Congressional negotiators claim a financial system bailout deal is near, yet, no real specifics have been identified and nothing is yet on paper.
More importantly, the American people have not spoken.
Right now, much of the American public has little trust for Wall Street, the President and his Administration, both Republicans and Democrats in Congress.
According to reports, Treasury Secretary Henry Paulson, House Speaker Nancy Pelosi, and Senate Majority Leader Harry Reid and negotiators have announced the tentative deal on a $700 billion plan will be to have the Treasury purchase bad assets, limit executive compensation for some companies give the U.S. government authority to take equity in companies that sell bad assets under the plan, and possibly charge a various financial companies fees to help offset the cost of the plan.
But a deal means little if Americans reject it.After all, firstly, the public really does not understand the problem and, secondly, wonders even if there really is a need.
The question becomes one of blind faith.Will the public accept the opinions of those negotiating a 700-billion dollar bailout plan of an institution about which the public comprehends little and possesses little belief?
Before Congress takes off to campaign for public office, perhaps they better make sure they absolutely have the public’s acceptance.Unlike most legislation, America is watching to make sure this complicated problem and fix make sense.If it is “fuddy duddy” to them, they could reject it straight out and want Congress and the Administration to do a much better job in identifying the need and the projected solutions.
America wants medicines to cure ailments they can see and feel.They will reject “funny money” resolutions as being written by the very government leaders who were hired to protect them from these traumas in the first place.The remedies’ devil will be in the details but America is having one devil of a time understanding why they must fork over the bank to save more banks.
Oops, the "Ron Paul" following “in liberty” did not copy. Perhaps Ron and I are misguided, but if the problem was artificially high housing prices, then isn't a precipitous drop in housing prices simply the "normal" (i.e. "market forces") correction to these artificially high prices? Perhaps there will NOT be an economic downturn - except for those who bet on ever increasing housing prices. Maybe our legislators are simply scamming us into believing we need to bail out Wall Street to help ourselves. Maybe those of us who did not take our mortgages we cannot pay back, those of us whose savings are greater than our debt will not suffer if there is no bailout. Maybe Ron Paul is right about this being a fraud to benefit the very wealthy at the expense of tax paying Americans. Well... then again... maybe Wall Street and the politicians they own have our best interests at heart, sure they do. Written by kpf
on 9/29/2008
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This man says it better than I ever could: Dear Friends:
The financial meltdown the economists of the Austrian School predicted has arrived.
We are in this crisis because of an excess of artificially created credit at the hands of the Federal Reserve System. The solution being proposed? More artificial credit by the Federal Reserve. No liquidation of bad debt and malinvestment is to be allowed. By doing more of the same, we will only continue and intensify the distortions in our economy - all the capital misallocation, all the malinvestment - and prevent the market's attempt to re-establish rational pricing of houses and other assets.
Last night the president addressed the nation about the financial crisis. There is no point in going through his remarks line by line, since I'd only be repeating what I've been saying over and over - not just for the past several days, but for years and even decades.
Still, at least a few observations are necessary.
The president assures us that his administration "is working with Congress to address the root cause behind much of the instability in our markets." Care to take a guess at whether the Federal Reserve and its money creation spree were even mentioned?
We are told that "low interest rates" led to excessive borrowing, but we are not told how these low interest rates came about. They were a deliberate policy of the Federal Reserve. As always, artificially low interest rates distort the market. Entrepreneurs engage in malinvestments - investments that do not make sense in light of current resource availability, that occur in more temporally remote stages of the capital structure than the pattern of consumer demand can support, and that would not have been made at all if the interest rate had been permitted to tell the truth instead of being toyed with by the Fed.
Not a word about any of that, of course, because Americans might then discover how the great wise men in Washington caused this great debacle. Better to keep scapegoating the mortgage industry or "wildcat capitalism" (as if we actually have a pure free market!).
Speaking about Fannie Mae and Freddie Mac, the president said: "Because these companies were chartered by Congress, many believed they were guaranteed by the federal government. This allowed them to borrow enormous sums of money, fuel the market for questionable investments, and put our financial system at risk."
Doesn't that prove the foolishness of chartering Fannie and Freddie in the first place? Doesn't that suggest that maybe, just maybe, government may have contributed to this mess? And of course, by bailing out Fannie and Freddie, hasn't the federal government shown that the "many" who "believed they were guaranteed by the federal government" were in fact correct?
Then come the scare tactics. If we don't give dictatorial powers to the Treasury Secretary "the stock market would drop even more, which would reduce the value of your retirement account. The value of your home could plummet." Left unsaid, naturally, is that with the bailout and all the money and credit that must be produced out of thin air to fund it, the value of your retirement account will drop anyway, because the value of the dollar will suffer a precipitous decline. As for home prices, they are obviously much too high, and supply and demand cannot equilibrate if government insists on propping them up.
It's the same destructive strategy that government tried during the Great Depression: prop up prices at all costs. The Depression went on for over a decade. On the other hand, when liquidation was allowed to occur in the equally devastating downturn of 1921, the economy recovered within less than a year.
The president also tells us that Senators McCain and Obama will join him at the White House today in order to figure out how to get the bipartisan bailout passed. The two senators would do their country much more good if they stayed on the campaign trail debating who the bigger celebrity is, or whatever it is that occupies their attention these days.
F.A. Hayek won the Nobel Prize for showing how central banks' manipulation of interest rates creates the boom-bust cycle with which we are sadly familiar. In 1932, in the depths of the Great Depression, he described the foolish policies being pursued in his day - and which are being proposed, just as destructively, in our own:
Instead of furthering the inevitable liquidation of the maladjustments brought about by the boom during the last three years, all conceivable means have been used to prevent that readjustment from taking place; and one of these means, which has been repeatedly tried though without success, from the earliest to the most recent stages of depression, has been this deliberate policy of credit expansion.
To combat the depression by a forced credit expansion is to attempt to cure the evil by the very means which brought it about; because we are suffering from a misdirection of production, we want to create further misdirection - a procedure that can only lead to a much more severe crisis as soon as the credit expansion comes to an end... It is probably to this experiment, together with the attempts to prevent liquidation once the crisis had come, that we owe the exceptional severity and duration of the depression.
The only thing we learn from history, I am afraid, is that we do not learn from history.
The very people who have spent the past several years assuring us that the economy is fundamentally sound, and who themselves foolishly cheered the extension of all these novel kinds of mortgages, are the ones who now claim to be the experts who will restore prosperity! Just how spectacularly wrong, how utterly without a clue, does someone have to be before his expert status is called into question?
Oh, and did you notice that the bailout is now being called a "rescue plan"? I guess "bailout" wasn't sitting too well with the American people.
The very people who with somber faces tell us of their deep concern for the spread of democracy around the world are the ones most insistent on forcing a bill through Congress that the American people overwhelmingly oppose. The very fact that some of you seem to think you're supposed to have a voice in all this actually seems to annoy them.
I continue to urge you to contact your representatives and give them a piece of your mind. I myself am doing everything I can to promote the correct point of view on the crisis. Be sure also to educate yourselves on these subjects - the Campaign for Liberty blog is an excellent place to start. Read the posts, ask questions in the comment section, and learn.
H.G. Wells once said that civilization was in a race between education and catastrophe. Let us learn the truth and spread it as far and wide as our circumstances allow. For the truth is the greatest weapon we have.
In liberty,
Written by kpf
on 9/29/2008
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Read the final draft of the bill, 110 pages in a pdf file, but didn't crosscheck the numerous citations in the amendments to other laws. The ACORN slush fund really is gone, the insurance is manadatory ("shall" in legislation means "must/got to"), there is oversight by the TON, sufficient judicial review is allowed (the original Paulson had ZERO external review by courts or agencies), clouds of reports are due on a predictable schedule, public e-access is required within two biz days of a purchase, several "savings" clauses are included to preserve claims and defenses pre-dating the bill, the budget is capped at $250B with an option for $100B more without a second vote. Stopping the last $350B takes a vote. There are both veto and override procedures, with all the delaying tactics stricken out. No "discharge" petition games here - if either the minority in either chamber wants a vote on recision or override a veto of it there will be one. Lots of other nice touches to boot. For example, banks can offset GSE losses against ordinary income; injunctive relief gets an expedited hearing. Seeing as how I'm a Republican, pulling all of the Leftie toys (bankruptcy cramdown, global pay rules, "say on pay" [proxy access], and especially ACORN's slush fund) out of the bill was a real accomplishment by the House Republicans. Tip o'the hat! Funny, the young Capt Dart Driver (F-102A) Bush stood up to - and then went around - his generals to get the surge. Gutsy play, the correct move, and the nation is far better off for it. But, on money matters, the MBA got rolled by Paulson. Still, overall, a vastly better bill than the Paulson original or the Dodd-Frank second version. I'm telling my side of the isle to vote for it. Pelosi needs 100 Repubs to have sufficient cover to put it to a vote and she ought to get them.
Written by Kelly Haggar
on 9/28/2008
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"Blind faith" is only needed if the bill is NOT posted on Thomas for 24 hours prior. (In the interest of comity I'll skip over who directed the creation of Thomas and made 24 hours ahead a condition of the deal.) Written by Kelly Haggar
on 9/28/2008
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