I tossed and turned last night after reading Paulson’s draft and got up this morning resolved to write my congresscritters.
I cribbed liberally from this blog entry of yours, and then sent the two senators and Olver over to your Crash Course as a final parting gift.
Sigh.
I hope it helps make a difference.
Here’s how you reach your congressmen by email:
Find your senators here and your congressperson here.
My letter read,
Regarding $700 billion mortgage-asset bail-out:
There are three serious flaws in the proposal put forth this week-end.
Sec. 6: the language “at any one time”, see below:
“Sec. 6. Maximum Amount of Authorized Purchases.
The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding AT ANY ONE TIME.”
This is unacceptable: this means that after, say, $100 billion of bad mortgages are flushed through this toxic waste dump another $100 billion can be bought. In short, these four little words assure that there is NO LIMIT to the potential size of this bailout. This means that $700 billion is a rolling amount, not a ceiling.
Sec. 8: is it even CONSTITUTIONAL to avoid all oversight and review? This seems to absolutely invite fraud of the type rampant in the Savings & Loan bail-out. What’s to prevent people from selling their friends assets for pennies on the dollar? What’s to prevent people from disposing of loans that aren’t really bad, in effect forgiving loans they made to friends?
See below:
“Sec. 8. Review.
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and MAY NOT BE REVIEWED BY ANY COURT of law or any administrative agency.”
Why do this as a bail-out at all? Why not put it through bankruptcy court where the equity investors will get nothing and performance-based compensation packages will suffer and companies will be punished for their failings? Sure, form a special bankruptcy work-out. But keeping the companies as going concerns and off-loading their errors to the government is wrong on so many levels. For one thing, it’s not just a taxpayer bailout, it’s a huge threat to our over-burdened currency already, nearly guaranteeing the horror-show of hyperinflation.
For a crash course on the economy, and why it is going to be different in the next twenty years than it has been in your entire life-time, I highly recommend Chris Martenson’s course, to be found here:
You are dabbling in the most serious legislation of your life this week-end. Do not misunderstand this: it is every bit as bad a proposal as when Bush wanted authorization to go into Iraq. He does NOT SERVE US. Please make sure that YOU do.
There’s no need to speculate. Secretary Paulson essentially said as much in an interview recently. A New York Times article reported on Sunday:
“Paulson said that Bernanke had long warned that a moment might come like the one they saw last week. ‘Going back a long time, maybe a year ago, Ben…said to me, when you look at the housing bubble and the correction, if the price decline was significant enough,’ the only solution might be a large-scale government intervention,’ Paulson said. ‘He talked about what has happened when there had been other situations historically, and basically he said in his view the time might come when something like this was necessary.’”
The article goes on, “[Paulson] had been reluctant to send lawmakers a plan that might not pass, worrying that a rejection would only further damage the markets.” http://www.nytimes.com/2008/09/21/business/21paulson.html?_r=1&sq=peter%20baker&st=cse&oref=slogin&scp=3&pagewanted=print
Evidently, last week the timing was right.
Congress was intentionally blindsided.
oh thank god i feel so much better. only the supreme court can decide on these issues. boy i was worried there for awhileafter all they did such a bang up job on the election in 2000.
Wall street cheers as the Government saves the day in a seat of the pants 700 billion (per time?) bailout…
I think our government has just exacerbated the problem, and assured that we go into a full blown depression.
Heres why:
“From ured.com: What probably wasn’t factored was that the government (taxpayer) has to pay all the maintenance fees for these loser mortgages. As a result, the bailout will cost far, far more than they are projecting. Its not just bailing out the banks; the government is buying long term liabilities. All the fees; HOA’s, insurance, utility assessments…the government gets to pay these bills in an environment of record inventories, nonexistent sales, and record foreclosures. This means we as taxpayers get a conglomerate of long term liabilities, outside of the base bailout costs. Disaster.
Lets not bother to discuss the major government administration and human resource costs to manage the properties they (we) will now own. Property management and accounting are major, non productive expenses. Or, that the Government will only get the worst loans on the banks portfolio, the ones that have no chance of maturing. Yet they are still trying to sell to the populace that the Government can actually make money on this. Please, sell that stale government liars bread to the tourists.
The fundamental fact is that housing is a liability. By taking on many thousands of homes in an inventory saturated environment, the costs for the government just skyrocketed. All this when there is a drastically reduced buyers pool, more stringent lending criteria, actual rates at over 6%, no speculation, and no expectation of year over year equity appreciation. Prime borrowers will realize they have been taken. We can expect more prime mortgage defaults will come as the government is forced to dump these houses to compensate for their vast new collection of housing liabilities! I bet they didnt factor that into their 700 billion number.
Additionally, expect more and more unemployment as the government takes these homes over and doesnt pay the fees. This means less realty agents, less state tax revenues, less county jobs, and less housing and commercial related service jobs (like utility workers, pest control, pool men, gardeners, etc). This will all just result in a major unemployment spike that will insure Depression II is now inevitable. Unemployment becaue neither the sophisticated defaulting homeowner nor the government is going to pay the state taxes, city assessments, or other fees.”
Example email to congressman. go to https://forms.house.go… or http://www.senate.gov/general/contact_information/senators_cfm.cfm
The Honorable Dave Weldon,
Please oppose further intervention by the unelected Fed & Treasury during this financial crisis. Please oppose efforts that fix the symptoms of this crisis and not the causes. Please exhibit leadership to shift the debate to fix the causes of the crisis rather than addressing the symptoms making your decision around what happens decades from now rather than next week.
I believe the symptoms to be exorbitant social security & medicare/medicaid liabilities, any budget deficit, failure to invest public funds in ventures which have even a hope of yielding a public & appreciable, & and a palatable lack of moral courage to accept facts. The facts of the situation are the rich made loans to unqualified poor and the Treasury’s current plan will have the moral middle class pay for those decisions. The US gov’t must acknowledge the wealth destruction that has already occurred and let those directly responsible live with the consequences of their decisions to include the foreign investors, otherwise we will follow Rome and Britain in the destruction of their middle class & subsequent collapse in financial ruin. Acknowledging this wealth destruction will indeed cause credit market to seize up as is necessary. Debt needs to become harder to obtain in the US because that is the most effective way to transform this nation into once again being a producing rather than consuming nation which is a root cause of this crisis.
As an Iraq War veteran, I find it sad that while the Iraq war has cost us under $700B over the past 6 years, the FED/TREASURY has already spent $900B in the past 3 months. On that scale, this is civil war and I thought only congress could declare war.
The unintended consequences of further government intervention are private individuals withdrawing wholesale from the now seemingly state-run markets, wholesale buying foreign currency and international stocks along with gold/silver, & ultimately moving to another country as citizens will choose to not subject their children to this national debt.
///////////////////////////////////////
The Honorable Mel Martinez,
Now that we U.S. citizens are part owners of such illusory enterprises as AIG and Fannie/Freddie, I would like you to initiate a lawsuit on behalf of your FL shareholders/constituents to obtain compensation for breach of contract by CEOs and CFOs who drew bonuses based on earnings that had to be restated.
The link below provides more detail. http://www.bloomberg.com/apps/news?pid=20601039&sid=amhY7f0W2igY&refer=home
question?is it naive to suggest letting the banks fail.
let the people who made hundreds of millions from risky bets
suffer the consequence by paying hefty taxes on all profits they have made .
spend the money on infrastructure such as national health, small business incentives,college funds,education, roads/efficient rail, debt consolidation and relief,care for seniors , sure up social security and pensions ,enrergy solutions… for all of us.
or preserve our economy the way it is and still suffer a contraction/depression, lost jobs ,no available credit,a worthless dollar, to keep consuming the way we have.
we end up carrying $11,000 or more each, to supposedly save the economy. I personaly would love to have my debt erased from my books, wouldn’t would you? would we not clamour to get that done if it were offered to us?
The mortgage bailout deal would essentially make the taxpayers liable for
bad mortgage lending by private companies, but federal officials argued that
this was the best way of stemming the credit crisis. Investors worldwide hold
$5 trillion in debt backed by the two firms, and their failure would shake the
global economy.
In this current economic situation, there needs to be some kind of viable
way to repair credit lines and get the economy moving again.
Treasury Secretary Paulson’s Troubled Asset Relief Program, or TARP, doesn’t seem to cover enough. The FDIC’s
chairperson, Sheila Bair, has set up her own strategy; a $24 billion plus plan
for the 1.5 million homeowners facing foreclosure. Her idea is to give a
stimulus of $1,000 to lenders for each renegotiated loan to owners in danger of
heading to foreclosure. In the event of default, the FDIC will
take on up to half of the burden. Paulson hates it, straight away, and
proclaims that its just more spending that will lead to the bankruptcy of the FDIC.
Some others view Bair’s actions as one of the first real attempts to help repair
credit of the banking system and get cash flowing again.
What do you think of the President Barack Obama’s $75 billion plan to improve the ability of troubled homeowners?
It’s not going to make it easier for us much in Orange County. First, people have to prove they qualify for loan. You can’t fake it anymore, which means lot of people are out. This also applies merely to Fannie and Freddie loans, which doesn’t include half of the people here through home loans.
Banks make bad loans and bundled them to make them look good
Sell bundles (derivatives) to people that just flat out did not know what they where buying
Market keeps selling these derivatives kinda like playing hot potato.
Many banks took out insurance to protect from being burned through AIG.
When the music stopped ((loans defaulted at an alarming pace)), the people with the hot potatoes where getting burned.
The Executives/owners of the "Big 5" banks ((the ones that are too big to fail and the ones that give together $1 to $2 million to many of our elected officials in the form of campaign funds not to mention all the perks from the lobbyists)) if by law they went into receivership would lose a lot of money and ipsofacto so do our elected officials, therefor all these new bills and acts to protect "some" banks have been crammed through our government.
In the meanwhile, I think the count is 21 other banks have closed plus 16 or so credit unions and went through the normal process with the FDIC.
During all this the government and the Federal Reserve have pumped Billions if not Trillions of dollars through AIG to help them pay for the insurance they issued to the "Big 5" banks and other central banks around the world (Germany and England to name a couple) at 100% the value of the insurance.
NOTE: I need to remember that the money from the Fed is loan to the USA at interest. We get to pay that too.
The acts in place allow the "Big 5" banks to sell to PI’s (privet investors) on auction. The Treasury (Government) match what the PI puts in and the Federal Reserve covers the rest ((oh yeah with interest to us)).
With the recent lose of Mark to Market, the "Big 5" can auction these "investments" at any price they want too.
Furthermore, the PI’s can be front companies owned in part by the "Big 5" even all of them at once, so if there is a lose the "Big 5" will only lose a very small % through these companies. And these companies can be funded by bailout loans from October last year or from AIG money. The "Big 5" can even boost that they paid back last years loan with the new plan’s money only losing a faction when they should have lost, around 30 to 70%.
If there is and most-likely will be a lose the treasury and the Fed take the hit, leaving us to pay back the money to the Fed with interest.
Last but not least, I have seen nothing in all that I have read that the PI’s need to sell immediately. This in my opinion means the Fed and Treasury will not show a lose until the PI’s sell them. If sold slowly over alot of time or held until things get better, the Treasury and Fed may not see such a hard lose at once or lose much less. We just pay interest on the loan from the Fed till time of sale. Then the Fed can absorb the money back slowly without letting inflation go too crazy or spike too fast.
If the PI’s sell all at once for whatever they can get, game overTreasury takes a hung hit on the books now ((more taxes or more money from the Fed, more interest)), and the Fed balance sheet goes off the charts ((if the sale can pay back the loan, we pay no more interest on the money lowering money in the system, hence not paying for a dead horse)). This will send our money into high inflation or worse.
Have we not given the bankers the SHTF button? They can press it at anytime with no lose to themselves or much less intensive than main-street will see.
I really want to hear others opinions on this one, maybe I am missing something. Maybe this is too simple. Worse off, maybe this is right.