Do Paulson and Bernanke Doom McCain's November Chances?
If his new plan remains afloat, Treasury Secretary Hank Paulson, from the Wall Street wing of the GOP, may well have doomed the November chances of John McCain, the presidential nominee of this month's Main Street-oriented Republican national convention. By promoting the mother of all financial bail-outs, Paulson has all but mocked McCain's recent anti-bail-out rhetoric, as well as whetting the Arizona Senator's slowly growing awareness that Wall Street misbehavior and greed and the year-long Paulson-Bernanke string of botched policy and rescue missions have been a disaster for 1) the United States and 2) what's left of Bush and Republican credibility.
McCain has never been much on economics, but Paulson's indicated arrangement with the Democrats -- financial firms will get to turn in the toxic debt and financial instruments they can't peddle for reimbursement by an American taxpayer-funded entity -- is so bad that if the former Navy pilot grins and accepts it he will look like a wobbler and a Grade A sap. He's already lost the edge he had coming out of the Republican convention. Barack Obama, by contrast, can get away with being evasive because the Democrats look like they're accepting a measure principally authored and promoted by Paulson and Federal Reserve Chairman Ben Bernanke.
Now for a little bit of background. We're not just looking at a real estate mess. Over the last quarter century, the total of public and private credit market debt in the United States -- most of it, in fact, is private -- has more than quintupled from $8 to $48 trillion, the biggest such orgy in world history. Over that period, domestic financial debt - the money borrowed by the financial sector for expansion, consolidation, empire-building, leverage, exotic mortgages, gambling, you name it - swelled from just $1 trillion to some $14 trillion. Employing these economic steroids, the financial sector ballooned itself from 14-15% of what back in the mid-1980s was the Gross National Product to 20-21% in 2004 of the newer Gross Domestic Product calculation. In the meantime, the once-dominant manufacturing sector fell far behind, dropping to just 12% of GDP. In a nutshell, the economy has been hijacked in recent decades by the very groups who now purport to have remedies - Wall Street, from whence Paulson emerged, and the money-bubbling, don't regulate the dangerous practices Federal Reserve Board, from whence Bernanke comes.
The public is finally starting to understand what's been going on in this perverse milieu of Wall Street socialism where private individuals get the profits and the taxpayers underwrite the bail-outs. It has a long history; in Bad Money I have a chart that lists fifteen or so rescues over some 25 years. Finance has now grown into an octopus, with dozens of debt, speculative, credit card, mortgage, interest group and Washington lobby tentacles that will lock onto any new bail-out proposal and turn it into another food supply. Even as the new "legislation" is being drafted, you can bet all the lawyers, lobbyists and big donors are already on the phone to key people in Congress, the White House, the Treasury and the Federal Reserve. Anybody with a good nose can almost smell the fixes and corruption, and of course, political critics and the public will be told that there's just no time for debate, no time to go over the details. Don't pass it tomorrow, pass it yesterday. We can assume that George W. Bush will sign it, possibly with a fleeting smirk.
Will this bail-out solve the current mess? Of course not. For the last year, Paulson and Bernanke have been Fumble and Bumble. They won't strike at the roots of the problem - indeed, one could almost say the two men represent those roots - so their rescue gimmicks fail and the crisis extends and deepens.
Ironically, the best hope for resistance comes not from the left but from free-market elements of the Republican Party. I have not had much good to say about the GOP for years, but recent events may hint at their political and ideological renewal. Sometime back, when Congress passed the Fannie Mae and Freddie Mac bail-out program, Senator Charles Grassley of Iowa, the ranking Republican on the Senate Finance Committee, ultimately voted against it. He had worked on its early stage, but ultimately voted no because seeing a pay-off to "Wall Street and K Street (the Washington lobbyist corridor)". Then the Republican National Convention, in a rejection of Bush, Paulson and Bernanke, put an anti-bailout section in its 2008 platform. A few days ago, the ranking Republican on the Senate Banking Committee, Richard Shelby of Alabama, called on the Fed to reject bail-outs and allow the markets to work even if the consequences are "brutal." And on September 18, a hundred Republican members of the House of Representatives sent a letter to Paulson and Bernanke requesting that the two men "refrain from conducting any additional government-financed bail-outs for large financial firms."
I suppose there's a chance that McCain could decide to oppose the administration and truly fight this latest round of Wall Street socialism. Maybe instead of asking George W. Bush to fire SEC Chairman Cox, McCain could come out against Paulson and Bernanke. But the odds are much greater than an embarrassed McCain will flounder toward November defeat.
That would mean that the anti-bail-out forces in Congress and at the grassroots will take over the national party helm in 2009, and it's not too late to start right now. If they strike a tough stance in the next few days, they could expose, delay, amend and even block -- by any available means -- what amounts to a massive mutation and even perversion of the U.S. economy. The leader of the hundred House Republican conservatives, Congressman Jeb Hensarling of Texas, summed it up quite neatly: "Enough is enough. It's time to bail out the American taxpayers from bail-out mania." Hopefully, we're looking at a September battle cry.
Kevin Phillips is the author, most recently, of Bad Money: Reckless Finance, Failed Politics and the Global Crisis of American Capitalism, published by Viking in April.
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Mr. P. --
Thank you, once again, for an astute and erudite piece. It's always enjoyable to read the commentary of someone who not only has a brain, but also knows how to use it.
I agree that the current financial meltdown is far from over, and that the gimmicky takeover "fix" that the regime hacks have dreamed up is nothing more than a very expensive bandaid.
The heart of the problem lies in the foundation of the economy -- which seems to be, right now, based on a Monopoly-money mindset -- everything is over-valued, and nothing is worth what it's selling for. Worthless paper currency is being traded back and forth, with everyone touching it taking their little piece of the action -- a manufactured "job" where no one really does any "work" other than just looking busy.
Actually, it's surprising that the scam has lasted so long -- I guess that's attributable to the tenacity of greed -- and the individuals who succumb to its lure.
I hope your assessment of John Insane's chances are correct. I sincerely believe, if he's elected, he will be the last prez of the US, as we will no longer exist after that.
Kevin Phillips is a class act ... how come more "conservatives" aren't like him?
Kevin don't underestimate the stupidity of the average American..
As it happens, I'm reading Bad Money right now. It's just all too prophetic.
The sad reality is that the American people have no power. Our politicians are bought and paid for along time ago--and I include both Obama and McCain, the former with Rezko, the latter with Keating. These guys know that the system is greased for them to get ahead, as politicians, if they play the game, and they've always been happy to play that game. You scratch my back, I scratch yours. Neither has the slightest intention or interest in changing things--why should they: everything's just hunky-dory for them.
Until the American people that they are as economically sovereign in this nation as they, at least theoretically, politically so; then the controllers of wealth--whether we call them industrialists, capitalists or, today, financiers, will always be able to bail themselves out from the public treasury.
We get what we deserve. Obama and McCain prove it.
And kudos to Mr. Phillips for being probably, in my view, the most astute, and honest, political observor on the scene.
Mickeyrat, how in your wildest imagination can you compare McCain's direct complicity with the Keating Five felons to Obama's real estate personal purchase of his own house which is neither a crime nor an immoral finanvial transaction.
You casual interjection in you post is a typical Ginkrich twisting the logic of any rational thinking man.
gimme a break.
we were doing better under clinton than with either of the bushes.
"that's what she said!"
gimme a break.
we were doing better under c linto n than with either of the busheses.
"that's what she said!"
Financial Crisis Fundamental Foundation Flaws and Solution
The flaws are articulated in details as well as the solution which involves a New Global Value Exchange Accounting System they have a list of power questions that media and journalists can ask. Coinage.me
According to them we have a fiat currency bubble burst.
One interesting ironic insight is a small fortune can be made off pennies as a result of the amazing paradox resulting from current market conditions.
Read about it on http://coi
I am watching Keith Olberman and he is showing polls. I am stunned and scared that people would even consider voting for McCain for president after looking at his complete lack of understanding of the economy. How? How can they still consider voting this guy?
Moreover, why OHIO is in the tank for McCain? God help this great country!
pie8ter --
It's the racism, stupid!
(No disrespect intended -- just trying to make a point.)
interesting news- I live in Ohio and every poll here puts Obama ahead by anywhere from 1-4 points. There's hope!
Southern Ohio is a "southern" state. They are racist and ignorant and they loved the idea that THEY put bush in office. Arrogant about all of this. I wonder what would happen if there was truly honest voting in Ohio...esp
NO MORE CHANCES!
NO MORE YEARS FOR REPUBLICAN CORRUPTION!
ALL REPUBLICANS now put AMERICA last and want to DESTROY THE MIDDLE INCOME AMERICANS by handing them the bill for Republican FAILURES.
NO MORE YEARS. REPUBLICANS need to lose BIG.
Chickens coming home to roost for the religious right. It's the religious right that voted G*B for 8 years just because he said he is against ab0rtion and gay marriage. This group didn't think through about our country's financial future. They are still out to get this country in deep trouble because Palin is against ab0rtion. Jesesus himself won't forgive this sin.
A simple explanation.
Your job is to decide whether to loan money to someone who wants to borrow money to buy a house. You're going to have some splainin to do, if you okay the loan and the borrower defaults. You've got to check the borrower's credit rating, income, and debt; get a realistic appraisal of the property, and run the numbers before you decide to risk approving the loan. If the buyer defaults, you are protected, as long as the buyer made a large enough down payment, and the property can be sold for the amount owing on the loan.
Remove all regulations and allow the bank (or a mortgage company) to sell the borrower's mortgage (I.O.U) to another bank. Let's say the mortgage is an IOU for $100,000 secured by the house purchased. Bank B buys it along with several million other IOUs just like it. Then Bank B sells the whole package of IOUs to Bank C within the hour, etc., etc.
When the employee for the initial lender is working on commission and being pressured to okay questionable home purchase or home equity loans supported by questionable appraisals and no oversight so that the initial lender can sell all of those loans for whatever the market will bear, you've got a recipe for financial collapse because whomever gets stuck holding billions of dollars of worthless IOUs when the music stops can't pay its creditors (customers or shareholders).
We still have to be worried that the votes will be counted accurately. Remember Dibold made the paperless voting machines. Also, Republicans not letting people vote. If it goes to the Supreme Court, we are dead meat.
woodnthrifty,
you got it.
PBS pt 1 voter caging
http://www
PBS pt 2 voter caging
http://www
voting machines lose votes
http://tec
High Turnout, New Procedures May Mean an Election Day Mess
By Mary Pat Flaherty
Washington Post Staff Writer
Thursday, September 18, 2008; A01
http://www
Want to avoid 'an election day mess'? VOTE EARLY! VOTE EARLY ! VOTE EARLY! And AFTER you have voted EARLY-SIGN UP TO BE A POLL WORKER ON ELECTION DAY!! In MOST STATES, ELECTION WORKERS ARE PAID! NOT MUCH! Actually-about as much as the pay for JURY DUTY-but it's time to test the ASSUMPTION that employers will not FIRE people who attempt to perform their CIVIC and NATIONAL DUTY! EASY SERVICE FOLKS!! It's ONE DAY and YOU GET PAID! Tell your employers you have a VERY IMPORTANT DUTY TO PERFORM ON NOV. 4. Volunteer to take people to the polls-sign up with your local campaign headquarters. Again-THE WHOLE WORLD IS WATCHING! Don't just sit there wringing your hands and moaning about a possible outcome-DO SOMETHING TO MAKE THE OUTCOME YOU WANT!
VOTE! VOTE! VOTE! VOTE! VOTE!
I have decided that I hate commercial television and we need a new medium.... On CNN right now... McC's surrogate got all his soundbytes out on how O is going to be horrid for the economy...
She then goes to the O surrogate and asks the same thing and then cuts him off before he even gets to state the fullness of point two of the six point plan....
McC... I'm your man!! I am gonna kill those greedy wealth mongers... I know how to do it!!! I am gonna do it!!!
Obama.... I have a plan, but right now it would not be prudent to try to undercut the administra
CNN: Well, we are happy that you came to us goodnite..
CNN is lame.
They seem to think they have to bash the democrats. They were horrible to HRC while they touted Obama and McCain. Once manipulated into place these candidates, they go for Obama's jugular. I can't stand this bunch any more. In fact WHO can we stand or trust? Did anybody watch Kevin Phillips on Moyers last night? Wow. Scary times ahead. I do watch PBS and Animal Planet. That is the cable channel right next to CNN. OOPS!
"and of course, political critics and the public will be told that there's just no time for debate, no time to go over the details. Don't pass it tomorrow, pass it yesterday. We can assume that George W. Bush will sign it, possibly with a fleeting smirk."
Sounds eerily familiar! Iraq anyone!
Is there no video of McCain carrying the banner for market deregulation?
All Obama has to do is flood the airwaves with evidence that McCain has been a foot soldier for the lack of regulation that has led to this historic taxpayer funded bailout.
We're way beyond hocky moms and lipstick now.
I don't know, Mr. Phillips. The GOP and its congressional representatives have always been fiscal conservatives - as long as they were out of power. Once they gained control of the congress, they went on a binge of corruption and spending. So, the solution seems to be that they should be kept out of power so that they may propose sound ideas. Of course, the economic meltdown is not limited to bank failures. There is the looming personal credit crisis, the healthcare crisis, the enormous national debt, most of which has been accumulated during the last eight years, the investment in infrastructure, and the cost of climate change. It would be much safer for the future of the country if the Republicans remain a minority - perhaps, they can spend their time in exile in developing a coherent theology that will let us know when God will solve our economic and climate problems.
I think fiscal conservatives, which includes me, need to realize that the GOP has been taken over by radical right-wing extremists who believe in enriching themselves; lying; endless war; eliminating all government regulation; abolishing all civil rights; spying on all citizens -- particularly dissenters; drowning government in a bathtub; privatizing the military; no-bid cost-plus contracts to financial supporters; cronyism; rigged elections; elimination of taxes for the rich; and demonizing minorities, the poor, and anyone who criticizes them.
The GOP is dead, RIP.
Those of you who have proudly called yourselves Republican and voted Republican are welcome to join the rest of us because all of us, and especially all of you, have been played for fools.
Today we face the biggest threat to our republic and way of life than ever before. Why? Because the threat comes from within.
Seriously, have I not spoken the truth?
Amen
Stop throwing money at the flipping war and bring it home to help OUR OWN COUNTRY! Right here, Right now! Who's gonna come to our rescue, and what will be have to pay for it (not in money - in the kind of stuff we try to get out of the nations we "help.") Nothing is free, especially not the people of the US. We are servants of corporate greed. Rachel, help! Come talk me down!
China will own ..... i mean "help" us......
Right on. Where can I get some Chinese language courses?
I know this has never been done before but couldn't they have just shut down the stock market for a few days and requested other countries do the same thing? That would have stopped all trading while they had a "time out" and just took a step back to figure out what was happening.
Economists all over the world have seen this storm coming for more than a year, which is why so many nations, including China and Japan have been lending us billions of dollars to keep our economy afloat. They acted out of self-interest to keep their economies from imploding because they also bought billions of dollars of these worthless loans. Make no mistake -- the world economy is on the verge of a total collapse that would make the world-wide depression of the 30s seem like a picnic.
Now, the question is who is going to have to pay for this fiasco?
Shutting the stock market down for awhile wouldn't have solved anything.
Trillions of dollars are owed to people and nations around the world who have paid billions of dollars for worthless paper promises.
The U.S. can't refuse to repay the billions of dollars that foreign nations have lent us to keep our economy afloat. We could, but at what cost?
So the issue is how do we repay this debt?
The answer, I believe, must place the primary responsibility on those who profited from this massive theft.
That ain't the middle class.
"Russia suspended stock trading for a second straight day and took other emergency measures in an attempt to halt a severe crash Wednesday as market turmoil spread..."
That is Russia did this week. We are not alone!
http://www
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