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This Federal Bailout Proposal is a Disaster
I am so mad about this proposed federal bailout of Wall Street, I can't see straight. Do you understand what they're going to do? They are about to steal ONE TRILLION dollars from us and just hand it over to the guys on Wall Street who screwed everything up. They are going to take all of their bad loans and dump it on us. We're going to have pay for their mistakes!
But they already made the money. They keep the profits and we keep the debts. It is absolutely, positively outrageous. The only thing more outrageous is that both of the presidential candidates are going along with it. Obama seems to be supporting it almost more enthusiastically than McCain. That is a terrible idea.
Here are two important things you must know about the impact of the financial bailout.
First, when the American people find out what's been done here, they are going to be livid. Conservatives, liberals, moderates, everyone. Why should we have to pay a trillion dollars of our own money to save the asses of bankers who already made a killing from these loans? Now, they get to unload all of their "toxic assets," as Paulson is calling it, on us. Who in their right mind would support that?
Wall Street is ecstatic. The market is through the roof right now because they can't believe they got such a good deal. Understand this is not an isolated bailout here and there. The Treasury Secretary just said he is going to take ALL of their bad loans off their hands. Why wouldn't they be elated?
The Bush administration and the Republicans (especially Phil Gramm) pushed for deregulation that allowed for, and almost encouraged, these mistakes. Now, the guys who told us they didn't believe in big government are going to send in big government to pick up the tab. Privatize the profits, socialize the debts. We have been robbed!
Even Jim Bunning (R-KY) said that when Hugo Chavez nationalized industries in his country at least the Venezuelan people get the profits as well. We only get the losses.
Secondly, this is likely to be the biggest issue of this campaign. How the candidates handle this could easily determine the outcome of this election. Whoever taps into this anger the best will win. Elections are about marketing. It doesn't matter that John McCain has been pushing for deregulation his whole career if he seems like he is going to be tougher on Wall Street in the next 45 days. He can be wrong as long as he likes as long as he wins the PR war over the next month and a half.
Obama is well on his way to blowing this already. Today he issued a terribly professorial statement about this bailout plan. He promised to be non-partisan and fully backed the plan. I couldn't imagine a worse response.
Non-partisan? Are you kidding me?! The Republicans are nearly completely responsible for this debacle (Bill Clinton should have never signed those laws Phil Gramm pushed through Congress, so the Democrats get blame, too). On the most important issue of the election, you're going to be non-partisan? Especially when you have the facts on your side? How badly do you want to lose this election?
For the love of God, tell the people what they need to hear - this meltdown is completely the fault of the George Bush, Phil Gramm, the Republican Party, the conservative movement and yes, most importantly, John McCain! John McCain with his reckless deregulation caused this to happen. If you don't tell the American people this, who will?
And why are you supporting Paulson's plan? The plan is a total overreaction, has no accountability, no checks built in so this mess won't happen again and leaves all of the "toxic assets" on the American taxpayer's lap. It will be judged very poorly by the history books. It is an amnesty plan for Wall Street. You should be tapping in to people's anger over this, not siding with the guys who are blowing it.
Do these guys know anything about politics? Blame it on Bush. Blame it on the Republican Party. Blame it on John McCain. They earned it. It is their fault. Now, you're going to bail them out by agreeing with their stupid bailout program (I understand the need for limited bailouts, even though I can't stand them, but this general amnesty is a terrible precedent -- it's like pardoning Nixon) and treating this as a non-partisan issue. This is a terrible mistake. And one that could cost Obama the election.
McCain has already done a much better job of sounding populist on this issue. If he plays the politics better, the people who are really going to get burned are us. He is going to put the same deregulators who caused this mess back in charge. He might even select Phil Gramm as his Treasury Secretary and put the fox back in charge of the henhouse. I'm asking Obama to be better at politics because the most important policy consequences are at stake here.
If Obama allows the Republicans to deceive the American people into thinking it wasn't their fault and they are put back in charge, this is all going to happen again. What message do you think Wall Street just got from Paulson's bailout plan? Take all the risks you want, the government will always take your bad loans off your hands. You are too big to fail. You will always be bailed out. If McCain gets elected, we'll have to pay for this round of mistakes and the next.
Obama better not blow this and he's in the middle of doing just that right now. I have one important piece of advice for him right now: Get mad. Get mad like it's your money they just took from you. They came to your house in the middle of the night and took your daughters' education fund. They robbed you. Now, are you going to go get the sons of bitches who did this or are you going to let them get away with it?
Follow Cenk Uygur on Twitter: www.twitter.com/TheYoungTurks
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Wall Street may have been ecstatic on Friday, but by Monday they've had a chance to look at the plan and they say it doesn't add up. It wouldn't save the banks, and just the possibility of such a large deficit spending binge sent the U.S. dollar plunging and crude oil prices up by the largest amount ever intraday. If this bill passes, or anything like it, it is the beginning of the end. Oil will be $150 by December and $200 by June, the dollar will fall to new lows and keep falling, and we'll have a combination of hyperinflation and depression that will make the Great Depression look like a cakewalk.
Quid Pro Quo. That's how it works in Washington, and how it
works in the big business of Wallstreet. This country is headed
into a Socialistic system, which is the step before Communism.
This isn't about political parties. This is about the future of a nation
and the rest of us.
First off I agree with you on the outrage but to say the least it was comming and you know who you can thank? Bush's massive irresponsible spending and tax cuts to the wealthy. Something needs to be done to make sure that this never happens again and that is to assure that we don't ever see a republican take the white house again.
My understanding is that the banks aren't being bailed out---the government isn't making them whole". The bad loans will be bought by the government at pennies on the dollar. That will liquify the banks so that people's cash depostis are safe. What can be done from here is appoint someone to renegotiate those bad loans and resell them to investors at a profit. It is possible to structure this in a way that that taxpayers profit in the long run.
I see this as a stopgap measure. Obama is doing the right thing. He has said before that there is only one President at a time. This is a crisis and in taking a bipartison approach, laying out his goals, and making sure the protections he wants (for Miain Street, regulations etc) are reflected in the legislation that is being developed this weekend to allow this to happen he is acting Presidential. He is the calm reassuring presence in the eye of the storm. That;s what leaders do. But he is talking about how this happened and who is responsible---he spent the entire week pounding on McCain and the Republicans for deregulating, And his tax increases for the wealthy will help us get out of this mess and make those who git us here take some responsibility for fixing it. Meanwhile, McCain flails, rages against the deregulation he put in place and stands by those tax cuts. He looks unhinged.
Bankruptcy is doing miracles for Lehman Brothers, all at no cost to the taxpayer. Barclays President called it a "deal of a lifetime." Hedge funds and creditors tried to block deal. "It's an extraordinary example of the flexibility that bankruptcy affords," said Peck (the Bankruptcy Judge). Private companies are lining up to pick up Japanese and investment/management units. What is so wrong with bankruptcy (the airlines are still flying?).
The whole issue, it seems to me, has to do with the risk of a run on the bank, and everyone closing out their retirement accounts at the same time. Mortgages were not driving the economy off a cliff, "a perception" was. It seems to me a President could have given a really good speech to stem the flood, built some bulwarks with some stop gap measures (re-instituting the uptick rule), and then sat down with his or her advisors to give some serious thought to long term reforms of the financial sector. Throwing money at a problem is rarely ever enough! If we're trying to create a better mood on Wall Street (and to re-assure people on Main Street), I can think of no better way than effective leadership at the helm - and better confidence in the person who is steering this super tanker.
Yes I'm furious---at the deregulation that has taken place and/or been ignored. and the massive Bush tax cuts for the wealthy. They tried to gut the regulations that FDR put in place to get us out of the Great Depression. That is what caused this. But given that is where we were, it had to happen. Some of the investment banks had announced they were going to "break the buck"---pay less than $ ! for $1 deposited in a money market fund which is supposed to be the safest (but uninsured) investment. We can't have that. We were facing a run on the banks and the banks didn't have the cash to redeem deposits. We were facing a total financial meltdown--not just here but globally.
Cenk, you wrote:
I am so mad about this proposed federal bailout of Wall Street, I can't see straight. Do you understand what they're going to do? They are about to steal ONE TRILLION dollars from us and just hand it over to the guys on Wall Street who screwed everything up. They are going to take all of their bad loans and dump it on us. We're going to have pay for their mistakes!
*****
I write:
We're going to have to pay for their mistakes...THRICE!
Once in the bailout funding itself, the second whenever anyone seeks a loan/line of credit/etc and can't get...can't take on more "risk".. The bailout only will fix what is known to be broken...what the bad loans/balances are.
So...what happens when the bottom drops again in a few months, as it will? Yup, another round of "help". That's 3 times...
The smartest thing to do would have been to bail out the people...1) so they could pay up their mortgages/keep their home/help avoid the bad drop in the real estate world and 2) the money the folks would paid the bailed out porkers would have propped up their balance sheets.
But hey, what do I know?
This 700 billion will also go to foreign banks that do business
in the USA, and who employ American workers. A week ago we
would be ok. Sunday emergency measures and a mega bailout.
What will they say next week, they underestimated and the bailout
will now be 900 billion?
Right on, Cenk!
End the Fed!
"The definition of insanity is doing something the same way... while expecting a different result." - Albert Einstein -
Cenk: You do understand it had to happen. This is the decider's promise to Wall Street cronies. $1 trillion as they walk out the door. The raping and pillaging of America for eight years, topped off by a $1 trillion dollar goodby. Come January, Obama will have the opportunity to bring them all back on war criminal charges. Hope that's enough consolation for you.
Absolutely accurate. What the hell? Where is the outrage? And remember, they wanted to put our Social Security in the markets. There would be some really sad old people right now.
A better plan would have been to provide fixed-rate, 30-year mortgages to all those struggling to keep their homes. It would have had the same effect of stabilizing the markets, stabilizing home prices. This is really ridiculous.
I think Obama is acting bipartisan because that's what people want right now. They want to feel that those in Congress are working together.
Meanwhile, McCain, who said he is bipartisan, is acting extremely partisan, putting all the blame on Obama today.
I totally agree with you.
Dear Brother Cenk,
No need for me to add anything, You and I are in the exact same stream of consciousness. Spot-On, enough said. Agape.
I completely agree with you from a moral standpoint. I am outraged. But from a political standpoint, I don't think Obama has a choice. Democrats in Congress are going to vote for this thing. They are just too frightened that if they don't, there will be a "meltdown" of the US and global financial system. And they will be blamed.
Obama can't go against what his own party is going to do. He needs to say, as he is, this is going to cost us $$$ and it is the Republican's fault. No politician is going to risk putting the economy into even worse shape than it is now.
It was 1983, Roanld Reagan was president. Continental Illinois National Banks was insolvent. It would have to be "closed" the way bank regulators closed so many smaller banks. However, the head of the FDIC (I think his name was Issacs) estimated on the basis of examiner analysis that... to close Continental would cause the simultaneus failure of 70 banks what had correspondent deposit relation ships and or Federal Funds with the target bank. The FDIC did not have the personnel to handle 70 bank closures at that point in time, indeed they would have been hard pressed to handle Continenal with the intermix of bank failures during the Reagan years.
Look this is complicated stuff... the subprime product is a "cancer" in the market place. It needs to be removed, not by a drip drip drip, but rather by a specialization and a concentration. Paulson is from the investment bank mindset, he should have been smart enough to know that this greedy self centered, arrogant, condescendind subset of humanity should not be trusted. And... this is what you get. It is, as they say now, only a matter of efficiency. I can guaranty you from experience, the cost will be less (sum total and time) to follow what Paulson is about to present. Republican idelogues about free markets should become an endangered species that we should let self destruct.
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