Day: September 24, 2008

McCain’s On Again Off Again Regulation Stands

Sen. John McCain has spent much of his two decades in Congress pushing deregulation, but the Republican presidential nominee is continuing his election year migration toward more government control of the economy as the nation faces one of its greatest financial crises since the Great Depression.

“I want the people in Ohio here to know that I have not forgotten the economy on Main Street,” McCain said during a campaign stop in Strongsville, Ohio, on Tuesday. “Not Wall Street, not Washington, D.C., but Main Street is the focus of our attention and our efforts.”

McCain’s latest populist message comes as Congress weighs a $700 billion bailout plan to prop up struggling financial firms beset by bad mortgages and head off a severe credit crunch.

McCain expressed doubts about the bailout during a campaign stop in Media, Pennsylvania, on Monday, in an attempt to help distance himself from the unpopular president.

Actually, this, as with most things political are nothing but politically expedient talking points.  So is he for or against regulating Wall Street?  That is a question the voter should be asking themselves.

Sen. Dodd Should Not Throw Stones

The two leading Democrats on the Banking Committee, Chairman Christopher Dodd of Connecticut and Charles Schumer of New York, are among the most favored recipients of campaign cash from big Wall Street interests.

Senator Schumer raised $12,928,000 in the 2003-2008 election cycle, according to the CPR. His top five industries for campaign cash were securities and investment, lawyers and law firms, real estate, miscellaneous finance and commercial banks, from which he netted a total of $3,937,000. His top five contributing firms were Citigroup, UBS, Paul Weiss et al, Kasowitz, Benson et al and Metlife, which funneled a total of $271,000 to his campaigns.

In the course of his political career, Senator Dodd has raised $43,344,000. In the 2003-2008 election cycle his top five industries for campaign funds were securities and investment ($4,268,000), lawyers and law firms, insurance, real estate and commercial banks, for a total of $9,826,000. His top five contributing firms were Citigroup, SAC Capital Partners, United Technologies, Royal Bank of Scotland and the insurance giant (taken over by the government earlier this month) American International Group. His total take from these firms was $1,315,000.

Dodd, who presents himself as the champion of homeowners victimized by the subprime mortgage racket, proposed a housing bill in June of this year that would assist subprime lenders such as Countrywide Financial, the biggest purveyor of such home loans. Countrywide, on the brink of collapse, was bought out by Bank of America earlier this year.

None of these guys have clean hands in this crisis.  They all are part of the problem.

Oh Yeah, Russia’s War Games

With the economic stuff that is controlling the news, there is another situation that needs to be watched.

A fleet of Russian warships led by a massive missile cruiser set sail from their Arctic base on Monday for naval exercises off Venezuela near US waters that have not been seen since the Cold War.

The deployment follows the arrival of two Russian Tu-160 nuclear bombers in Venezuela earlier this month also for exercises, an event that Venezuelan President Hugo Chavez branded a “warning” to the US “empire.

The state-owned Vesti-24 television channel, broadcasting from the deck of the Peter the Great, on Monday showed the vessel’s heavy artillery firing to test their readiness for the joint exercises with the Venezuelan navy.

“The planned naval exercises by Russia and Venezuela are not aimed at third countries and do not have an aggressive character. There is no political subtext to these exercises,” Dygalo said, Interfax news agency reported.

The nuclear-powered Peter the Great is one of the largest warships of its kind and carries a variety of weapons systems including Granit anti-ship cruise missiles that can be armed with nuclear warheads.

The pro-Kremlin daily Izvestia speculated the ships could stop in Syria as part of a broader show of force in the Mediterranean, quoting a navy source who said Russian engineers were expanding the Syrian ports of Tartus and Latakia.

“The possibility of basing aircraft carriers and missile cruisers there is foreseen,” the source told Izvestia, referring to the ports in Syria, a Moscow ally during the Cold War that hosted a Soviet naval supply base.

Their visit to the Caribbean is the first such manoeuvre in the vicinity of the United States since the Cold War and it comes as relations between Moscow and Washington are in a deep chill over Russia’s war in Georgia last month.

Moscow’s decision to send warships to the Caribbean also came after Russian officials reacted angrily to the deployment of US naval vessels, including the flagship of the US Sixth Fleet, to Georgia for humanitarian aid deliveries.

Stop!  What’s that sound?  A new Cold War coming down……..to paraphrase Buffalo Springfield.

Obama’s Campaign Promises May Be Put On Hold

In an interview Tuesday morning with NBC’s “Today” show, Obama said of the bailout, “How we’re going to structure that in budget terms still has to be decided.” He continued, “Does that mean I can do everything that I’ve called for in this campaign right away? Probably not. I think we’re going to have to phase it in. And a lot of it’s going to depend on what our tax revenues look like.”

The new spending Obama has proposed on programs like education, infrastructure and health care is so minimal, compared to the vast social need, that it doesn’t deserve the label “reform.” It is barely a sop. But even this is likely to be withheld initially, and then canceled outright once the cost of the Wall Street bailout mushrooms, as it inevitably will.

As late as the weekend, in an interview with John Harwood of CNBC, Obama had rejected suggestions that the magnitude of the Treasury expenditure for purchasing mortgage-backed securities would put any new social spending off the agenda. He claimed that he would proceed with a proposal to expand health insurance as well as additional funding for education, the environment and child care.

But by Tuesday the Democrat had abandoned even this position, promising only to retain a series of tax cuts in the first budget of an Obama administration—which will inevitably accrue more to upper-income families—while making no such pledge for social spending.

What a difference a month makes.

Random Thoughts

This will probably be a regular thing here….it is notes that I take daily and that I have, for whatever reason, not turned into a post.  There are questions that should be answered and thoughts that need to be expanded.  I sincerely hope that my readers participate and if they do it will expand the story greatly.

1–McCain has been for de-regulation from the beginning, starting in 2000 with Enron he called for more transparency and then in 2006 he was for more oversight for Wall St.  So now he is all for regulation.  Sounds like his stands are politically convenient.

2–Has anyone noticed noticed that the economic situation, that the market is becoming concentrated into fewer and fewer hands.  A monopoly in the making?

3–There is no silver bullet for the economic crisis.  Somewhere down the road someone is gonna have to fail.  Then it could be possible for the healing process to begin.

4–Rescue Wall Street?  Who will rescue Main Street?

5–May I suggest that if McCain wants to look more concerned when he speaks then maybe he should stop reading from cue cards.

6–The plan for the government to assume the burden of the collapse is being called a “Credit Default Swap”….WTF?… no where is there a economic definition for that term…so basically they are making this crap up as they go.

Please if anyone has a comment on these random thoughts, let ’em fly!  I will look forward to them.

What Does The Bailout Really Say?

We are listening to the news and see that Wall Street is set to be bailed out of there current problems, but what does the plan really say?  Just thought, for those who want to know, here is the wording:

The text of the four-page “Legislative Proposal for Treasury Authority to Purchase Mortgage-Related Assets,” published Saturday by the New York Times, reveals the profoundly anti-democratic and open-ended nature of the scheme.

The first provision establishes the unlimited and unilateral authority of the Treasury secretary, an unelected official, to order the use of taxpayer funds to purchase whatever “mortgage-related” securities, at whatever price, at whatever amount and from whatever financial institutions he chooses.

It states that the secretary—currently Henry Paulson, the multi-millionaire former CEO of Goldman Sachs—is “authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the secretary, mortgage-related assets from any financial institution…”

This is followed by a provision stipulating that the Treasury secretary’s authority under the act is “without limitation.”

A further provision authorizes the Treasury secretary to enter into contracts with the banks “without regard to any other provision of law regarding public contracts.” In other words, to ignore established law concerning public contracts.

The proposal states that the government will designate “financial institutions” to operate the bailout program. This means that the government will hand over management of the program to some of the very corporations that are responsible for the crisis and which stand to profit directly or indirectly from the bailout.

Congress, under the proposal, will be relegated to receiving semi-annual reports from the Treasury Department. It will have no real power of oversight or control.

The proposal gives the Treasury secretary unchecked authority to resell assets the department has taken off of the hands of the banks. This means that the banks will profit on both ends of the deal—they will be relieved of massive debts and will then be able to buy back the securities at fire-sale prices after the housing market has restabilized.

The text states that the Treasury secretary’s authority to purchase mortgage-related assets will be limited to $700 billion “at any one time.” In other words, he will be able to buy more worthless assets after having sold back some of those previously purchased—rendering the supposed $700 billion limit fictitious.

Under “Termination of Authority,” the proposal declares a two-year limit, but includes certain exemptions that will, in practice, enable the Treasury to extend the duration of the program indefinitely.

The proposal calls for a $700 billion increase in the statutory limit on the national debt, raising it to $11.315 trillion.

It then defines “mortgage-related assets” so broadly as to potentially cover everything from trillions of dollars in bonds to the estimated $62 trillion unregulated market in so-called “credit default swaps.”

Perhaps the most extraordinary provision reads as follows: “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.”

Now you have the wording of the plan….you decide who it benefits and who it screws.

Bailout Offers Many Powers

If the plan is pushed through Congress, there will be some massive new powers for the boyz in control.

• Buying Power: This is the cornerstone of the proposal — allowing Treasury to buy up to $700 billion of privately held assets in the market. The original proposal called for buying power to be limited to “mortgage-related” assets, but a later draft expanded that to allow the government to purchase any “troubled assets.” There’s a staggering difference in authority between the two phrases, and it is a moving target as of press time. The banking industry generally favors the second version, but that potentially exposes taxpayers to much higher costs.

• Managing Power: Under the Bush administration’s plan, Treasury would hire private managers to handle the hundreds of billions of dollars’ worth of assets it will soon own. But Treasury was silent on whether those managers would be able to actually negotiate directly with homeowners who hold the troubled mortgages. Democrats would go further and demand that bankruptcy judges be given the ability to renegotiate those failing mortgages on behalf of homeowners. This will be one of the more contentious sideshow fights of the negotiations.

• Global Power: Under one version of Treasury’s proposal, the government would have the power to buy assets from any institution in the world that it deemed worthy of a bailout.

• Pay Power: Democrats on Capitol Hill say they want the final plan to include restrictions on payouts to the executives of the financial institutions that take the taxpayer lifeline. Paulson says he doesn’t like this idea, but it may be tough for elected officials to oppose this populist carve-out in an election year.

• Equity Power: Democrats would like the government to get shares in the financial institutions that take federal help — effectively giving taxpayers ownership stakes in the nation’s largest banks and providing them with a huge windfall if those institutions prosper in future years.

• Oversight Power: Treasury’s initial proposal included very little room for congressional oversight of the new effort, calling for reports to be sent to the Hill just twice per year. That isn’t flying with Democrats or many Republicans on the Hill; if a bill makes it through Congress, it will almost certainly have much stronger oversight provisions.