I thought you were buying “toxic assets” with my money?

The Fed has plans for the first $250 billion of the $700 billion we loaned them a few weeks ago. Buying stock in private banks and expanding protections for the U.S. financial system. This idea comes after a Treasury Department meeting between top government economic officials and executives of the largest banks in the country. Goldman Sachs CEO Lloyd Blankfein, Morgan Stanley CEO John Mack, Citigroup CEO Vikram Pandit, JPMorgan Chase & Co. CEO Jamie Dimon, and Bank of America Corp. CEO Kenneth Lewis were all asked to attend. A who’s who of very powerful men with an agenda all their own convening with a Government official to discuss the economic future of our country. Following the meeting President Bush, the Fed’s biggest puppet, “was to be briefed early Tuesday by economic advisers and then announce the plan which the Treasury said was designed to restore functioning of our credit markets.” We have granted the Secretary of the Treasury the ability to do what he sees fit with our hard earned money and then he briefs the President on what to tell the public after he has made his decision. Sounds a tad backwards does it not? Plus, I was under the impression that the purpose of the bailout was to buy up the “toxic assets” weighing down the balance sheets of these financial institutions. You guys intimidated us with the gravity of the situation, convinced enough Congressmen of the severity, were somehow permitted the money to buy these assets, and then just decided to “devote a significant part to direct government purchases of stock in banks.”(Associated Press) This is an idea that Paulson brought up only last week, subsequent to the approval of the bill for its intended purpose and I’m sure after many a conversation with his old banking buddies.

The plan would also provide a way for the government to insure loans that banks make to each other, a critical part of the credit system. This move alone eased the minds of many bankers and the market responded accordingly with the largest single day gain ever. Again, let me stress that I am no economist and am unable to guess if this may be what the financial sector needs in order to sustain itself. I do know enough to understand that the “frozen” credit markets could have been thawed out weeks ago as a result of this insurance from the Fed. We only decided to do it now in order to “catch up to Europe in what has become a footrace between countries to reassure investors that their banks will not default or that other countries will not one-up their rescue plans.”(NY Times) They were afraid that investors from here might move their money to a safer place since Europe had already guaranteed their bank’s loans. “We’re trying to prevent wholesale carnage in the financial system,” stated Kenneth S. Rogoff, a professor of economics at Harvard.

All the while, we are pumping dollar after dollar of money we seriously do not have into these institutions. I have always heard that the market fears uncertainty and that is all that is surrounding us. Perhaps the problem is not just that the credit markets are supposedly frozen and toxic assets are obviously everywhere. Maybe the problem is that investors are uncertain of our future and the government got involved in an area they should not have with a solution that is causing more problems than it is solving. Maybe they are scared because in less than one month we will be choosing a new President, when neither of the candidates has revealed any meaningful suggestion for our current economic situation. Or maybe, just maybe, we are feeling the repercussions of our government pushing “spending” down our throats for so many years, encouraging us that credit rather than savings is what our economy thrives on. We do not have to borrow in order to prosper. Our personal, and national, credit limit is maxed out and it is time for a change (Please excuse the unintended Obama slogan).

Panic can cause a prudent person to do rational things that can contribute to the failure of an institution.

Panic is being spread by the President, the Fed, and every proponent of this bill. Bush stressed today that “this is an issue that’s affecting hard-working people. They’re worried about their savings; they’re worried about their jobs; they’re worried about their houses; they’re worried about their small businesses.” I know I am only one homeowner out of millions but I’m not worried about my home. Maybe that is due to the fact I did not agree to some adjustable-rate mortgage because I had the ability to calculate the maximum amount I could afford monthly on a mortgage payment. Owning a home is not a right here in America it is a privilege. Crafting numerous ways to give unqualified or risky mortgage seekers access to NINJA loans (No Income, No Job, and No Assets) is not only unethical on the bank’s part but also irresponsible and shortsighted of the buyer. The bank should not have lent out the money without proper underwriting and documentation of income and consumers should not have purchased a house just because they could afford the payment for the first year before the rates adjusted. The resulting amount of defaulted loans and huge drop in market value of homes everywhere is not the sole cause of the “credit crisis,” but it the largest catalyst of this whole mess. The “credit freeze” is only a term for banks wising up and being cautious who they now lend to. Struggling to convince us that we must now give up billions of dollars we would rather see spent elsewhere in order to stimulate the economy and unfreeze these credit markets is absurd. I would rather the banks be cautious who they lend to and save us Americans the cash.

Having said that, the Senate shrewdly took a three page proposal and turned it into a four-hundred and fifty page bill with saccharine. I have a feeling they may have done just enough to sway the few voters they needed to so that this bill passes the second time around. Let’s look at what they added and why. First, they tacked on what even they refer to as sweeteners which are provisions that make it difficult for any lawmaker to resist. “This bill has been packaged with a lot of very popular things to give it even more momentum,” said Senator Jeff Sessions. Added was a $150 billion in new tax breaks and increased insurance on deposits from the FDIC. They are slow to tell us that new items being added would substantially increase the burden on taxpayers and the Senate version of the tax plan adds most of the cost to the deficit over the next decade. Representative Joe Barton, Republican of Texas said it best when he stated that “the bailout legislation that the Senate is sending back to the House is a fraternal twin to the one I voted against on Monday — meet the new bill, same as the old bill.” At the heart of this is still the same $700 billion dollars regardless of what other good legislation gets attached to it but now instead of agreeing with the bailout lawmakers “could now say they voted for increased protection for deposits at the neighborhood bank, income tax relief for middle-class taxpayers and aid for schools."(NY Times) All we are doing is “trying to get this thing passed” said Senator Harry Reid. Appears like they will do whatever they are told unless the order comes from their constituents.

Brace yourself. The government is going to take care of us.

The Senate majority voted yes tonight on a bill very similar to the one that was just rejected by the House. I'm not a legislator so I do not know the full process but I would venture to say that rewriting a bill in order to reduce the powers it grants to the Treasury and to better protect the taxpayers should take more than a day. According to CNN Money what they did instead was attach Senate add-ons causing “the bill's initial price tag will be higher than the $700 billion dollar” figure we were just starting to get comfortable with. The bill now includes “elements designed to attract House Republican votes - particularly popular tax measures that have garnered bipartisan support.” They took the same principles from one bill and added power windows and power seats to make it more appealing to the Representatives that denied it the first time. They didn’t even change the name. The Senate voted tonight on H.R. 1424; the H.R. stands for House of Representatives. "Fails in the House, just give it to the Senate they know how to sweeten it up, then send it back." These tax breaks may be very beneficial to those they are intended to help and they are probably a long time coming. It is a crime that our government is only allowing us these tax breaks in exchange for $700 billion dollars. I have a strong feeling they are going to get more money than we are. No matter how you try and spin this thing Washington is taking money out of our pockets people not putting money in. Think about this logically. Would $700 billion dollars have a better chance of stimulating the economy if it was left in our wallets and pumped into the markets by us, the consumers, or if that money was taken out of our pocket by the government to spend how they see fit?

White House Spokesman Tony Fratto passed on this message today. "This morning we're seeing increased evidence of the credit squeeze on small businesses and municipalities all across the country. So it's critically important that we approve legislation this week and limit further damage to our economy." There are still the undertones of impending doom in his words. Washington now knows that we are aware of the fact they were trying everything they could to sell us this “plan.” They are even admitting it now stating that “the hurdle is overcoming the word ‘bailout.’ ” The New York Times even wrote an article titled Labeled as a Bailout, Plan Was Hard to Sell to a Skeptical Public. Well of course it was hard to sell to us because you are asking for over $700 billion dollars and we do not like letting you take that money from other programs where it would be better spent. This “taxpayer” money is not going to be collected door to door by the government it is going to be taken from places where it has already been allocated. Places we worked hard to get that money to. We vote for local representatives and governors and we watch them make it to Congress all the time hoping they will do with our money what they said they would. And as soon as we get close they try a trick like this. Good thing the Federal Reserve can just print more money anytime it needs to. Just create some more currency out of thin air for this purpose at least then the only thing Americans will suffer from is devaluation.

Operation Fear 2008

The Bush Administration rolled out its latest installment in their policy of fear. Good thing they are horrible salesmen. They have tried to convince us that this bailout must happen immediately or the consequences will be felt by the pocketbook of every American and we just may never recover. Well we aren’t buying it. This proposal is being forced through with five weeks until the next election and there is a reason for that. Since Congress shot down the bill, requiring a new draft to be written, the gift of time has been given to the lobbyists for the financial industry. I know the lobbyists must have been working the phones yesterday calling their favorite representatives in Congress, on their day off mind you, persuading them to somehow protect their turf in this new proposal. Politico reporter Chris Franks stated that in the first six months of this year alone lobbyists for the financial companies (credit cards and banks) have spent over $230 million dollars trying to get their voices heard. These institutions are major players and they get listened to. We are talking about $700 billion dollars up for grabs. These institutions want their piece of the pie, are willing to try to persuade anyone to get it, and if successful just may put themselves at the top of the list for a cut of the “winnings.” Does the Countrywide mortgage scandal ring a bell? James A. Johnson, who led mortgage buyer Fannie Mae from 1991 to 1998, received more than $5 million in loans from Countrywide that were arranged outside its ordinary underwriting process. Senator Chris Dodd and Senator Kent Conrad both received special “VIP” treatment from Countrywide, refinancing their homes with special deals from Countrywide that the average American did not have access to.

The race to pass this legislation just may be a last ditch effort by the Bush Administration to take care of their buddies before the holidays. Let’s give the Secretary of the Treasury far reaching and unheard of authority, and a cozy sweater. However; the charge is being presented to us as Armageddon. Similar to the campaign they previously led to create panic in every home in America. When is the last time you checked the “Terrorist Threat Color of the Day” before you went to work? Not once. But the "I Smell B.S. Color of the Day" today is red. Operation Fear worked on us once, you need a new tactic and offensive to overrun us this time.

Do you need bailed out too? Well so do I. If you have "bad assests" that you would like the government to buy from you go to (www.buymyshitpile.com) and put them up for auction.

Congress sends the message that the economic problem may not be too dismal after all:

First, let me applaud Congress for making one of the most monumental and important decisions they have ever collectively made. Their vote against the proposed legislation yesterday sent a extremely important message to the citizens of the United States, and the Bush Administration for that matter. And now, while you and I are being assaulted with statements that America’s economic future depends on the manifestation of some sort of immediate rescue plan our Representatives in Congress are taking the day off. In fact, just today President Bush said "for the financial security of every American Congress must act" (Video: Bush's warning). Yet today Congress observed a non-federal, religious holiday. This happens in the midst of the supposed “largest economic crisis” since the Great Depression. Their actions inadvertently give the impression to the public that this crisis may not be so grim after all. During an unprecedented time in our history when our future allegedly hangs in the balance I would normally feel better if Congress was in office writing legislation. However, I am more than pleased that they are at home doing what they normally do when they are in office; nothing. I am starting to get the impression that there may be no problem to begin with. After all the credit markets that are supposedly going to be frozen if we do not do something soon are the same credit companies that send me “pre-approved” applications by the mailbox full and continue to increase my credit limit without me even asking. I fully comprehend that when these companies have to write down a significant number of losses and have to leverage themselves to recoup money lost on defaulted loans that they are going to be extra cautious who they lend to next. But to insinuate that the credit markets will be “frozen” and that no profitable small business or responsible individual will be extended a line of credit ever again is ridiculous. Things are not going to be extraordinary in the future they are going to return to the “norms of the past before cheap money inflated asset values, undermined lending standards, and encouraged” excessive risk (10 Things That Will Change). After a record breaking drop in the Dow Jones Industrial Average yesterday (-777.68) due apparently to the denial of the rescue plan, the markets had an almost record breaking increase today (+485.21).

Some are now saying that the denial of the bill was really an attempt by the Republicans to distance them from the Bush Administration. By publicly denouncing this rescue plan they allow themselves the ability to later say that it was not them who spent our tax dollars to bailout Wall Street. Whatever the reason, a win is a win and we should take what we can get.