September 22, 2008 archive

1. The Washington Post reports on A sense of resentment amid the ‘For Sale’ signs. “The bailout doesn’t smell right to the people” and “this may be a Main Street bailout backlash in the making… the central fact of the matter hasn’t been lost on anyone”.

   The taxpayers are on the hook for the bad judgment of others. And they say they don’t like it.

   They didn’t break it, but now they’ve bought it. Political leaders and financial titans say the bailout is necessary to save the economy, but on the ground, … people think that the bailout will reward the wrong people…

   The anti-bailout sentiment appears to cut across class lines.

   Meanwhile, the bailout is growing bigger. The NY Times reports Terms are set as bailout debate begins.

   Financial companies were already lobbying to broaden the plan. And the Bush administration did indeed widen the scope by allowing the government to buy out assets other than mortgage-related securities as well as making foreign companies eligible for government assistance.

   That’s right, American taxpayers are being asked to bailout foreign financial firms. From the Treasury Fact Sheet:

   Asset and Institutional Eligibility for the Program. To qualify for the program, assets must have been originated or issued on or before September 17, 2008. Participating financial institutions must have significant operations in the U.S., unless the Secretary makes a determination, in consultation with the Chairman of the Federal Reserve, that broader eligibility is necessary to effectively stabilize financial markets.

   As Calculated Risk remarks that not only does this taxpayer “bailout covers any securities issued on or before last week… but the second sentence is even more surprising: eligibility has been changed from ‘financial institution having its headquarters in the United States’ to ‘significant operations in the U.S.’ – and even ‘broader eligibility’ if Paulson so decides.”

   The NY Times headline reads the Two presidential candidates back bailout, but with caveats, but McCain “would press on with his plan to extend the Bush tax cuts and to cut others. Contrary to the warnings of fiscal analysts” and Obama “would press ahead with his plans to overhaul the health care system to insure more people, make college tuition more affordable, give a tax cut to the middle class and raise taxes on those making over $250,000 a year.”

   This kind of talk is silly in light, as The Hill reported on Friday, the Wall Street bailout could ‘cripple’ federal budget. “This cripples the domestic policy priorities of the next president, whoever it is, because it soaks up so much cash,” said Jim Cooper of Tennessee, a senior Democrat on the House Budget Committee and a former investment banker.

   Throw in that Peter Orszag, the head of the Congressional Budget Office, said “The nation is on an unsustainable fiscal course.” The CBO assessment made before the current surge in bailouts was announced. So taken together, any promises made now are about akin to the big stinky pile of crap that is the U.S. financial system.

Four at Four continues with the American Dream alive and well in Brazil, Viktor Bout’s extradition hearing, and the stealthy creep of conservatism on college campuses.

What – no AstroGlide?

You’d think the world would just give us a break while we’re watching all this money fly around, but alas, that is not to be.

Two stories, both found at Raw Story.

One, Pakistani troops fire on intruding U.S. choppers:

ISLAMABAD, Sept 22 (Reuters) – Pakistani troops fired on two U.S. helicopters that intruded into Pakistani airspace on Sunday night, forcing them to turn back to Afghanistan, a senior Pakistani security official said on Monday.

It was the second such incident in a week, and reflects frayed relations with the United States over Pakistan’s failure to act more forcibly against Islamist fighters in the tribal lands bordering Afghanistan.

The number of missile attacks by U.S. drone aircraft in the remote tribal areas has multiplied in recent weeks.

The helicopters violated the border in the area of Lowara Mandi, 40 km (25 miles) west of Miranshah, the main town in the North Waziristan tribal region, at around 9 p.m. on Sunday, the official said, speaking on condition of anonymity because of the sensitivity of the subject.

There was no official confirmation.

So this is not an “official story.”  Of course it is pretty damned official that the US has been going in to Pakistan recently:

Pakistan’s army chief has criticised the US military for making unilateral cross-border raids in the the hunt for al-Qaeda’s top leadership, as tensions between the allies reached new heights on the anniversary of the 9/11 attacks on America.

In an unusually tough statement, General Ashfaq Kayani, Chief of Army Staff, said that there was “no agreement or understanding with the coalition forces whereby they are allowed to conduct operations on our side of the border”. Pakistan would defend its sovereignty and territorial integrity “at all costs”, he said.

The statement followed revelations this week that President Bush had approved US special forces incursions into Pakistan in July – without the Pakistani Government’s approval – and comments by the Chairman of the US Joint Chiefs of Staff, Admiral Mike Mullen, who told Congress that a new cross-border strategy was needed to wipe out al-Qaeda “safe havens” in Pakistan.

Winning hearts and minds all over the world, that’s our Georgie.

My gut reaction to everything I’ve read about this financial markets crash up to the now infamous Paulson Plan has me soooooooooooooooo angry that I just don’t know what to do with myself.

Reading the provisions of this Paulson Plan produced yet another assault of shock and awe from BushCo. And the fucking Democrats? In on it. Fuck!!!!!!!!!

Jay Elias, in his essay, Why All Americans Need To Oppose the Bailout As Currently Proposed points gets right to the heart of this dark plan:

The various merits and demerits of the proposal to create a fund for the acquisition of toxic securities and derivatives by the Federal government compose a huge list.  But one of the key provisions of the bill as currently proposed makes it unpalatable for any reason:

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

Is this insane? Are they insane? Are the American people, wholesale, so depleted, scared, unable to think that they are going to buy this crap?

The various merits and demerits of the proposal to create a fund for the acquisition of toxic securities and derivatives by the Federal government compose a huge list.  But one of the key provisions of the bill as currently proposed makes it unpalatable for any reason:

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

Under no circumstances ought we allow this provision to become law.  Yves Smith:

This puts the Treasury’s actions beyond the rule of law. This is a financial coup d’etat, with the only limitation the $700 billion balance sheet figure. The measure already gives the Treasury the authority not simply to buy dud mortgage paper but other assets as it deems fit. There is no accountability beyond a report (contents undefined) to Congress three months into the program and semiannually thereafter. The Treasury could via incompetence or venality grossly overpay for assets and advisory services, and fail to exclude consultants with conflicts of interest, and there would be no recourse. Given the truly appalling track record of this Administration in its outsourcing, this is not an idle worry.

But far worse is the precedent it sets. This Administration has worked hard to escape any constraints on its actions, not to pursue noble causes, but to curtail civil liberties: Guantanamo, rendition, torture, warrantless wiretaps. It has used the threat of unseen terrorists and a seemingly perpetual war on radical Muslim to justify gutting the Constitution. The Supreme Court, which has been supine on many fronts, has finally started to push back, but would it challenge a bill that sweeps aside judicial review?

I urge you to read Smith’s entire post on why this ought to be opposed.  FWIW, economists from such disparate backgrounds as Paul Krugman, Tyler Cowen, and Bryan Caplan all agree this proposal is awful in its current form (Caplan, an anarcho-capitalist, has opposed all government bailouts).

Republican Fiscal Policy

Always Reward Those Who Destroy The Economy

And Screw Over The Average Taxpayer

Radical Shift for Goldman and Morgan  



By ANDREW ROSS SORKIN and VIKAS BAJAJ

Published: September 21, 2008    

Goldman Sachs and Morgan Stanley, the last big independent investment banks on Wall Street, will transform themselves into bank holding companies subject to far greater regulation, the Federal Reserve said Sunday night, a move that fundamentally reshapes an era of high finance that defined the modern Gilded Age.

The firms requested the change themselves, even as Congress and the Bush administration rushed to pass a $700 billion rescue of financial firms. It was a blunt acknowledgment that their model of finance and investing had become too risky and that they needed the cushion of bank deposits that had kept big commercial banks like Bank of America and JPMorgan Chase relatively safe amid the recent turmoil.

Iraqi detainees languish in clogged justice system

A new U.S.-funded legal clinic in Baghdad attempts to review the cases of those who have been held without charge or trial, but the task is daunting and hurdles numerous.

 By Tina Susman, Los Angeles Times Staff Writer

September 22, 2008  

BAGHDAD — Just five minutes.

That’s what Iraqi soldiers said they needed when they took Ahmed-Hussein Juma in for questioning in February 2007.

“And now here we are, 1 1/2 years later,” Juma said with a hopeless laugh last month as he stood in a holding cage, metal handcuffs on his wrists and a prison number stitched crookedly on his green jumpsuit.

Dozens of other men sat on benches at Baghdad’s Rusafa detention center, all waiting to visit a new U.S.-funded legal aid clinic that American officials hope will help clear the backlog of detainees lost in Iraq’s severely overloaded prison system.

In its bid to get the men fair trials or release, the clinic faces immense obstacles, not the least of which is a case file system that consists of paperwork tied together with bits of string. But even more worrying are the sectarian overtones: Most of the detainees are Sunni Arabs accused of terrorism-related offenses, and many claim to be targets of the Shiite Muslim-dominated security forces who they say used trumped-up charges to achieve sectarian “cleansing.”

USA

As Hill Debates Bailout, Wall St. Shifts Continue

Paulson, GOP Oppose Democrats’ Proposal to Limit Executive Pay

By Lori Montgomery and David Cho

Washington Post Staff Writers

Monday, September 22, 2008; Page A01  

Congressional Democrats considering the Bush administration’s emergency plan to shore up the U.S. financial system countered with their own demands yesterday, presenting draft legislation giving the government power to cut salaries of chief executives at firms that participate in the bailout and slash severance packages for their top management. Democratic leaders have broadly embraced the administration’s proposal to spend up to $700 billion to take troubled assets off the books of faltering firms and are not questioning the need to give the Treasury Department expansive authority to halt the meltdown in world markets.

That’d be roughly seven hundred billion dollars.

Yeah. $700 billion.

$700,000,000,000. heh.