Obama Goes On The Offense

Yeah, Barry. They DO think America is stupid.

More On Fannie And Freddie

Here's some more information on what's going on this weekend with Fannie Mae and Freddie Mac and The Big Big Bailout.

Bonddad has an excellent primer on the situation.

So, what do these two institutions do? Why are they so important?

Let me explain that by comparing the mortgage business of 100 years ago to the mortgage business of today. 100 years ago, a borrower would go to a bank and get a home loan. However, the bank would own the loan for the duration of the loan - that is, the bank that made the original loan would be the bank that sent out monthly statements and collected mortgage payments until the loan was paid off.

Let's compare that to the mortgage business of today. Today a borrower gets a loan from a lender. Once the loan closes, the lender sells the loan to a larger financial institution. Sometimes this is Fannie and Freddie, sometimes it's some other large financial institution (think Citigroup, JP Morgan or another large, money center bank). Fannie and Freddie stood atop the financial pyramid of buying, selling and pooling mortgages. They issue the largest amount of securitzed product. They touch about 70% of all US mortgages. Both institutions have (until now) an implied governmental guarantee. That gave both institutions an incredible advantage in the market by allowing them to borrow at slightly cheaper rates then their competitors. This is how they attained top dog status in the financial world.

Chris Bowers at OpenLeft agrees with me that what The Big Big Bailout means is that the GOP has finally become everything they hated about big government: they have nationalized the mortgage industry to the tune of trillions.

The problem I have with this is not the move to nationalize the mortgage industry. That actually seems like a good idea to me. The problem I have is with the incredible cognitive dissonance surrounding "big government" in our national political discourse. Even as we have reached national consensus on nationalizing industries, which is the literal definition of socialism and big government, politicians of every party keep talking about "small government" as though it were a virtue. I mean, the day after the Republican convention, which included countless attacks on big government, the Republican administration goes out an nationalizes a major industry. It will probably be done in the corporate welfare style typical of American government--privatize the profits, socialize the risk--but it is still nationalization.

Voters, Democrats, Republicans, Independents, Conservatives, Moderates, Progressives, Greens--everyone is in favor of "big government" moves like nationalizing the mortgage industry now. And yet, all of those same people keep talking about how terrible big government is, and how we need to stop it. It is massive national lie. It is as though the entire country is a homophobe who is actually a closeted homosexual. It is as though the Emperor has no clothes, but now the entire nation has decided to dress to match.

Can we all stop lying to ourselves on this one? Please? Pretty please? This national self-delusion is a major obstacle to having an honest ideological debate in this country.

Like it or not, America is becoming a socialist country. Government is getting bigger every day. It's time to admit it, and then fix it.

I Know I Said I Was Done...

...but this one's too important to ignore. Troopergate's about to get shut down by the GOP in order to spare Sarah Palin from a nasty October Surprise.

Key Alaska allies of John McCain are trying to derail a politically charged investigation into Gov. Sarah Palin's firing of her public safety commissioner in order to prevent a so-called "October surprise" that would produce embarrassing information about the vice presidential candidate on the eve of the election.

In a move endorsed by the McCain campaign Friday, John Coghill, the GOP chairman of the state House Rules Committee, wrote a letter seeking a meeting of Alaska's bipartisan Legislative Council in order to remove the Democratic state senator in charge of the so-called "troopergate" investigation.

Coghill charged that the senator, Hollis French, had "politicized" the probe by making a number of public comments in recent days, including telling ABC News that Palin had a "credibility problem" and that the investigation into the firing of public safety commissioner Walter Monegan was "likely to be damaging to the administration" and could be an "October surprise." Wrote Coghill: "The investigation appears to be lacking in fairness, neutrality and due process."

The McSame camp says Troopergate is a partisan witch hunt. They're playing the "picking on Pailn" card for all it's worth to kill this.

The investigation, authorized by the Legislative Council last July, revolves around charges that Palin abused her power by embroiling the governor's office in a bitter family feud involving her ex-brother in law, a state trooper named Mike Wooten. Specifically, the council is investigating whether Palin fired Monegan when he refused to dismiss Wooten (who at the time was involved in an ugly custody battle with Palin's sister) after getting repeated complaints about him from the governor and her husband, Todd Palin. (Among the allegations that were raised against Wooten by Palin's sister: he had Tasered his ten-year-old stepson and shot a moose without a permit.) Palin has denied wrongdoing; Monegan has said he believes his firing was connected to his refusal to fire Wooten.

French, the Democrat overseeing the probe, has hired a special counsel to determine, in effect, whether Palin "used her public office to settle a private score," he recently said. He has also suggested that the probe may turn up evidence that state laws were violated by Palin's aides because they pulled confidential personnel files on the trooper.

But Coghill, who told NEWSWEEK that he has the backing of Republican Speaker of the House John Harris in his effort to remove French, suggested Friday that the investigation into Palin's firing of Monegan should be shut down entirely. "If this has been botched up the way it has, there's a question as to whether it should continue," Coghill told NEWSWEEK.

The move underscored the huge political stakes in the outcome of a legislative investigation that is being closely monitored by both the McCain and Obama campaigns because of its potential impact on the fall election. "How can this possibly be read as anything but a partisan attempt to shut down a legitimate investigation that was approved and funded with bipartisan support?" said one state Democratic legislative aide, who asked not to be identified because of the political sensitivities. Coghill told NEWSWEEK that he decided to write his letter to strip French of his position on his own-without any coaxing by McCain campaign officials.

How can McSame and Palin be talking about reform with this going on? This is insanity.

Global No Confidence Vote: The Big Big Bailout

As long expected, the Big Big Bailout of Fannie Mae and Freddie Mac is now a reality.

The government has formulated a plan to put troubled mortgage giants Fannie Mae and Freddie Mac under federal control, dismiss their top executives and prop them up financially, federal officials told the two companies yesterday, according to three sources familiar with the conversations.

Under the plan, which could prompt one of the most sweeping government interventions in financial markets in U.S. history, federal officials would place the firms under a conservatorship, a legal status giving the government the option and time to restructure and revive the companies, the sources said. The value of the companies' common stock would be diluted but not wiped out, while the holdings of other securities, including company debt and preferred shares might be protected by the government.

Instead of giving each company a big capital infusion upfront, the government could make quarterly injections as the companies' losses warrant, the sources said. This would be an attempt to minimize the initial cost of the rescue.

The timing of government action remained unclear last night, and the final details were still under discussion. But as the pace of discussions accelerated, Treasury officials contacted senior congressional leaders yesterday, telling them they might be briefed on the plan this weekend and asking for telephone numbers where they could be reached.

And with this plan now a certainty dictated by a crumbling economy and 2008's growing job losses taking America to a 6.1% unemployment rate and rising, the era of the free-wheeling free market has officially come to a crashing halt.

The Fed has just admitted that the housing market has brought down America's economy. The real story here is that America is on the brink of financial collapse and only an unprecedented multi-billion dollar bailout of Fannie and Freddie will stave off imminent ruination of America.

You can throw out both Barack Obama's and John McSame's financial plans. The next President of the United States of America is going to be facing an economy on life support. There will be no Federal funds for universal health care or investment in new energy sources. With the Iraq and Afghanistan wars draining billions daily and now The Big Big Bailout thrown into the mix, America's $10 trillion national debt is on the verge of detonation.

Now couple that with the fact that America's level of consumption is plummeting. We can't afford goods and services like we could before, and the rest of the global economy is slowing down now too. That means foreign countries are unable to sustain America by importing goods we export.

Home prices continue to fall, consumption continues to fall, exports continue to fall, job generation continues to fall, consumer confidence continues to fall, real wages continue to fall, discretionary income continues to fall...all of this is leading up to a massive deflationary event in 2009. The American consumer is beyond tapped out now.

And now with the Fed about to take over as America's mortgage guarantor, taking on ANOTHER $12 TRILLION in leveraged debt, the chance of a cascading failure across the markets only increases.

Everything the Fed has done to rescue America's economy over the last 24 months has failed. More than ever our economy exists because of foreign countries servicing our catastrophic debt. Now this debt is beginning to drag down the economies of those foreign countries as well. What happens when China and Japan and other countries stop buying our debt? What happens when they realize -- as they are starting to do now with the failure of Fannie and Freddie -- that we will never be able to pay them back?

The UK economy is now falling apart. The housing crisis is spreading into London, Toronto, Dublin, Sydney, and more. It's going global, and Asia's markets are down almost by half from their highs last year.

The Big Big Bailout is a bailout of the world's central banks that hold Fannie and Freddie debt...hundreds of billions of it. China has well over $300 billion just in Fannie/Freddie debt. If Fannie and Freddie aren't rescued, that debt will collapse America's economy and the global economy with it. The Fed is playing its next to last card in its hand with The Big Big Bailout. It has to, or the consequences will be a tsunami of global fank failures and a Second Great Depression. The Fed has no choice.

The last card is hyper-inflation. Everything up until now has failed to stabilize the markets and crack the credit crunch and stop the housing depression. The Big Big Bailout will do nothing to correct the problem...only delay the effects of waiting to play the last card.

The engine of world economic growth has been the American consumer and the China/India markets allowing the purchase of debt to fund our consumption. Both of those have now come to an end. They are reeling. The global market has stalled out. The world is trying to find a way to restart the global engine. They can't. The engine has seized up and is going to require replacement.

The Fed is now in pure panic mode. From this point on we're in the Twilight Zone. When the massive deflationary event hits next year, the Fed will play the hyper-inflation card in an attempt to reinflate the dollar.

And after that...the game ends.

And a new one begins.

Be prepared.

Cross-posted at the Frog Pond.

StupidiNews, Weekend Edition

• Hanna's making a nuisance of herself, but her big brother Ike could be the real problem for the Gulf Coast.
• Benazir Bhutto's widower is Pakistan's new President.
• The growing rift between Moscow and Washington is getting deeper...and more dangerous.
• Teh Google!!1!one! hits 10 years old this week.
• Nevada's Silver State Bank is 2008 bank failure #11.