mm503: The $700 Billion Fairy Tale

© Penguinn | Dreamstime.com

© Penguinn | Dreamstime.com

Don’t have the energy for a full fledged rant, but several stories and commentaries crossed the screen today, and made it clear that, in an administration that never stops scamming us, they’ve totally topped themselves.

The Yiddish term is Chutzpah, whose classic definition has a young man, caught with bloody hands after murdering his parents, asking the court for mercy, as he’s an orphan.

We begin with that stalwart bastion of progressive thought, Steve Chapman of the Chicago Tribune. Stalwart, yes, bastion, yes, progressive? Judge for yourself.

chitrib

The case against a federal bailout

Steve Chapman | September 25, 2008

The late comedian Jack Benny made a career of claiming to be a cheapskate. In one joke, a robber accosted him and said: “Your money or your life.” Getting no response, the thug repeated his demand. Benny replied, “I’m thinking about it!”

That’s the sort of dilemma posed by Treasury Secretary Henry Paulson and Federal Reserve chief Ben Bernanke in their proposed rescue of financial institutions. They predict dire consequences if they don’t get their way. But the consequences of letting them have their way are so awful that the alternative doesn’t look so bad.

What they prescribe is for the federal government to buy $700 billion worth of lousy assets from banks and other lenders, exposing taxpayers to a potentially crushing liability. This plan would nationalize the money-losing part of the financial sector, to the benefit of capitalists who have made spectacularly bad decisions—fostering more bad decisions in the future.

It would add to the liabilities of a government that is already living way beyond its means. It would give unprecedented power to a couple of officials who have proved highly fallible in trying to avert this alleged crisis. And it poses the risk of abuse and corruption because the government has no way to gauge the value of what it will buy….

Paulson and Bernanke say, and probably believe, that their program is for the good of us all. But remember what Thoreau thought of their 19th Century counterparts. “If I knew for a certainty that a man was coming to my house with the conscious design of doing me good,” he wrote, “I should run for my life.”

The case against a federal bailout — chicagotribune.com

Read a local media observer today who thought that this was the year that Chapman’s paper, the Chicago Tribune might endorse a Democrat for president for the first time. Ever. In over 150 years.

Next, an interesting analysis from the opposite (?) end of the political spectrum, Daily Kos.

All those assumptions they’ve been throwing us, about all of this calamity caused by subprime mortgages, are they factual? Perhaps not.

dailykos

What Are We Buying?

by Devilstower | Thu Sep 25, 2008 at 11:15:01 AM PDT

On one level, we know that the $700 billion taxpayers are being asked to cough up is going to investment banks, the institutions that have gobbled up the remains of investment banks, and wherever else Czar Paulson decides to pull out his checkbook. But what are those institutions using the money for? Because there’s a little problem with the math.

This crisis was brought to you by subprime mortgages. We know that because we’re told it many, many times each day. So how big is the problem?

The total value of all home mortgages has risen steeply over the last few years as the housing bubble drove home prices up and lax lending rules roped more people into the pool. Home mortgages were valued at $7 trillion in 2003 but were up to $11.1 trillion by last year.

How many of those were “subprime?” It depends on how you define it. Funny thing: the initial definition was loans that didn’t meet Fannie Mae or Freddie Mac qualifications, meaning that those institutions shouldn’t be holding any subprime loans. But as a term, subprime is now more often applied to any loan where either the applicant’s credit fell below the mid-range of “good” or where the lender did an abbreviated credit check. That kind of loan really came and went rather quickly. They were 8% of loans in 2003, topped out at 20% of loans in 2005 and 2006, and were back to 3% of loans in 2007. According to the Joint Center for Housing Studies at Harvard, $139 billion of subprime loans were handed out in the last quarter of 2006, but this was down to $14 billion in the matching quarter of 2007

Now the real question: how many of those loans are in trouble? …

Handing out $700 billion wouldn’t be buying up the mortgages of home owners who got in over their heads, it would be buying up the excesses of executives for whom even subprime loans weren’t enough. A sensible solution would be to hand out less money — maybe $100 billion — to address mortgages now in default, and authorize bankruptcy judges to negotiate on the terms of mortgages on primary residences. On those renegotiated mortgages, the $100 billion fund could be used to pick up some portion of the difference between the original and revised terms. Used that way, $100 billion should cover every mortgage that fails for the next decade.

Daily Kos: What Are We Buying?

Once again, the administration of George III is baldly manufacturing facts to fit a scenario they must have had in mind for many months, if not years. Sound like Iraq to you?

Okay, for the hat trick, back to rock-solid conservative thought and Forbes, who once proudly characterized itself, and perhaps still does, as “The Capitalist Tool.”

Here’s what they reported a couple of days ago, did you catch it?

forbesdotcom

Bad News For The Bailout

Brian Wingfield and Josh Zumbrun 09.23.08, 6:39 PM ET

“The secretary and the administration need to know that what they have sent to us is not acceptable,” says Committee Chairman Chris Dodd, D-Conn. The committee’s top Republican, Alabama Sen. Richard Shelby, says he’s concerned about its cost and whether it will even work.

In fact, some of the most basic details, including the $700 billion figure Treasury would use to buy up bad debt, are fuzzy.

“It’s not based on any particular data point,” a Treasury spokeswoman told Forbes.com Tuesday. “We just wanted to choose a really large number.”

Wow. If it wants to see a bailout bill passed soon, the administration’s going to have to come up with some hard answers to hard questions. Public support for it already seems to be waning. According to a Rasmussen Reports poll released Tuesday, 44% of those surveyed oppose the administration’s plan, up from 37% Monday.

Bad News For The Bailout – Forbes.com

What a crock!

Hank Paulson is attempting to deliver a bouquet to his Wall Street friends and former colleagues as his swan song. A bouquet worth $2,333 per man, woman and child in this country.

How can we let these thieves and liars get away with yet another scam?

If you haven’t yet, let your elected representatives know what you think of this attempt to, as always over the past 8 years, work assiduously to line the pockets of the top 1/2% at the expense of the next four generations of the 99-1/2% of the rest of us.

Remember, fairy tales are FICTION.

And, beyond this bailout catastrophe, remember your obligation come November 4. Quoting my favorite blogger,

Citizens, you must fight back.

Citizens, elect progressive candidates, starting with Barack Obama, on November 5, and chase the greedy troglodytes and religious wingnuts and knee-jerk NRA fanatics back to the 19th Century, or the stone age, where they belong.

Citizens, it’s seldom been more true: the future well being of you, your family (down to the fifth generation) and your nation is in your hands.

Citizens, the time for waffling is over. Vote progressive, proudly, and win back America.

It’s it for now, thanks.

–MUDGE

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One Response to mm503: The $700 Billion Fairy Tale

  1. […] written before about our hometown newspaper, the Chicago […]

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