You Really Believe We're the Priority?

As the Bailout Bill nears completion, one of the principles being espoused is to protect the taxpayer. Pardon me if I express some healthy skepticism here by example.

Late last week, Washington Mutual, the nation's largest thrift institution collapsed. Wamu closed its doors one evening and woke up the next as JPMorgan Chase. The FDIC claimed victory, because no depositors lost money and, in fact, the insurance fund received money. JPMorgan managed to walk away with almost $200 billion in deposits (the cheapest form of money for a financial institution), and lots of "investments", such as mortgages. For this, JPMorgan paid the FDIC $1.9 billion. JPMorgan immediately wrote off $30 billion of the value of the assets they acquired (which tells you why Wamu was in trouble, and how much trouble some other banks may be in).

Now I may be making an assumption, but JPMorgan's belief in the value of the deal may have something to do with the Bailout legislation. Why? Because if the Legislation is enacted, JPMorgan may be able to simply sell the bad assets to the Government; and do so at a profit. Voila. JPMorgan ends up with the good part of Wamu for a song. The taxpayer ends up with "Toxic Waste." Seems to me like a great deal for the taxpayer.

If I am correct, and judging from years of experience watching our executive and legislative branches this is a reasonably likely, you have to believe this legislation will ensure the taxpayer is the last person in line.

Comments

[kaski]

Get rid of the privately owned Federal Reserve. They also own Wall Street. So, DUH!!

[ProgressiveVoice]

This American Life, on NPR, did an excellent episode on May 9th, explaining the what led us into the housing bubble and why it collapsed as it did. One can listen to it on-line or buy it for download at the bargain price of 98¢

[Sundialsvc4]

Don't worry, Neil... as of next Wednesday, only the King's Royal Exchequer will have anything to do or say on these matters, and it will strictly be "don't ask, don't tell." No one can sue him. No court can review him. Congress can't ask him questions.

This, and quite-a-few other little gems that are buried in this 110-page "OMG! We Gotta Pass This NOW!" scrap of legislation, speaks volumes about the people who are passing it.

I don't know about you, Neil, but if I were an international businessman I would be madly converting every bit of my holdings into a currency other than the United States Dollar, and I would demand that henceforth all of my invoices must be paid in some other currency.

[Neil Grossman - Huffpost Blogger]

I wrote another piece the other day which got little air time; The Law of Unintended and Unanticipated Consequences. It is worth a look if you did not see, as it talks about some of the things being overlooked in the rush to the exit. One is the dollar. I agree with you. I remember quite well (and if you don't you should go look) at the currency crisis that hit Britain and Sweden in the early 90's. A nightmare. No one believes there can be a dollar crisis (I agree with you that one may be looming); but if it comes, we have not seen anything yet. I like to refer people to Weimar Germany and to Brazil in the 70's and 80's.

[Sundialsvc4]

Indeed, so do I.

A nation's currency is representative of that nation's government and its policies. Said policies define that nation's standards of business and political conduct. Anyone who seeks to do business in or with the citizens of that nation is necessarily influenced by that conduct, usually for the worse.

There can be no clearer statement being made to the international community than what we see happening right now: "We're going to close ranks around the lawless, and protect the lawlessness, because we are lawless. We seek outright to conceal from you what you might need to know. In other words, we're going to defraud you using our currency. We are going to defraud our own people! We know what we are doing and we fully intend to do it."

As you said, "this has happened before," and any prudent businessman will promptly retort, "not on MY watch, you're not!" Fool me once, etcetera. Other nations have been stung by us because they believed our promises. They won't make that mistake again.

When you have lost "trust," you have lost everything. And you usually don't know it ... at the time.

[martymartymarty]

Just like our wars, the burden of taxes is put on the middle- and working- class. Congress is too out of touch to care at all about "Main Street", almost all of them come from privilege in the first place and received opportunities not available to anyone from down below. Taxpayers to them are numbers on paper, not real people. Lobbyists are the "representation" that they heed, taking care of their own and the rest of us can just punt. Especially true of Republicans, though Democrats are far from immune.

[Neil Grossman - Huffpost Blogger]

There is no doubt that Congress is out of touch; but it is not only with Main Street. Also, keep in mind, that Main Street has voted for these people (many over and over and over) for a generation. We all reap what we sow. As to the tax burden, it is not only the middle and working class who bear the burden. There is no doubt that there is a point where wealth is sufficient to shield tax responsibility at the individual level; there is no doubt that our corporations are given breaks; there is no doubt that the tax system has real problems. However, many people who earn a very good living, at income levels that make them upper class or rich, pay a lot of tax. In both absolute terms and in percentage terms. In total, a very small number of people (on a percentage basis) shoulder most of the tax burdern. Maybe it is still unfair, maybe it is not. However, since this country runs a deficit, and has done so almost every year for the past half century, none of us has paid enough taxes. In the end, under a democratic electoral system, the electorate should pay for what it wants and what it gets--and almost none of us want to accept this. I have been watching my daughter's future deteriorate for the last 18 years (her age); and I promise you she has done nothing to earn this burden.

[JBS]

Oh, the taxpayer will be right up at the front of the line ... bent over, squealing like a pig!

[Neil Grossman - Huffpost Blogger]

Perhaps a little graphic, but hard to argue with. I prefer to think of Kevin Bacon in his first major role in Animal House, "Thank you sir, may I have another."

[keepingfaith]

The Republican way of taxing the American people, except for the wealthy 1%. Taxation without representation!

[ProudLiberalDemocrat]

Republicans broke it, and now they don't want to fix it. It's called denial.

What the taxpayer gets will be a stable home value and access to capital.

The need to do the deal is wrong, but doing the deal is not.

You could say, "Two wrongs don't make a right." Doing nothing is wrong.

Vote Democrat!!

[Neil Grossman - Huffpost Blogger]

When you look back at the performance of our Govenment for the past half century, "taxation without representation" stands out as their ideology. But it is not just the wealthy 1%. Most of the tax liabilities have been imposed on our children and their children. (I will refer you to a piece on my blog, ThoughtNGi­ne.Wordpre­ss.Com , entitled An Unbearable Burden) When you think about it, we elect our legislators for varying periods, the longest being six years. They take this authority and provide as many short term benefits to the current voting class and as many liabilities to the future (currently non-voters) as possible. I believe that a balanced budget amendment should be seriously reconsidered.

[schatsie]

PLEASE read FREE LUNCH and tell me again that the rich are paying anything..

They are collecting and keeping STATE sales taxes, Income taxes in the form of the UTILITY rates and then taking the money off shore, and DEFERRED TAXES without any interest (why won't my mortgage company let me do that)... AND YOU CANNOT TELL ME THAT THE IRS under BUSH is auditing 1% of these people...

The tax rates in the 50s were high and this accomplished 2 things, the rich really helped to fund the government and it also served to CONTROL GREED..

We need transparency, any organizations taking charitable deductions should have their financial statements on the internet, the IRS can post them and the details about Executive Compensation AND EXPENSES AND BENEFITS.

[PT6]

A CULTURE OF GREED BUILDING ON GREED!

Young students right out of "state-of-the-art" Financial Engineering programs in BIG NAME UNIVERSITIES dropped into quarter million salaries.

If they were able to develop a "COMPUTER OR TRADING TRICK" that made a BROKER ten Billion in an afternoon or a week they took home $30 mill bonuses!

Brokerage FIRMS USED UNIVERSITIES as training grounds to "Take" investors of all types.

BROKERS who hired these "WHIZZES" became the GREAT TRAINING GROUND FOR GREED!

These young people still exist and are still tasked with "DEVELOPING TRICKS!" to SCAM US.

That is why we need "PROTECTION" in the form of REGULATIONS for FAIR MARKETS.

WE NEED ETHICS TRAINING FOR EVERY YOUNG PERSON COMING OUT OF A UNIVERSITY!

[schatsie]

also the investors in Washington Mutual are screwed...­..

[Neil Grossman - Huffpost Blogger]

Yes. And if they could have survived the weekend, they might have survived (fair or unfair).

[fairwitness]

Probably so, but our leaders will tell us otherwise.

[mommadona]

It is time for a new Boston Tea Party.

Call it the Wall Street Dirty Martini Party:

http://en.wikipedia.org/wiki/Tax_resistance

http://en.wikipedia.org/wiki/Women's_Tax_Resistance_League

http://www.warresisters.org/pages/piechart.htm

http://sniggle.net/Experiment/index.php?entry=howto

[Neil Grossman - Huffpost Blogger]

Just to be clear, at least from my perspective, Wall Street is not the only party to blame for this fiasco. Congress likes to place the blame elsewhere, but don't forget that the Glass Steagall Act, passed in the Great Depression, was repealed by Congress in 1999. Congress resisted increased oversight of the mortgage giants FNMA and Freddie Mac, in large part do to lobbying pressure. From my perspective, and you can see this in other blogs I have written on the Huffington Post and my own Blog ( ThoughtNGi­ne.Wordpre­ss.Com ), you will see I believe the most significant part of this crisis was due to lenient Federal Reserve policy rates. This fostered the easy credit that made home ownership so attractuve and fueled inflation. In fact, the cost of commodity inflation is another reason found it impossible to stay in their homes. When this period is analyzed, it is important to understand that the causes were broad, and in many ways foreseeable.

[mommadona]

Completely understood.

Time for a revolt.

No representation, no money.

[Rule Of Law]

There are many so-called progressives who post on these blogs who are still caught up in the judgment and punishment phase of the sub-prime rip off and insist on blaming working Americans for this scandal. But your line, above, about the lenient FED rates being the Real reason behind the bubble, shatters that myth of millions of middle class workers suddenly becoming so sophisticated that they all decided to game the system and buy houses they couldn't afford, and by gawd, should be made to pay for that!

Let me quote a section from Bonddad today:

The Federal Reserve for lowering interest rates to 0% after adjusting for inflation. Lower the price of anything available for sale and people will buy more of it. That's exactly what happened. Household debt exploded. Total household debt outstanding increased from $7.6 trillion in 2001 to $14 trillion in the second quarter of this year. That's a huge increase. Most of it was .... mortgage debt, which increased from $5.3 trillion to $10.6 trillion over the same time period. All of that debt had to go somewhere -- namely the balance sheet of every financial company on the planet.

Greenspan hammered the rates and encouraged the creation of new Very sophisticated loan instruments, Cheney said, "Deficits no longer matter!" and the housing boom propped up a swooning GNP to hide the recession we were already in back in 2003!

[Neil Grossman - Huffpost Blogger]

I would encourage you to read something I wrote elsewhere ( ThoughtNGi­ne.Wordpre­ss.Com ) entitled "Trickledown Monetary Policy) . I think the Greenspanian Fed used asset prices as a monetary tool (although he denied this). By protecting assets, instead of conducting proper monetary policy, Mr. Greenspan helped increase the divide between the rich (who hold the preponderance of this country's assets and everyone else. In part, this felt good while your house went up in value (somewhat artificially as everyone can now see). If you look at the Fed's policy response over the last 12 months, they are still primarily concerned with protecting asset prices.