| THE HANDSTAND | LATE AUTUMN2008 |
Update
on the bail-Out
Be sure to read carefully
about the handouts to Wall Street. Mr. Paulson, former
CEO of Goldman Sachs, has made sure that the bonus pool
at GS will be generous this year. It will be at other
Wall Street firms as well. Nice way to spend the
taxpayers money, eh?
| The crux of the problem, in a
nutshell: The Collapse of a 300 Year Ponzi Scheme E. Brown, October 16th, 2008 "All the king’s men cannot put the private banking system together again, for the simple reason that it is a Ponzi scheme that has reached its mathematical limits. A Ponzi scheme is a form of pyramid scheme in which new investors must continually be sucked in at the bottom to support the investors at the top. In this case, new borrowers must continually be sucked in to support the creditors at the top. The Wall Street Ponzi scheme is built on “fractional reserve” lending, which allows banks to create “credit” (or “debt”) with accounting entries. Banks are now allowed to lend from 10 to 30 times their “reserves,” essentially counterfeiting the money they lend. Over 97 percent of the U.S. money supply (M3) has been created by banks in this way.5 The problem is that banks create only the principal and not the interest necessary to pay back their loans. Since bank lending is essentially the only source of new money in the system, someone somewhere must continually be taking out new loans just to create enough “money” (or “credit”) to service the old loans composing the money supply. This spiraling interest problem and the need to find new debtors has gone on for over 300 years -- ever since the founding of the Bank of England in 1694 – until the whole world has now become mired in debt to the bankers’ private money monopoly. As British financial analyst Chris Cook observes: “Exponential economic growth required by the mathematics of compound interest on a money supply based on money as debt must always run up eventually against the finite nature of Earth’s resources.”6 The parasite has finally run out of its food source. But the crisis is not in the economy itself, which is fundamentally sound – or would be with a proper credit system to oil the wheels of production. The crisis is in the banking system, which can no longer cover up the shell game it has played for three centuries with other people’s money. Fortunately, we don’t need the credit of private banks. A sovereign government can create its own. " http://www.webofdebt.com/ article...st_proposal.php |
Handouts to Wall Street Announced
Monday, October 13, 2008, 9:00 pm,
by cmartenson
Once again, the "will of the people" was
overridden by Congress in their haste to respond to an
"emergency" and once again it turns out the
people's instincts were right.
Quote:WASHINGTON — The Treasury Department, in its boldest move yet, is expected to announce a plan Tuesday to invest up to $250 billion in large and small banks, according to officials. The United States is also expected to guarantee new debt issued by banks for a period of three years, officials said. NYTimes
Instead, the money will be used to buy bank stock
which is a great deal if you are a bank because you get
cash equity and probably a nice boost to your stock price
(I am cynically assuming that the government is not going
to get the best price here....). And these
purchases will be non-dilutive to existing shareholders.
I was OK with the notion of capital infusions, but I am
astounded to hear that they will be done in a manner to
save existing shareholders.
Even more startling to me is that instead of slapping
the banks firmly on the wrist for being reckless, the
government is also "expected to guarantee
new debt issued by banks for a period of three years".
To put it bluntly, that is just not the way to combat the
moral hazard that is clearly endemic to our current
banking system. I think the banks should be fully on the
hook for any loans they make from here on out....mess up
again and your institution goes under.
Next, if you read the list of handouts below, things
get even more troublesome (if your measure is "enormous
rewards for Wall Street for misbehaving bother me").
Citigroup and JPMorgan Chase were told they would each
get $25 billion; Bank of America and Wells Fargo, $20
billion each (plus an additional $5 billion for their
recent acquisitions); Goldman Sachs and Morgan Stanley, $10
billion each, with Bank of New York Mellon and State
Street each receiving $2 to 3 billion. Wells Fargo will
get $5 billion for its acquisition of Wachovia, and Bank
of America the same for amount for its purchase of
Merrill Lynch.
A few of those companies are not even in trouble, at all, and yet they are about to receive billions and billions of dollars. Apparently there's a $5 billion reward for acquiring a competitor....I wonder how many knew about that when they were at the bargaining table? I bet quite a few of them.
Wait, it get's better: The goal is to inject massive liquidity
into the banking system. The government will
purchase perpetual preferred shares in all the largest U.S.
banking companies. The shares will not be
dilutive to current shareholders, a concern to
banking chief executives, because perpetual preferred
stock holders are paid a dividend, not a portion of
earnings.
First, this is NOT a liquidity injection, this is a
capital injection and there's a big difference there.
Second, this deal could not possibly be any sweeter for
any of the bankers or their shareholders. It is a
gigantic reward for playing risky and getting caught.
Executive positions and shareholders are to be spared.
I am now squinting anew at the market sell-off last
week because it served to inject a lot of fear into the
government and G7 negotiations at a critical moment that
paved the way for the largest, and most massive bailout
ever in history. Strangely good timing for the banks.
After these trillions of dollars have been spent and
distributed to the least worthy institutions on the
planet you will discover a few oddities along the way:
- Government
debts will balloon enormously
- No
new jobs will be created
- House
prices will continue to fall and foreclosures
will continue to mount
- The
real economy will receive practically zero
benefit from this
- Bridges,
roads and schools will still be in poor repair
- States
will still be hurting for revenues
- We'll
still have no national energy plan
In short, none of this money is directed at the real
economy. All of it is directed at the institutions
that created this mess in the first place and which,
honestly, feast on the productive economy.
This was, quite simply, the largest ever transfer of
public monies to private parties with the least amount of
public gain. We're going to be paying for this for a long,
long time.
Posted at lemetropolecafe.com (MIDAS):
Bill,
On 10/1/08, the first day of the 2009
fiscal year, the federal debt surged again, up another $99.5
billion to $10,124,225,067,127.69. This makes the federal
debt increase over the last 12 business days to be $490.1
billion or over $40 billion per day average. The federal
debt for recent fiscal years is as follows: 2005 = $553.7
billion, 2006 = $574.3 billion, 2007 = $500.7 billion,
2008 = $1,017.1 billion. The deficits for 2005, 2006, and
2007 were just over $2 billion per business day. Compare
this $2 billion to the $40 billion average over the last
12 days and you can see why I am writing this. This cash
infusion must be going down a black hole, because if it
were entering the economy the Dow would be 20,000 and
gold would be double what it is. Paulson better have a
passport, because he will not be welcome in IOUSA much
longer. This is the greatest theft / ransom in world
history. Regards,
Bryant
***************************************************************************************
All that talk about the bailout bill
going to help "Mr. and Mrs, Jones" and helping
Main Street and the American people and not Wall Street
was just that, talk.
Inserted into the bill on page 61, was a provision snuck
in by the Senate to make it MORE difficult for homeowners
to seek mortgage relief. http://careandwashingofthebrain.blogspot.com
Dow Jones Industrial Index
This bill is so incredibly stupid, it has the
potential to be the Smoot-Hawley equivalent of our times.
Bailout Passes, Stocks Limp
Minyanville Professor Kevin Depew is writing Five Things You Need to Know: Bailout
Passes, Stocks Limp.
How can this be? How can the passage
of the Bailout Bill find stocks limping awkwardly into
the close? Wasn't this supposed to be our finest hour?
The desperate resolution to the year-long crisis? Well,
the reality we have tried to reveal here in Minyanville
is that the Bailout simply will not work.
The credit markets have spoken. And they are saying - no,
they have been saying all along - that the $700 billion
Bailout Bill is nothing but a gnat attacking a buffalo.
There has been an ongoing disconnect between stocks and
credit markets for months now and even the action on
Monday did little to correct it.
There is only one thing necessary to understanding what
is happening and it is this: no one at U.S. Banks, no one
at the Federal Reserve and no one in politics can accept
the reality that real estate assets in this country
remain oversupplied, overpriced and overleveraged.
It is that simple.
TAF, TSLF, SuperSIV, TARP, none of that matters. No... http://globaleconomicanalysis.blogspot.com/
"Men at some time are masters of
their fates:
The fault, dear Brutus, is not in our stars,
But in ourselves,that we are underlings." Julius
Caesar by William Shakespeare
We are "small people" in the minds of the
"players" and in reality because we are not in
control of our lives. Our representatives do not fear us
because we are so "civilized" that we believe
the answer to our problems is to intrust the solution to
the very people who created the problem.
"Whether 'tis nobler in the mind, to suffer
The slings and arrows of outrageous fortune;
Or to take arms against a sea of troubles,
And by opposing end them?"
Hamlet by William Shakespeare
It's Official
The People are irrelevant
The bailout is not designed to work but to bail out
fraudsters with the taxpayer picking up the tab. No
better than a pick pocket.
From this day forward, will get what I need and not what
I want.
Will not borrow a dime,unless it's life or death, from
these vampires. That includes credit cards!
Cleaning out bank account and leaving the bare minimum
for bills.
No more direct deposit.
Anything that's not necessary is canceled.
Mad as HELL doesn't even cover it!!!!
* * * * *
Henry M Paulson Jr.:
The bill gave him unprecedented powers to shore up
the ailing financial system. With few constraints,
Paulson will make all the key decisions on who to hire,
when to launch the program and perhaps most importantly
how much the government will pay for troubled assets from
ailing Wall
Street firms. A misstep could mean hundreds of
billions in losses for taxpayers or a cascade of failures
for banks.Besides hiring five to 10 asset managers,
Paulson is seeking a top executive to oversee the program
with the rank of assistant secretary of the Treasury as
well as about two dozen bankers, lawyers and accountants.
Paulson urged Congress to pass the bailout plan quickly because credit markets were freezing up. Banks and investors were reluctant to make even overnight loans for fear that they would not get their money repaid. But the passage of the plan yesterday did not immediately ease the credit crunch.
* * * * *
Speculation was rampant on Wall Street yesterday about
who Treasury would hire to manage the assets that the
government plans to buy. Industry sources say the
department has asked leading Wall Street firms for
feedback and that Legg
Mason, Pimco, BlackRock and MKP Capital Management
were recommended to Treasury.
Letter received:4.Oct.2008
SEC Deregulation Let Banks Leverage Up
Posted by Barry Ritholtz on Friday, October 03, 2008 | 07:27
We've discussed this extensively over the past few weeks, but its now on the front page of the NYTimes:
"Many events in Washington, on Wall Street and elsewhere around the country have led to what has been called the most serious financial crisis since the 1930s. But decisions made at a brief meeting on April 28, 2004, explain why the problems could spin out of control. The agency’s failure to follow through on those decisions also explains why Washington regulators did not see what was coming.
On that bright spring afternoon, the five members of the Securities and Exchange Commission met in a basement hearing room to consider an urgent plea by the big investment banks.
They wanted an exemption for their brokerage units from an old regulation that limited the amount of debt they could take on. The exemption would unshackle billions of dollars held in reserve as a cushion against losses on their investments. Those funds could then flow up to the parent company, enabling it to invest in the fast-growing but opaque world of mortgage-backed securities; credit derivatives, a form of insurance for bond holders; and other exotic instruments
The five investment banks led the charge, including Goldman Sachs, which was headed by Henry M. Paulson Jr. Two years later, he left to become Treasury secretary.
(emphasis added)
No wonder the bailout package is so poorly crafted: The same genius, Hank Paulson, that helped us to get into this, and has utterly failed to see this coming until it was all but on top of is, is trying to get us out. He is uniquely unqualified for this task. How this guy hasn't honorably fallen on his own sword yet is beyond me.
Here are a few money quotes from the article:
“We’ve said these are the big guys,” Mr. Goldschmid said, provoking nervous laughter, “but that means if anything goes wrong, it’s going to be an awfully big mess.”
“I’m very happy to support it,” said Commissioner Roel C. Campos, a former federal prosecutor and owner of a small radio broadcasting company from Houston, who then deadpanned: “And I keep my fingers crossed for the future.”
Now you know: Hoping and praying as a policy approach don't really work all that well . .
http://bigpicture.typepad.com/
* * * * *
According to research produced by
MAPLight.org, House members who voted yes on the proposed
bailout package received 54% more money from banks and
securities than members who voted no: Over the past five
years, banks and securities firms gave an average of $231,877
in campaign contributions to each Representative voting
in favor of the bailout, compared with an average of $150,982
to each Representative voting against the bailout –
54% more money given to those who voted Yes. Democrats
who voted yes received “an average of $212,700 each,
about twice as much as those voting No, $107,993.”
Republicans who voted yes “received an average of $273,181
each, 50% more than those voting No, $181,688.”
http://thinkprogress.org/2008/09...utions-bailout/
(and let this portrait tell a story!) 
World reacts to US bail-out rejection |
|
H
R 3997 RECORDED
VOTE 29-Sep-2008 2:07
PM
World leaders have been reacting to the rejection of the $700bn US bail-out plan to stabilise the economy by the House of Representatives. Report from the BBC 30/9/2008 - bail-outs are already going on in Belgium. JB,editor BRITISH PRIME MINISTER GORDON BROWN The vote in America is very disappointing. The governor of the Bank of England, the chancellor and I will take whatever action necessary to ensure continued stability for Britain. The stability of our system is something that we are doing everything in our power to maintain.
BRAZILIAN PRESIDENT LUIZ INACIO LULA DA SILVA Emerging nations, poor nations who have done everything to have a good fiscal policy and to keep their economies stable, should not be paying for the price for the American economy's casino-like policies. It is not fair to have countries in Latin America, Africa or Asia pay for the irresponsibility of certain sectors of the American financial system. GERMAN CHANCELLOR ANGELA MERKEL The government expects and I expect that the rescue package in the United States will be approved this week, because it is needed so that new confidence can be established in the markets. AUSTRALIAN PRIME MINISTER KEVIN RUDD These are turbulent times, these are worrying times. What's important is that all people of good will around the world act in concert with our friends in the United States to see the right measures taken through the US political process to stabilise the global financial system. The call that we need to make is for them to put aside party politics and to pass this package because it is necessary for the stabilisation of US financial markets and global financial markets. All of our interests are at stake here. EU TRADE COMMISSIONER PETER MANDELSON I feel they've taken leave of their senses and I hope that in Europe we will not see politicians and parliamentarians replicating the sort of irresponsibility and political partisanship that we have seen in Washington. The American banking system is going to have to reinvent itself... It's going to be consolidated, it's going to operate in a different way, it's going to have to operate with more responsibility, less risk. FRENCH CENTRAL BANK GOVERNOR CHRISTIAN NOYER It's bad news but the Americans have no choice. They absolutely must have an overall plan because the crisis is hitting America much more than it's hitting the rest of the world. I have total confidence that they will find the right solution. NEW ZEALAND PRIME MINISTER HELEN CLARK I think we are all very disappointed that the US Congress and the administration haven't agreed on the rescue package. That rescue package would have injected a lot of confidence into the international financial systems. The fact that it hasn't happened has affected share markets as far away as New Zealand. JAPANESE PRIME MINISTER TARO ASOWe have to respond appropriately in order not to affect the Japanese economy and to prevent the financial system from falling apart. INDIAN FINANCE MINISTER P. CHIDAMBARAM We are watching the situation carefully. Of course, we will be greatly helped if a bail-out package is quickly approved by the US congress. THAI PRIME MINISTER SOMCHAI WONGSAWAT The impact of the global financial turmoil on our economy will be limited. We can still cope with the situation but we have to warn investors not to be alarmed. PHILLIPPINE PRESIDENT GLORIA ARROYO That just goes to show that this is really a time of global economic uncertainty. I know that these global forces are causing real difficulties for countries around the world so we in the Philippines have been working hard on all fronts. SOUTH KOREAN FINANCE MINISTER KANG MAN-SOO If necessary, we will inject foreign exchange reserves into the market. We're not at a stage where we have to worry about liquidity. CHIEF EXECUTIVE OF HONG KONG DONALD TSANG We must also remember the economic
fundamentals of Hong Kong are good and our
regulatory system, our fiscal economic system,
are sound. For that reason, we should have
confidence in ourselves in dealing with crises of
this kind. |
|
---- NOES 228
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| Abercrombie Aderholt Akin Alexander Altmire Baca Bachmann Barrett (SC) Barrow Bartlett (MD) Barton (TX) Becerra Berkley Biggert Bilbray Bilirakis Bishop (UT) Blackburn Blumenauer Boustany Boyda (KS) Braley (IA) Broun (GA) Brown-Waite, Ginny Buchanan Burgess Burton (IN) Butterfield Buyer Capito Carney Carson Carter Castor Cazayoux Chabot Chandler Childers Clay Cleaver Coble Conaway Conyers Costello Courtney Cuellar Culberson Cummings Davis (KY) Davis, David Davis, Lincoln Deal (GA) DeFazio Delahunt Dent Diaz-Balart, L. Diaz-Balart, M. Doggett Doolittle Drake Duncan Edwards (MD) English (PA) Fallin Feeney Filner Flake Forbes Fortenberry Foxx Franks (AZ) Frelinghuysen Gallegly Garrett (NJ) Gerlach Giffords |
Gillibrand Gingrey Gohmert Goode Goodlatte Graves Green, Al Green, Gene Grijalva Hall (TX) Hastings (WA) Hayes Heller Hensarling Herseth Sandlin Hill Hinchey Hirono Hodes Hoekstra Holden Hulshof Hunter Inslee Issa Jackson (IL) Jackson-Lee (TX) Jefferson Johnson (GA) Johnson (IL) Johnson, Sam Jones (NC) Jordan Kagen Kaptur Keller Kilpatrick King (IA) Kingston Knollenberg Kucinich Kuhl (NY) Lamborn Lampson Latham LaTourette Latta Lee Lewis (GA) Linder Lipinski LoBiondo Lucas Lynch Mack Manzullo Marchant Matheson McCarthy (CA) McCaul (TX) McCotter McHenry McIntyre McMorris Rodgers Mica Michaud Miller (FL) Miller (MI) Mitchell Moran (KS) Murphy, Tim Musgrave Myrick Napolitano Neugebauer Nunes |
Ortiz Pascrell Pastor Paul Payne Pearce Pence Peterson (MN) Petri Pitts Platts Poe Price (GA) Ramstad Rehberg Reichert Renzi Rodriguez Rogers (MI) Rohrabacher Ros-Lehtinen Roskam Rothman Roybal-Allard Royce Rush Salazar Sali Sánchez, Linda T. Sanchez, Loretta Scalise Schiff Schmidt Scott (GA) Scott (VA) Sensenbrenner Serrano Shadegg Shea-Porter Sherman Shimkus Shuler Shuster Smith (NE) Smith (NJ) Solis Stark Stearns Stupak Sullivan Sutton Taylor Terry Thompson (CA) Thompson (MS) Thornberry Tiahrt Tiberi Tierney Turner Udall (CO) Udall (NM) Visclosky Walberg Walz (MN) Wamp Watson Welch (VT) Westmoreland Whitfield (KY) Wittman (VA) Woolsey Wu Yarmuth Young (AK) Young (FL) |
| Bailout
is Not Out of the Woods; Procedural Vote Close Associated Press Julie Hershfeld Sep 29, 2008
The package cleared a key procedural hurdle on
the House floor Monday morning with a 220-198
vote to move it to three hours of general debate
and a final vote, likely by midday or early
afternoon. Two leading players in the negotiations also
spoke early Monday, taking to television news
shows to lobby for approval of a package deeply
unpopular with a public angry that taxpayer money
will save Wall Street firms from heavy risk-taking.
Thousands of angry phone calls, e-mails and
letters have poured into Capitol Hill from
constituents. Treasury Secretary Henry Paulson sought the
unprecedented amount of money with little
supervision. Banks,
credit unions, securities brokers and dealers,
and insurance companies, among others, could get
the help as long as they had "significant
operations" in the United States. Originally
designed to help companies get rotten mortgage-related
investments off their balance sheets, the
legislation would allow the government to buy up
any kind of asset top economic officials think is
necessary to promote market stability. |
| Lehman
After the Bail Out, Derivative Curse Begins Financial Times, London Sep 29, 2008 The
biggest challenge then begins in earnest:
liquidating Lehman's gigantic portfolio of
derivatives contracts, securities holdings,
warehoused mortgages and real estate assets. At
its last quarterly results, posted days before it
went under, Lehman reported total assets of $600bn.
But it is hard to know yet what Lehman's real
assets and liabilities are because of the scale
of its involvement in derivatives. The gross
value of its interest rate swaps book is more
than $10 trillion, according to one insider.
Unwinding it all will require the assistance of
existing staff, which could be a source of
tension. |
| Henry
Paulson's Goldman Sachs Cashes in on Bail Out Mark Pittman, Bloomberg Sep 29, 2008 Sept. 29 (Bloomberg) -- As much as
$37 billion from federal bailout loans to
American International Group Inc. has gone to
investment banks including Goldman Sachs Group
Inc., the firm Treasury Secretary Henry Paulson used
to run. The payments show how bailouts engineered by
Paulson and Federal Reserve Chairman Ben Bernanke
are beginning to shift money to Wall Street firms
involved in subprime mortgage trading. As
Congress prepares to vote on a broader $700-billion
bailout, the AIG credit line is one indication of
how it might work. Paulson last week hired former Goldman
colleague Edward C. Forst to advise him on the
government's $700 billion rescue plan. Forst left
Goldman Sachs in June to become executive vice
president at Harvard University. ``There have been
calls for a sweeping investigation of exactly
what happened,'' said Congressman Miller. ``I'm
not sure many people who are inside the policy
loop on all this really knows what went wrong.'' |
| American
taxpayers will swallow Wall Street's toxic debts Guardian UK Sep 28, 2008 EditorCE-
the press and the Congress keeps telling
us the "taxpayers" will swallow the
debt, but it is much worse than that, it is the
consumer who will pay it all in higher prices!
This includes your unborn children and
grandchildren, who are not taxpayers, but will
have to pay with every drop of milk
and diaper they consumer from they day they are
born! Paulson
says: "This bold approach will
cost American families far less than the
alternative - a continuing series of financial
institution failures and frozen credit markets
unable to fund economic expansion," Paulson
told a press conference in Washington. |