Poll Up Your Arse

The latest ARG poll shows two things(h/t Think Progress): One, Bush's approval rating is back in the basement, a record-tying nadir of 19%, down from 30% in August.

Two, the number of people polled who now say "the economy is improving" is statistically zero.
None. Nobody. Zilch. Nada. 82% or five in six say it's getting worse.

Even Republicans are pissed.

Among Republicans, 46% approve of the way Bush is handling the economy and 48% disapprove. Among Democrats, 97% disapprove of the way Bush is handling the economy and 2% approve. Among independents, 8% approve and 87% disapprove of the way Bush is handling the economy.

Democrats and Independents are overwhelmingly against Bush on the economy. A majority of Republicans are against him too. McSame = Bush, now more than ever.

[UPDATE] FiveThirtyEight has Obama running away with this one.

They have him winning VA, CO, OH, IA, NH and even NV.

Commodity Calamity

Nymex Oil futures are up $11 bucks to $115 and rising. It might hit $150 this week.

Gold is up nearly $50 to $915 and going up. It may hit $1000 this week.

The dollar is down to $1.4775 per Euro and it's getting worse. The dollar may cross the $1.50 mark like tomorrow.

Is the bailout working yet?

[UPDATE] Nymex Oil Futures are now up nearly twenty dollars a barrel to $123 and going crazy. Dollar's in freefall, $1.48 per Euro and plummeting. We may hit $1.50 TODAY.

Nailed It

Goddamn I love Paul Krugman.

Some skeptics are calling Henry Paulson’s $700 billion rescue plan for the U.S. financial system “cash for trash.” Others are calling the proposed legislation the Authorization for Use of Financial Force, after the Authorization for Use of Military Force, the infamous bill that gave the Bush administration the green light to invade Iraq.

There’s justice in the gibes. Everyone agrees that something major must be done. But Mr. Paulson is demanding extraordinary power for himself — and for his successor — to deploy taxpayers’ money on behalf of a plan that, as far as I can see, doesn’t make sense.

Some are saying that we should simply trust Mr. Paulson, because he’s a smart guy who knows what he’s doing. But that’s only half true: he is a smart guy, but what, exactly, in the experience of the past year and a half — a period during which Mr. Paulson repeatedly declared the financial crisis “contained,” and then offered a series of unsuccessful fixes — justifies the belief that he knows what he’s doing? He’s making it up as he goes along, just like the rest of us.

So let’s try to think this through for ourselves. I have a four-step view of the financial crisis:

1. The bursting of the housing bubble has led to a surge in defaults and foreclosures, which in turn has led to a plunge in the prices of mortgage-backed securities — assets whose value ultimately comes from mortgage payments.

2. These financial losses have left many financial institutions with too little capital — too few assets compared with their debt. This problem is especially severe because everyone took on so much debt during the bubble years.

3. Because financial institutions have too little capital relative to their debt, they haven’t been able or willing to provide the credit the economy needs.

4. Financial institutions have been trying to pay down their debt by selling assets, including those mortgage-backed securities, but this drives asset prices down and makes their financial position even worse. This vicious circle is what some call the “paradox of deleveraging.”

The Paulson plan calls for the federal government to buy up $700 billion worth of troubled assets, mainly mortgage-backed securities. How does this resolve the crisis?

Short answer: It doesn't.

This doesn't address any of those four issues. The housing market is continuing to fall. Banks still have too little capital on hand because of falling real estate asset values. Those two problems led directly to the credit crisis, and everyone is STILL trying to unload illiquid assets to raise capital and are glutting the market...just like the real estate market is glutted with unsold and foreclosed homes.

Banks are losing money or real estate assets, and they can't sell crap funny paper to anyone to raise the difference.

If banks are losing more money on real estate asset losses then they can make back by selling funny paper to the government and they have hyperleveraged their deposit assets to the point where they have zero wiggle room, they are insolvent. This is not a liquidity problem. It is an insolvency problem. The amount of assets these banks have is less than the amount that they owe, plain and simple. When that happens outside Wall Street, you go out of business.

No amount of liquidity will solve this issue. Throwing money at the banks will not solve this issue. These banks are leveraged at 20X or more...meaning the bad debt they really owe is more than 20 times what they have on the books.

They are beyond insolvent. They are criminally negligent.

This bailout will not work. It is a plan to make it to November, maybe January. It is a stopgap measure that will cost trillions. And then when this fails, the road is set for hyperinflation and the destruction of the dollar as the world's reserve currency...and our quality of life will plummet into that of a third-world country, with the police/fascist trappings that will certainly come from that. Everything is in place. The Bushies have robbed the country and are setting up one last Ocean's Eleven gambit on the way out.

America may not survive the next 12 months, people.

Cartoon Of The Moment

Ed Stein, Rocky Mountain News, via Cagle's Cartoons.

Obama Attacks On Health Care

This is a great ad. It uses McSame's own words and policies and establishes that he is a bigger risk than Obama. McSame has been attacking on the principle that he is the least risky choice in a time of turmoil. That couldn't be further from the truth.

View From The Street

At noonish or so Dow's off 200, the US Dollar is down 1.5% against the Euro out to $1.46 per Euro, and could end up at $1.50 a Euro or worse over the next few days/weeks. The Dollar is going to continue to get shit-hammered. WaMu's down 20%, Wachovia's down 12%.

Not even the largest plan to nationalize debt ever is helping Wall Street at this point. That speaks volumes.

AIG has been replaced on the Dow by Kraft.

Oil contracts have jumped up another $5. They were at $91 a week ago, now they are at $109 and rising. People are getting back into commodities quickly. Somebody figured out that through a 40% oil price drop, we've had maybe a 5-10% gas price drop in the meantime.

Emporer Paulson-tine

Mike Whitney has a pretty sobering post up at Information Clearing House about what Hank Paulson is really, really asking Congress to do: abdicate the rest of its oversight and regulatory duties to him and him alone.

These are dark times. While you were sleeping the cockroaches were busy about their work, rummaging through the US Constitution, and putting the finishing touches on a scheme to assert absolute power over the nation's financial markets and the country's economic future. Industry representative Henry Paulson has submitted legislation to congress that will finally end the pretense that Bush controls anything more than reading the lines from a 4' by 6' teleprompter situated just inches from his lifeless pupils. Paulson is in charge now, and the coronation is set for sometime early next week. He rose to power in a stealthily-executed Bankster's Coup in which he, and his coterie of dodgy friends, declared martial law on the US economy while elevating himself to supreme leader.

"All Hail Caesar!" The days of the republic are over.

Section 8 of the proposed legislation says it all:

"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."

Right; "non-reviewable" supremacy.

Congress, of course, is more than eager to abdicate whatever little authority they have left. They're infinitely grateful for their purely ceremonial role, the equivalent of Caligula's horse, albeit, with considerably less dignity. Has even one senator spoken out against this madness, which--according to informal internet polls--is resoundingly rejected by the voters? Does it concern the members of congress at all, that the present financial crisis was brought on by the proliferation and sale of trillions of dollars of mortgage-banked garbage which were fraudulently represented as Triple A rated bonds by the very same people who now claim to need unprecedented and dictatorial powers to fix the problem? Or are they more worried that the steady torrent of contributions which flows from Wall Street to congressional campaign coffers will be inconveniently disrupted if they fail to ratify this latest assault on democratic governance? The House of Representatives is one big steaming dungheap that should be leveled and turned into an amusement park instead of a taxpayer-funded knocking shop. What a pathetic collection of cowards and scumbags.

Paulson is trying to engineer a coup for a reason: he knows what's coming. He's convinced he needs this extraordinary singular power to nationalize and control the financial sector, to "declare martial law on Wall Street" as Whitney puts it, because it's only a matter of time before our economy collapses.

He's preparing the way for the fascist takeover of the economy. Hyperinflation is the only way out of this mess. The dollar is done for as I have been saying time after time after time. He will need extraordinary and unchecked authority to do what he knows he will have to do and he knows there's a very good chance he will need to do it before the next election. Even worse, this could very well be the neon sign that the fix is in and that Paulson plans to be McSame's Economic Emporer.

Let's honestly think about this. Two weeks ago we were told the economy is strong and that Wall Street's free market innovation was the envy of the world. Now we're being told that Congress has a matter of days to pass a blank check that could total in the trillions and must give unlimited power to Henry Paulson or that the Second Great Depression will be upon us.

There's a reason I'm talking some scary shit here. That's because this shit is truly scary.

The Great Sign Of The End

If both Digby and Malkinvania are adamantly on the same side of the issue (Congress must stop Hank Paulson's bailout at all costs) then you know there is a dire threat to the stability of the universe.

It's like that episode where He-Man and Skeletor have to team up to stop a galactic threat that's far bigger than both of them combined, ya dig?

Epic Campaign Manager Fail

How to lose an election badly in three days:

1) Get nailed on a decades-long effort to deregulate the financial industry, which leads to the worst financial crisis since the Great Depression on Saturday.

2) Get nailed on saying you want to bring those same deregulation efforts to health care and Social Security as you did to Wall Street on Sunday.

3) Get nailed on your campaign manager having taken $2 million in banking lobbyist cash to stop regulation and oversight on Monday(h/t AmericaBlog).

Senator John McCain’s campaign manager was paid more than $30,000 a month for five years as president of an advocacy group set up by the mortgage giants Fannie Mae and Freddie Mac to defend them against stricter regulations, current and former officials say.

Mr. McCain, the Republican candidate for president, has recently begun campaigning as a critic of the two companies and the lobbying army that helped them evade greater regulation as they began buying riskier mortgages with implicit federal backing. He and his Democratic rival, Senator Barack Obama, have donors and advisers who are tied to the companies.

But last week the McCain campaign stepped up a running battle of guilt by association when it began broadcasting commercials trying to link Mr. Obama directly to the government bailout of the mortgage giants this month by charging that he takes advice from Fannie Mae’s former chief executive, Franklin Raines, an assertion both Mr. Raines and the Obama campaign dispute.

Incensed by the advertisements, several current and former executives of the companies came forward to discuss the role that Rick Davis, Mr. McCain’s campaign manager and longtime adviser, played in helping Fannie Mae and Freddie Mac beat back regulatory challenges when he served as president of their advocacy group, the Homeownership Alliance, formed in the summer of 2000. Some who came forward were Democrats, but Republicans, speaking on the condition of anonymity, confirmed their descriptions.

“The value that he brought to the relationship was the closeness to Senator McCain and the possibility that Senator McCain was going to run for president again,” said Robert McCarson, a former spokesman for Fannie Mae, who said that while he worked there from 2000 to 2002, Fannie Mae and Freddie Mac together paid Mr. Davis’s firm $35,000 a month. Mr. Davis “didn’t really do anything,” Mr. McCarson, a Democrat, said.

Mr. Davis’s role with the group has bubbled up as an issue in the campaign, but the extent of his compensation and the details of his role have not been reported previously.

McSame is going down in flames along with Wall Street and the GOP. That may be the only good thing to come from this. John at AmericaBlog seems to think now's the time to go on the full court press and unload ads and calls for Davis to resign. I think he's right. Obama must continue to roll on offense here, and he's got McSame increasingly on the ropes.

EPIC FAIL.

Pretty Soon You're Talking Real Money

Reuters totaled up the bailout costs just this year of what the Fed has done since Bear Stearns. The results? A thirteen digit number: $1.8 trillion.

Following are details of actions, proposals and amounts:

—Up to $700 billion to buy assets from struggling institutions. The plan is aimed at sopping up residential and commercial mortgages from financial institutions but gives Treasury broad latitude.

—Up to $50 billion from the Great Depression-era Exchange Stabilization Fund to guarantee principal in money market mutual funds to provide the same confidence that consumers have in federally insured bank deposits.

—The Fed committed to make unspecified discount window loans to financial institutions to finance the purchase of assets from money market funds to aid redemptions.

—At least $10 billion in Treasury direct purchases of mortgage-backed securities in September. In doubling the program on Friday, the Treasury said it may purchase even more in the months ahead.

—Up to $144 billion in additional MBS purchases by Fannie Mae and Freddie Mac.The Treasury announced they would increase purchases up to the newly expanded investment portfolio limits of $850 billion each. On July 30, the Fannie portfolio stood at $758.1 billion with Freddie's at $798.2 billion.

—$85 billion loan for AIG, which would give the Federal government a 79.9 percent stake and avoid a bankruptcy filing for the embattled insurer. AIG management will be dismissed.

—At least $87 billion in repayments to JPMorgan Chase for providing financing to underpin trades with units of bankrupt investment bank Lehman Brothers . Paulson said over the weekend he was adamant that public funds not be used to rescue the firm.

—$200 billion for Fannie Mae and Freddie Mac. The Treasury will inject up to $100 billion into each institution by purchasing preferred stock to shore up their capital as needed. The deal puts the two housing finance firms under government control.

—$300 billion for the Federal Housing Administration to refinance failing mortgage into new, reduced-principal loans with a federal guarantee, passed as part of a broad housing rescue bill.

—$4 billion in grants to local communities to help them buy and repair homes abandoned due to mortgage foreclosures.

—$29 billion in financing for JPMorgan Chase's government-brokered buyout of Bear Stearns in March. The Fed agreed to take $30 billion in questionable Bear assets as collateral, making JPMorgan liable for the first $1 billion in losses, while agreeing to shoulder any further losses.

—At least $200 billion of currently outstanding loans to banks issued through the Fed's Term Auction Facility, which was recently expanded to allow for longer loans of 84 days alongside the previous 28-day credits.

This is what we know of just so far. We're talking the very real possibility of having spent close to $3 trillion dollars on this mess before it's all over -- matching the cost of the wars we're still fighting.

The Bush Administration could end up costing us SIX TRILLION DOLLARS or more just in financial stupidity and the wars. And that's just what we know about, and not including all the other lost revenue from tax cuts on his 1% buddies and other examples of "GOP fiscal responsibility."

Never again should these people be allowed into power. Never. Again.

[UPDATE]Forget that $700 billion figure. This morning we see it's way too low, because Paulson and Bernanke are going for the whole ball of wax.

The Bush administration widened the scope of its $700 billion plan to avert a financial meltdown by including assets other than mortgage-related securities.

The U.S. Treasury submitted revised guidance to Congress on its plan late yesterday as lawmakers and lobbyists push their own agendas. The department also adjusted its plan to insure money-market funds to limit protection to balances as of Sept. 19, after complaints from bank lobbyists.

Officials made the changes two days after unveiling plans for an unprecedented intervention in financial markets. The change to potentially allow purchases of instruments such as car loans, credit-card debt and other devalued assets may force an increase in the size of the package as the legislation proceeds through Congress.

What does this mean for UberBailout? It just got more Uber.

``The costs of the bailout will be significantly higher than originally considered or acknowledged,'' said Josh Rosner, an analyst with independent research firm Graham Fisher & Co. in New York. ``How, given these changes, can the administration and Federal Reserve believe they are being forthright in their unrevised expectation of future losses?''

Treasuries rose on speculation the Fed will cut interest rates to support the rescue plan. Two-year note yields declined 8 basis points to 2.11 percent as of 3:20 p.m. in Tokyo.

Say goodbye to the dollar. UberBailout is going to kill it. The pieces are being moved into place for hyperinflation as the solution to deflation from the real estate crash.

For the first time I'm beginning to think Roubini is not pessimistic enough.

Will The Last Investment Bank Turn Out The Lights Please?

Late last night the Fed put an end to the era of the independent investment bank. Goldman Sachs and Morgan Stanley are now bank holding companies, now making them subject to commercial bank regulation and oversight.

The move allows Goldman and Morgan to scoop up retail banks and to streamline their borrowing from the Federal Reserve. The shift also is aimed at removing them as targets of nervous investors and customers, who brought down their former rivals Bear Stearns, Lehman Brothers and Merrill Lynch this year.

But it also puts Goldman and Morgan under the Fed's supervision, increasing the agency's regulatory oversight and possibly forcing them to raise additional capital. As banks, Lehman and Goldman will be forced to take less risk, which will mean fewer profits.

And it brings to a close the era of the Wall Street investment bank, a storied institution that traded stocks and bonds, advised mergers and showered lavish bonuses on its executives.

"The separation of investment banking and commercial banking has come to an end," said Bert Ely, an independent banking consultant.

The conversion is but the latest in a series of unprecedented events on Wall Street as it convulses through the global credit crisis. In the past eight days, the federal government announced a $700 billion plan to rescue the financial sector by buying up troubled mortgage assets and an $85 billion emergency loan to insurance titan American International Group. Also, Lehman filed for bankruptcy and Bank of America took over Merrill Lynch.

Morgan (MS, Fortune 500) and Goldman (GS, Fortune 500), whose shares plummeted last week before the $700 billion bailout was unveiled, will likely avoid those fates with the conversion, experts said.

"They were afraid they'd get killed if they didn't [convert]," said Christopher Whalen, managing director of Institutional Risk Analytics. "The Fed is scrambling to take the remaining targets off the radar."

It's certainly a start. Lack of capitialization requirements, the rules that commercial and retail banks had to follow by having enough cash on hand at all times, certainly contributed to the downfall of the industry. But there's now a second problem.

The duo is expected to quickly add to their tiny existing retail banking divisions, which will give them access to a cheaper and more stable source of funding - customer deposits - rather than the volatile short-term funding they rely on. The companies, which both requested the conversion, signaled as much in separate press releases Sunday.

They have plenty to pick from now that the credit crisis has devastated the banking sector.

Morgan, which has $36 billion in deposits, may already have a partner in mind. Rumors have flown on Wall Street in the past week that it would hook up with Wachovia (WB, Fortune 500), a large but troubled bank. Sunday's shift would make such a merger easier.

With $20 billion in deposits, Goldman said it plans to grow its deposit base through acquisitions and internally. It is also shifting assets from other divisions into its Goldman Sachs Bank USA, which will become one of the 10 largest banks in the United States with $150 billion in assets.

Yep, that's right: now Goldman Sachs and Morgan Stanley can be like the rest of the commercial banks with trillions of bad paper on the books, and their assets will now primarily be customer deposits. So when these derivates blow up, it's the FDIC and the Fed "lender of last resort window" to the rescue, or the loss is of grandma's savings account.

Who's going to save the Fed lending window and the FDIC when they go under? The taxpayer, once again. The government is converting these brokers into too big to fail commercial banks. Privatized profit, socialized losses...the American way.

Meet the new suckers. Same as the old suckers.

StupidiNews!

• Yankee Stadium has seen its last game played.
• McSame, champion of the people: seven homes, thirteen cars.
• Mad Men and 30 Rock madly rocked the Emmys.
• Still plenty of electronic voting machine problems and almost no time to fix them.
• Cutting California's old-growth forests to save the environment?

Zandar's Thought Of the Day

SecTreas Henry Paulson was on teevee today, bumrushing all the Village Idiot shows, saying that if we don't get this passed AS IS, THIS WEEK, America is done for.

AS IS of course is a $700 billion check to the Bush Administration with quite literally zero oversight and zero regulation. It's a twelve digit number given to the same people who told us to trust them implicitly on Iraq, Afghanistan, torture, civil liberties, the PATRIOT Act, rule of law, executive privilege and oh yeah, the economy.

So now they want to pass the largest intervention in the free markets in 70 years or so in a matter of a few days, giving them 100% implicit trust that this is absolutely necessary and that they are doing this only because there is no other choice.

So why question is this: Why exactly should we trust the Bush administration on this again? Can anybody honestly give me a single, solid reason why we should trust them with $700 billion with no oversight given their conduct over the last eight years?

If you can, I'll shut this blog down and vote McSame.

UberBailout UberBacklash

It's looking like lawmakers on both sides have a serious problem with the UberBailout.

As the U.S. government takes stronger measures to stabilize financial markets, some former Federal Reserve officials, lawmakers and Wall Street executives are saying too much has already been done.

``Every time they intervene, they do more harm than good,'' said Peter Schiff, president of Euro Pacific Capital in Darien, Connecticut, a brokerage that manages $1 billion. Critics of the rescues agree that government actions, such as those that prevented the failures of Fannie Mae, Freddie Mac and American International Group Inc., can't postpone the inevitable worsening of housing and financial markets.

They say the bailouts by the Fed and Treasury also encourage future reckless risk-taking by investors. ``If we don't stop now, there will be no end,'' said Gerald O'Driscoll, a former vice president of the Dallas Fed and now a scholar at the Cato Institute in Washington. He joins Vince Reinhart, former director of the Fed's monetary affairs division, and Marvin Goodfriend, a former official at the Richmond Fed in questioning the market interventions.

They're getting support from Republican lawmakers, who are stepping up their efforts to put a halt to further rescues. Yesterday a group of 100 lawmakers released a letter asking Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson to ``refrain from conducting any additional government-financed bailouts for large financial firms.''

Could it be that fiscally conservative Republicans and progressive Democrats could stop this?

The Sharks Smell Blood And Are Circling, Sir

Now, you didn't honestly think that a trillion dollars of oversight-free regulation-free money was going to just magically get past Wall Street lobbyists, did you? (h/t TPM)

Also, according to the Journal, finance industry lobbyists are already giving orders to Republican hill staffers not to allow any meaningful reforms or protections for taxpayers. So, just the money. No strings attached.

House Republican staffers met with roughly 15 lobbyists Friday afternoon, whose message to lawmakers was clear: Don't load the legislation up with provisions not directly related to the crisis, or regulatory measures the industry has long opposed.

"We're opposed to adding provisions that will affect [or] undermine the deal substantively," said Scott Talbott, senior vice president of government affairs at the Financial Services Roundtable, whose members include the nation's largest banks, securities firms and insurers.

A deal killer for the group: a proposal that would grant bankruptcy judges new powers to lower the principal, interest rate or both on a mortgage as part of a bankruptcy proceeding.

Nope. I didn't think so either. What I want to know is how exactly the hell Wall Street lobbyists get to call the shots on anything anymore? Oh wait, I remember: Wall Street is more than willing to take down the economy with them if they don't get exactly what they want out of this deal, which is the money. The GOP has been given their ultimatum. Give us the money or else. Do you see them drawing any real lessons about what got us into this?

Who gives a shit about the American taxpayer? Not these guys. They want their slice of the trillion with no oversight and no regulation so they can get right back to making risky deals with the profits they'll have freed up with this. The last ten days have clearly demonstrated that the Bushies have no clue how to fix the problem other than to throw money at it, and that Wall Street just doesn't care, they want the money and they want it now.

The only thing that will change when this too fails is the magnitude of the financial devastation. Uberbailout will have no meaningful regulation, no meaningful oversight, and no meaningful protections for taxpayers.

And it has no meaningful chance of working. But by then it's the next President's problem. This is nothing more than Bush dumping off the financial nightmare on the next guy. How many trillions will it take to fix this?

More than we'll be able to spend without destroying the economy.