Posted on 09/28/2008 10:22:50 AM PDT by Thane_Banquo
Republican leadership is also sending this around:
Following is myth/fact document regarding the current draft of the economic rescue legislation.
Myth: Windfall for ACORN.
Fact: The Frank-Dodd proposal created an affordable housing slush fund and directed 20 percent of net benefits from the program to be directed to ACORN-type organizations. The proposed compromise does not include any affordable housing slush fund and directs all net benefits back to the Treasury to pay down the national debt.
Myth: Tax increase on financial industry.
Fact: The proposed compromise imposes NO tax on the financial services industry. The proposed compromise simply requires a proposal from the Administration to recoup any losses after five years.
Fact: The proposed compromise includes tax cuts for struggling community banks.
Myth: Blank check for $700 billion with little accountability.
Fact: In general, the Treasury Secretary is limited to purchasing up to $250 billion outstanding at any one time. If the Treasury needs to use another $100 billion, the President must certify this action and report to Congress. Further spending requires Congressional action.
Myth: Treasury plan is the only option available.
Fact: Treasury is given multiple options to deal with the current economic crisis, including insurance, public/private auctions, loan guarantees, and direct support to financial institutions.
Fact: Further, Treasury is MANDATED to create an insurance program (Section 102) that protects the taxpayers and requires companies that wish to participate in this program to have some skin in the game by paying risk-based premiums.
Myth: The taxpayer is not adequately protected.
Fact: The proposed compromise includes strong taxpayer protections. Treasury’s proposal had minimal oversight to protect taxpayer dollars. The proposed compromise enhanced the oversight structure by creating a Financial Stability Oversight Board, a Special Inspector General, and a Congressional Oversight Panel.
All AIG-type deals require mandatory equity interest in order to provide taxpayers with potential future benefits. All auctions require a percentage of equity interest based on participation in the program.
Requires the Secretary to develop regulations/guidelines necessary to prohibit or, in specific cases, manage any conflicts of interest with respect to contractors, advisors, and asset managers.
Myth: The taxpayer does not benefit from Treasury bailouts.
Fact: The proposed compromise (Section 113) requires mandatory equity interest in scenarios like AIG. The proposed compromise also allows Treasury to take an equity interest in the program generally.
Myth: Treasury will never use the insurance option.
Fact: Treasury is mandated (Section 102) to establish an insurance program and set risk-based premiums. This will protect taxpayers by requiring the beneficiaries of the insurance program to pay risk-based premiums. Treasury further shall collect premiums
mandatory equity interest in scenarios like AIG. The proposed compromise also allows Treasury to take an equity interest in the program generally.
Myth: Windfall for ACORN.
Fact: The Frank-Dodd proposal created an affordable housing slush fund and directed 20 percent of net benefits from the program to be directed to ACORN-type organizations. The proposed compromise does not include any affordable housing slush fund and directs all net benefits back to the Treasury for debt reduction.
Myth: Tax increase on financial industry.
Fact: The proposed compromise imposes no tax on the financial services industry. Republicans forced Democrats agreed to requiring a proposal from the Administration to recoup any losses after five years.
Myth: Blank check for $700 billion with little accountability.
Fact: In general, the Treasury Secretary is limited to purchasing up to $250 billion outstanding at any one time. If the Treasury needs to use another $100 billion, the President must certify this action and report to Congress. Further action requires Congressional approval.
Myth: Treasury plan to purchase troubled assets is the only option.
Fact: Treasury is mandated to create an insurance program (Section 102) that protects the taxpayers and requires companies that wish to participate in this program to have some skin in the game by paying risk-based premiums.
Myth: The taxpayer is not adequately protected.
Fact: The proposed compromise includes strong taxpayer protections. Treasury’s proposal had minimal oversight to protect taxpayer dollars. The proposed compromise enhanced the oversight structure by creating a Financial Stability Oversight Board, a Special Inspector General, and a Congressional Oversight Panel. [CONFLICTS OF INTEREST]
Myth: The taxpayer does not benefit from Treasury bailouts.
Fact: The proposed compromise (Section 113) requires mandatory equity interest in scenarios like AIG. The proposed compromise also allows Treasury to take an equity interest in the program generally.
09/28 12:49 PM
How about some accurate record keeping and paying down the debt?
That's what I keep thinking, Ari.
There is an oversight board. But the reality is, it is better only to have $250 bln to screw up than the $700 bln the Democrats were going to hand him. The issue isn’t that this is perfect. The thing is, we significantly decreased the magnitude of this.
The bailout was going to get passed no matter what we did, but we got the thing weakened significantly.
You don’t have to expect 100%, but you don’t have to fold.
A few people are going to get rich no matter what happens. You'll never prevent that.
All I know is that the people who put us into this mess are the very people who are supposed to save us from the consequences. Not only that but these people are virtually certain to be reelected and very likely have more like-minded persons elected which will give them even more power.
Sooner-or-later in the words of the “reverend” Wright the chickens are going to come home to roost. Maybe that time has come. I hope not but all I find myself hoping for is that the fall will come later rather than sooner. I have no hope at all that it can be avoided altogether.
Are they gonna publish the Bill and allow US to read it before they vote on it?
As someone pointed out on another thread, since money is fungible, requiring profits to go to paying down the debt is mere meaningless window dressing. “We have $200 billion in profits to pay down the debt, so we’ll increase the budget deficit by $200 billion with more spending elsewhere.” Kinda how things get done in Washington.
No, not $700 billion.
$250 - $350 billion.
I think the bailout is an emergency measure just to keep the credit markets alive for right now.
Congress is going to have to do a lot more to fix the fundamental problems created by the Community Reinvestment Act.
The only question is will Democrats allow that to happen, because fixing it would be an admission that they broke it.
if mccain actually wins, we’ll have a lot more flexibility and maybe even repeal this. If obama wins, we’ll have much much worse things to worry about than this bailout. it’s as simple as that.
House GOP will likely increase seats in the House this year, in my view.
Auto companies got bailed out last week. Airlines are next. I’m still trying to determine if this is technically socialism or fascism.
Here’s a good start, then go do more reading.
How’d you like the takedown of WaMu ? Instead of allowing the usual bankruptcy proceedings for an insolvent compay, gov steps in, siphons off the assets for 1.9 billion to JPM and keeps the liabilities, screwing over all bond holders of WaMu who might have expected to get some small percentage after the liquidation in BK court. No, instead the bondholders get zeroed by fiat, not by law. THEN the gov allows the bank to declare BK after all the assets are stripped.
What do you think the bondholders of every bank are now going to do ? This makes the capital markets a bigger problem, because every rational bond investor is going to want to get out of the market. Except for the bondholders of JPM, GS - they are obviously FOH(friends of Hank) and will be allowed to prey on weaker banks. Is that what this country should be ? Friends of gov officials making billions at the expense of taxpayers and non-connected businesses ?
NOTHING CAN BE FIXED UNTIL WE RETURN TO THE RULE OF LAW, return transparency to bank balance sheets by forcing level 3 assets to be marked to market, and stop the gov manipulation of the equity AND credit markets.
This bill does NONE of that.
http://market-ticker.denninger.net/archives/584-The-Potential-End-Of-Americas-Government.html
Now understand that there is no solution to this fast and vicious destruction of America’s financial markets and financial companies until and unless the lying stops.
It has NOT stopped and in fact has gotten materially worse.
Folks, this meltdown will not stop until either:
* ALL financials mark everything to the market, ALL OTC derivatives are traded on an exchange or declared void, and ALL balance sheets are transparent so we can determine who is broke and who is not.
OR
* The market has completely imploded with every financial stock worth zero as the hedge funds and others short each in turn into the ground, forcing each to be bailed out in turn.
Those are the ONLY TWO CHOICES.
Nothing else HAS WORKED and nothing else WILL WORK. With each bailout you simply give people another target and a new way to kill the next company in line. This process will proceed from firm to firm until NONE ARE LEFT and credit availability in the economy is ZERO.
The Fed has expended more than half of their balance sheet, in excess of four hundred billion dollars. It has not stopped the cascade.
The Government has spent nearly a trillion dollars we do not have in bailouts and other miscellaneous nonsense. It has not stopped the cascade.
Indeed, all that has happened is that the velocity of the crash has accelerated dramatically.
There is NO WAY to fix this through adding “more liquidity” - the problem IS AND HAS BEEN THE LIQUIDITY in that this allows BANKRUPT companies to continue to operate and LIE instead of forcing them into the open where they can be liquidated under Chapter 11.
We are here precisely because of the intentional provision of far TOO MUCH liquidity by Alan Greenspan and now by Ben Bernanke.
You cannot solve someone’s drinking problem by giving them another bottle of whiskey!
THE LIQUIDITY SWAMP MUST BE DRAINED.
We cannot have a “financial system” that is based on fraud and theft. We cannot have “financial institutions” that claim to be solvent when they in fact are not unless they are able to make up values that are much higher than the REAL value for their so-called “assets”.
Wayne Angell was on “Fast Money” tonight claiming that the balance sheet of The Fed is “infinite” and that “they can’t be downgraded.”
Wayne, you need to be charged with treason for spewing that crap on national television.
Sure, “in theory” The Fed’s balance sheet is infinite - they can coordinate with Treasury to print as much money as they want.
So was Weimar Germany’s.
The word for what Wayne was promoting on Fast Money this evening is HYPERINFLATION where you find that a wheelbarrow is worth more than all the $100 bills you can stuff into it.
Does anyone remember how hyperinflation worked out for them? I seem to remember a gentlemen with the first name of “Adolf” that the world got out of that little exercise of an “infinite balance sheet.”
Why does this path inevitably lead to political failure? Because as soon as lenders discern that this is occurring they shut off credit entirely.
Think about it - you have $1,000 to lend out. You detect that the government is printing and intentionally devaluing your money. If you lend it out at 10% interest but the government is hyperinflating at 100% a year, you lose about half of the money’s value every year! So if you lend me that $1,000 when I pay you back you can only buy half as much as you could before! For obvious reasons you’re not going to allow that - you will instead immediately spend your $1,000 on something of physical value such as land before it can be debased.
Hyperinflation kills all credit availability instantly for this reason and any credit-based economy immediately implodes. This results in enormous and immediate mass unemployment and a resulting rupture of the social and political fabric of a nation.
As for not being able to be downgraded, you obviously didn’t hear S&P today, which stated quite clearly that the United States “AAA” credit rating is not a right and must be earned. Can’t be downgraded eh? Oh yes The Fed can be - along with everything else.
Folks, we require over $2 billion a day in foreign investment in order to pay our bills.
This is what came out from China today:
“BEIJING, Sept 17 (Reuters) - Threatened by a “financial tsunami,” the world must consider building a financial order no longer dependent on the United States, a leading Chinese state newspaper said on Wednesday.
“The eruption of the U.S. sub-prime crisis has exposed massive loopholes in the United States’ financial oversight and supervision,” writes the commentator, Shi Jianxun.
“The world urgently needs to create a diversified currency and financial system and fair and just financial order that is not dependent on the United States.”
“Infinite Balance Sheet” eh? See what foreign governments think of that sort of garbage?
Please understand - if foreign governments withdraw their support of our government funding via either scaling back their Treasury purchases or outright refusal to buy (or worse, they dump them on the market into this “fear spike” we’re seeing now), we are absolutely and instantaneously screwed.
Michael Bloomberg, one of the few intelligent commentators out there (and a billionaire by his own hand) said exactly the same thing today:
“WASHINGTON (AP) — New York Mayor Michael Bloomberg is warning a ‘next wave’ of financial pain may come when foreign entities stop buying U.S. debt.
The billionaire mayor is speaking to an audience at Georgetown University, telling them it’s not clear who is going to continue buying U.S. debt as financial firms try to cope with a crisis of confidence on Wall Street.”
Mr. Bloomberg sees the same thing I do, but he’s a bit more polite than I am about it.
Then there was S&P which made this quite clear as well:
“The $85 billion bailout of AIG on Tuesday by the U.S. Federal Reserve “has weakened the fiscal profile of the United States,” S&P’s John Chambers told Reuters in an interview.
“Lack of a pro-active stance could have resulted in further financial stress and put pressure on the U.S. triple-A rating,” Chambers said. “There’s no God-given gift of a AAA rating, and the U.S. has to earn it like everyone else.”
Is that clear enough?
Congress MUST ACT RIGHT DAMN NOW.
Congress MUST stop The Fed and Treasury from printing any more money. The institutions that are insolvent must be forced into the open and put through bankruptcy.
We CANNOT wait until the next Congress and the election to stop this nonsense; that’s five months in the future. By then The United States could easily be quite literally broke and forced into a hyperinflationary spiral!
Debt that cannot be paid must be defaulted.
Yes, this is painful.
Yes, it will hurt.
But as you can see it is already hurting plenty; the “alternative” isn’t working and CAN’T WORK, as I’ve been pointing out for over a year!
We CANNOT get a true value on the market until this occurs.
It is NOT POSSIBLE.
In the BEST CASE if we do not act NOW, take your salary and assets and cut them by 30%. Everything else - cost of food, gas, electricity, etc - remains the same.
Worst case? Divide your salary and assets by three, but again, your costs remain the same.
If you are in the lower income echelon, you will go broke and become homeless.
If you are middle class, you will be living in a tenement or trailer. If you’re lucky. If you currently own a home, you won’t any more.
If you are upper-middle class, you will fall to lower-middle class, and all your luxuries will disappear. No more Lexus or nice vacations.
If you are “well off”, you will be living in a modest home, what we now call “middle class”, and some of you will go broke outright, because your “well off” status has been achieved with leverage - which will blow up in your face.
If you find this unacceptable you must act TODAY to stop the government from proceeding down the path we are on.
Your choices are:
1. DO NOTHING and your employer and you will lose access to credit. As he or she does, you will lose your job and ultimately everything you own.
2. GET ACTIVE RIGHT NOW - on the phone with Congress, Treasury, The President and the Candidates. Take to the streets. Organize a general strike with your friends and neighbors, and buy nothing for a day or even a week. Make clear to your representatives that you INSIST that they stop this fraud and nonsense, forcing all of the fraudsters and phony balance sheets and lies into the open, along with removing all of the regulators who intentionally turned a blind eye to this mess, including but not limited to Geithner, Bernanke and Paulson.
If you do nothing, you will get #1, or worse, The Government will continue to face bailout after bailout until the printing reaches a point that foreign governments say “no mas” - at which point our government’s ability to fund itself - and our current way of life and representative government ends.
Ohh my bad the socialism is to be distributed slowly which means the robber barons will have to mug us multiple times with congressional approval.
Where’s the provision that will address the credit default swaps that will have Wall street asking us for several trillions of dollars in further corporate in a few months?
People say they’re afraid that Barack Obama will be the mastermind behind the largest transfer of wealth in American history, but I say that George Bush is doing a pretty good job of it right now...
Exactly. We cannot expect to get everything we want, that is what compromise is about. It is a miracle that the minority party had this much say in the first place.
Just make sure that the agreement sent to President Bush for signing is the final one, not some forged version of the old.
I am thankful for the miracle. Thank you Republicans With Courage.
Issue also is, given that some kind of bailout was doomed to pass no matter what with a liberal Democrat Congress and a moderate Democrat President, do we now want a McCain or an Obama administration to do the implementation and oversee the program?
If Obama wins, they’ll create some scheme to funnel all the funds to ACORN or some other leftist organization. I trust McCain a lot more. He’s a good man, even if I don’t always agree with him.
Of Course her majesty Nancy Pelosi will allow the peasent 24 hours to review the documents before it gets voted on.
I mean we wouldn’t want to rush anything now would we...
Your right. I’ve been throwing around ‘socialism’ as the term. This is more of a ‘Fascist’ move. Vote for the Rescue plan or your personal savings is jeopardy.
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