Posted on 09/21/2008 5:31:22 AM PDT by libstripper
The financial world breathed easier Friday, as the full force of the U.S. government was employed to stop what had become a full-fledged global panic. Now comes the equally crucial job of protecting taxpayers -- and restoring markets -- after a historic federal intervention.
There's little doubt that this week we were watching the modern equivalent of a 1930s bank run. Instead of lining up at bank windows, investors were unloading financial assets on their PCs. Credit markets had seized up, to the point that even routine daily settlements had stopped until banks had the actual securities or cash in hand.
(Excerpt) Read more at online.wsj.com ...
Section 2:
(a) Authority to Purchase.—The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States.
(b) Necessary Actions.—The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation:
(1) appointing such employees as may be required to carry out the authorities in this Act and defining their duties;
(2) entering into contracts, including contracts for services authorized by section 3109 of title 5, United States Code, without regard to any other provision of law regarding public contracts;
(3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them;
(4) establishing vehicles that are authorized, subject to supervision by the Secretary, to purchase mortgage-related assets and issue obligations; and
(5) issuing such regulations and other guidance as may be necessary or appropriate to define terms or carry out the authorities of this Act.
The Treasury Secretary can buy broadly defined assets, on any terms he wants, he can hire anyone he wants to do it and can appoint private sector companies as financial deputies of the US government. And he can write whatever regulation he thinks are needed.
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.
The WSJ has lost a lot of credibility with me this week.
It is time to stop the bailout. Wallstreet and the crooks in Washington are to blame.
Seize ALL of their assets and let them bailout Wallstreet.
Wow. Talk about a blank check.
If this had gone on another week then Main Street was going to be in a world of hurt. It should never have gotten this far but it was largely due to the government’s interference in the market anyway. Honest investors and bank customers did nothing wrong here. Neither did honest home owners who put their 20% down, didn’t lie on their mortgage apps and made all of their payments.
More money tossed into the Ponzi scheme.
What is this REALLY going to cost the American taxpayer.
Hey great, Uncle Sugar coming to the rescue...at a price.
We in essence are nationalizing our major financial institutions. To be sure, every board room will have government overseers and will exert control over these institutions.
The cost of borrowing, the cost of printing more money, the cost of foreign entities coming to the rescue has yet to surface.
The real story:
Devaluation of the dollar / your investments. Inflationary pressures on the American consumer, Foreign countries ability to tighten the economic screws on America. Taxpayers WILL realize higher taxation in the future regardless of what these politicians promise.
Congress and the White House are attempting to spend their way out of financial trouble.
And, WHY are the Fannie and Freddie Scammers, including Franklin Raines, not being charged over their criminally fraudulent practices?
Remember, the SEC has oversight authority on publicly traded stocks, which Fannie and Freddie were.
The WSJ supports free market capitalism on the way up,
And socialism on the way down.
“...protecting taxpayers...”.
It is to laugh. I guess there’s a firt time for everything.
If you read the fine print there are no safeguards to ensure that the government buys anything but the bad investments.
The stated goal is to prevent firms from collapsing and the only way to do that is to let them keep the good investments and palm the bad debts off on taxpayers.
The problem still exists, that so much credit and debt has been created that there is no credit left.
Literally, the US government faces bankruptcy. Congress doesn’t realize that despite what they think, they cannot add to the national debt unless somebody else, somebody they don’t control, is willing to provide credit. If nobody is willing to do so, the US government is instantly bankrupt. It has already spent all its tax revenues for the year, and then some.
Typically, to get more money then they have raised through tax revenues, the Treasury Department issues short term T-bills. If nobody wants to buy them at their sale price, the price drops and the yield, the interest, that the US pays goes up. Eventually it reaches a point where the T-bills become junk bonds, promising enormous yields. Between the low price and high yields, there is nothing left.
$700B? Where do they think that money will come from:? A wishing well?
On the plus side, the only way they can get the money they have to have, the US government will have to cut back. Not just cuts in the rate of growth, but real cut backs. Maybe as much as 25% of the government will have to shut down.
It’s simple, really. If your credit cards are maxed out, you have no choice but to not go shopping on credit. Until you can pay off at least one of those cards, they are just a piece of plastic.
No! No! No! The US government can do what failed governments have done throughout history. Fire up the printing press.
Actually, I hope they fire up the printing press. Unlike Weimar Germany or Zimbabwe right now, the US has less than 5% of its economy backed by paper. The Bureau of Engraving and Printing is at 100% production just to sustain this.
There is almost no way we could have a currency backed hyperinflation. But we are at grave risk of hyper-deflation. If there is a massive credit collapse, caused to a great extent by the $130T in unregulated derivatives, the biggest shortage that will hit us instantly is in paper money.
At the individual level, imagine that your credit cards are all suddenly invalid. Most people would immediately turn to bank checks, which are not true credit instruments, they are debit instruments. But because so many people live by credit, they would automatically create a huge number of overdrafts. The banks would have to shut down their checking.
This leaves only debit cards and cash as ways to spend your money. You might have $100k in the bank, and not be able to buy a doughnut, because you cannot get the money from the bank to the retailer.
The vast majority of US retail will have to be done with debit cards, run through the credit card companies, the only entity able to administratively process that much of that kind of data.
But so many transactions have to be done with cash, you get a true cash-only deflation. That is, if you buy something that costs $1 with a debit card, it still costs $1. But if you buy it with cash, it might only cost a dime, a nickel, or even just a penny. Solely because nobody will have any cash, yet everybody will desperately need cash.
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