Thanks.
http://michaelperelman.wordpress.com/2008/09/30/crisis-commentary-second-installment/
Monday, September 29, 2008
Crisis Commentary: Second Installment
I just posted the second installment on my crisis commentary. Again, I would appreciate any comments, since it still needs more work.
Thanks.
Thanks.
What was it about 1995 and the US Federal Reserve?
1990 – 1992 era. The changes began then that led to the elimination of the reserve requirement.
1992 The Fed Reserve ratios were lowered.
1995 – The US Federal Reserve effectively eliminated the fractional reserve ratio. Banks were no longer required to back assets that largely corresponded with “broad money” (M3) with cash reserves. The consequence was that banks could effectively create money without limitation. From early 1994 to late 1996, most of the remaining reserve deposits disappeared. "This transformation of banking practices seems to have started small, but really picked up steam by 1996 and 1997, likely due to competitive pressures among banks; those banks that used these methods could easily out-compete those that did not."[1]
1995 – US Fed and other central banks printing money like confetti….It is reasonable to suppose that such a gigantic increase in money supply would produce price rises in assets, housing and commodities BUT consumer price inflation remained under control. Why? Rapid growth of India and China (source of cheap labour)? Internet and telecommunications revolution rapidly improved the cost structures of existing products? Labour-free productivity of manufacturing. The stepping up of the rate of environmental rape (mining of raw materials and forests) associated with industrial production? The WTO established.
1995 Dow First close above 5000. Stock Market Keynesianism. Never before had a US economic expansion become so dependent on the ascent of the stockmarket.
Mid 1990s – the collapse of the First Italian Republic. It involved large-scale criminal influence in government and originated as an American parapolitical operation.
1995 – 1999 – The vice president of the Bank of New York sets up illegal accounts to facilitate the movement of funds into and out of Russia. Her crimes of money laundering did not result in a sentencing for her.
1995 – 2001 – the dot com speculative bubble.
1990 – 2005 – doubling of the global workforce
1995 – 2005 – about 3.2 million US homeowners bought houses on the basis of subprime mortgages or similar credit terms
1995 – 2005 Global ‘Savings’?? Glut. “..a remarkable reversal in the flows of credit to developing and emerging-market economies, a shift that has transformed those economies from borrowers on international capital markets to large net lenders…” (Ben Bernanke in 2005)
[1] What (Really) Happened in 1995? How the Greenspan Fed Screwed Up in the Mid-90s and set the stage for the Greatest Financial Bubble in the History of the World. By Aaron Krowne
Also see: ‘Made in U.S.A. 1995’ by Eric Janszen. March 22, 2006
http://www.itulip.com/forums/showthread.php?p=1495
1992 The Fed Reserve ratios were lowered.
1995 – The US Federal Reserve effectively eliminated the fractional reserve ratio. Banks were no longer required to back assets that largely corresponded with “broad money” (M3) with cash reserves. The consequence was that banks could effectively create money without limitation. From early 1994 to late 1996, most of the remaining reserve deposits disappeared. "This transformation of banking practices seems to have started small, but really picked up steam by 1996 and 1997, likely due to competitive pressures among banks; those banks that used these methods could easily out-compete those that did not."[1]
1995 – US Fed and other central banks printing money like confetti….It is reasonable to suppose that such a gigantic increase in money supply would produce price rises in assets, housing and commodities BUT consumer price inflation remained under control. Why? Rapid growth of India and China (source of cheap labour)? Internet and telecommunications revolution rapidly improved the cost structures of existing products? Labour-free productivity of manufacturing. The stepping up of the rate of environmental rape (mining of raw materials and forests) associated with industrial production? The WTO established.
1995 Dow First close above 5000. Stock Market Keynesianism. Never before had a US economic expansion become so dependent on the ascent of the stockmarket.
Mid 1990s – the collapse of the First Italian Republic. It involved large-scale criminal influence in government and originated as an American parapolitical operation.
1995 – 1999 – The vice president of the Bank of New York sets up illegal accounts to facilitate the movement of funds into and out of Russia. Her crimes of money laundering did not result in a sentencing for her.
1995 – 2001 – the dot com speculative bubble.
1990 – 2005 – doubling of the global workforce
1995 – 2005 – about 3.2 million US homeowners bought houses on the basis of subprime mortgages or similar credit terms
1995 – 2005 Global ‘Savings’?? Glut. “..a remarkable reversal in the flows of credit to developing and emerging-market economies, a shift that has transformed those economies from borrowers on international capital markets to large net lenders…” (Ben Bernanke in 2005)
[1] What (Really) Happened in 1995? How the Greenspan Fed Screwed Up in the Mid-90s and set the stage for the Greatest Financial Bubble in the History of the World. By Aaron Krowne
Also see: ‘Made in U.S.A. 1995’ by Eric Janszen. March 22, 2006
http://www.itulip.com/forums/showthread.php?p=1495
Sunday, September 28, 2008
Bailout can WORSEN things: top US budget director.
The Washington Post reported the following a few days ago.
A financial bailout could worsen the crisis, be insufficient to restore trust and cost ‘a few’ billion dollars a year to administer said Peter R Orszag, US Congressional Budget Office Director, in his testimony before the House Budget Committee. The key question he said what “What are we buying and what are we paying for it?" Orszag feared that the bailout as it stands might reveal that the large financial corporations are inflating prices of assets on their books. “Suppose a company has Asset X, whose value is recorded on the books as $100. Because of the current economic decline, Asset X's real value has dropped to $50. If the company takes part in the government bailout and sells Asset X for $50, the company has to report a $50 loss on its books. On a scale of millions of dollars, such write-downs could ruin a company.” Such corporations "look solvent today only because it's kind of hidden” [but they] “actually are insolvent".
Here's what I don't understand: Because short-term lending by the banks had almost completely shut down Treasury is acting as a go-between in short-term lending between banks. "Instead of Bank A lending directly to Bank B, as is customary, Bank A [purportedly] no longer had confidence that Bank B could repay the loan. So Bank A would give the money to the Treasury, which issued a security that was put into the Federal Reserve, which then issued the cash to Bank B." [That action implies that the US Government is already guaranteeing the debt of insolvent firms; already bailing them out. Is that correct?]
Bailout Could Deepen Crisis, CBO Chief Says
Asset Sales May Lead to Write-Downs, Insolvencies, Orszag Tells Congress
By Frank Ahrens, Washington Post Staff Writer. Thursday, September 25, 2008; D04
http://www.washingtonpost.com/wp-dyn/content/article/2008/09/24/AR2008092402799_pf.html
A financial bailout could worsen the crisis, be insufficient to restore trust and cost ‘a few’ billion dollars a year to administer said Peter R Orszag, US Congressional Budget Office Director, in his testimony before the House Budget Committee. The key question he said what “What are we buying and what are we paying for it?" Orszag feared that the bailout as it stands might reveal that the large financial corporations are inflating prices of assets on their books. “Suppose a company has Asset X, whose value is recorded on the books as $100. Because of the current economic decline, Asset X's real value has dropped to $50. If the company takes part in the government bailout and sells Asset X for $50, the company has to report a $50 loss on its books. On a scale of millions of dollars, such write-downs could ruin a company.” Such corporations "look solvent today only because it's kind of hidden” [but they] “actually are insolvent".
Here's what I don't understand: Because short-term lending by the banks had almost completely shut down Treasury is acting as a go-between in short-term lending between banks. "Instead of Bank A lending directly to Bank B, as is customary, Bank A [purportedly] no longer had confidence that Bank B could repay the loan. So Bank A would give the money to the Treasury, which issued a security that was put into the Federal Reserve, which then issued the cash to Bank B." [That action implies that the US Government is already guaranteeing the debt of insolvent firms; already bailing them out. Is that correct?]
Bailout Could Deepen Crisis, CBO Chief Says
Asset Sales May Lead to Write-Downs, Insolvencies, Orszag Tells Congress
By Frank Ahrens, Washington Post Staff Writer. Thursday, September 25, 2008; D04
http://www.washingtonpost.com/wp-dyn/content/article/2008/09/24/AR2008092402799_pf.html
How to afford a new pair of trousers
No need to scrimp when money is short. Just grab a piece of grandma's quilt, cut out a rectangle, double it over and sew up the seams. Viola! A new pair of trousers.
Takes about half an hour on the sewing machine.
Saturday, September 27, 2008
Debate Post-Mortem: The Limits of Framelessness
Both McCain and Obama are effectively running against Bush, but neither is able to frame his argument in a coherent way. That is, we have criticisms of this policy or that one, but no general position that ties them together and makes them look like anything more than random corrections. McCain’s problem is obvious—he’s really running against his party (the “maverick” trope)—but what about Obama?
Republicans have put forward different frames over recent years, but two are central to actual policy: free-market economics and the unrestricted, hegemonic use of police and military power (“standing tall”, “keeping us safe”). You could say that the current financial crisis blows away the first and that Iraq discredited the second. So this is an opportunity for the Democrats to engage in a little frame replacement to their own advantage. Instead, what do we get?
Obama talks about the Iraq disaster in an apolitical fashion, as a simple error in judgment. As one who saw through the bs from the beginning, he claims to have superior judgment compared to someone like McCain. What’s missing, however, is how his rejection of Bush’s war reflects a broader position on military and foreign policy. No doubt he is afraid of being labeled “soft”, and this explains his reckless belligerence regarding Pakistan. Yet it would not be very difficult to construct a politically saleable alternative to the shoot’em up philosophy of Bush/McCain.
You’d think he would do better on the economic side. The lessons of the financial mess are straightforward and lend themselves to a reframing of the public role in directing the economy. Still, Obama goes only halfway. He talks repeatedly of the “failed philosophy of the last eight years”, but he says nothing about what the new philosophy should be.
A failure to frame is politically disabling on multiple levels. It cedes too much of the political turf from the outset, and does nothing to predispose the voters to support you. It means that every policy initiative has to start from zero, with no ideological headstart. Above all, it represents an abandonment of the leadership role of politics, the struggle to change the political center of gravity. If one side hammers relentlessly on its frames and the other talks about competence and judgment—well, we know what you get.
There is no evidence at this point that the Democrats are prepared to conduct a political fight in broad daylight to change the direction of this country.
Republicans have put forward different frames over recent years, but two are central to actual policy: free-market economics and the unrestricted, hegemonic use of police and military power (“standing tall”, “keeping us safe”). You could say that the current financial crisis blows away the first and that Iraq discredited the second. So this is an opportunity for the Democrats to engage in a little frame replacement to their own advantage. Instead, what do we get?
Obama talks about the Iraq disaster in an apolitical fashion, as a simple error in judgment. As one who saw through the bs from the beginning, he claims to have superior judgment compared to someone like McCain. What’s missing, however, is how his rejection of Bush’s war reflects a broader position on military and foreign policy. No doubt he is afraid of being labeled “soft”, and this explains his reckless belligerence regarding Pakistan. Yet it would not be very difficult to construct a politically saleable alternative to the shoot’em up philosophy of Bush/McCain.
You’d think he would do better on the economic side. The lessons of the financial mess are straightforward and lend themselves to a reframing of the public role in directing the economy. Still, Obama goes only halfway. He talks repeatedly of the “failed philosophy of the last eight years”, but he says nothing about what the new philosophy should be.
A failure to frame is politically disabling on multiple levels. It cedes too much of the political turf from the outset, and does nothing to predispose the voters to support you. It means that every policy initiative has to start from zero, with no ideological headstart. Above all, it represents an abandonment of the leadership role of politics, the struggle to change the political center of gravity. If one side hammers relentlessly on its frames and the other talks about competence and judgment—well, we know what you get.
There is no evidence at this point that the Democrats are prepared to conduct a political fight in broad daylight to change the direction of this country.
The Bailout and the Deficit Recycling Loop
I’ve been thinking mostly about the global portion of the loop—how the dollars we send abroad on the current account (and now, just a bit, on net private capital outflows) are returned to us—and its operation under the Paulson plan. The Fed/Treasury team is proposing to allow this recycling to proceed under an asset cleansing program: the Fed removes the bad assets from our creditors’ portfolios while the Treasury replaces them with nice, reliable T-bills. (Metaphor: TARP as a giant mollusk in the sea of finance.) So far so good.
But this is only part of the picture. The other part is the domestic sector. Our current account deficit says that, as a country, we consume about 6% more than we produce, where “consume” in this context means total demand and not just the household piece of it. So the recycling process has to actually get the money into the hands of those who will spend it. This means credit expansion of some form. To be more specific, capital spending is very weak at present, and households are now holding up the tent. They have been borrowing against largely fictitious real estate equity and, to a lesser extent, running up credit cards and drawing down savings. If the popping of the housing bubble and the retrenchment of consumer credit mean that these channels are no longer available, how do we keep the engines running?
Basically, there are two channels still open: fiscal deficits and further drawdowns of savings. In the case of the former, it is important to be able to identify how the deficits will enter the spending stream. I worry that much of the eleven-figure disbursement will simply keep financial institutions, now highly risk-averse, afloat. This maintains existing wealth for the small minority that holds most of it, but it doesn’t translate into effective demand. And eating up savings can go only so far. Say what you want, the asset bubble(s) promulgated by earlier rounds of recycling at least propped up domestic spending. I worry that, even if the bailout keeps the global loop in operation, it will not be able to reconnect it to the domestic loop. The result will be a monster recession.
But this is only part of the picture. The other part is the domestic sector. Our current account deficit says that, as a country, we consume about 6% more than we produce, where “consume” in this context means total demand and not just the household piece of it. So the recycling process has to actually get the money into the hands of those who will spend it. This means credit expansion of some form. To be more specific, capital spending is very weak at present, and households are now holding up the tent. They have been borrowing against largely fictitious real estate equity and, to a lesser extent, running up credit cards and drawing down savings. If the popping of the housing bubble and the retrenchment of consumer credit mean that these channels are no longer available, how do we keep the engines running?
Basically, there are two channels still open: fiscal deficits and further drawdowns of savings. In the case of the former, it is important to be able to identify how the deficits will enter the spending stream. I worry that much of the eleven-figure disbursement will simply keep financial institutions, now highly risk-averse, afloat. This maintains existing wealth for the small minority that holds most of it, but it doesn’t translate into effective demand. And eating up savings can go only so far. Say what you want, the asset bubble(s) promulgated by earlier rounds of recycling at least propped up domestic spending. I worry that, even if the bailout keeps the global loop in operation, it will not be able to reconnect it to the domestic loop. The result will be a monster recession.
“Something suspe[ct] ... uhhh, SUBSTANTIAL, must be done."
(Quote from President George Bush this week.[1])
Non-financial blue chip corporations are having difficulties raising money in the commercial paper market, along with their financial counterparts. They are now borrowing from banks at higher rates. Of course, many banks have high levels of investment in these same corporations and this suggests that, in reality, corporations outside of the large global conglomerates are the ones left without any real defence.
Interbank lending has shut down. Oligopoly banks with interlocking directorates and interlocking ownerships with the big 500 are not trading with each other. Are they also refusing to trade with their own global financial subsidiaries? If the latter statement is true the irony is stark, along with the economic repercussions. Intracorporate trade now makes up such a huge percentage of global economic transactions and this fact makes the unfolding crisis without modern historical precedent.[2]
Privately-owned central banks and public treasury officials have not been prepared to seize and shut down insolvent firms. The emphasis has been on financial bailouts rather than control of the outcome. It’s a panic and the risk has increased. Large private lenders with significant control in the overnight market are demanding higher compensation. (A billion dollars lent overnight at the US Fed rate (2%) yields only about $55,000, an amount deemed insufficient in today’s risky environment)[3].
In 1930 the private central banks increased the monetary base but with these same banks being insolvent and funds being withdrawn by worried depositors, money supply contracted regardless. ($16 billion was withdrawn from WaMu before it went down, according to Bloomberg [4].) What percentage of deposits went out of the banking system? How much was converted to cash and gold and how much was capital flight? What research has been done on this?
The determinants of how the crisis plays out go beyond the actions of financial and political authorities. Investor and consumer action will shape its evolution as well.
If central banks (i.e. the conglomerate of major private banking firms accessing taxpayer funds) continue to lend below-market rate (to themselves) the taxpayer will remain the only source of capital.
The taxpayer needs to insist that their lending is backed up by equity in these ‘private’ firms and be prepared shut them down quickly if they are now insolvent. The transition from publicly-funded ‘private’ banks to publicly-funded ‘public’ banks is not a big one.
[1] As cited by Juan Falcone on Naked Capitalism's "Europe Opens Ugly" as published on 26th September 2008.
[2] "Giant multinational corporations dominate the area of international exchange and a very large share of world ‘trade’ is actually between branches of these same corporations. In North America trade associated with U.S. parent multinationals or their foreign affiliates accounted for 54 percent of U.S. exports of goods and 36 percent of imports.[2] Forty percent of trade between the US and Canada in 1998 was intra-corporate.[3]. “Forty percent of the US-Europe trade is between parent firms and their affiliates, and in respect of Japan and Europe, it is 55 per cent; with regard to US-Japan trade, it is 80 %.”
From 'General Concept of Transfer Pricing'.By Khurram Khan. [t-price.pdf]
http://www.hmaconsultants.com/pdf/t-price.pdf
As cited in 'It's not international trade. Don't be fooled', Brenda Rosser. 24th July 2008
[3] Juan Falcone on Naked Capitalism's "Europe Opens Ugly" as published on 26th September 2008.
[4] Juan Falcone on Naked Capitalism's "Europe Opens Ugly" as published on 26th September 2008.
Non-financial blue chip corporations are having difficulties raising money in the commercial paper market, along with their financial counterparts. They are now borrowing from banks at higher rates. Of course, many banks have high levels of investment in these same corporations and this suggests that, in reality, corporations outside of the large global conglomerates are the ones left without any real defence.
Interbank lending has shut down. Oligopoly banks with interlocking directorates and interlocking ownerships with the big 500 are not trading with each other. Are they also refusing to trade with their own global financial subsidiaries? If the latter statement is true the irony is stark, along with the economic repercussions. Intracorporate trade now makes up such a huge percentage of global economic transactions and this fact makes the unfolding crisis without modern historical precedent.[2]
Privately-owned central banks and public treasury officials have not been prepared to seize and shut down insolvent firms. The emphasis has been on financial bailouts rather than control of the outcome. It’s a panic and the risk has increased. Large private lenders with significant control in the overnight market are demanding higher compensation. (A billion dollars lent overnight at the US Fed rate (2%) yields only about $55,000, an amount deemed insufficient in today’s risky environment)[3].
In 1930 the private central banks increased the monetary base but with these same banks being insolvent and funds being withdrawn by worried depositors, money supply contracted regardless. ($16 billion was withdrawn from WaMu before it went down, according to Bloomberg [4].) What percentage of deposits went out of the banking system? How much was converted to cash and gold and how much was capital flight? What research has been done on this?
The determinants of how the crisis plays out go beyond the actions of financial and political authorities. Investor and consumer action will shape its evolution as well.
If central banks (i.e. the conglomerate of major private banking firms accessing taxpayer funds) continue to lend below-market rate (to themselves) the taxpayer will remain the only source of capital.
The taxpayer needs to insist that their lending is backed up by equity in these ‘private’ firms and be prepared shut them down quickly if they are now insolvent. The transition from publicly-funded ‘private’ banks to publicly-funded ‘public’ banks is not a big one.
[1] As cited by Juan Falcone on Naked Capitalism's "Europe Opens Ugly" as published on 26th September 2008.
[2] "Giant multinational corporations dominate the area of international exchange and a very large share of world ‘trade’ is actually between branches of these same corporations. In North America trade associated with U.S. parent multinationals or their foreign affiliates accounted for 54 percent of U.S. exports of goods and 36 percent of imports.[2] Forty percent of trade between the US and Canada in 1998 was intra-corporate.[3]. “Forty percent of the US-Europe trade is between parent firms and their affiliates, and in respect of Japan and Europe, it is 55 per cent; with regard to US-Japan trade, it is 80 %.”
From 'General Concept of Transfer Pricing'.By Khurram Khan. [t-price.pdf]
http://www.hmaconsultants.com/pdf/t-price.pdf
As cited in 'It's not international trade. Don't be fooled', Brenda Rosser. 24th July 2008
[3] Juan Falcone on Naked Capitalism's "Europe Opens Ugly" as published on 26th September 2008.
[4] Juan Falcone on Naked Capitalism's "Europe Opens Ugly" as published on 26th September 2008.
Why has interbank lending shut down?
3 reasons. Are there more?
(i) Banks are terrified of not getting their money back due to bankruptcy and not being able to access funds if they need them.
(ii) Why borrow and lend to your fellow banks if you can get plenty of cheap funding from your central bank.
(iii) Lending is dead because interest rates are too low to reflect 11% inflation and the existing default risk.
(i) Banks are terrified of not getting their money back due to bankruptcy and not being able to access funds if they need them.
(ii) Why borrow and lend to your fellow banks if you can get plenty of cheap funding from your central bank.
(iii) Lending is dead because interest rates are too low to reflect 11% inflation and the existing default risk.
HUSTLER
by the Sandwichman
Wikipedia: Hustling is the deceptive act of disguising one's skill in a sport or game with the intent of luring someone of probably lesser skill into gambling (or gambling for higher than current stakes) with the hustler, as a form of confidence trick.... A skilled hustler may pretend to be intoxicated, unintelligent, or otherwise impaired (that is, until it is time to run the table or make a game-winning shot).
What if Governor Palin has been coached to deliberately low-ball her interview performances with Charlie Gibson and Katie Couric so that she can pull a stunning reversal during the vice-presidential debate and come off as (comparatively) sharp, knowledgeable and articulate?
Bets?
Wikipedia: Hustling is the deceptive act of disguising one's skill in a sport or game with the intent of luring someone of probably lesser skill into gambling (or gambling for higher than current stakes) with the hustler, as a form of confidence trick.... A skilled hustler may pretend to be intoxicated, unintelligent, or otherwise impaired (that is, until it is time to run the table or make a game-winning shot).
What if Governor Palin has been coached to deliberately low-ball her interview performances with Charlie Gibson and Katie Couric so that she can pull a stunning reversal during the vice-presidential debate and come off as (comparatively) sharp, knowledgeable and articulate?
Bets?
Thursday, September 25, 2008
George Bush solves the immigration crisis
Give George Bush credit. He is managing to shut down the flow of illegal immigration. Of course, he did it by trashing the economy, but now people are not as enthusiastic about coming to work in the United States.
The Financial Crisis Goes Beyond Finance
I just dashed off the first draft of a discussion of the financial crisis to be published in a South Asian publication. It is very preliminary. I could appreciate any pointers. Thanks.
Financial-Crisis
Financial-Crisis
Is the bailout for China?
A RUMOUR: Chinese regulators have told domestic banks to stop interbank lending to U.S. financial institutions to prevent possible losses during the financial crisis. [1] There's talk that Chinese authorities have since denied this claim.
China is worried about the default risk on its loans to the US. The nation is also losing on the principal value of its borrowings to the US because of the steady revaluation of the Yuan. (This revaluation has been done, whether justified or not, as a result of pressure from the US).
The Paulson plan is expected to inject $700 billion into (private) banks. This financial capital is then expected to be used by (for profit) banks to create up to 14 trillion dollars credit to buy the quantity of extra treasuries that will go onto the market. I don't see why a nationalised bank can't perform this function?
Some leading financial authorities in China want the Asian nations to agree to refrain from panic selling of US treasury securities in order to prevent a free-fall in their value. Such an agreement is unlikely given the history of wars and antagonism between the various nations.
Whatever the outcome of this immediate saga it is almost certain (IMHO) that China's 'export-growth strategy' will come to an end. That will be a day for the forests and planet earth to celebrate!
[1] http://www.reuters.com/article/companyNewsAndPR/idUSPEK16693720080925
China is worried about the default risk on its loans to the US. The nation is also losing on the principal value of its borrowings to the US because of the steady revaluation of the Yuan. (This revaluation has been done, whether justified or not, as a result of pressure from the US).
The Paulson plan is expected to inject $700 billion into (private) banks. This financial capital is then expected to be used by (for profit) banks to create up to 14 trillion dollars credit to buy the quantity of extra treasuries that will go onto the market. I don't see why a nationalised bank can't perform this function?
Some leading financial authorities in China want the Asian nations to agree to refrain from panic selling of US treasury securities in order to prevent a free-fall in their value. Such an agreement is unlikely given the history of wars and antagonism between the various nations.
Whatever the outcome of this immediate saga it is almost certain (IMHO) that China's 'export-growth strategy' will come to an end. That will be a day for the forests and planet earth to celebrate!
[1] http://www.reuters.com/article/companyNewsAndPR/idUSPEK16693720080925
Crazy Like Foxes
Now it all makes sense. From the incomparable Josh Marshall:
Saving Sarah!
Saving Sarah!
These guys are just digging into such depths of nonsense and desperation that pretty soon they're going to pop out in China, which will be helpful since they can ask the Chinese for the trillion dollars it'll take to bail out McCain's pals on Wall Street for the mess his economics advisor Phil Gramm made possible. Here's the latest attempt to exploit the financial market crisis for political ends (from CNN)...
McCain supporter Sen. Lindsey Graham tells CNN the McCain campaign is proposing to the Presidential Debate Commission and the Obama camp that if there's no bailout deal by Friday, the first presidential debate should take the place of the VP debate, currently scheduled for next Thursday, October 2 in St. Louis.
So we need to put the country first and cancel the vice presidential debate.
Wednesday, September 24, 2008
Financialization
I just posted a brief section on financialization, taken from my recent book: The Confiscation of American Prosperity.
financialization
financialization
Nothing 'punitive' or banks won't participate
The New York Times reported Monday, “Mr. Paulson said that he was concerned that imposing limits on the compensation of executives could discourage companies from participating in the program.
“’If we design it so it’s punitive and so institutions aren’t going to participate, this won’t work the way we need it to work,’ Mr. Paulson said...” [1]
And
"Bernanke wants government [taxpayer] to pay significant premium over current "firesale" price for troubled assets. Specifically, he wants to pay close to the "hold-to-maturity" price, which he argues is much higher than the mark-to-market firesale price. Bernanke and Paulson believes this is necessary to get banks to participate." [2]
Apart from feathering the next of his colleagues, don't you get the impression that Paulson is hiding something? After all the Paulson bailout plan has been extended to the financial securities of foreign banks in the US. I suspect that the US Government has placed some form of pressure on them to purchase subprime collateralised debt obligations and other dodgy financial securities in the first instance (Just as the Bush administration did to local authorities in US states.) And we know that a high degree of fraud has been involved in selling such 'products'.
[1] Paulson warns: No limits on CEO pay
By Barry Grey. 23 September 2008
http://www.wsws.org/articles/2008/sep2008/ceo-s23.shtml
[2] US Treasury Bailout Auction Scam and How To Stop It
Politics / Credit Crisis Bailouts Sep 23, 2008 -
By: Mike_Shedlock
http://www.marketoracle.co.uk/Article6429.html
“’If we design it so it’s punitive and so institutions aren’t going to participate, this won’t work the way we need it to work,’ Mr. Paulson said...” [1]
And
"Bernanke wants government [taxpayer] to pay significant premium over current "firesale" price for troubled assets. Specifically, he wants to pay close to the "hold-to-maturity" price, which he argues is much higher than the mark-to-market firesale price. Bernanke and Paulson believes this is necessary to get banks to participate." [2]
Apart from feathering the next of his colleagues, don't you get the impression that Paulson is hiding something? After all the Paulson bailout plan has been extended to the financial securities of foreign banks in the US. I suspect that the US Government has placed some form of pressure on them to purchase subprime collateralised debt obligations and other dodgy financial securities in the first instance (Just as the Bush administration did to local authorities in US states.) And we know that a high degree of fraud has been involved in selling such 'products'.
[1] Paulson warns: No limits on CEO pay
By Barry Grey. 23 September 2008
http://www.wsws.org/articles/2008/sep2008/ceo-s23.shtml
[2] US Treasury Bailout Auction Scam and How To Stop It
Politics / Credit Crisis Bailouts Sep 23, 2008 -
By: Mike_Shedlock
http://www.marketoracle.co.uk/Article6429.html
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