulas that did nothing!!! I spent mine and I'm still struggling to pay for gas, heat, mortgage, food and I dont even have kids! Good luck to all!! Lets try and stay positive in such a negative world
I am glad to see so much righteous anger about how we have all been victimized by the superrich, but the real question is what do we do about it. The first step must be to elect Barach Obama in November and a healthy majority for the Democrats. To the one person who thinks the Democrats are responsible for this whole mess what kind of drugs are you on? Bush has blocked any meaningful legislation with his veto power which went unused so long as the Republicans were in the majority. Neither party is perfect, but the choice is so clear and compelling this time a vote for the Republicans should be viewed as a sign of mental impairment.
I'd like to see this "bailout" treated as a loan, repaid with interest to the American public. I'd like to see the Banking and Wall Street Executives whose
companies will be receiving this financial boost to take 20% reduction in salary and accrue no bonuses until the debt is paid off. Gutting the American economy can not be rewarded any longer.
"i don't see what we need the federal government for anymore. if the people in power are determined to keep swindling us and sending our money overseas, giving it to hired mercenaries, wall street crooks with no strings attached, etc, then why the hell should we keep paying them? we could easily fix a lot of problems if we quit giving the feds our cash and diverted the money back into the state."
Reply: I'm with you on that idea of keeping the money in our states. Don't send a dime to the Feds. Our States each need to stand up and demand a return of their sovereignty. Right now, they're slaves to Washington's hand-outs and will do The Feds bidding because of the potential perks they supposedly get back if they submit our tax money to Washington. In Michigan, we aren't getting anything back like we pay in. Our economy in Michigan is going straight downs the tubes. If our governor would grow a set and demand that we be treated as a sovereign as stated we should be in the Constitution, and deny any payments to Washington, we could rebuild our State ourselves. We need to run this State like it's an independent, self-reliant country; not a addict relying on Washington for its' hits.
Of course, if we tried to reclaim our sovereignty, we all know that we'd be looking into the muzzle of big guns, most likely wielded by Blackwater or some other mercenary group.
Two thousand years ago there was a wise man who spoke in parables. The record says he did this in order that the masses would not understand. Only the initiates of his inner circle would be privy to the whole truth. Most of his parables are straight forward and comprehensible. But there is one which has been an enigma to me until recently.
The parable says: That a certain king, while balancing his books, found a steward had been mis-managing his stores. He threatened to fire him. The steward, to provide for his future welfare, had the kings debtors write down their debts by significant amounts. The King found this to be a prudent action. And this is deemed a wise thing to do in this world.
I now understand. This parable is about business and what to do in troubling times. Forgive the debtors that the kingdom survives. No need to borrow or be bailed out. I believe that if we were to follow this advice we could solve our current dilemma.
This is what I would advise based on this parable: Cut all the home prices in half and rewrite the papers at a fixed rate of 5%. This will save all home owners and put the burden where it belongs, on those who created the problem. It will stabilizes the market. It also solves the bundled mortgage problem if the papers are simply declared as the property of whoever the home owner is currently sending payments to. All the re-writing should be done without subsidiary costs. There is no need for escrow, title search, or inspection. It has to be assumed that the original searching and inspection were done with due diligence and are still valid for the original applicants.
All loans stop at the mortgage holder until the market becomes stable and oversight procedures are strengthened. All those ‘investment vehicles’ vanish, as they should, into the thin air they were conjured out of. The big houses holding them collapse. But the economy roars on because the foundation is now solid. No need for tax rebates or reductions. No need to slap the high money dudes, their reward will be their depleted investments. The mortgage companies are saved and the wild speculators who bet borrowed money based on false premises and invalid assumptions, are screwed.
Clint Campbell
Las Vegas, Nevada
I am no economic genius. And truthfully, I am f'in lost here. I do believe that we are facing a combined barrage of obfuscation, arrogance, and false deadlines. Does this not seem familiar (post 9/11 reaction-ism)? I am truly scared for my family. But in truth, I don't know if I should be. I really do need that ivy league economist to bail me out with some real knowledge here. Help! What the heck is going on here. Are we witnessing a takeover? Are there alternatives? I ask sincerely. This smells like week old dead fish to me.
you're probably right about staring down the barrel of a blackwater gun, but the things is, we're paying their (outrageous) salaries. i just think that even if obama wins (crossing my fingers!) the system is so incredibly corrupt that the ordinary citizen doesn't see any benefit to their tax dollars these days. on the other hand, i don't mind paying state and city taxes because i know the money goes to valuable programs in our communities. that's what we need in this country. locally, if someone proposes we spend X million dollars on a performing arts center we VOTE on whether we think their proposal is valid--on whether we want to pay for it. and yet, when it comes to the federal government we give them far MORE money than we give our states and we have NO SAY in how they use our money? then we sit quietly while they give themselves tax breaks and line their pockets with our cash! it's insane.
where have you been for the last seven and ahalf years , ina cave some where.
Bailout Main Street not Wall street. Wall street and George bush and his rich buddies can go to hell!!!
Barrak Obama Should not meet with George Bush and McCain. They try to lure him to their mess. If their bailout doesn't work in future, they will say Obama faults to because he sign up to their mess.
Time to cling to those bibles and guns!? If only Ron Pauls bill to abolish the Federal Reserve in 2007 would have passed...maybe we wouldn't be in this mess. Ron Paul isn't looking so eccentric and wack-o anymore now that what he's been harping on is actually happening. Obama and McCain are bought, a vote for either of them is a vote for the wealthy getting wealthier crowd...write in "Ron Paul!"
Shane, put down the kool-aid and step away from the Fox news channel. Go for a walk and take a few deep breaths, then get out your wallet and go buy a clue. This disaster has been percolating for a long time under a Republican controlled Congress (who then managed to get a Republican President). The Dems may stink, but this one isn't one of their piles...
If only your math were correct, but I still like the idea. Too bad we have no lobbyists speaking for our interests.
Our laws,like the spider's web,catch the fly and let the Hawk go free.
This is the biggest bailout in the History of the World! Don't do it! That $700,000,000,000 could be spent in better ways with a National Health Ins. Plan for everyone, free education, jobs here at home to clean up our invironment, and fixing our bridges and roads! This is just too hard to imagine wasting our tax dollars on greedy theives. Why do we reward bad behavior we try not to do with raising our children? Lets put it on the coming ballot and see what hard working Americans think of this bailout perposal. Lets have a democracy again!
Where are the Bailouts for people who have lost their homes and are now homeless, the Bailouts for many in America who go to bed hungry, where are the Bailouts for 45 millions Americans who have no healthcare, the Bailouts for students struggling just to pay the interest on their student loan. Where is the help for the Victims of Katrina 3 years later, who still sleep in tents under highway bridges? Guess who stole the money that should have gone to them? Where are the weapons of Mass Destruction?
Did anyone see “The Late, Late Show with Craig Ferguson (9/24/08)…I’m glad I stayed up to watch? Great Show Craig…Democracy has nothing to do with the Bailouts of greedy fools that could care less about America or Americans….as they sail away in their boats. The world is watching and laughing.
One of the biggest demonstrations in Alaskan history was an Anti-Sara Palin rally. Her own state is rejecting her. CNN covered it. CBS said nothing. Had there been an Anti-Obama rally...the media would have run it all day as a "Special News Event." Anyone who gets on a plane and travels to another country should now call themselves... an expert in foreign policy.
