What the Heck Happened?

American Thinker ^ | December 22, 2008 | Randall Hoven

[neverdem]

It was springtime in the US.  The most recent unemployment number was 5.0%, a slight tic down from the previous month and in line with the previous 12-month, fairly low, average of 4.8%.  We were in a quarter of positive real economic growth, a 2.8% annual rate, following a previous quarter of positive growth.  On May 19, the S&P 500 hit 1427, the highest point since January 3 and essentially where it ended the previous year.

On the foreign front, the surge in Iraq was clearly bearing fruit.  The number of US military deaths in Iraq in May was the lowest since the war started.  The fatality count of Iraqi civilians was also at or near an all-time low.  The Iraq war, Barack Obama's initial campaign theme, was losing its steam as an election issue.

On the political front, the Republicans had picked their nominee in all but formality: a sitting US Senator with 26 years of experience in national elective office, a war hero and a political centrist.  The Democrats were closing in on one of two candidates: one with a little more than one term in the Senate and the other with just over half of one term, both extremely liberal (American Conservative Union lifetime ratings of 7.71 and 7.67, respectively), and neither one having any military or executive experience.

As spring turned to summer, there was some nervousness about banks in trouble and increases in the unemployment rate.  The S&P 500 hovered between 1200 and 1300 for most of June through August.  On September 2, the first trading day after John McCain announced his VP pick of Sarah Palin, and as the Republican Convention began, the S&P closed above 1300, about the average level for the whole year up to then.

The very next weekend, September 6, the federal government announced that it would take over Fannie Mae and Freddie Mac.  But it appeared to have little effect on the markets or politics.  John McCain, now teamed with Sarah Palin, was rising in the polls.  In fact, the McCain/Palin ticket had taken a slight lead over the Obama/Biden ticket about then.  As the markets closed on Friday, September 19, the S&P 500 stood at 1255, still about where it had been for months.

By mid-September, the latest GDP figures had been revised upward and showed a fairly strong second quarter.  In fact, we seemed to be missing the recession happening in Europe at that time.  Iraq was looking ever more like we were reaching a successful end-game.  The markets were mostly steady, maybe showing some nervousness that could be explained by the uncertainty of the coming elections.  The race was close, with McCain actually enjoying a slim lead.

Then on September 21, Treasury Secretary Henry Paulson went on Meet the Press to announce the urgent need for a $700 billion bailout of banks.  Seven.  Hundred.  Billion.  $700,000,000,000.  Over one quarter of the entire federal budget, after bailing out Freddie, Fannie and AIG and before the sweeteners were attached.  Over five Marshall Plans, even after adjusting for inflation.

The world has not been the same since.

President Bush and both presidential candidates voiced support for the bailout and by October 3 the bailout was law. The bailout enjoyed bipartisan support.  We would never see the S&P above 1200 again.  On November 4, Election Day, it closed just above 1000.  The election results came in that night.  So long, 1000.

In the three months after Paulson went on Meet the Press, the S&P 500 fell almost 30%, from 1255 on September 19 to 888 on December 19.  A bear market on top of a bear market.  The London FTSE fell 19%; Hong Kong's Hang Seng fell 22%; the German DAX fell 24%; the French CAC 40 fell 25%; Japan's Nikkei fell 28%; and Singapore's market fell 30%.

The financial collapse was global.  Banks were failing everywhere.  By mid-November, there were riots in Iceland due to the financial crisis.

Riots in Iceland.

In December there were riots in Greece.  So much so that Greece ran out of tear gas trying to quell them.

What the heck happened?  One day we're cruising along with 3% real growth, the stock markets are steady, we are winning in Iraq and John McCain is leading in the polls.  The next day we are in global financial collapse and Barack Hussein Obama is President-Elect of the US.

Was Henry Paulson so prescient that he really did time the crisis almost perfectly, announcing the urgent need for a bailout almost exactly as the financial system really did collapse?  Or did he cause that collapse?

We'll never know, but I think Paulson and his bailout only made things worse.  I think McCain would have won the election if he had come out against the bailout.  I think President Bush would have had a very defendable record over his two terms if he had not supported every bailout ever conceived in his last four months in office.  But now, even I, who had been one of his few supporters, have to regard Bush as a failure.

To add insult to injury, Secretary Paulson now appears totally confused about his own bailout.  First he said it was to relieve the credit crunch by buying bad debt.  Then he changed his mind about the "bad debt" thing and said, "we must make sure we fully understand the nature of the problem which will not be possible until we are confident it is behind us."  (Translation:  Just give us $700B and we'll figure it out as we go along.)  And recently he said it's all over.  According to CNBC,

"Treasury Secretary Henry Paulson said he doesn't plan to ask Congress for the rest of the $700 billion Wall Street bailout fund before leaving office next month.... Paulson said he doesn't expect any more big financial institutions to fail... The Treasury has received half of the $700 billion TARP fund so far and used most of it to shore up banks and other financial institutions. The remaining $350 billion must be released by Congress."

TARP stands for Troubled Asset Relief Program.  But I thought the adjective "troubled" modified "asset".  Now we find it really modified "program."

So I guess we're done.  Mission accomplished.  Well, except for the auto bailout, which itself is a flip-flop.

A 30% or so decline in global wealth in just three months since Paulson went on Meet the Press.  A looming trillion dollar deficit.  Riots in Iceland.  Greece out of tear gas.  President-Elect Obama.  Mission accomplished!

Where does George W. Bush find his Treasury Secretaries?  Paul O'Neill (pal of Bono's, author of a Bush-bashing book), Hank Snow, Henry Paulson.  Was Bernard Maddoff unavailable?

Regardless of the immediate financial effect of the bailout, it changed our budgetary psychology completely.  Everyone is now talking in units of trillions.  Bailouts for banks.  Bailouts for states.  Bailouts for cars.  A car czar.  A trillion bucks for infrastructure.  Imagine: a Democratic President, a Democratic Senate and a Democratic House, just after the Republicans presided over $8 trillion in cumulative bailouts.  We're driving 120 mph and we just disabled the brakes.

This is your budget on drugs.  This is your government on crack.  Spend like there's no tomorrow, because, well, there's no tomorrow.  Medicare's broke now and Social Security will be within a decade, so throw a trillion at roads and bridges -- to nowhere or to anywhere.  Drug czar.  Car czar.  Carbon czar.  What's your problem?  Whatever it is, a trillion bucks and a czar ought to fix it.

The real kicker to all this is that the top Republicans, President Bush and presidential candidate John McCain, were totally in favor of every bailout ever proposed.  Billions, trillions -- who cares?  We had to destroy the economy in order to save it.

Were we taken over by pod people in early September?  Did I miss the UFO invasion?

Did you ever hear of a guy who was happily married with six kids, only to find out none of the kids is his?  I think I know how that guy feels.  My Republican Party was the town party girl.

Randall Hoven can be contacted at randall.hoven@gmail.com or  via his web site, kulak.worldbreak.com.

[buccaneer81]

On the political front, the Republicans had picked their nominee in all but formality: a sitting US Senator with 26 years of experience in national elective office, a war hero and a political centrist.

That was a big part of the problem.

[freekitty]

Crooks and low rents happened.

[buccaneer81]

Then on September 21, Treasury Secretary Henry Paulson went on Meet the Press to announce the urgent need for a $700 billion bailout of banks. Seven. Hundred. Billion. $700,000,000,000. Over one quarter of the entire federal budget, after bailing out Freddie, Fannie and AIG and before the sweeteners were attached. Over five Marshall Plans, even after adjusting for inflation.

An economic coup d'etat. For which I will never forgive GWB.

[buccaneer81]

Makes you want to suck start a 9 mil...

No, it makes me want to aim one...

[trumandogz]

On the political front, the Republicans had picked their nominee in all but formality: a sitting US Senator with 26 years of experience in national elective office, a war hero and a political centrist.

The problem is quite obvious.

[buccaneer81]

And I’m not directing my previous post at anyone specific, living or dead.

[Lancey Howard]

It was all about election fixing:

The "October Surprise" - a lttle early

[buccaneer81]

See my post # 8. Frustration and a figurative point.

[do the dhue]

A big part of the problem is demorats. They crashed the economy with their marginal loans. When the Press asked rats like Frank what happened, they blamed Bush's regulators.

And please allow me to add another thing: the above act is no different then the obstructionist policy of the rats from 2000 to 2006. They said no to everything the Republicans tried to do and then stood back and said, ‘look, the Republicans are inept’.

The problem is the vast majority of American voters don't pay attention to details and they believe what the Lame Stream Media has to say. This is another huge problem.

[paltz]

Where does George W. Bush find his Treasury Secretaries? Paul O'Neill (pal of Bono's, author of a Bush-bashing book), Hank Snow, Henry Paulson. Was Bernard Maddoff unavailable?

This was part of Bush reaching across the aisle (eyes rolling) When will we learn that we shouldn't be expected to reach across the aisle our values should allow others to reach across the aisle to us!

[do the dhue]

No, it makes me want to aim one...

Much more appropriate then committing jihad on yourself. :-)

[NRA2BFree]

ACORN and voter fraud happened, and the wimpy Republicans gave them a pass, just like they do every time a RAT commits a crime! Had they done something about it after all the fraud came to light last election, ACORN would have been out of business and the RATS would never have taken the House and the Senate, let alone the Presidency. I will go to my grave believing that Obama won because of voter fraud.

[buccaneer81]

I agree. But a conservative president should have fought and gone down swinging.

On domestic policy in his second term, GWB has no honor.

[buccaneer81]

LOL! Thanks.

[Nahanni]

Two words. George Soros. All the strange things that happened over the last nine months fits his M.O.

There is a reason he is kill on sight in more then one country.

[do the dhue]

You know, I said that the other day. Bush didn't fight against any of the claims the media and rats laid on his doorstep.

You are right, he should have fought like, like, like Blago!

[do the dhue]

Dang good point! Soros spent a lot of money to win the White House.

[buccaneer81]

Even Nixon had more balls.

[Lui]

What your describing was the effect and what your asking is what was the cause and why the timing of it all. It looks to me some very powerful people decided it was time to show the world its hand. Why the government was apparently ignorant of what they were holding is another question.

[Mr Ramsbotham]

Even Nixon had more balls.

He at least had two.

[OL Hickory]

What the heck happened...

The dumbing down of America, which has been going on for years (SEE farm kids in Kansas dressing/acting Black) finally had the total majority it needed to elect a non-qualified, minority, reality TV star as president.

Next comes ARNOLD to complete the “Mission”

[do the dhue]

I don't know if it is a matter of guts or not. I think it may have been that Bush didn't want to spend his energy facing off with the Press and the rats. Big mistake that was. He should have spent some energy setting the record straight; and may I add he should have spent some energy building a fence along our border.

Also, when the regulators were run out of town by the likes of Meeks , Walters, Dodd, and Frank he should have stood up for the economy and the American people and put up a fight like a Michael Vick pit bull.

[21twelve]

“Why the government was apparently ignorant....”

HA! It’s the government!

And I think that Paulson, etc. figured they could pull a little piece out of the economy to put a little fear into folks. (Hence the 700 billion statement - but I think we are approaching about 8 TRILLION now).

But, tugging on even a certain piece will bring a house of cards down. Idiots. Although it would have come sooner or later. However, perhaps not in such dramatic form and could have been handled “in-house” without the gov’t intervention.

[TheThinker]

As far as the bailout is concerned, even capitalism can’t fix the effects of Marxist regulations. They just don’t mix. It was either pass the bailout or watch the financial system collapse. The bailout may not give us much time but it prevented a collapse before the election. Republicans feared this collapse more than anything. Most Americans hated the idea of bailing out the banks and Wall Street but then they hate capitalism anyway. They would’ve been angry either way but a collapse would have hurt a lot more.

[Irish Eyes]

The problem is the vast majority of American voters don't pay attention to details and they believe what the Lame Stream Media has to say. This is another huge problem.

That and the dumbing down of our school system is the problem. People no longer can think for themselves. If it is on the news it just has to be the WHOLE truth.

[count-your-change]

“My Republican Party was the town party girl.”

So what does that make you, Randall? HUH? What does it make YOU when you pull over to the curb and offer some tarted up hag a “ride”, Randall?

Ya got what ya paid fer!

[do the dhue]

The regulators were not the problem. Barney Frank and friends were making the banks give more and more marginal loans. Regulators were trying to end this because we were giving more marginal loans then the system could handle, if the people who received those loans failed to pay up.

We knew this years ago, but the regulators were called racist for trying to keep the inner city people down. The regulators were told that there was no problem with Fannie Mae and Freddie Mack by the likes of Frank and friends. It was maybe six months ago or so that Frank told the regulators that there was no problem.

When the press asked Frank and others what caused this, the rats said the regulators were the problem. The press believed it and told the American people a huge lie. The problem was the government (Frank and friends) forcing banks to make more marginal loans. Now, I will say that some of the lenders figured the government will back the loans and they became predatory. So, there were others who were greedy, but it wasn't the regulators. Now, can you tell me why exactly the regulators should be at fault here?

[do the dhue]

HEAR HEAR to that Irish Eyes!

[JDoutrider]

We were set up the bomb BUMP!

[WildcatClan]

It seems one of our biggest problems is that everything is a problem, everything is a crisis. The only recourse for the “Crisis of the Week” is always more Government. Only the Government can solve the crisis.

The media have far too much influence on Americans. If they say it often enough, it becomes our reality. Of course they can’t be blamed entirely. It takes a lot of ignorance on the part of the citizenry to allow themselves to be guided so easily. The media has their desired outcome, and they get the propaganda in the pipe. You aren’t going to see any stories on the 94% of Americans who have a job. You will however, see a plethora about the 6% who don’t. Then the sheeple begin to fear. Whatever will we do? What is the government doing to help us out of this “crisis”?

[woofie]

I agree with this guy for the most part EXCEPT what if the financial system was on the verge of collapse?
If it WAS (past tense)I guess we fixed it. All I know is all of a sudden a lot of people said it was so, and if I understand the whole Fannie May Freddie Mac scenario it makes some sense ...a lot of bad loans etc. etc. etc. So where are the massive defaults? Maybe they are there waiting to bite us ...maybe we fixed it with the billions of $ Clearly something happened as all my money went away
Damn

[JSteff]

“They would’ve been angry either way but a collapse would have hurt a lot more.”

Show us there was a collapse, other than manufactured. Most citizens, including several captains of business and finance, sensed and knew there was NO bailout immediately needed.

So what is your opinion based on? What evidence do you have that we needed the 700B immediately?

[Darkwolf377]

I think one problem is people lost the will to fight--I don't mean to bitch and moan, or to hold conservative principles, but to fight for them. Fighting for them doesn't mean coming here (as much as I like coming here, and it's valuable for education purposes), it means in particular three things: Teaching your children (and by example your neighbors, friends, family) what conservative principles are and how to live a life with them; Pressuring your school when their liberal dogma is spouted (this may seem a relatively minor thing--it's not); and supporting conservatives in primaries on all government levels.

I hope we are teaching through word and example conservative principles. We complained about teachers, but we never did anything about it. And we shot ourselves in the foot and allowed McCain to get the nomination by having silly disputes about religious differences and being blind to the unelectability of some candidates, when we should have been focusing on which candidates were able to COMMUNICATE why conservative values are those that link us to what this country was founded to be in the first place.

Schools are teaching our kids that the government is this Santa Claus (secular, of course) and its job is to "help" people through income redistribution. With the bailout bonanza going on, the attitude is now "To heck with principles, I'm not gonna sit here while everyone ELSE is getting money, where's mine?"

I'm not saying we're to blame for all this. But we're sure not able to take any credit for stopping it.

[Vaduz]

Dumb and unwashed voters may have alot to do with it.

[PogySailor]

What happened? The Grasshoppers finally outnumber the Ants. That’s been the plan for over 75 years.

[NoControllingLegalAuthority]

The American people spoke VERY LOUDLY against the $700 billion bail-out. They burned up the phone lines and the e-mail system of Congress in angry denouncement of the bail-out.

The bail-out was forced upon us anyway...

Then the American people went out and re-elected the same socialist bastards pushing the bail-out!

The source of America's destruction is its own citizens.

I am in agreement with the theory no democracy or republic can ultimately survive universal suffrage. The people can be manipulated using their own selfishness and greed. The loss of a moral foundation in a godless society is the only necessary ingredient.

Only those with property should be allowed to vote.

The mob will never act in its long-term best interest when there is short-term hardship.

[NoControllingLegalAuthority]

I'm not saying we're to blame for all this. But we're sure not able to take any credit for stopping it.

We are simply outnumbered by those who believe in the "bail-out fairy."

Socialism is in full flower. A communist was elected president of the United States but communism didn't even have to wait for his inauguration. The sitting president converted to communism during the stampede.

The majority believe there is "free" government money to be had by all.... unlimited amounts....

Lacking any leadership, we now live under government by panic.

[fr_freak]

And we shot ourselves in the foot and allowed McCain to get the nomination by having silly disputes about religious differences and being blind to the unelectability of some candidates,...

This whole concept of "electability" still burns me up. We ended up with McCain and a hundred other idiots just like him precisely because people were choosing candidates based on their perceived "electability" rather than what those candidates stood for. I realize that in our dumbed-down society, there is a certain amount of MTV culture involved in getting people elected, but putting up bad candidates because they seemed to have some kind of mass-media appeal was always a foolish approach. Most of the finalists in the Republican primaries were just as worthless in the long run. The real, principled conservatives never even made it to the big show.

[Carley]

IMO, the collapse was a vote of NO CONFIDENCE when the democrats took over congress in 2006.

It became clear to the rest of the world that our economy was going to tank under their socialist leadership.

[joesbucks]

You have to have a target. Otherwise your efforts are fruitless.

[joesbucks]

What captains of business and finance? They were few real calls not to do the bailout.

[Darkwolf377]

The majority believe there is "free" government money to be had by all.... unlimited amounts

A great part of this is the whole "I'm gettin' mine" attitude. One of the landmark moments for me at FR was when, many months ago, I posted something about how we should do away with social security among other government-run "social" programs, and someone responded that they'd paid into it, so they wanted it to stay around until they could get their share of the pie.

Folks, that's the entitlement trap--they "give" you something, and even if you don't want it, or it adds to the power government has over individual liberty, you still want to benefit from it because your taxes funded it.

We'll never get anywhere with that mentality.

[iopscusa]

There were a lot of No Bailout calls, the problem was the lack of leaders with a shred of principle. Consider that at the time McCain goes to Washington and totally fails to lead at a time that was the perfect Maverick opportunity. The War Hero could/would not pull the trigger. Something really, really stinks about this whole scam, the Paulson/GWB/Congress stampede. IMO, the first step is to find out the truth!!!

[TexasCajun]

Republicans had picked their nominee

NOT!

[PasorBob]

Crooks and low rents happened.

I don't know. Oil became a huge positive issue for Republicans. "Drill here, drill now" was working. The Democrats had no answer. Oil was supposed to go to $200/bbl. Car dealers were selling cars promising to lock in gas prices at $3.00 for a year. All of the sudden, oil prices plumeted and, by November, was no longer an issue.

[TexasCajun]

And we have yet to get an accounting for that first 800+ Billion of bailout money!