Day: September 25, 2008

Banks Dictate Conditions Of Bailout

As the Times article put it: “There were signs of the industry’s fingerprints on drafts of the legislation released over the weekend.

To put it bluntly, the American financial industry is preparing to deliver to the US Treasury every bad debt it accumulated over the years of reckless speculation and financial manipulation that generated super-profits and multimillion-dollar compensation packages for its top executives. And it is insuring that the American people pay super-inflated prices for their financial junk, so that they can launch a new and even bigger orgy of speculation.

The announcement of the bailout plan has set off a particularly ferocious competition for inclusion among the financial companies that are to be hired by the government to manage the operation. This plum job could, according to the Times, earn the winners $1 billion a year in fees.

All of these firms played major roles in creating the financial disaster from which they now seek to profit. They all are deeply involved in speculation on the assets that are to be bought by the government, and some, such as Morgan Stanley and JPMorgan Chase, have billions of such assets on their books.

Among the changes being called for by various industry lobby groups are:

* Pushing back the date of purchase of assets which the government will accept. The Treasury proposal released Saturday set the cut-off date at September 17 of this year. Some bankers are demanding that the date be changed to December of 2007, and, according to the Financial Times, some industry groups are lobbying for a clause that would “allow banks selling assets to the fund to account for any losses realized over a number of years.”

* Small banks are urging the government to buy loans they made to homebuilders and commercial developers.

* Some bankers are pushing for government support for municipal securities.

* The banking industry, according to the Wall Street Journal, “has gone directly to the SEC (Securities and Exchange Commission) demanding a letter changing US accounting rules that require banks to state the value of their assets at the market price.” They instead want their rotten assets to be valued at their price at the time of purchase—a change that would cost the government additional hundreds of billions in taxpayer money.

So I ask, is this bailout for the good of the nation or the good of speculators on Wall Street?

President Speaks To America (Finally)

Bush’s 13-minute speech was a compendium of evasions, half-truths and outright lies. While declaring that the United States is “in the midst of a serious financial crisis” and demanding the immediate passage of legislation that will hand over at least $700 billion to Wall Street banks—by buying up their unsalable assets at inflated prices and placing the burden for their losses on millions of working class families—Bush offered no credible explanation of the cause of the crisis. Nor did he explain how the proposed bailout of the bank will be implemented, let alone how it will stave off economic disaster for the working class.

His claim that the “rescue effort” will “help American consumers and businesses get credit to meet their daily needs and create jobs” is patently untrue. There is a consensus in the financial press, especially outside the United States, that the bailout will accelerate the descent of the American and world economy into the deepest recession, if not depression, since the end of World War II.

“I know many Americans have questions tonight,” Bush stated. “How did we reach this point in our economy? How will the solution I propose work? And what does this mean for your financial future?”

“These are good questions,” he continued, “and they deserve clear answers.”

But no such answers were provided by Bush. Instead, he offered a bizarre narrative which presented the unfolding disaster as if it were the result of inexplicable cosmic forces.

You voted for this guy—Are you happy with that choice now?

Gore Prods The Young

Al Gore called Wednesday for “civil disobedience” to combat the construction of coal power plants without the ability to store carbon, Reuters reported.

The former vice president, whose efforts to raise awareness of global warming have made him the most prominent voice on that issue, made the comment during a session at the fourth annual Clinton Global Initiative in Manhattan.

“If you’re a young person looking at the future of this planet and looking at what is being done right now, and not done, I believe we have reached the stage where it is time for civil disobedience to prevent the construction of new coal plants that do not have carbon capture and sequestration,” Gore said, according to Reuters.

It wasn’t clear what specific action he intended by “civil disobedience,” which calls for the intentional violation of laws deemed to be unjust.

But first, he will have to educate the young on just what “civil disobedience” means.

Who Is Henry Paulson?

Soon to be King Henry!

Does anyone really know who he is?

I know that you have heard the name and you mat possibly know who he is, the Sec. of Treasury, but what else do you know about the guy that will have unlimited control of almost a trillion dollars?  I will bet not much.  That is about to change and you may thank the Professor for his diligence.

The plan to rescue the US financial industry arrogates virtually unlimited money and power over the financial affairs of the state to the office of Treasury Secretary Henry Paulson. Paulson is a figure with a long history of intimate connections to the political and financial elite.

In 1970, fresh from the Masters program of the Harvard Business School, Paulson entered the Nixon administration, working first as staff assistant to the assistant secretary of defense. In 1972-73, Paulson worked as office assistant to John Erlichman, assistant to the president for domestic affairs. Erlichman was one of the key figures involved in organizing President Richard Nixon’s notorious “plumbers” unit that carried out illegal covert operations against the president’s political opponents, including espionage, blackmail, and revenge. Ehlichman resigned in 1973, and in 1975 he was convicted of obstruction of justice, perjury, and conspiracy, and was imprisoned for 18 months.

Utilizing his connections, Paulson went to work for Goldman Sachs in 1974. In a 2007 feature, the British newspaper the Guardian wrote, “Not only was he well connected enough to get the job [in the Nixon White House], but well connected enough to resign in the thick of the Watergate scandal without ever getting caught up in the fallout. He went straight to Goldman back home in Illinois.”

Paulson rose through the ranks of Goldman Sachs, becoming a partner in 1982, co-head of investment banking in 1990, chief operating officer in 1994. In 1998 he forced out his co-chairman Jon Corzine “in what amounted to a coup,” according to New York Times economics correspondent Floyd Norris, and took over the post of CEO.

Since taking office, Paulson has overseen the destruction of three of Goldman Sachs’ rivals. In March, Paulson helped arrange the fire sale of Bear Stearns to JPMorgan Chase. Then, a little more than a week ago, he allowed Lehman Brothers to collapse, while simultaneously organizing the absorption of Merrill Lynch by Bank of America. This left only Goldman Sachs and Morgan Stanley as major investment banks, both of which were converted on Sunday into bank holding companies, a move that effectively ended the existence of the investment bank as a distinct economic form.

In the months leading up to his proposed $700 billion bailout of the financial industry, Paulson had already used his office to dole out hundreds of billions of dollars. After his July 2008 proposal for $70 billion to resolve the insolvency of Fannie Mae and Freddie Mac failed, Paulson organized the government takeover of the two mortgage-lending giants for an immediate $200 billion price tag, while making the government potentially liable for hundreds of billions more in bad debt. He then organized a federal purchase of an 80 percent stake in the giant insurer American International Group (AIG) at a cost of $85 billion.

There you are sports fans, I am sure that there is something I missed, but this is as much as I could find on short notice.  Now you decide if a trillion dollars should be controlled by one person, in essence.

Drilling Ban Will Expire

The Dems in Congress have fallen to the weight of public opinion.

The offshore drilling ban that became a flash point in the U.S. presidential election looks set to expire next week after Democrats decided to drop the prohibition from a temporary spending bill that would keep the government running.

The end of the ban will not lead to a rush of new drilling any time soon, but it would be a big win for Republican Presidential nominee John McCain who has made opening most U.S. offshore areas to drilling a key part of his campaign. His Democratic rival, Barack Obama, supports limited offshore drilling as part of a bigger overhaul of U.S. energy policy.

This is a politically advantageous move…has nothing to do with whether it is the right thing to do.

Iraq Finally Makes A Political Breakthrough

After months of infighting, Iraq’s parliament passed a crucial law Wednesday that will allow most of the country to hold provincial elections early next year.

The law is seen as a key step toward bringing under-represented groups back into Iraqi politics, particularly Sunnis in Anbar province who have recently turned against violence and al Qaida extremists.

The United States and the United Nations have been urging Iraqi politicians for months to agree on a law, hoping that holding elections soon will help solidify recent, tenuous security gains here.

A contentious debate over who will control Kirkuk , an oil-rich northern city, was the main sticking point delaying an agreement. Legislators didn’t resolve that issue Wednesday and instead set it aside for later.

To become law, Iraq’s three-man presidency council, headed by President Jalal Talabani , a Kurd, must approve the elections measure. Parliament passed an elections law earlier this year that called for power sharing among Arabs, Turkomen and Kurds, which the presidency council quickly rejected.

In a written statement, President Bush praised parliament. “Nothing is more central to a functioning democracy than free and fair elections,” the statement said. “Today’s action demonstrates the ability of Iraq’s leaders to work together for the good of the Iraqi people and represents further progress on political reconciliation.”

FBI Enters Into The Crisis Picture

Federal investigators have opened preliminary probes into the financial troubles of four high-profile companies that are at the center of the current financial turmoil that the Bush administration says requires an unprecedented proposed taxpayer-funded bailout to clean up.

The Federal Bureau of Investigation’s preliminary inquiries are focusing on whether fraud helped cause some of the troubles at Fannie Mae, Freddie Mac, Lehman Brothers Holdings Inc. and American International Group Inc., according to senior law-enforcement officials.

Pressure is building for the FBI and regulators to hold top executives accountable for the crisis that has crippled the nation’s finance sector. In meetings on Capitol Hill, some lawmakers raised concerns with Treasury Secretary Henry Paulson that by taking large stakes in some financial firms, the government may be limiting its ability to exact penalties for wrongdoing, according to people familiar with the matter.

The FBI says that the corporate probes are part of an effort to pursue allegations of higher-level fraud more sweeping than the retail-level infractions that have been at the center of most cases brought so far.

During the Savings and Loan bailout 20 years ago, federal prosecutors brought more than 600 cases against 1,000 defendants. But the complicated securities at the heart of today’s crisis make comparable prosecutions more difficult, investigators say.

Maybe we will be that lucky again and make the people who caused this to be held responsible…NOPE…I would only be dreaming.

McCain, Obama Play Politics

Presidential candidates Sen. John McCain — who said Wednesday that he was suspending his campaign because of the nation’s economic crisis — and Sen. Barack Obama will meet Thursday with President Bush to discuss a proposed Wall Street bailout.

McCain and Obama accepted Bush’s invitation to discuss the proposed $700 billion bailout with him and congressional leaders at the White House, the candidates’ aides said Wednesday night.

Also Wednesday night, McCain and Obama said in a joint statement that the bailout plan was “flawed” but that “the effort to protect the American economy must not fail.”

“Now is a time to come together — Democrats and Republicans — in a spirit of cooperation for the sake of the American people,” read the statement, which was released about 15 minutes before Bush made a televised address on the economy.

The White House rivals maneuvered to claim the leadership role in resolving the economic turmoil that has overshadowed their campaign six weeks before Election Day. Obama said he would proceed with his debate preparations while consulting with bailout negotiators and Treasury Secretary Henry Paulson. McCain said he would stop all advertising, fundraising and other campaign events to return to Washington and work for a bipartisan solution.

Sen. Lindsey Graham, McCain’s representative in debate negotiations, said McCain will not attend the debate “unless there is an agreement that would provide a solution” to the financial crisis. Graham, R-S.C., told The Associated Press that the agreement would have to be publicly endorsed by Obama, McCain, the White House and congressional leaders, but not necessarily given final passage by the House and Senate.

It is good to look presidential, but neither of these guys has to be part of the deliberations.

Chrysler And The Electric Car

After seeming to fall behind in the race for alternative-fuel vehicles, Chrysler said on Tuesday that it would produce an electric car for sale in 2010 and follow it up with a broad lineup of battery-powered vehicles.

Chrysler, the smallest of Detroit’s three automakers, showed off three electric models, including a minivan, a sport utility vehicle and a two-seat sports car.

“Chrysler’s electric car bombshell is an attempt to prove to the public and the media that the company is indeed working on future vehicles and that it still has life left in it,” said Aaron Bragman of the research firm Global Insight.

By promising an electric model in showrooms by 2010, Chrysler is competing head-on with General Motors and Nissan Motor of Japan to be the first to market in the United States. Last week, G.M. showed off the production version of its Chevrolet Volt, a four-door sedan powered by a lithium-ion battery pack augmented by a small gasoline engine for recharging.

At a press conference, Chrysler unveiled electric versions of its Town and Country minivan and Jeep Wrangler S.U.V.

Both models are so-called range-extended vehicles like the Volt, meaning they can travel 40 miles on battery power alone and up to 400 more miles with the assistance of a small gas engine.

The third model, the Dodge EV, is a rear-wheel-drive sports car with a body built by the European automaker Lotus. The car, which is powered solely by a lithium-ion battery pack, is said to have a driving range of more than 150 miles and can accelerate to 60 miles an hour in less than five seconds.

Chrysler executives declined to disclose the price of the first model, where it will be built or how soon consumers can expect a full line of electric vehicles. But the electric program, they said, was accelerated by the decision to adapt existing products to the new technology.