So, $290 billion into his bailout plan, Hank Paulson is calling for a do-over. Now there is a confidence booster.
Providing "I-told-you-so" talking points to the what's-the-rush crowd, the Secretary of the Treasury announced yesterday that the government is no longer going to use any of the $700 billion Congress allocated to the Troubled Asset Relief Program (TARP) to buy, well, Troubled Assets from financial institutions -- the original centerpiece of the plan.
Instead, Paulson is looking to fortify the financial industry by continuing to buy premium stock in banks (aka the Warren Buffett approach). Unfortunately, instead of sending Paulson a thank you note in the form of increased consumer lending, the banks are depositing the government checks and taking a wait and see approach. (Among the things they've seen: another $40 billion handed over to AIG.)
This is not to say that Paulson's midstream direction change is a bad thing -- indeed, the lip service he's now paying to putting the focus on consumers is encouraging -- but it shows just how uncertain official Washington is about how to keep the economy from imploding.
In the meantime, oversight of the massive bailout plan remains a mirage -- undermined by White House inaction and Congressional turf wars.
Remember all the promises that the $700 billion in taxpayer money would be closely supervised? No blank checks here, we were told. A special inspector general was going to be picked by the White House and Congress was going to hand-select an oversight panel.
But despite over a quarter of a trillion dollars having already been doled out by Paulson, so far both the inspector general position and the five Congressional Oversight Panel slots remain unfilled.
The White House appears ready to nominate New York prosecutor Neil Barofky as inspector general, though it's up in the air how quickly Congress would confirm him (if they confirm him at all). Among the looming issues, a squabble between the Senate Banking Committee and the Senate Finance Committee over which would have control of the confirmation process.
"It's a mess," said Eric Thorson, the Treasury Department's inspector general, who has been doing fill-in oversight duty until the special inspector general is confirmed. "I don't think anyone understands right now how we're going to do proper oversight of this thing."
Bartender, another round of lack of confidence for everyone.
Unfortunately, while Paulson waffles, the White House dawdles, and Congress dithers, the economy continues to burn.
The number of Americans filing new claims for unemployment last week -- 516,000 -- was the most since September 2001, in the wake of 9/11. And the number of people continuing to collect unemployment -- 3,897,000 -- was the highest it's been in 25 years.
"The labor market is deteriorating more rapidly than previously thought," Andrew Gledhill, economist at Moody's Economy.com, told CNNMoney.
In the past week, Ford said it would cut salaried employment costs by 10 percent, global delivery company DHL said it was cutting 9,500 jobs and financial service provider Fidelity Investment announced 1,300 job cuts. The list goes on and on: Circuit City, Pizza Hut, Morgan Stanley, Condé Nast, Yahoo, US Steel, Cesna, and QVC.
According to the Department of Labor, 240,000 jobs were lost in October, bringing the total of 2008 pink slips to 1.2 million. The unemployment rate is 6.5 percent, the highest it's been in 14 years.
On the housing front, another 84,868 homes were lost to foreclosure in October; there have been 936,439 home foreclosures since August 2007. And the housing future continues to look bleak: in October, 279,561 borrowers received at least one foreclosure-related notice, including default notices, notices of auction sales and bank repossessions, according to RealtyTrac. One in every 452 housing units received one of these. Nevada, Arizona, and Florida had the country's top three foreclosure rates.
Despite the carnage in the housing market, the White House continues to offer what the New York Times labeled "pathetic responses" and inadequate "half measures." And much-discussed legislation allowing bankrupt homeowners to rework their mortgages in court remains in a holding pattern, awaiting action from the lame duck Congress. I wouldn't hold my breath.
January 20th cannot arrive fast enough for the American people.
Follow Arianna Huffington on Twitter: www.twitter.com/ariannahuff
Hale "Bonddad" Stewart: The Myth of the Black Swan
This is the third time that I have been through an economic event where there were groups of people who said the old methods of analysis didn't apply. As I will demonstrate, nothing could be farther from the truth.
~ salary caps ($400,000 annually)
~NO bonus for ANYBODY until further notice
Common sense!
" I"M SICK AND TIRED....................."
And nearly broke.
Any money given to the big Automakers MUST have parameters/rules whatever you want to call it where they stop making huge gas-guzzling tubs. They should be forced to make smaller cars with better gas mileage and I do not mean maybe get 5 gallons more per mile. They big 3 have fought this effort and look where it has gotten them.... close to bankruptcy. Don't they realize we buy European cars because they get better miles to the gallon?
Any money given to the big Automakers MUST have parameters/rules whatever you want to call it where they stop making huge gas-guzzling tubs. They should be forced to make smaller cars with better gas mileage and I do not mean maybe get 5 gallons more per mile. They big 3 have fought this effort and look where it has gotten them.... close to bankruptcy. Don't they realize we buy European cars because they get better miles to the gallon?
The Repubs are also looking ahead to 2010 elections. The Repubs are not trying to do anymore because they are hoping that they can saddle the Dems and Obama with the economic mess and exploit the crisis in 2 years to regain control of the congress or at least to diminish the Democratic lead.
Thus as the strategy goes: The Repubs want the the economy to slide further for the next two months; this will then prevent Obama from enacting all his policies before 2010
If this occurs, then the republicans can claim that the Dems and Obama reneged on promises or are ineffective leaders
I hope I am wrong.
This is not the time to screw it all up.
I keep reminding everybody that based on what many noted economic professors, and others in the industry were recommending, (i.e., that we should leave it alone and let it figure itself out, that to bail them out would only prolong the inevitable....) many, many of us called and emailed our senators and congressmen to voice our opposition to the $700 Billion bailout, but they went ahead and voted for it anyway.
You see, Pres Bush refused to listen to anybody but Paulson and Bernanke, on whose watch the problem happened, and then put them in charge of "fixing" the problem. All they have done is make it worse, and the people are the ones still holding the bag, and they are mis-spending the taxpayers money. It's absolutely insane! And we the people, have absolutely no recourse. All we can do is sing ninner-ninner- ninner... we told you so. And what good does THAT do? In the meantime, the economy gets worse and worse. I can't say it better that Ariana did..
Of that we are asked to believe that a small percentage of those have faulty “sub-prime” mortgages they were sold by “experts” that they had no business making and now cannot pay what? Anything?
The solution is to kick them out of their homes? Even taking this as the source for trillions of dollars that somehow is “missing”, then why are we not fixing the source of the problem? Why wouldn't we make the bailout as a loan to mortgage company's as exchangeable payments for these homeowners who would have them added onto the back ends of their mortgages and demand refinancing that was affordable if possible to keep people in homes?
Why don't we recreate community banks trading out foreign debt from the banks for local debt and shore up the taxpayers within the community they are being asked to pay for?
Could Paulson and others have done what Lincoln and Silverado did in the 80's?
The first part of the rescue money was used to recapitalize financial institutions, in return for ownership and potential gains, a must do or everyone shuts down. This alone helped unfreeze interbank lending. Most of those CEOs have already lost their jobs and millions throughout the ecosystem are being laid off. Part II of the funding is being changed away from throwing good money after bad to directly affect mortgages that people have as opposed to the derivatives. A good move. However to pay off mortgages or to buy down capital is not the solution. Refinancing everyone’s at something like 3-4% is. With Frannie/Freddie we have always socialized housing anyway, we should just fess up.
The management at the big three have not been able to make cars that people really want to buy for over 30 years. Do not let them touch any taxpayer money. Either take the money to retrain all those workers into better green jobs, allow them to import cars that sell well elsewhere, or restructure the big three all like we did to the financial institutions (in case anyone was paying attention). Companies still function under bankruptcy protection - the big three are essentially bankrupt now. Lastly we must lower healthcare 10:1.
Do you really think this current administration can do anything to forestall the mess they generated except to make it much worse?
Patience and prudence.
Oh and great job on helping our next administration and a renewed Congress come to our rescue.
Kudos.
And just what is Obama planning to do to help us little people?? He is going to raise our taxes, and follow Nancy Pelosies advice to give money to the automakers to bail them out, because the democrats are enslaved by the auto unions. The best thing for the automakers to do is to file for bankruptcy, and then to restructure, and to re-negotiate with the unions, just like all of the airlines have done. We all have to tighten our belts now, and that includes the union workers, many of which have already lost their jobs, and their benefits. And we also have to crack down on the crooks in Washington, and their earmarks and pork projects.
Now all we hear from trolls is whine whine whine.
heh
Obama repeatedly says he favors tax cuts for people with taxable incomes under 200K. For Fox watchers the message is distorted to mean the opposite. Fox News tries to force events to fit Republican talking points, even the the ludicrously false talking points. Oddly though, in a relative sense, Bush's tax cuts for the rich combined with deliberately understated inflation have forced the working class to pay a larger portion of total revenue collected. Is that a tax increase on the working class? Oh I forgot, Fox watchers don't do nuance!
If you get the chance, watch the movie "Idiocracy" it is painful look at how things are going in America. It is supposed to be comedy but tragically shows among other things, how Fox watchers contribute to our steady decline (often referred to as Globalism).
Congress and Sheila Bair's obsession with this spend-only bailout rewards the reckless and punishes the prudent. Consider the lesson it imparts to promote bailouts to the reckless. City by city, neighborhood by neighborhood, people who live beneath their means and manage money carefully will see more careless neighbors supported by federal decree. And what about the 30 percent of this nation who were smart enough to rent? Or how about the large percentage of us who gave plenty of warnings to these same people the government now wants to redistribute my taxes to so they can stay in a house twice the size the home I live in. The backlash to the 700 B bailout package was not only because of the bailout of wall street but also the bailout of the reckless homeowners and their relentless ATM / HELOC spending.
We are becoming a nation of people who feel it is not only okay but justified to cheat, lie, and swindle each other and the rest of the population. Personal responsibility is discouraged by the government and the mainstream media. Our nation is eating ourselves from within just to keep a facade of prosperity. Hope is being replaced by anger and desperation.
I have little pity for someone who willingly entered into a shady mortgage and is now losing their house. I especially don't want to bail people like that out. I want to bailout the greedy bankers who sold them the mortgages even less.
This whole bailout was a crime and both the Republicans and Democrats are guilty. I hope Paulson ends up in jail, but there is no justice in America anymore. Obama was the better choice, but I still don't see him bringing that type of change.