Double G On The UberBailout

As usual, Double G is three steps ahead of me on things.

Leave aside for the moment whether this gargantuan nationalization/bailout scheme is "necessary" in some utilitarian sense. One doesn't have to be an economics expert in order for several facts to be crystal clear:

First, the fact that Democrats are on board with this scheme means absolutely nothing. When it comes to things the Bush administration wants, Congressional Democrats don't say "no" to anything. They say "yes" to everything. That's what they're for.

They say "yes" regardless of whether they understand what they're endorsing. They say "yes" regardless of whether they've been told even the most basic facts about what they're being told to endorse. They say "yes" anytime doing so is politically less risky than saying "no," which is essentially always and is certainly the case here. They say "yes" whenever the political establishment -- meaning establishment media outlets and the corporate class that funds them -- wants them to say "yes," which is the case here. And they say "yes" with particular speed and eagerness when told to do so by the Serious Trans-Partisan Republican Experts like Hank Paulson and Ben Bernake (or Mike McConnell and Robert Gates and, before them, Donald Rumsfeld and Colin Powell).

So, we know UberBailout is going to happen. We just don't know how much of a bribe we'll get.

Second, whatever else is true, the events of the last week are the most momentous events of the Bush era in terms of defining what kind of country we are and how we function -- and before this week, the last eight years have been quite momentous, so that is saying a lot. Again, regardless of whether this nationalization/bailout scheme is "necessary" or makes utilitarian sense, it is a crime of the highest order -- not a "crime" in the legal sense but in a more meaningful sense.

What is more intrinsically corrupt than allowing people to engage in high-reward/no-risk capitalism -- where they reap tens of millions of dollars and more every year while their reckless gambles are paying off only to then have the Government shift their losses to the citizenry at large once their schemes collapse? We've retroactively created a win-only system where the wealthiest corporations and their shareholders are free to gamble for as long as they win and then force others who have no upside to pay for their losses. Watching Wall St. erupt with an orgy of celebration on Friday after it became clear the Government (i.e., you) would pay for their disaster was literally nauseating, as the very people who wreaked this havoc are now being rewarded.

Which goes back to my moral hazard argument. America should be pissed off and in the streets on this...but we don't care.

Third, what's probably most amazing of all is the contrast between how gargantuan all of this is and the complete absence of debate or disagreement over what's taking place. It's not just that, as usual, Democrats and Republicans are embracing the same core premises ("this is regrettable but necessary"). It's that there's almost no real discussion of what happened, who is responsible, and what the consequences are. It's basically as though the elite class is getting together and discussing this all in whispers, coordinating their views, and releasing just enough information to keep the stupid masses content and calm.

Can anyone point to any discussion of what the implications are for having the Federal Government seize control of the largest and most powerful insurance company in the country, as well as virtually the entire mortgage industry and other key swaths of financial services? Haven't we heard all these years that national health care was an extremely risky and dangerous undertaking because of what happens when the Federal Government gets too involved in an industry? What happened in the last month dwarfs all of that by many magnitudes.

All true. And he ends with this shocking statement:

Here is the current draft for the latest plan. It's elegantly simple. The three key provisions: (1) The Treasury Secretary is authorized to buy up to $700 billion of any mortgage-related assets (so he can just transfer that amount to any corporations in exchange for their worthless or severely crippled "assets") [Sec. 6]; (2) The ceiling on the national debt is raised to $11.3 trillion to accommodate this scheme [Sec. 10]; and (3) best of 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" [Sec. 8].

Put another way, this authorizes Hank Paulson to transfer $700 billion of taxpayer money to private industry in his sole discretion, and nobody has the right or ability to review or challenge any decision he makes.

Financial dictatorship. No oversight. No accountability. Just like Iraq, Afghanistan, Katrina, everything. No plan. Just a crazy scramble to sucker the Democrats into giveing Bush another blank check to fix a problem that he can't fix, and months, years down the road we'll need trillions more.

If McSame's president of course he'll get it.

Why, why, why, why, why are we giving Bush another blank check?

Welcome to Bush's America. Long after he is gone, we're still be trapped in it.

Pushback On UberBailout

Looks like the Dems at least remember there's an election on, and that the geniuses who got us into this without any oversight are the same people Bush wants in charge to get us out...with no oversight.

House of Representatives Speaker Nancy Pelosi said on Saturday that Democrats want to deal swiftly with the Bush administration's $700 billion financial market rescue plan, but also want more oversight, taxpayer protections and regulatory reform.

"In working with the administration, we will strengthen the proposal by ensuring that the government is accountable to the taxpayers in any future actions under this broad grant of authority, implementing strong oversight mechanisms, and establishing fast-track authority for the Congress to act on responsible regulatory reform," she said in a statement.

"We will also seek to protect lower- and middle-income Americans ... from the fallout of the ongoing Wall Street crisis, by enacting an economic recovery package that creates jobs and returns growth to our economy," the California lawmaker added just hours after the rescue proposal was unveiled.

Financially this is a disaster either way. But frankly from a purely political standpoint, I believe the Democrats have the Republicans by the balls here. The Dems are going to want a lot of concessions out of this and they are going to get quite a few of them.

If the GOP doesn't play ball, the Dems are going to hammer them on the fact that the "fiscally responsible" GOP has no problem spending $700 billion on banks, but zero on American homeowners.

Even the most die-hard Republican voters aren't going to put up with that with an election just around the corner.

McGamble

Obama on the road in Florida today made a very important point: If we had listened to Bush and McSame and the Republicans in 2004 about privatizing Social Security, how many Seniors would be getting wrecked by the markets over the last year?

Democrat Barack Obama accused Republican presidential rival John McCain on Saturday of wanting to gamble with the retirement savings and health care of Americans by subjecting them to the uncertainty of open markets.

As the government prepared another costly bailout of the reeling U.S. financial system, Obama said McCain's support for privatizing Social Security and opening up the health care system to market forces would put Americans at financial risk.

He attacked McCain for supporting some privatization of Social Security retirement funds, a proposal President George W. Bush made a centerpiece of his 2004 White House campaign but was unable to push through Congress.

"I know Senator McCain is talking about a 'casino culture' on Wall Street -- but the fact is, he's the one who wants to gamble with your life savings," Obama said at a rally in Daytona Beach in Florida, a state with a large population of seniors and retired workers.

"That is not going to happen when I'm president," the Illinois senator said, asking the crowd to imagine the fears of retirees who found their Social Security funds tied to the current market.

"We're not going to gamble with your ability to retire with dignity after a lifetime of hard work. We're going to strengthen and protect Social Security so it's a safety net our families can count on -- today, tomorrow and always," he said.

This is a winning attack in Florida. Obama needs to pounce on this in states like Florida and New Mexico.

More Details Of UberBailout

Preznitman is starting the price tag at $700 billion dollars.

President Bush said Saturday that the plan matches the scope of the problem.

"It is a big package because it's a big problem," he told reporters at a joint news conference with Alvaro Uribe, the president of Colombia.

"The risk of doing nothing far outweighs the risk of the package," Bush said.

Treasury Secretary Henry Paulson, lawmakers and their aides are expected to work through the weekend in an effort to craft a bill swiftly. Democratic leaders on Capitol Hill said they expect the bill to go before a vote within days.

Paulson, Federal Reserve Chairman Ben Bernanke and other officials have said in recent days that the lack of easy credit between banks and other financial institutions threatens to inflict serious damage on the economy if not addressed immediately.

Remember, that's just the opening bid. And once again I remind you that every step the government has taken to fix this problem has been increasingly more expensive and has failed every single time.

They are still treating this as a liquidity problem. Buy the toxic waste off the books and banks will magically be solvent again? No. Look, let's call this what it is: the plan to push this crisis off for another six months onto the next President's plate.

The basic problem here is that the housing depression is still going. It will go well into 2010. Mortgages will lose money. Banks are still leveraged out the ass. This plan does nothing -- not a single thing mind you -- for homeowners facing foreclosure. Even worse, this bailout will lock up the foreclosure market. Nobody's going to buy a house if the value goes down. Millions of more Americans will go underwater on their mortgages.

They will walk away, broken. Imagine what $700 billion could do for homeowners in underwater mortgages. But they won't see a dime. They will lose their homes. Homes nearby will lose their value. More people will get into trouble. Homeowners already are maxed out on debt.

So that $700 billion won't be nearly enough to buy these toxic debts, because more debts will go bad, more homes will go into foreclosure, banks will lose money on foreclosed properties as real estate drops and they will become increasingly more insolvent.

All this bailout will do is encourage massive consolidation. You'll see megabanks buy out everything they can get their hands on in order to take more assets and force the government to take toxic debt off the books through UberBailout, for these new hyperbanks will be Too Big To Fail. AIG has shown the financial sector the way.

What assets they do have they will take increasingly larger risks with. And those risks will fail as mortgages and the economy fail.

It's a death spiral, and we're trapped in it. This too will fail. $700 billion will turn into trillions and trillions, until hyper-inflation kicks in and we're all screwed. And how do I know it's going to fail? The same Wall Street people who got us into this mess are going to be in charge of managing the bailout.

As part of the government bailout of the financial industry, the Treasury has floated a plan with industry executives that envisions the $700 billion in bad mortgage debts being bought by the government will be run by five to ten outside asset managers, CNBC has learned.

These managers will each run portfolios of up to $50 billion each, according to a source familiar with the plan. The portfolios will be amassed through so-called "reverse auctions" where the seller bids the lowest price it will accept from the government for buying up the asset.

Enjoy the ride.

StupidiNews, Weekend Edition

• The Large Hadron Collider is offline for a while after the magnets have malfunctioned.
• A University of California study suggests ethnic cleansing was behind lower Iraq violence this year, not the Surge.
• The UberBailout will cost the next President dearly.
• Israel's PM handover process could start as early as Sunday.
• A new report shows the BATF is good at watching alcohol, tobacco and firearms, just not good at watching their own laptops.