Banners for President Palin
Courtesy of Mickeleh:
Get the full set and start passing them around. This one was my favorite.
UPDATE: A few new ones are here.
Market Meltdown: Thoughts on Shadows, Secrets, and Shells
After reading Francine Hardaway, Dave Winer and Steve Gillmor today, it occurs to me that we are not under any obligation to accept the Bush Administration’s claim that their way is the only way out, or hand off incredible power to the Secretary of the Treasury with absolutely no understanding of how that power is to be used or how it will cure the problem.
Further, many have pointed out that the proposed bailout plan does not put a cure on the underlying disease that brought us to this place — out of control credit and lending practices locked inside an invisible, or shadow, banking system. As many other smarter people than I have pointed out, there is no instant cure for our financial market mess; there are too many players, too many vines branching out, and too many unknowns. But let’s start with mortgages as a place to dig our feet in.
The mortgages that are rocking the financial industry are still secured by real estate. The homes are, for the most part, still worth something, and when the market rebounds (which it will, just like it has many times in the past), they will regain their value. At the moment, many of these foreclosed homes (and office buildings, and parking lots and whatever else…) are vacant and waiting for someone to buy them. So we have a bunch of unoccupied homes that are bank-owned and worth less than what was loaned by the bank to purchase them.
Then, thanks to the repeal of Glass-Steagall and subsequent removal of the firewall between investment companies and banks, we have these mortgages bundled into funds by the banks’ subsidiary broker-dealer (wholly owned by the bank holding company, of course), and sold to individual investors as “prudent investments”, intended to spread the risk among many. In theory, it’s great, because evidently no one foresaw the entire industry turning belly up at once and leave those investors holding the bag. As Morgan Stanley and Goldman Sachs become full-fledged bank holding companies tomorrow by decree of the Federal Reserve, the Glass-Steagall firewal evaporates forever.
What we have isn’t a meltdown of the traditional banking system. It’s a meltdown of the shadow banking system, the behind the mask, unnamed industry that relies on short-term credit to reap big profits which are plowed back into investments in commercial paper.
In 2007, the founder and CIO of PIMCO wrote the following:
Financial institutions fell for the ruse, and now we all suffer the consequences. Defaults are rising, the dollar’s sinking, and — good Lord! — even Google’s (Charts, Fortune 500) stock price is going down. Something must really be wrong.
It is. What we are witnessing is essentially the breakdown of our modern-day banking system, a complex of leveraged lending so hard to understand that Federal Reserve chairman Ben Bernanke required a face-to-face refresher course from hedge fund managers in mid-August.
My Pimco colleague Paul McCulley has labeled it the “shadow banking system” because it has lain hidden for years, untouched by regulation, yet free to magically and mystically create and then package subprime loans into a host of three-letter conduits that only Wall Street wizards could explain.
And in March, there was this excellent description of the shadow banking system:
On Wall Street, of course, what you do not see can hurt you. In the past decade, there has been an explosion in complex derivative instruments, like collateralized debt obligations and credit default swaps, that were intended primarily to transfer risk.
These products are virtually hidden from investors, analysts and regulators, even though they have emerged as being among Wall Street’s most outsized profit engines. They do not trade openly on public exchanges, and financial services firms disclose few details about them.
Used judiciously, derivatives can limit the damage from financial miscues and uncertainty, greasing the wheels of commerce. Used unwisely – when greed and the urge to gamble with borrowed money overtake sensible risk-taking – derivatives can become Wall Street’s version of nitroglycerin.
Bear Stearns’s vast portfolio of these instruments was among the main reasons for the bank’s collapse, but derivatives are buried in the accounts of just about every Wall Street company, as well as those of major commercial banks like Citigroup and JPMorgan Chase. What is more, these exotic investments have been exported all over the globe, causing losses in places as distant from Wall Street as a small Norwegian town north of the Arctic Circle.
For years, this has been the shell game fueling Wall Street while ordinary folks just try to get through the day and pay their bills. Credit has been the currency driving the markets, and as it proved lucrative for US investors, so too did it prove lucrative for foreign investors. As I understand it, 41% of US Treasury bonds are owned by foreign investors. Call me naive, but it seems to me that the addiction to credit isn’t just on Wall Street, it’s in Washington, too.
As I wrote last Sunday, our war in Iraq is being fueled by issuance and purchase of US Bonds. Only US citizens aren’t the only ones buying them. As more debt is piled on more debt, we run the serious risk of having our margins called by the likes of China, Saudi Arabia, and others. In the meantime, the UK markets grow shakier by the minute, and we are all placed at risk of losing what little savings we’ve managed to accumulate, while Lehman executives share 2.5 billion in bonuses, courtesy of Barclays Bank, who skimmed the cream off the soured milk that was a respected investment bank.
Glenn Greenwald echoes my own thoughts on this:
What is more intrinsically corrupt than allowing people to engage in high-reward/no-risk capitalism — where they reap tens of millions of dollars and more every year while their reckless gambles are paying off only to then have the Government shift their losses to the citizenry at large once their schemes collapse? We’ve retroactively created a win-only system where the wealthiest corporations and their shareholders are free to gamble for as long as they win and then force others who have no upside to pay for their losses. Watching Wall St. erupt with an orgy of celebration on Friday after it became clear the Government (i.e., you) would pay for their disaster was literally nauseating, as the very people who wreaked this havoc are now being rewarded.
More amazingly, they’re free to walk away without having to disgorge their gains; at worst, they’re just “forced” to walk away without any further stake in the gamble. How can these bailouts not at least be categorically conditioned on the disgorgement of ill-gotten gains from those who are responsible? The mere fact that shareholders might lose their stake going forward doesn’t resolve that concern; why should those who so fantastically profited from these schemes they couldn’t support walk away with their gains? This is “redistribution of wealth” and “government takeover of industry” on the grandest scale imaginable — the buzzphrases that have been thrown around for decades to represent all that is evil and bad in the world. That’s all this is; it’s not an “investment” by the Government in any real sense but just a magical transfer of losses away from those who are responsible for these losses to those who aren’t.
Which brings me to my point, such as it is. If a bailout of Wall Street is inevitable for our own protection, I want it on my terms. If I have to finance it, I want to do it in a way that’s going to benefit ME, the taxpayer. I want a return on my investment, not more taxes to service the debt owed to China.
Let’s start by making a citizen’s margin call. We actually do have clout, because it’s our 401(k) and pension money fueling the new investments that keep the pyramid on track as we move forward. Let’s tell the government we will make our investments in US bonds which may only be owned by US citizens, earmarked only for the purpose of retiring debt to foreign investors.
Let’s also insist that we don’t act with haste on any bailout of Wall Street. Any emergency measures taken at this time should be just that — emergency measures, for a very short period of time (3-6 months, maximum), while a longer-term plan which includes full disclosure, appropriate sanctions, and full recovery efforts of whatever assets and profits are left to recover.
Finally, there can be no — I repeat, NO — blank check granted for this bailout. No power without oversight, no action without proper accountability and recourse. None. Because it’s worth remembering this important fact, again courtesy of Glenn Greenwald:
What’s most vital to underscore is that the beneficiaries of this week’s extraordinary Government schemes aren’t just the coincidental recipients of largesse due to some random stroke of good luck. The people on whose behalf these schemes are being implemented — the true beneficiaries — are the very same people who have been running and owning our Government — both parties — for decades, which is why they have been able to do what they’ve been doing without interference. They were able to gamble without limit because they control the Government, and now they’re having others bear the brunt of their collapse for the same reason — because the Government is largely run for their benefit.
Lest you doubt, let me remind you that Jeb Bush served as a financial consultant to Lehman from 2007 on. Here’s an added bonus:
Sitting behind McCain was former Gov. Jeb Bush, who was hired a year ago by Lehman Brothers as a financial consultant. As governor, Bush served on the three-member State Board of Administration that agreed to let the state’s retirement fund buy a series of mortgage-backed securities from Lehman Brothers that turned out to be troubled. The subsequent steep drop in value prompted a $9 billion run on the fund last December by local governments who had invested their money in the SBA managed fund. Lehman also manages two funds for the SBA, which is also heavily invested in some Lehman securities.
All I can say to that is that the good people of Florida should really think hard before electing someone Jeb and George endorse, if they hope to keep what little retirement savings they have left.
Sphere: Related ContentStunning Coup Attempt of 2008: Right Here, Right Now
When I wrote about the bailout bill this morning two things happened. First, I was focused on the staggering, mind-numbing numbers. And second, even though intuition told me there would be something about this plan as insidious as the Patriot Act, I didn’t imagine it to be quite as bold and brazen as it was.
Fortunately, others did. It’s stunning in its audacity and simplicity.
In essence, the bailout as proposed represents the largest transfer of Congressional power to the executive branch in United States History, as well as the shift of public funds into corporate hands. Worse yet, there’s this:
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.
Read that a couple of times. Let it sink in. The Treasury Secretary has been elevated above the rule of law. In essence, we are being asked to fork up 700 billion dollars to give to the Treasury Secretary with no accountability and no recourse. Imagine that. Then go read all of Larisa Alexandrovna’s article on Huffington Post.
If ever the words “fierce urgency of now” had any meaning, they must have meaning here. They must. Alexandrovna is absolutely right when she calls for us all to stand against this in unison, regardless of party:
You are no longer Republicans, Democrats, or any shade of voter. You do not live in a swing state or a solid colored state. You are simply this: an American. That is the only side that matters. So call your members of Congress and demand, no, declare that unless they do their duty to the Constitution and to us, we will move to the streets – not because we want to, but because our founding fathers demanded this duty of each and every citizen in the face of such a domestic enemy. Demand – as is your right – that this bill be voted against and demand – as is your right – that the people plotting this treachery be held to account. We are either a nation of laws or we are no longer a democracy. Pick a side, because there won’t be another time, another moment, another chance to be a patriot.
She’s right. There is no crisis more urgent, more in need of our attention, than this. Because if we, the people, do not stop this end run around the rule of law and balance of powers, we will live in the dictatorship we deserve.
This is the bookend to the Patriot Act, make no mistake. It’s time to say no.
Sphere: Related ContentMortgage Bailout: Questions Without Answers
Here is the full text (PDF) of the proposed bailout of the mortgage industry. It isn’t very long, take the time to read it.
In essence, it permits the federal government to purchase mortgage and mortgage-related assets from any US financial institution.
The first question you should be asking is this: What are mortgage-related assets? That would be a good question. Mortgages are easy enough to define. They’re loans secured by the equity in a piece of real estate. But what are mortgage-related assets? Does that definition extend to the mortgage funds that have created the havoc in the marketplace that we already see?
And then this: What are the rights of the borrower? Note that the act grants the government the authority to designate financial institutions as government agents, acting on behalf of the government. Which financial institutions? What benefit will they derive? I’m thinking specifically about banks like Bank of America, which has made what I consider to be incredibly imprudent decisions to buy Countrywide Financial and Merrill Lynch. To what end? If designated as an agent of the government, do they then become responsible for the servicing and collection of government-acquired mortgages?
And the best for last. Spending and debt caps: What are they and what do they mean? Under Section 6, the amount allocated to the purchase of mortgage-related securities is $700 billion. However, Section 10 increases the statutory limit on public debt (yes, that’s our National Debt) to 11.3 trillion from 8.2 trillion. That’s an increase of 3.1 TRILLION, even though the authorized limit for mortgage purchases is 700 billion.
Tired of numbers? Me too. But what is the purpose of increasing our debt limit in relation to this particular piece of ‘emergency legislation’ if not to pad the balance sheet to make the Bush administration look better than it should? My own theory is that the increase in the debt limit is a way to get the cost of the Iraq war onto the balance sheet without debate.
The Patriot Act taught me not to trust anything put before the taxpayers with the “urgent that we do this RIGHT NOW” admonition. That’s how we signed away part of our Constitutional rights. And just like now, it was done in a climate of fear and uncertainty.
Fear and uncertainty is the tool by which Bush, Cheney, McCain and Palin browbeat everyone into being forced to accept their point of view. Because so much of what they do would not stand up to public debate, they invoke fear-based ‘emergency legislation’, and then slide in provisions that don’t make much sense unless they’re considered in the larger context of world events.
For some perspective, here’s a chart of the growth of our national debt since 1940:
For extra credit, you can map out the increases to the party in power for some real eye-popping madness, but for purposes of this post, consider the end point of the graph – years 2000-2007.
Increasing the debt cap by 3 trillion dollars means a weaker dollar — weaker than it was even before this disaster. Now that may be inevitable, given the credit gorge we’ve been on. According to some, the alternative was a complete collapse of the dollar. However, what I take away from it is a promise that higher taxes are inevitable, no matter who is in office. So there remains only one lingering question: Who will spread the tax burden more fairly?
The answer can be found easily enough in the candidates’ tax proposals. One gives relief to those earning 6 figures; the other gives relief to 95% of taxpayers. While I’m not a huge fan of either proposal, I’ll opt into the one that lessens the burden for the majority wherever possible.
Paul Krugman has some questions about the bailout, too. Go read it here.
Sphere: Related ContentOpen Letter to Sen. Barack Obama
Dear Senator Obama,
Since January of this year, I’ve been absolutely committed to getting you elected. I’ve donated to your campaign, I’ve canvassed for you, I’ve volunteered to work in the office around the corner, and I’ve even put my marriage into severe stress by refusing to sit idly by and once again allow my Republican spouse to cancel out my vote.
But I need your help. And I need it now.
I knew it was going to be a rough campaign. I even suspected that Sarah Palin would be the choice for their ticket after seeing her profiled earlier this year. Why didn’t you?
I also suspected that the Republicans would use every single weapon at their disposal, including the financial markets, race, war, and terrorism (their little deck of fear) to intimidate voters into electing them.
But I believed you when you called upon us to be the New American Majority. This is what I wrote in February:
We are the new American majority. We have a voice. We walk streets, we make phone calls, we give what we can, even if it’s just $3.01 at a time. We are speaking for ourselves rather than waiting for someone to speak for us. We want our country back, and we want our standing back in the world. We’re tired of the naysayers who leave our fates in the hands of Wall Street and the Halliburtons, Diebolds and Blackwaters of the world. We are no longer going to stand idly by and have our lives and quality of our lives dictated to us by lobbyists and corporations.
This is not hate. It is democracy.
But Senator Obama, we can’t do this by ourselves. When Bill Clinton gives an interview praising Sarah Palin’s political acumen and you fall silent, what am I to think? When Hillary Clinton won’t come out with both guns blazing against her, I can only assume that your choice of Joe Biden so offended them that they plan now to toss the election over to McCain — their Plan B.
The fierce urgency of NOW isn’t just a phrase to inspire voters, Senator Obama. You have to get it, too.
This week has just about snuffed out the hope. That’s what McCain and the Republicans want. They want us to be afraid, to believe in nothing, to be emotionally and financially bankrupt, bent and spent, looking up and reaching up for them to rescue us.
We don’t need rescuing; we need your voice. We need you to get down on their level, to tell the voters the truth just like you said you would. Tell them that Sarah Palin is no more qualified to succeed McCain as President as she is to be dogcatcher. Ask them if they want Vice President Palin to be in contempt of Congress the same way Vice President Cheney is now. Point it out, shout it out! Ask the voters if they really think it’s a good idea to surrender to snark.
Did you learn nothing from the primaries? Hillary Clinton won by snarking her way right past you. And now she and Bill are handing a victory to McCain by signalling permission to their supporters. What Bill Clinton said in that interview was that Sarah Palin was competent because she could play politics.
I’ve seen Sarah Palins in my lifetime. They’re the cheerleaders that steal boyfriends because they can, the antagonists that walk into healthy groups and leave them shattered and broken with their backbiting and gossip, the women who stand up and preen their righteousness while their kids flip them off behind their backs. They’re the ‘beautiful ones’, the ones with enough bite to keep honesty at bay, just enough brains to convince everyone they’re right, and two-faced enough to tell everyone else you’re wrong. (For even more examples, read this)
Sarah Palin is dangerous. Until you neutralize her, you risk losing this election. And it must be YOU. Not Biden. Not Clinton. Not Michelle. YOU.
You are the one who has to call her what she is. Ambitious and incompetent. You are the one who has to point it out, and once you do, then you can call McCain out for taking such a dangerous risk with our country. Did you hear her yesterday, calling it the Palin-McCain administration? Where were YOU? Why weren’t you on it?
You have said you are running on change. As Steve said on NewsGang yesterday, the only thing that has changed since the convention is the selection of Sarah Palin. As the change candidate, it’s up to you to address the change, take it out, neutralize it.
Because as much as I want to be all hopey and stuff, after this week I’m as pessimistic as I’ve ever been. People will surrender hope to fear. They do it all the time. It’s a crisis of courage. And I guarantee you that if you don’t stand up and lead the way on this, they will falter. If they falter, you will fail. And if you fail, we will not have a country left to stand for. We will be a burned-out husk of our former glory, owned by China, loathed by all, and quite possibly vulnerable to far, far worse than we’ve seen so far.
Do you want to win? Do you want the opportunity to actually do what you’ve said you’ll do? Do you want my support?
Stop with the wonkitude and stand up to Palin. She’s your threat. Not McCain. She’s who they want in office, not McCain.
Just. do it. Now. Because there is an urgency to now. Because we need you to show us that you can lead, and that you can push our enemies out of the way to do it.
Sphere: Related ContentMcCain’s Real Friends: Who are they?
When John McCain says “My Friends”, who is he talking about?
Sphere: Related Content
