The coming financial crisis

[PoopyfaceMcGee]

Blame Greenspan!

Blame the donkeys!


Let's face it; there are very few innocents in this mess.

[ATV]

September 22, 2008
Falling Into Fall

    So many shoes are poised to drop this week that the American scene might be confused for the world's greatest-ever clog dancing festival, but a closer look will reveal a circle of cavorting skeletons.
     Last week's ripe moment turned out to be the Thursday night Washington photo op when Treasury Secretary Paulson and Fed Chief Bernanke emerged from a huddle with House Speaker Nancy Pelosi and just about every other legislative eminentissimo in an attempt to reassure the nation that its financial system had not turned into something like unto a truckload of stinking dead carp. I don't know about you, but I got two distinct vibes from the faces in that particular tableau: 1.) abject fear, and 2.) a total lack of conviction that they knew what they were doing.
      The product of that huddle was a cockamamie scheme for the US treasury to absorb all the losses from a twenty-year binge in which Wall Street created and retailed the most complex set of swindles ever seen on this planet Earth. The background music to the tableau was the whoosh of a several trillion dollars exiting the US financial system never to be seen again.
     The next day (Friday) many particulars of that scheme began to emerge -- such as the complete lack of oversight and review mechanisms for Treasury's new power to monetize private business failures and frauds -- and the stock market soared in response. Other new features of the reformed capital landscape also resolved later that day, like a new experiment aimed at eliminating the short sale as a way of guaranteeing that henceforth market bets could only be placed on the upside of the table. It will be interesting to see how that reform works out in the days ahead.
     Over the weekend, all these various playerz retreated into their gilded bunkers to negotiate the details, and by Sunday night, among other things, Goldman Sachs and Morgan Stanley -- the two remaining investment giants left standing -- announced that they would metamorphose into regular banks in order to qualify for additional truckloads of government loans in exchange for any leftover fraudulant securities still lurking in their vaults. Another new provision had the Treasury rescuing swindled foreign companies, too -- in effect, saving the world, which seemed at least, how you say, pretty ambitious.
      By this morning, many new arguments had been raised by a suddenly de-zombified congress as to whether the proposed grand bail-out might reward recent Wall Street turpitudes and incentivize future mis-deeds and it looks like enough objections may be lodged to gum-up the process before it even goes into effect -- which, of course, would tend to revert the whole reeking cargo of trouble to its original train-wreck trajectory. I guess we'll see what happens now.
      Any way you paint this grotesque panorama, it looks like a very new chapter of history for life in the USA. Basically, we are a much poorer nation than we were even a couple of years ago, and we have a much-reduced ability to project our will around the world, or even among our own floundering sectors and regions. Most troubling to me is the question of legitimacy that now hangs over the proscenium like a guillotine blade. Factoring in the old saw that history doesn't repeat but it rhymes, I think the situation emerging is rather like the crisis of legitimacy that preceded the Civil War. Then, in the 1850s, the nation's two symbiotic political parties, Whig and Democrat, entered a zone of fatal discredit. The White House had been occupied by a sequence of empty cravats named Fillmore, Pierce, and Buchanan, and so much pent-up mistrust roiled the centers of power that the nation entered a convulsion.
      At issue then was the great festering unresolved polity of slavery. The Whig party, in its oafish, craven fecklessness, disappeared so quickly from the scene that an embarrassed God Almighty seemed to have hooked it off-stage in a nanosecond. Into the vacuum stepped an awkward lawyer from Illinois -- widely mocked by the coarser elements of what was then called the press as a figure resembling an ape in a stovepipe hat. He accomplished one crucial thing in the process of his emergence: he deployed a potent rhetoric that captured the essence of the crisis and clarified it for all to understand what was at stake -- and then the convulsion commenced in earnest.
     The Republican Party amounts to today's Whigs. Their candidate for president, John McCain, is trying to run away from his own party -- as one might shrink away from a colony of importuning lepers. I am actually not kidding when I label the Republicans "the party that wrecked America," because I believe that is truly how the popular strain of history will regard them when (maybe if) the wreckage of their ministrations ever clears. But history doesn't repeat exactly. The current figure from Illinois, Barrack Obama, has yet to offer a truly crisis-clarfying rhetoric, though he labors under the expectation of being able to do so. Like his long-ago predecessor, he is mocked by the coarser elements of what we call "the media" these days -- Fox News and the moron-rousers of talk radio.
     Some of the issues yet-to-be-clarified concern the behavior of the American public in the broad sense. We have obdurately resisted the reality of the energy crisis that hangs over everything we do (as slavery hung over the 1850s), from the way we inhabit the landscape to the way we do daily business in our 240-million-plus fleet of cars and trucks that ply the ribbons of asphalt and the lagoons of parking that now run from sea to shining sea where the fruited plain was replaced by the Wal Marts.
     Mr. Obama isn't kidding either when he alludes to the change America faces, though history has not yet rhymed enough for his rhetoric to really set forth the terms of this change in its stark particulars. And even if he is able to articulate these things, he won't forestall the convulsion anymore than Lincoln held back a war between the states. That prior crisis was when America learned good and hard how tragic life could be, and it colored our national character for a century -- until we chucked it all to become a society of overfed clowns, with God Almighty replaced by Ronald McDonald. That pageant of happy idiocy is now ending. Like everyone else in this fraught and nervous land, I'm standing by to see what transpires in the days just ahead.

From http://www.kunstler.com/index.html

[SD_Eagle5]

Possible new scam:

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Tuesday, September 23, 2008 5:11 AM
From: XXXXXXX <Add sender to Contacts>
To: XXXX

Dear XXXXX

I need to ask you to support an urgent secret business relationship with a transfer of funds of great magnitude.

I am Ministry of the Treasury of the Republic of America. My country has had crisis that has caused the need for large transfer of funds of 800 billion USD. If you would assist me in this transfer, it would be most profitable to you.

I am working with Mr. Phil Gramm, lobbyist for UBS, who (God willing) will be my replacement as Ministry of the Treasury in January. As a former U.S. congressional leader and the architect of the PALIN / McCain Financial Doctrine, you may know him as the leader of the American banking deregulation movement in the 1990s. As such, you can be assured that this transaction is 100% safe.

This is a matter of great urgency. We need a blank check. We need the funds as quickly as possible. We cannot directly transfer these funds in the names of our close friends because we are constantly under surveillance. My family lawyer advised me that I should look for a reliable and trustworthy person who will act as a next of kin so the funds can be transferred.

Please reply with all of your bank account, IRA and college fund account numbers and those of your children and grandchildren to wallstreetbailout@treasury.gov so that we may transfer your commission for this transaction. After I receive that information, I will respond with detailed information about safeguards that will be used to protect the funds.

Yours Faithfully,

Minister of Treasury Paulson

lol

[rjs246]

Ron Paul weighs in.

The dude wants the government to butt out entirely, which is lunacy since deregulation and lax enforcement of regulations helped lead to this mess, but this part was right on the money.

I am afraid that policymakers today have not learned the lesson that prices must adjust to economic reality. The bailout of Fannie and Freddie, the purchase of AIG, and the latest multi-hundred billion dollar Treasury scheme all have one thing in common: They seek to prevent the liquidation of bad debt and worthless assets at market prices, and instead try to prop up those markets and keep those assets trading at prices far in excess of what any buyer would be willing to pay.

Additionally, the government's actions encourage moral hazard of the worst sort. Now that the precedent has been set, the likelihood of financial institutions to engage in riskier investment schemes is increased, because they now know that an investment position so overextended as to threaten the stability of the financial system will result in a government bailout and purchase of worthless, illiquid assets.

[PoopyfaceMcGee]

Exactly.  At this point, you have to let them down easy, but you ultimately have to let them down.

The debt-driven economy is farging us all.

[Cerevant]

Exactly.  At this point, you have to let them down easy, but you ultimately have to let them down.

The debt-driven economy is farging us all.

The pyramid scheme is collapsing, and those at the top are scrambling to prop themselves up before they go down with the prols.

Cynicism alert: could the reaction to this crisis be a political ruse?

Economy Tanks
BushCo comes up with a ridiculous plan to buy bad debt with...more debt.
Congressional Republicans scream, "Socialist!"
Bush bad, Republicans good
Socialism = Liberals
Obama = Liberal
Financial crisis all Obama's fault!

[PoopyfaceMcGee]

I'm pretty sure you've finally lost your mind.

[Cerevant]

It is quite possible that I have lost my mind, but first four steps have already been taken:

Sen. Jim Bunning, R-Ky., added, "This massive bailout is not a solution. It is financial socialism and it's un-American."

Republicans hate the bail-out, and that effectively separates them from BushCo.  It is just a matter of time until McCain jumps on the bandwagon.  The only question is when/where it became contrived.

[PoopyfaceMcGee]

At some point, it would be a good idea to reduce the incentive for people to abuse the markets, no?

[Cerevant]

You are preaching to the choir.  It just seems odd that the Republicans, who have been loyally marching to the Bush drum are suddenly up in arms with his policy decisions.

[General_Failure]

Not at all. McCain/Palin are mavericks, fighting against Washington fat cats. It should be obvious to any red-blooded American that they're talking about the filthy liberals who control Congress. It's about damned time that these Republican patriots starting fighting back!

[PoopyfaceMcGee]

Next step?  MOB RULE

[ATV]

Mob rule? Woo-hoo! Where can I sign myself up for some purple heart bandaids?

[phillymic2000]

Someone needs to pay. I heard on the radio news that the FBI is now investigation a bunch of companies and CEO's. I tuned in on the back end of it. Just Brutal.

[PoopyfaceMcGee]

Many top Economists deride the bailout plan