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Global Economy

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Global Economy
<b>Government Bailouts: A U.S. Tradition Dating to Hamilton</b>
By MICHAEL M. PHILLIPS

The bubble pops. Lenders freeze. Depositors lose faith. Panic spreads. And the government steps in because nobody else will.

Today it is Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke putting together the rescue package for a financial system rocked by falling home prices and a wave of defaults on subprime mortgages.
[Bailouts throughout history]

But a short walk through U.S. history demonstrates the point made by Alex J. Pollock of the American Enterprise Institute: "If you would like an empirical law of government behavior, it is that in a panic or threatened financial collapse, governments intervene -- every government, every party, every country, every time."
The Panic of 1792

The nation's first president was in his first term when the U.S. ran into its first financial panic.

In 1791, the federal government assumed obligations that such states as Massachusetts and South Carolina owed from the Revolutionary War, part of a larger deal that included moving the national capital from New York to Philadelphia to Washington. Taking on the states' obligations added about $18 million to a total U.S. domestic debt of $65 million -- debt securities that proved attractive to financial speculators.

Primary among them was William Duer, a well-connected New York businessman who schemed to start a New York bank to drive down the price of Bank of New York stock and win control of BONY on the cheap. He and his colleagues also intended to corner the market on government 6% bonds, so-called Sixes.

Treasury Secretary Alexander Hamilton, the founder of BONY, watched the developments with alarm. "I have learnt with infinite pain the circumstance of a new Bank having started up in your City," Mr. Hamilton wrote to a New York associate, according to research by economic historians Richard Sylla, Robert E. Wright and David J. Cowen. "Its effects cannot but be in every view pernicious," because of the damage they caused to "the whole system of public Credit, by disgusting all sober Citizens and giving a wild air to everything."

The price for Sixes in New York jumped markedly from early December to mid-January. By March, the bubble had burst, with the price of the bonds dropping 25% over two weeks.

Working without a historical blueprint, Hamilton engineered an innovative response. The Treasury borrowed money from the banks and used it to buy government bonds, lifting the market price. He also told banks to accept bonds as collateral for loans to securities brokers, with the government guaranteeing the collateral.

"What Hamilton did in 1792 is just like what Paulson and Bernanke are doing now," said Mr. Sylla, who teaches at the Stern School of Business at New York University.

The financial system stabilized in April, and not a single bank failed until 1809. Mr. Hamilton's improvisation did the trick, or at least so concludes Mr. Wright, also at NYU. He named his son Alexander Hamilton Was Wright.
The Panic of 1907

The century that followed was punctuated by financial instability. There was the panic of 1819, during which states passed laws delaying foreclosures on real estate and personal property.

In 1841, another bout of financial volatility sent land values plummeting. States that had been depending on land taxes suddenly found themselves short of cash; nine of them defaulted on their debts. There was talk of a federal bailout, but Congress balked. Some states raised taxes and paid up; others swapped canals or other assets with their creditors.

"There were banking panics all of the time," said Princeton University economist Alan Blinder, former vice chairman of the Federal Reserve Board. "The banking panic of 1907 was particularly pernicious."

One immediate cause of the panic involved a failed attempt to corner the market on stock in a particular copper company. That led to a run on banks and trusts that had made loans for the plot, starting with the Knickerbocker Trust Co. Public confidence in other financial institutions soon evaporated.

The Treasury injected millions of dollars into the banking system. But it was really J. Pierpont Morgan, the banking magnate and undisputed king of New York financial markets, who saved the day. He had been in Virginia for a church conference when the panic hit, and he took an overnight train back to New York City. He dispatched his lieutenants to figure out which banks were in the worst trouble, then he called the bankers to his home. Working through the night, he browbeat the others into forming a joint pool of capital that they would use to pay depositors at banks that faced runs.

Once depositors saw that they were going to get their money, the panic eased. "Where's J.P. Morgan when we need him?" joked Mr. Blinder.

Six years later, Congress established the Federal Reserve system, creating a lender of last resort for the country's financial system.
The Great Depression

By 1933, four years after the infamous stock-market crash, about 1,000 American homeowners a day were losing their houses to the bank. President Franklin Delano Roosevelt and Congress created the Home Owners' Loan Corp., an ambitious government agency designed to prevent foreclosures on an enormous scale.

The agency bought defaulted mortgages from banks, then refinanced them at lower rates for fixed, 15-year terms. Over the three years it accepted applications, the agency was swamped with 1.9 million requests; about half of the applicants had monthly incomes of between $50 and $150.

Ultimately, the agency issued mortgages, averaging $3,039 apiece, to some one million homeowners. About one in 10 Americans with nonfarm, owner-occupied dwellings secured aid from the agency, according to a 1951 paper by C. Lowell Harriss of Columbia University.

The current mortgage crisis involves securities backed by subprime home loans. But during the 1930s, there was no secondary market for securitized mortgages. So the agency had to hold the mortgages for the full terms. It finally closed up shop in 1951, with about 80% of borrowers having paid their loans off on time or early.

The agency earned the government a small profit. "You save 80% of the people from being tossed out of their homes, and it didn't end up costing the government a dollar," said Lee Davison, a historian at the Federal Deposit Insurance Corp., another Great Depression creation.
Savings and Loan Crisis

It used to be that savings-and-loan associations were staid institutions that stuck to home loans and lured savings-account depositors with blankets and toasters. But during the 1980s, the industry expanded wildly into commercial real-estate lending, spurred by deregulation and poor regulation, according to Mr. Blinder.

The business model worked as long as the S&Ls made more money on their loans than they had to pay for deposits. But the model broke down when interest rates rose, and the institutions found themselves paying more for deposits than they earned from fixed-rate loans in their portfolios.

"In addition," said Mr. Blinder, "they went into a lot of what could only be called stupid real-estate investments."

From 1986 through 1995, about half of the 3,234 S&Ls in the U.S. closed, leaving federal insurers stuck with tens of billions of dollars in bad loans. In 1989, after eight months of debate, Congress created the Resolution Trust Corp. to make depositors whole, investigate allegations of wrongdoing and deal with the husks of the S&L industry.

At the time, skeptics warned that government was reaching too far into the marketplace, and predicted darkly the RTC would be saddled with bad assets for generations.

Indeed, the government ended up owning shopping centers, homes and resorts, along with an odd collection of assets put up as collateral for S&L loans, including Picasso and Warhol paintings, a 30-horse merry-go-round, a Colonial-era whiskey distillery, a drawstring made from Martha Washington's gown and 800 units of semen from a registered Brahma bull.

By the time the S&L cleanup was over, it had cost U.S. taxpayers about $124 billion in non-inflation-adjusted dollars, according to FDIC research. Mr. Davison, the FDIC historian, wrote in a 2006 journal article: "Perhaps a measure of the RTC's success is that little more than a decade after it closed, this agency that provoked so much debate is now largely forgotten."
—Greg Hitt and Louise Radnofsky contributed to this article.

Write to Michael M. Phillips at michael.phillips@wsj.com
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<img src='http://s.wsj.net/public/resources/images/NA-AS631_HISTOR_NS_20080919180847.gif' border='0' alt='user posted image' />


http://online.wsj.com/video/a-conspiracy-a...7F5AF35D46.html

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This crisis is part socialism part greed in wall street.
AIG
Kerry investment 2.5 million
Pelosi investment 0.5 million
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<b>SEC to Expand Trading Probes</b><!--QuoteBegin-->QUOTE<!--QuoteEBegin-->The SEC said it will require hedge-fund managers, broker-dealers and institutional investors with significant trading activity in financial stocks or positions in credit default swaps to disclose their investments under oath to the agency. SEC enforcement staff members also plan to subpoena documents and testimony.

...
In a short sale, which is a bet that a stock will fall, shares are borrowed on the open market and then sold to another investor. To repay the lender, the short seller buys the stock later at what he hopes is a lower price than where he sold it. The short seller profits from the difference.
<!--QuoteEnd--><!--QuoteEEnd-->
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Takeovers of AIG, Fannie and Freddie raise business and political questions
The federal government is entering uncharted territory. Lawmakers and experts wonder whether it is up to the job of running large corporations.
By Jim Puzzanghera, Los Angeles Times Staff Writer
September 21, 2008
WASHINGTON -- Uncle Sam is turning into Uncle CEO. But will the new corporate suit be a good fit?

By agreeing to bail out insurance giant American International Group Inc. and mortgage lenders Fannie Mae and Freddie Mac, the federal government has put itself in the unprecedented position of running huge private companies. In the case of American International Group, or AIG, the government is now the majority shareholder, acquiring 80% of the company in exchange for lending it as much as $85 billion over two years to keep the business out of bankruptcy as it is dismantled.



* Full coverage: Financial system in crisis
Full coverage: Financial system in...

But some lawmakers and financial experts wonder whether U.S. officials are up to the task of directing large corporations through such turbulent times. AIG, for instance, has 116,000 employees and does business in about 100 countries. Fannie Mae and Freddie Mac together hold or guarantee $5.4 trillion of mortgages, about half of the nation's home loans.

"The government does not have a core competency to run an insurance company of the magnitude of an AIG," said David M. Walker, former head of the Government Accountability Office, the congressional watchdog agency. "It's clearly not going to be able to effectively manage AIG and do what needs to be done."

Top Bush administration officials say they authorized the controversial bailouts to prevent corporate failures that could have crippled the U.S. economy. But many details about how the government will run the companies, and for how long, are still being worked out.

Some critics of the bailouts are heartened that federal officials moved quickly to place seasoned, private-sector executives into key leadership positions at the companies. For example, Edward M. Liddy, former chairman and chief executive of Allstate Corp., was installed as the new head of AIG and told employees that he didn't think the government intended to "hamstring" the company.

Yet questions remain about what influence federal officials such as Treasury Secretary Henry M. Paulson -- who reportedly sought the ouster of AIG Chief Executive Robert Willumstad as a condition of the bailout -- will exert over the companies, and what role politics might play in their operation.

"When you have these things going on behind closed doors, it's a little disconcerting," said Dean Baker, co-director of the Center for Economic and Policy Research, a left-leaning think tank in Washington. "When you do have sell-offs of the parts of AIG, we want to make sure that is done on a fair-market basis. You don't want to have sweetheart deals."

Still, given the dire financial problems faced by AIG, Fannie Mae and Freddie Mac, Baker said, it won't be difficult for the federal government to improve on their management.

"It's hard to see how they could do worse," he said.

The history of federal bailouts has been generally good, said Benton E. Gup, a finance professor at the University of Alabama and editor of the 2003 book "Too Big to Fail: Policies and Practices in Government Bailouts." The government even turned a $313-million profit on stock options it received when it provided $1.5 billion in loan guarantees to automaker Chrysler Corp. in 1980, he noted.

In those bailouts, however, the government did not take control of the companies. It simply provided guarantees for loans. The Federal Reserve and Treasury did the same thing in March when they authorized $29 billion in loan guarantees to JPMorgan Chase & Co. to facilitate its purchase of struggling brokerage Bear Stearns Cos.

But the bailouts of AIG, Fannie Mae and Freddie Mac are new territory, fueled by an attempt to avoid a global financial disaster.

"They are not taking over because they believe they can manage them better, but rather because it's a way to provide a government guarantee," said Pablo Spiller, a professor of business and technology at UC Berkeley. "This is the biggest financial crisis in the last 80 years."

The subprime mortgage mess crippled Fannie Mae and Freddie Mac, private companies known as government-sponsored enterprises because they were originally chartered by the federal government. Many investors believed the companies -- which buy mortgages from savings and loans, banks and other lenders to generate more cash for those lenders to make more home loans -- had the implicit financial backing of Washington.

Two weeks ago, the federal government seized control of the companies. The Treasury Department plans to buy as much as $100 billion in stock in each, expand their portfolios of mortgages and mortgage-backed securities until 2010, then slowly reduce their holdings.

To do that, the government placed Fannie Mae and Freddie Mac into a conservatorship run by the Federal Housing Finance Agency, a body created by Congress this summer. Paulson said having a government-appointed conservator was the only way he would commit taxpayer money to the bailout.

The agency's director, James Lockhart, appointed new CEOs and board chairmen after consulting with the Treasury Department. The conservator cannot liquidate the companies, but otherwise has full power to run them. But President Bush's successor is likely to appoint a new director of the agency, who will run the conservatorship, as well as a new Treasury secretary.

In the AIG bailout, the government received 80% of the stake in exchange for loans from the Federal Reserve that kept the company from bankruptcy. The Federal Reserve Board, which authorized the bailout, said the loan was designed to let the company sell some assets "in an orderly manner."

The government appointed Liddy as CEO and probably will replace the board. The government will have veto power over major corporate decisions, including whether to pay dividends to shareholders.


Sen. Charles E. Schumer (D-N.Y.) said Liddy's hiring was a good sign.

"They've appointed a very capable executive who was the head of another major insurance company," Schumer said. "Most of the parts of AIG are still making money. . . . So the idea is to keep the mainstay, this biggest American insurance company, still working." AIG is the largest U.S. insurer as measured by assets and the second-largest by premiums.



* Full coverage: Financial system in crisis
Full coverage: Financial system in...

Insurance is regulated at the state level, so the sale of assets by AIG would have to be approved by the industry regulator in the state where an asset is based. The National Assn. of Insurance Commissioners has formed a working group to assist federal officials with the sales of AIG properties.

"We want to make sure they don't damage the health of the insurance properties," said California Insurance Commissioner Steve Poizner, a member of the working group. Five AIG companies are headquartered in the state, and 25 others do business there.

Daniel J. Mitchell, a senior fellow at the Cato Institute, a libertarian Washington think tank, opposed the AIG bailout. But he said U.S. officials were making responsible decisions about how to run the firms.

"It appears like they're doing the wrong thing in the best way possible," he said. "I assume that it's going to be somewhat akin to a company going into receivership, and we're not going to have the government so much running the company as giving approval process for the people who are left to run the company."

So far, it does not appear that political affiliation has played a role in placing executives at the companies.

Liddy has given campaign money to Bush and Republican presidential nominee John McCain, according to contribution data from the Center for Responsive Politics. David M. Moffett, the new Freddie Mac CEO and a former chief financial officer of U.S. Bancorp, has contributed to GOP congressional candidates.

But new Fannie Mae CEO Herbert M. Allison Jr., who was chairman of investment firm TIAA-CREF, has contributed to Republicans and Democrats, including Democratic presidential nominee Barack Obama. New Fannie Mae Chairman Philip Laskawy, who served as chairman and CEO of accounting firm Ernst & Young, has given most of his contributions to Democrats. And new Freddie Mac Chairman John Koskinen, former president of the U.S. Soccer Foundation, worked in the Clinton White House.

Still, Rep. Tom Feeney (R-Fla.) said politics was bound to play a role in how federal officials run the companies. And that's one reason he opposed the bailouts.

"Government's not equipped to successfully run any of these entities," he said. "We will do a lousy job. Worse than they did."

jim.puzzanghera@ latimes.com

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<b>
Treasury says tax-exempt funds can use new guaranty</b>
Reuters - 54 minutes ago
By Mark Felsenthal WASHINGTON (Reuters) - The Treasury Department said on Sunday tax-exempt money market funds would not jeopardize the tax-exempt treatment ...
<b>
US to assist money market funds</b>
Financial Times, UK - 1 hour ago
The US Treasury rushed to the aid of ailing money market funds yesterday, saying it would offer a blanket guarantee on these funds as it attempted to ...
<b>
Bailout of Money Funds Seems to Stanch Outflow</b>
Wall Street Journal - Sep 19, 2008
By DIYA GULLAPALLI and SHEFALI ANAND The federal bailout of money-market funds seems to have stanched the outflow of investments that bedeviled the industry ...
<b>
Rescue Plan for Funds Will Come at a Cost</b>
New York Times, United States - Sep 19, 2008
By DIANA B. HENRIQUES Emergency steps by regulators on Friday to shore up money-market funds appeared to restore confidence in the $3.4 trillion industry, ...
<b>
Corporate Treasurers Remain Wary Of Money-Market Funds</b>
CNNMoney.com - Sep 19, 2008
SAN FRANCISCO -(Dow Jones)- An explicit government guarantee of money-market funds will likely put a floor under the struggling $3.4 trillion market, ...
<b>
Washington moves to shore up money market funds</b>
MarketWatch - Sep 19, 2008
By Sam Mamudi, Greg Robb & Steve Goldstein, MarketWatch NEW YORK (MarketWatch) -- The US government acted Friday morning to prevent a broad collapse in the ...
<b>
Putnam, Mellon Spur `Oh, My God' Money-Market Flight (Update2)</b>
Bloomberg - Sep 19, 2008
By Michael Janofsky Sept. 19 (Bloomberg) -- Before yesterday, Sheila Bialka, a retired dance and drama teacher in Laguna Woods, California, said she hadn't ...
<b>
Mutual fund protection changed</b>
WTTE, OH - 57 minutes ago
WASHINGTON (AP) -- The Bush administration is making a significant change to its still-evolving plan for rescuing the financial industry. ...
<b>
Money market funds proclaim they're secure</b>
Forbes, NY - Sep 19, 2008
By DAVID PITT 09.19.08, 2:31 PM ET Industrial engineer Peter Miter of Doylestown, Penn., is like millions of American investors who had retirement money ...
<b>
US offers to insure money market mutual funds</b>
Los Angeles Times, CA - Sep 20, 2008
The move is intended to halt a run on the funds in the wake of the Lehman Bros. collapse. By Josh Friedman, Los Angeles Times Staff Writer Investors with ...
<b>
Treasury puts up $50B to guarantee money markets</b>
Bizjournals.com, NC - Sep 19, 2008
The Treasury Department will insure the holdings of mutual funds, addressing a concern that had further rattled investor confidence in the midst of ...LEH - FNM - FRE
<b>
Money Funds Offer More Detail</b>
Wall Street Journal - Sep 19, 2008
By ELEANOR LAISE Amid the turmoil in a once-sleepy corner of the mutual-fund world, investors are left wondering which money-market funds are safe and which ...
<b>
Rushing to save money-market funds</b>
CNNMoney.com - Sep 19, 2008
In effort to calm critical part of the broader financial system, Fed and Treasury take three-pronged measure to stabilize troubled funds. ...
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"Mushroom Cloud Over Wall Street" By Mike Whitney

"One bank to rule them all; One bank to bind them..."

"These are dark times. While you were sleeping the cockroaches were busy about their work, rummaging through the US Constitution, and putting the finishing touches on a scheme to assert absolute power over the nation's financial markets and the country's economic future. Industry representative Henry Paulson has submitted legislation to congress that will finally end the pretense that Bush controls anything more than reading the lines from a 4' by 6' teleprompter situated just inches from his lifeless pupils. Paulson is in charge now, and the coronation is set for sometime early next week. He rose to power in a stealthily-executed Bankster's Coup in which he, and his coterie of dodgy friends, declared martial law on the US economy while elevating himself to supreme leader.

"All Hail Caesar!" The days of the republic are over.

Section 8 of the proposed legislation says it all:

"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."

Right; "non-reviewable" supremacy.

Congress, of course, is more than eager to abdicate whatever little authority they have left. They're infinitely grateful for their purely ceremonial role, the equivalent of Caligula's horse, albeit, with considerably less dignity. Has even one senator spoken out against this madness, which--according to informal internet polls--is resoundingly rejected by the voters? Does it concern the members of congress at all, that the present financial crisis was brought on by the proliferation and sale of trillions of dollars of mortgage-banked garbage which were fraudulently represented as Triple A rated bonds by the very same people who now claim to need unprecedented and dictatorial powers to fix the problem? Or are they more worried that the steady torrent of contributions which flows from Wall Street to congressional campaign coffers will be inconveniently disrupted if they fail to ratify this latest assault on democratic governance? The House of Representatives is one big steaming dungheap that should be leveled and turned into an amusement park instead of a taxpayer-funded knocking shop. What a pathetic collection of cowards and s*******.

Paulson's Chicken Little routine might might have soiled a few senatorial undergarments, but let's hope the American people are made of sterner stuff and will reject this charade. The conversation should be shifted from conceding more authority to hucksters in pin-stripes to indictments for securities fraud. Even the most economically-challenged nation ought to be able to afford a few sets of leg-irons and a couple hundred jail cells. That's all it will take. That, and a couple brisk dunks on the waterboard. Glub, glub.
<b>
Economist and author Henry Liu summarized the current maneuvering like this: "The Fed is merely trying to inject money to keep prices not supported by fundamentals from falling. It is a prescription for hyperinflation. </b>The only way to keep price of worthless assets high is to lower the value of money. And that appears to be the Fed unspoken strategy."

Congress is getting steamrolled and the American people are getting snookered. Consumer confidence--already at historic lows--is headed for the wood-chipper feet-first. Something has got to give.

One minute everything is hunky-dory; the subprime meltdown is "contained" and "the fundamentals of our economy are strong".(Paulson) And, less than a week later, congress is forced to surrender their constitutionally-mandated right to oversee spending in order to forestall economic Armageddon. Which is it? Or is the real objective just to keep the country on an emotional teeter-totter long enough for all state-power to be subsumed by the Wall Street Politburo?

No one knows what will happen next. We are in uncharted waters. And no one knows what the political landscape will look like after the dust settles from this outrageous power grab. According to Paulson, things are so dire, the entire nation will be reduced to smoldering rubble and twisted iron. But can we trust him this time after his long litany of lies?

Isn't it about time to send the cockroaches scuttling back to their hideouts and bring in the cleaning crew to hose the whole place down? It sounds like a job for Ralph Nader, a man of vision and unshakable integrity. Give Ralph a badge and let him deploy his Raiders to Wall Street armed with bullwhips and tasers. Let them post a guard in every CEOs and CFOs office and every boardroom on the Street---and if even one decimal is accidentally moved to the right or left on the corporate ledger; clap them in leg-irons and drag them off squealing to Guantanamo. That's how you clean up Wall Street!
<b>
Don't let the prospect of a national crisis trick you into giving up your freedom, America. The people behind this scam are the same landsharks and flim-flam men who polluted the global marketplace with their snake oil and toxic sludge. These are the fraudsters who manufactured the crisis to begin with.</b> This is just the latest installment of the Shock Doctrine; engineer a crisis, and then, steal whatever is left behind. Same sh**, different day. Be resolute. Don't budge. Our economic foundations may be crumbling, but or determination is not. This is our country, not Goldman Sach's. The people who destroyed America must be held to account. Their time is coming. Justice first."

The full article is at:
http://rense.com/general83/fide.htm

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<b>What if the bailout plan doesn't work?</b>

<b> “Greed is good”: Or is it?</b>
By Harald Stanghelle

<b>Professor warns of bailout consequences </b><!--QuoteBegin-->QUOTE<!--QuoteEBegin-->"<b>Right now the only people who understand the assets are the people who created the assets," she said. "The people who will be in charge of every step of the bailout - identifying the assets, valuing the assets and selling the assets - are likely to be former investment bank employees</b>."<!--QuoteEnd--><!--QuoteEEnd-->
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Les Echos, France
<b>How to Make a Large Merchant Bank Vanish in a Matter of Days </b>

<b>Collapse of empire</b>
<i><b>Hassan Nafaa</b>* plots the demise of the Project for the New American Century, the power-house think tank that once drove US foreign policy </i>
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Wednesday, September 24, 2008
<b>‘US at fault for financial collapse’</b>

El Diario Exterior, Spain
<b>Things Have Changed On Wall Street</b>
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<b>US economic crisis, Finnish déjà vu</b>
Former Bank of Finland governor sees same mistakes behind US finance crisis that Finland made in 1990s
By Teija Sutinen

<b>Back to the basics of risk</b><!--QuoteBegin-->QUOTE<!--QuoteEBegin-->Yet that is the source of arguably the biggest threat to the global financial system since the Wall Street crash of 1929. And, unlike the 9/11 attack on the World Trade Center, oil shocks and various wars, this seismic event was brought upon the financial system by some of its own major players.<!--QuoteEnd--><!--QuoteEEnd--><!--QuoteBegin-->QUOTE<!--QuoteEBegin-->"I view derivatives," said the legendary US investor Warren Buffett in 2002, "as time bombs, both for the parties that deal in them and the economic system." Buffett has pointed out that before a derivatives contract is settled, the parties might record huge profits and losses in their current earnings statements "without so much as a penny changing hands.<!--QuoteEnd--><!--QuoteEEnd-->
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Le Matin, Morocco
<b>The Financial Crisis: Moment of Truth in the Race to The White House? </b>

<b>Ask Yourself Why Congress Didn't See the Financial Crisis Coming</b>
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<b>Text of President's speech</b>
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Le Matin, Morocco
<b>The Financial Crisis: Moment of Truth in the Race to The White House?</b>
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Wednesday, September 24, 2008

Dear Friends,

Whenever a Great Bipartisan Consensus is announced, and a compliant media assures everyone that the wondrous actions of our wise leaders are being taken for our own good, you can know with absolute certainty that disaster is about to strike.

The events of the past week are no exception.

The bailout package that is about to be rammed down Congress' throat is not just economically foolish. It is downright sinister. It makes a mockery of our Constitution, which our leaders should never again bother pretending is still in effect. It promises the American people a never-ending nightmare of ever-greater debt liabilities they will have to shoulder. Two weeks ago, financial analyst Jim Rogers said the bailout of Fannie Mae and Freddie Mac made America more communist than China! "This is welfare for the rich," he said. "This is socialism for the rich. It's bailing out the financiers, the banks, the Wall Streeters."

That describes the current bailout package to a T. And we're being told it's unavoidable.

The claim that the market caused all this is so staggeringly foolish that only politicians and the media could pretend to believe it. But that has become the conventional wisdom, with the desired result that those responsible for the credit bubble and its predictable consequences - predictable, that is, to those who understand sound, Austrian economics - are being let off the hook. The Federal Reserve System is actually positioning itself as the savior, rather than the culprit, in this mess!

• The Treasury Secretary is authorized to purchase up to $700 billion in mortgage-related assets at any one time. That means $700 billion is only the very beginning of what will hit us.

• Financial institutions are "designated as financial agents of the Government." This is the New Deal to end all New Deals.

• Then 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." Translation: the Secretary can buy up whatever junk debt he wants to, burden the American people with it, and be subject to no one in the process.

There goes your country.

Even some so-called free-market economists are calling all this "sadly necessary." Sad, yes. Necessary? Don't make me laugh.

Our one-party system is complicit in yet another crime against the American people. The two major party candidates for president themselves initially indicated their strong support for bailouts of this kind - another example of the big choice we're supposedly presented with this November: yes or yes. Now, with a backlash brewing, they're not quite sure what their views are. A sad display, really.

Although the present bailout package is almost certainly not the end of the political atrocities we'll witness in connection with the crisis, time is short. Congress may vote as soon as tomorrow. With a Rasmussen poll finding support for the bailout at an anemic seven percent, some members of Congress are afraid to vote for it. Call them! Let them hear from you! Tell them you will never vote for anyone who supports this atrocity.

The issue boils down to this: do we care about freedom? Do we care about responsibility and accountability? Do we care that our government and media have been bought and paid for? Do we care that average Americans are about to be looted in order to subsidize the fattest of cats on Wall Street and in government? Do we care?

When the chips are down, will we stand up and fight, even if it means standing up against every stripe of fashionable opinion in politics and the media?

Times like these have a way of telling us what kind of a people we are, and what kind of country we shall be.

In liberty,

Ron Paul
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China Gate via WenWeipo, China
<b>
U.S. Asks Japan and Europe to
Shell out for Financial Crisis
</b>
Translated By Yaqing Wen

September 22, 2008



China - China Gate via WenWeipo - Original Article (Chinese)

With no end in sight to the current economic crisis, the U.S. has already notified Japan, Germany and the U.K. to draw out rescue plans to save the troubled banks within their borders, the Washington Post reports. With all of the complicated ties of the world’s banks, the United States government’s inability to solve the financial crisis on its own has become a global concern. The bailout plan that the U.S. announced last week will cost approximately $700 billion, even more than the cost of the Iraq War, leaving a huge mess for the next president to clean up.

The U.S. Department of Treasury handed the two and half page bailout plan to the Congress last Friday. It was made clear then that only American financial institutions would receive aid, but the Department of Treasury has since changed its initial statement. In the brief introduction of the plan released last Saturday night, there were suggestions of foreign companies possibly also receiving aid.

The introduction to the bailout plan clearly stated that the “qualifying financial institutions be businesses of considerable stature within the U.S.” However, After the Secretary of the Treasury Henry Paulson discusses the matter with Chairman of the United States Federal Reserve Ben Bernanke, there is a possibility that the range of qualifying businesses will be expanded to insure more efficient stabilization of the global market.
<b>
Request for Japan, Germany and England to Carry out Similar Plan of Action

According to the Washington Post, the Department of Treasury ultimately decided to directly contact foreign governments. The U.S. government has already requested similar bailout plans from Japan, Germany, England and other countries, in a push to resolve the issue of bad assets.
</b>
When asked by the English news source Reuters, Washington officials confirmed that the U.S. is currently holding discussions with officials from two foreign countries. An anonymous English banker stated that his bank has been in contact with American banks, testing the theory of “a global outcry to solve a global issue.” The European Central Bank refused to comment.

The Department of Treasury will buy the foreclosed assets at the lowest price. The plan leaves room for future clauses regarding bad assets, and doesn’t eliminate the possibility of the purchase of foreign assets. The Department of Treasury can either sell the assets or hold them until they expire. The cash from the sale of the assets, including any net profit, will go into the Treasury.
<b>
Deficit Constitutes 6% of Economy--Highest Since Reagan Administration

The plan laid out by the government costs approximately $700 billion, more than the $600 billion spent on the Iraq War. It is not currently clear how this plan will influence the budget, but experts estimate that when the next president steps into office, the deficit could constitute roughly 6% of the American economy, the highest since the Reagan administration.</b>

If the Senate decides to pass the plan, it can be expected to be implemented by the end of this week. However, House Financial Services Committee chairman Barney Frank states that the additional clauses requested by Democratic Congressmen will become the most debated issue. Speaker of the House Nancy Pelosi states that the plan must take into consideration the majority of the population and that Democratic Congressmen will do more to promote additional clauses to the plan to stimulate the economy.
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US economy in crisis: How did it come to this?
<!--QuoteBegin-->QUOTE<!--QuoteEBegin--> As the Senate aide put it after China used a week of American political and economic decline to demonstrate its emergence as a rival power: “They’ve just put men in space. We can’t get 400 congressmen to agree that preventing another depression is a good idea.”<!--QuoteEnd--><!--QuoteEEnd-->
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http://afp.google.com/article/ALeqM5iiCFgC...KgEebyAcxFOE8OQ


http://www.forbes.com/facesinthenews/2008/...facescan01.html


http://www.businessweek.com/ap/financial...DP05O0.htm


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<b>American “Black September” Has Shaken the Global Economy </b>

Le Monde, France
<b>Faced With a Crisis, Americans Are Staying Calm</b>

Ideal Digital, Spain
<b>Volatile Euphoria</b>
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<b>THE END OF ARROGANCE </b>
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->Of course, it is not solely the result of undesirable economic developments that the United States is in the process of forfeiting its unique position in the world and that the world is moving toward what Fareed Zakaria, editor of Newsweek International, calls a "post-American age." Washington has also lost much of its political ability to impose its will on other countries.  <!--QuoteEnd--><!--QuoteEEnd-->
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->American economist Raghuram Rajan, whom ECB President Trichet is frequently quoting these days, had a premonition of the current disaster three years ago. The total integration of the markets "exposes the system to large systemic shocks," Rajan wrote then in a study. Although the economy had survived many crises before, like the bursting of the Internet bubble, "this should not lead us to be too optimistic." "Can we be confident that the shocks were large enough and in the right places to fully test the system?" Rajan asked. "A shock to equity markets, though large," he continued, "may have less effect than a shock to credit markets."

There was certainly no shortage of warnings, and there were many voices of caution. As long ago as 1936, John Maynard Keynes recognized the risk that "speculation may win the upper hand" in the markets. Its influence in New York, the British economist wrote, was "enormous," and the situation would become serious "when the capital development of a country becomes the by-product of the activities of a casino." <!--QuoteEnd--><!--QuoteEEnd-->
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->This is all the more vexing for the German government because it was the one that warned against the current malaise some time ago. During the G-8 economic summit in Heiligendamm more than a year ago, for example, Chancellor Angela Merkel tried to convince her state guests of the need for tighter controls on the financial markets. But President Bush and then British Prime Minister Tony Blair gave the chancellor the cold shoulder. <!--QuoteEnd--><!--QuoteEEnd-->
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