House Rejects Financial Rescue, Sending Stocks Plummeting 777 points: House Speaker Nancy Pelosi (D-Calif.) addressed the media after the House defeated the bailout package worth $700 billion - the Republicans did not like what she said.

By Jonathan Weisman, Washington Post Staff Writer, Tuesday, September 30, 2008; Page A01.

A bipartisan rebellion in the House killed a $700 billion rescue plan for the nation’s financial system yesterday, sending global stock prices plunging, prompting fierce recriminations on the presidential campaign trail and dealing President Bush his worst legislative defeat.

House Democratic and Republican leaders vowed to go back into negotiations to devise compromise legislation to stabilize the credit markets, but no talks were scheduled. After U.S. financial markets closed, with the Dow Jones industrial average down a one-day record of 778 points, or 7 percent, Treasury Secretary Henry M. Paulson Jr. tried to calm frazzled traders, assuring them that work on a market intervention would resume.

“I will continue to work with congressional leaders to find a way forward to pass a comprehensive plan to stabilize our financial system and protect the American people by limiting the prospects of further deterioration in our economy,” he said. “We’ve got much work to do, and this is much too important to simply let fail.”

Rarely has a congressional vote held such high drama and produced such immediate repercussions, directly from the House floor to the trading floor. Wall Street traders huddling around television screens watched lawmakers denounce the bailout legislation, and then sent the Dow plummeting. Stocks had recovered somewhat by the time the vote was gaveled to a close, but jittery investors sent them plunging again as Republicans and Democrats took turns blaming each other for the defeat. In a few hours, $1.2 trillion in paper wealth was wiped out.

As lawmakers in Congress pointed fingers, the collapse of the world’s financial markets only built steam. Brazil’s main stock index lost more than 9 percent on the news of the U.S. congressional vote, and fears spread that other emerging markets could feel the credit crunch. European bourses fell earlier in the day as a result of the financial struggles of major European banks, and regulators from Belgium, the Netherlands and Luxembourg moved to rescue the European banking and insurance giant Fortis. And Citigroup stepped in to buy Wachovia’s banking operations for $2.16 billion, making it the dominant bank in the Washington area.

On the 228 to 205 congressional vote, 140 Democrats voted yes and 95 voted no; 133 Republicans opposed the measure, while 65 approved.

“The Democratic side more than lived up to its side of the bargain,” said House Speaker Nancy Pelosi (D-Calif.).

House Minority Whip Roy Blunt (R-Mo.) said of the Democrats: “We’re going to reach back out to them. We’re going to be talking to our members and see how we can come together in the next few days to reverse whatever negative impact there may be in the economy over the next few days because Congress has failed to act.”

Yesterday, Bush called nearly every member of Texas’s Republican delegation, GOP aides said. He won over four of the 19.

Congressional leaders and the White House faced several options, none of them palatable just weeks before a heavily contested presidential election. Democratic leaders could choose to return with a measure guaranteed to win more Democratic votes, even at the expense of Republican support. Instead of simply purchasing distressed assets from financial institutions, some Democratic economists favor injecting lenders with cash in exchange for stock, letting the institutions figure out what to do with the mortgage-backed securities and other troubled assets weighing down their books.

A Democratic bill would also include more money for homeowners in or facing foreclosure and would change the bankruptcy law to allow judges to adjust mortgage repayment terms. But Democratic leaders would have to ensure that the measure could survive a filibuster in the Senate and would be signed by the president.

Republicans were advocating slight changes to the bill that could attract a handful of new votes. Party members might be enticed by a measure that would allow businesses to write off more past losses on this year’s taxes or a more robust expansion of mortgage insurance, financed by banks. Democrats could add more assistance to ailing state and local governments without raising too many GOP objections.

In the thick of the presidential campaign, the collapse of the deal left Washington buzzing with recriminations. Republicans — from Sen. John McCain’s top economic aide to the House GOP leadership — initially blamed Pelosi, saying her floor speech castigating Bush administration “policies built on budgetary recklessness, on an anything-goes mentality, with no regulation, no supervision, and no discipline in the system” poisoned the atmosphere and invited partisan retribution.


In truth, few Republicans were on the floor to hear that speech, and those who were there showed no signs of discomfort, as they often do. Republican leaders backed away within hours, conceding they never had the votes they had promised.

Democrats found strength in numbers, saying nearly two-thirds of their members voted for the bill. If anyone is to blame for a record sell-off on Wall Street, Democrats said, it was the party that provided just 65 votes.

Nowhere were the recriminations fiercer than on the presidential campaign trail. McCain, the GOP nominee, had been prepared to claim credit for the measure’s passage, attributing it to his decision to suspend his campaign last week and engage in negotiations.

“I’ve never been afraid of stepping in to solve problems for the American people, and I’m not going to stop now,” he said at a rally in Columbus, Ohio. “Senator Obama took a very different approach to the crisis our country faced,” he said of his opponent, Sen. Barack Obama. “At first he didn’t want to get involved. Then he was monitoring the situation.”

When two-thirds of the House Republican Conference voted no, the McCain camp changed its pitch. Not a single member of McCain’s home-state Arizona House delegation voted for the bill.

“Just before the vote, when the outcome was still in doubt, Speaker Pelosi gave a strongly worded partisan speech and poisoned the outcome. This bill failed because Barack Obama and the Democrats put politics ahead of country,” said Douglas Holtz-Eakin, McCain’s senior domestic policy adviser.

Obama campaign aides gleefully shared a quote from McCain’s chief political strategist, Steve Schmidt, who said Sunday on NBC’s “Meet the Press”: “What Senator McCain was able to do was to help bring all of the parties to the table, including the House Republicans, whose votes were needed to pass this.”

Obama delayed a campaign event in Westminster, Colo., to speak to Paulson and Pelosi, then told his audience: “One of the messages I have to Congress is, ‘Get this done, Democrats; Republicans, step up to the plate.’ “

For Bush, the defeat was the starkest sign yet that a president who once had lockstep support among congressional Republicans has all but lost his influence.

He has had vetoes overridden, on a water projects bill and a major agriculture measure, but nothing to compare to the defeat of a measure he had said was critical to the nation’s economy. In the days before the vote, the president addressed the nation about the urgency of the plan, spoke out daily, even summoned congressional leaders and the two presidential candidates to the White House.

The divisions in both the Republican and Democratic ranks that had bedeviled negotiators simply could not be mended that easily. House Republican leaders acknowledged they let Pelosi put the bill on the floor with at least a dozen Republican votes still needed. But they thought they could win them over, with stock prices falling and time running out.

Conservative Republicans who have been decrying the bailout never wavered in their opposition, nor did liberal Democrats who saw the measure as a rescue plan for Wall Street millionaires. And House members in tough reelection bids abandoned the legislation in droves.

Opponents included the most endangered Democrats, including Reps. Carol Shea-Porter (N.H.), Nick Lampson (Tex.) and Nancy Boyda (Kan.), and the most endangered Republicans, from conservative Marilyn Musgrave (Colo.) to moderate Lincoln Diaz-Balart (Fla.). Democrats Mark Udall (Colo.) and Tom Udall (N.M.), both running for Senate seats, voted no. Low-level members of the Republican leadership, such as Marsha Blackburn (Tenn.) and Thaddeus McCotter (Mich.), defied their senior leaders. African American Democrats with virtually no prospect of defeat voted no en masse.

Still, with the options declining and their members eager to get home to campaign, congressional leaders insisted they would not adjourn for the year without some kind of stabilizing legislation. The shock waves of the House defeat are expected to rock world markets this morning. Already, the carefree attitude that international bankers had been taking has begun to give way, with the European Central Bank moving an extra $173 billion into European markets yesterday.

“What happened today cannot stand,” Pelosi said. “We must move forward, and I hope that the markets will take that message.”

Staff writers Paul Kane, Anne E. Kornblut, Michael D. Shear and Perry Bacon Jr. contributed to this report.

—————–

 http://www.ourfuture.org/blog

After the Revolt: Top 5 Reasons to Vote Against Wall Street’s $700 Billion Bailout.                                                by David Sirota, September 28, 2008,

On Calming Down, Not Celebrating and Getting it Right
By David Sirota, September 29th, 2008

Bank Lobbyists Laugh At Congressional Dems
by David Sirota, September 24, 2008

Don’t cry for the bailout plan
by Hank Kalet, September 30, 2008

The fix was in. The leadership of both parties in Congress, both major presidential candidates, media poobahs, financial statesmen from Warren Buffett to Bob Rubin, all weighing in to support giving Treasury Secretary Henry Paulson a $700 billion revolving fund to bail out Wall Street.
And then Americans said, “stuff it.” The bill was incredibly unpopular. Calls against were running as high as 200 to 1, with venom. With Americans struggling—their salaries not keeping up with the cost of gas and health care, their homes losing value, their savings exhausted, their credit cards maxed out, foreclosures and bankruptcies on the rise—giving the Treasury Secretary, the former head of Goldman Sachs, $700 billion to try to bail out his friends on Wall Street was a very hard sell.
Congress can’t walk away. Something must be done. We need a real plan:
• to get the economy going
• for financial reconstruction
• to staunch the housing hemorrhaging.
So in the House, the vote counters went to work. In both parties, to the extent possible, members in contested districts were to be given permission to vote against the bill. Those in safe districts were expected to vote for it. Leadership labored to assemble a bare bipartisan majority to pass it. But that increased the influence of progressives on the left and conservatives on the right who had relatively safe seats. Members of the Progressive Caucus split 50-50, but Speaker Nancy Pelosi produced the 150 votes she promised. Conservatives, eager to distance themselves from Bush, revolting against House Minority Leader John Boehner’s leadership and hoping to blame Democrats for the mess, bailed out on the bailout in large numbers. Pelosi wisely decided not to try to force it through with Democratic votes only.

But Congress can’t walk away. Something must be done. The markets were already indicating the Paulson plan was inadequate. Conservatives are truly out to lunch. Their plan featured suspending capital gains taxes (as if investors would then rush to put their money in the banks’ toxic paper), and further deregulation, letting banks hide the current value of their assets by suspending mark-to-market rules. That actually made it into the final bill, but it hardly would increase confidence in Wall Street. Rather than making further compromises with the conservatives who simply don’t get it, Democrats should put forth a plan that is far bolder and that deals with the real problems.

***

1. We need a real plan to get the economy going.
The Paulson plan had a big price tag, but wasn’t likely to work. It was, as Nobel Prize winner Joseph Stiglitz noted, essentially a version of the trickle-down economics that got us into this mess. Bail out the guys at the top and the benefits will trickle down to the rest of us.
The financial crisis comes from the collapse of an $8 trillion housing bubble. Banks—and many homeowners—made a lot of bad bets on the assumption that housing prices would always go up. The shadow banking system—including the off-balance sheet entities set up by the commercial banks—borrowed massively to make those bets. They invented exotic securities and over the counter, unregulated credit swaps and the like to add layers and layers to the house of cards.
Now it’s collapsed. The real economy is in trouble. Consumers have lost trillions in home equity and are tightening their belts. We are headed into what is likely to be a long and severe downturn. Defaults on mortgages, credit cards, auto loans and other consumer debt are rising. Banks and investment houses have no idea what the value of the paper they own is, much less the condition of other banks. Financial markets are close to freezing up.
So Paulson asked for the authority to bail them out—to buy some of the toxic paper, not all of it by any means—to “restore confidence” and create a market price for the stuff. Good luck with that.

In fact, the downturn in the real economy is more likely to send the pain upward. We already have rising unemployment; declining consumption; collapsed construction and decimated manufacturing sectors; sinking retail; and financially strapped states and localities about to make deep cuts in health care and construction, and lay off police, teachers and other public workers.

So what does the administration do? The president says it is “premature” to have a serious stimulus plan to get the real economy going. The Democratic leadership offers up a token, $50 billion stimulus. The Republicans in the Senate wage a filibuster to kill it.

Worse, by authorizing $700 billion for the bank bailout, Congress would set up those who will argue that we have no money left to stimulate the real economy.
Instead progressives should demand a real—$200 billion or more—stimulus that invests in new energy, extends unemployment benefits, aids states and localities to avoid debilitating cuts, rebuilds our crumbling infrastructure and puts people to work.

***

2. We need a plan for financial reconstruction.

Second, the Paulson plan itself simply does not go far enough to deal with the reality that Wall Street needs to be purged of insolvent firms, excess capacity, and that imprudent lenders and investors have to take their losses. Paulson is looking to restore confidence by buying some of the banks’ toxic paper. He could well end up with a Halloween plan, pumping blood into the living dead.

What we need, as Alex Pollock and John Makin, both of the conservative American Enterprise Institute, argue, is a Reconstruction Finance Corporation that has the power to take over financial firms, sort out the solvent from the insolvent, close down some, merge others, and back those that are solvent. Sweden provides, as many have shown, a good example of how this can be done—with remarkably little cost to the taxpayer.

***

3. We must staunch the housing hemorrhaging.

Finally, more direct steps should be made to help forestall foreclosures and insure that housing prices don’t simply collapse. The Paulson bill did instruct the Treasury Department to take steps to renegotiate mortgages on the paper that the government purchases. But with many of the mortgages sliced and diced into securities, Treasury will still have difficulty getting much done. And the bill, in a testament to Wall Street’s clout, omits the fairest way to sort out the victims from the bounders: empowering bankruptcy courts to renegotiate mortgages to keep deserving homeowners in their homes and reduce the flood of foreclosures across the country.
The turmoil in Europe and the decline in the markets are being read as warning signs that delay will be costly. And Congress is likely to try to pass a version of the defeated bailout bill with cosmetic changes once more, lipstick on pigs being in vogue. But, in fact, the Paulson plan deserved to fail. It exemplifies the philosophy that got us in this mess—the assumption, as Sen. Barack Obama noted, “ if we give more and more to those with the most, prosperity will trickle down to everyone else,” while ignoring the reality that the pain is shooting up.
We need real investment to kick-start the economy. We need an independent agency with greater power to take over and sort out the financial community. And we need greater focus on staunching the hemorrhaging of housing values on Main Street, not the value of securitized exotica in Wall Street’s basements. Let’s start with a bold plan that can work and negotiate from there.

————————

Top 5 Reasons to Vote Against Wall Street’s $700 Billion Bailout

There’s news this Sunday afternoon of a congressional deal to bailout Wall Street fat cats with $700 billion of taxpayer cash. Though the deal negotiated between congressional leaders and the White House is better than what Treasury Secretary Henry Paulson originally proposed early last week, it remains an insulting atrocity, having omitted even basic aid to homeowners, bankruptcy reforms and any modicum of future financial industry regulation. Now, the New York Times reports that the Democratic leadership may not have the votes to pass this bailout. So without further ado, here are the top 5 reasons (in no order) why every single member of Congress - Democrat and Republican - should vote this sucker down. Please feel free to copy and paste this post into an email to your congressperson. They are deciding right now - let them hear your voice.
1. BAILOUT’S INHERENT FISCAL INSANITY COULD MAKE PROBLEM WORSE
When an individual consumer uses a new credit card to pay off astounding debt from an old credit card, it’s akin to check kiting, which is is illegal. Apparently, though, when the government does it, it’s billed as Serious Public Policy. Because that’s what this supposedly prudent bailout bill would do: Force taxpayers to borrow $700 billion from foreign banks to pay off the bad debt of Wall Street banks. During a crisis that is aimed at preventing interest rates from skyrocketing, nobody has been able to explain how adding almost a trillion dollars to the interest rate-exacerbating national debt would do anything other than undermine the plan’s underlying objective. Worse, the U.S. Treasury Department itself admits that the $700 billion number is “not based on any particular data point” - that is, they created it out of thin air because “We just wanted to choose a really large number.” Slapping that amount of money onto the national credit card when our government can’t even justify the amount is beyond absurd - it is insane.
It didn’t have to be this way, of course. As I noted in my newspaper column this week, Senator Bernie Sanders proposed a temporary tax on millionaires to finance part of this bailout. Similarly, Blue Dog Democrats proposed a future tax on financial firms if and when taxpayers lose cash on the deal. These proposals were discarded in favor of language asking the government to “submit a plan to Congress on how to recoup any losses,” according to the Associated Press. Not only is that language toothless, but it opens up the possibility of a plan being submitted that says we should raise middle-class taxes or slash middle-class social programs to pay for Wall Street’s misbehavior.
2. EXPERTS ON BOTH THE LEFT AND RIGHT SAY THIS BAILOUT COULD MAKE THINGS WORSE
Primum non nocere is the latin phrase for “first do no harm” - the priority principle for any EMT working on a sick patient. It should be the same priority for Congress at this moment - and a growing group of esteemed experts on both the Right and Left are insisting that this bailout bill could make things worse. Here’s a review:
The Washington Post reported on Friday, almost 200 academic economists “have signed a petition organized by a University of Chicago professor objecting to the plan on the grounds that it could create perverse incentives, that it is too vague and that its long-run effects are unclear.”
NYU’s Nouriel Roubini, the visionary who had been predicting this meltdown, says “The Treasury plan (even in its current version agreed with Congress) is very poorly conceived and does not contain many of the key elements of a sound and efficient and fair rescue plan.”
Harvard’s Ken Rogoff, a Former Federal Rerserve and IMF official, insists that the prospect of this bailout is, unto itself, taking a manageable problem and making it into a more intense crisis. He says that credit is frozen primarily because banks want to avoid dealing with other banks that might drive a hard bargain, and instead would rather wait for free money from the government. Without the prospect of that free money, Rogoff suggests that credit would probably begin moving again, if slowly.
Dean Baker of the Center on Economic and Policy Research says that spending so much cash so quickly on such a poorly conceived plan could have the effect of making it impossible to fund economic stimulus that is the real way out of this mess. “Suppose the Paulson plan goes through,” he writes. “It is virtually certain that the economy will weaken further and the number of foreclosures and people without jobs will continue to rise. This is the fallout from a collapsing housing bubble…When families respond to their loss of home equity by cutting back their consumption it will deepen the recession. In this context it might prove very important to have the resources needed to provide a substantial stimulus. [and] there is no doubt that this bailout will make further stimulus much more difficult to sell politically.”
Meanwhile, it’s not even close to clear that this is a problem that requires such an enormous response. As mentioned above, the Treasury Department admits it has absolutely no factual basis for requesting $700 billion - an amount equivalent to about 5 percent of our entire economy. Additionally, the Washington Post reports that “Banks throughout the United States carried on with the business of making loans yesterday even as federal officials warned again that their industry is on the verge of collapse, suggesting that the overheated language on Capitol Hill may not reflect the reality on many Main Streets.” Indeed, “many smaller banks said they were actually benefiting from the problems on Wall Street” and “even some of the nation’s largest banks, which have pushed hard for a federal bailout, deny that the current situation is forcing them to reduce lending.”
The questions, then, are simple: In the face of this bipartisan opposition from objective experts, why should a lawmaker instead believe the same Bush officials who helped create this crisis with their deregulation, the same Bush officials who just months ago said everything was AOK? Shouldn’t there be almost complete unanimity among both objective and partisan observers before spending 5 percent of our entire economy after just one harried week of White House demands? Fool me once shame on you, fool me twice, shame on me. It’s time, as The Who said, that we “don’t get fooled again.”
3. THERE ARE CLEARLY BETTER AND SAFER ALTERNATIVES
The mantra throughout the week has been that America has “no choice” but to pass Treasury Secretary Henry Paulson’s $700 billion giveaway - that, in effect, there are no alternatives. But that’s an out-and-out lie - one with a motive: Making it seem as if the only thing we can do is hand the keys to the federal treasury over to both parties’ corporate campaign contributors.
The truth is, there are a number of alternatives. Here are just a few:
In the Washington Post last week, Galbraith outlined a multi-pronged plan shoring up and expanding the FDIC, creating a Home Owners Loan Corporation, resurrecting Nixon’s federal revenue sharing, and taxing stock transactions (a tax that would fall mostly on speculators) to finance the whole deal.
The Service Employees International Union has drafted a plan based around a massive investment in public services and national health care, and regulatory reforms preventing foreclosures and forcing banks to renegotiate the predatory terms of their bad mortgages.
For those in the mindless, zombie-ish “someone has to do something, so we have to do what the White House says!” camp, consider the possibility that you are under the spell of the same kind of White House fear that led us to invade Iraq because of Saddam’s supposed WMD. Consider, perhaps, that there may not even be a compelling basis for doing anything just yet (or at least not anything nearly so huge), and that the whole reason there is this urgent push right now has nothing to do with the financial situation, and everything to do with creating the political dynamic to pass a wasteful giveaway - one that couldn’t be passed otherwise without a sense of emergency. And ask yourself why you would listen to this White House instead of listening to those experts who have been predicting this crisis and are now advising against this bailout - experts like CEPR’s Baker. In two separate posts (here and here), he says that letting the problem play out could be the best path, because Treasury and the Fed may already have the tools they need. Following this path, the worst thing that happens is “The Fed and Treasury will have to step in and take over the banks [which] is exactly what many economists argue should happen anyhow,” Baker writes. “So the outcome of the worst case scenario is a really frightening day in which the whole world financial system is shaken to its core, followed by a government takeover of the banks. Eventually the government straightens out the books and sells them off again. But the real threat here is not to the economy, it is to the banks.”
Then there is the idea of simply taking the $700 billion and simply give it to struggling homeowners to help them pay off part of their mortgages. This hasn’t even been discussed but the thought experiment it involves is important to understanding why there is, indeed, an alternative to the Paulson plan. If the root of this problem is people not being able to pay off their mortgages, and those defaults then devaluing banks’ mortgage-backed assets, then simply helping people pay their mortgages would preserve the value of the mortgage-backed assets and recharge the market with liquidity. That would be a bottom-up solution helping the mass public, rather than a top-down move helping only financial industry executives.
On this latter proposal, some may argue that giving any relief to homeowners is “unfair” in that those homeowners created their problems, so why should taxpayers have to help them? But then, is helping homeowners any less fair than simply giving all the money away to Wall Street, no strings attached? I’d say no - and helping homeowners also serves a second purpose: namely, keeping people in their homes, which not only helps them, but helps an entire neighborhood (as any homeowner knows, nearby properties can be devalued when foreclosures hit).
4. ANY INCUMBENT VOTING FOR THIS PUTS THEMSELVES AT RISK OF BEING THROWN OUT OF OFFICE
As a preface, let me state that I think we live in a country where politicians too often listen to their donors and to the Establishment rather than their constituents, not the other way around. America is a country where our leaders dishonestly invoke the concepts of “Statesmanship” and “Seriousness” and their supposed hatred of “pandering” to justify ignoring what the public wants (as if giving the public what it wants is somehow not the objective of a democratic republic). So, in short, I don’t think there’s anything wrong with this bill being “politicized” by coming down the pike right before an election - in fact, I think it’s a good thing because the election - and the fear of being thrown out of office forces our politicians to at least consider what the public wants. I mean, really - would we rather have this decision made after the election, when the public can be completely ignored?
Polls overwhelmingly show a public that sees voting for this bill as an act of economic treason whereby the bipartisan Washington elite robs taxpayer cash to give their campaign contributors a trillion-dollar gift. As just two of many examples, Bloomberg News’ poll shows “decisive” opposition to the bailout proposal, and Rasmussen reports that their surveys show “the more voters learn about the proposed $700 billion federal bailout plan for the U.S. economy, the more they don’t like it.” Put another way, this bailout proposal has unified both the Right and Left sides of the populist uprising that I described in my new book and that is now even more angry than ever.
Any sitting officeholder that votes for this - whether a Democrat or a Republican - should expect to get crushed under a wave of populist-themed attacks from their opponents. We’ve already seen it start. In Oregon, Democratic challenger Jeff Merkley (D) is airing scathing television ads hammering Republican incumbent Gordon Smith for potentially supporting the deal. Similarly, this morning on Meet the Press, we saw Republican Senate challenger Bob Schaffer (CO) dishonestly papering over his own votes for deregulation and ripping into his opponent Rep. Mark Udall (D) for potentially supporting the deal. Incumbents, get ready for that kind of election-changing heat in your face if you vote “yes.”
This, by the way, could play out in the presidential contest. Barack Obama has been taking the advice of the Wall Street insiders in his campaign in endorsing this bailout. McCain has endorsed the vague outline, but he may ultimately back off once he sees the details, allowing him to then run the last month of the campaign as the economic populist in the race. I’m not saying it would work, considering McCain’s 26-year record of supporting the deregulatory agenda that created this crisis. But such a move could end up help him flank Obama on the defining economic issues of the race.
5. CORRUPTION AND SLEAZE ARE SWIRLING AROUND THESE BAILOUTS - AND AMERICA KNOWS IT
The amount of brazen corruption and conflicts of interest swirling around this deal is odious, even by Washington’s standards - and polls suggest the public inherently understands that. Consider these choice nuggets:
Warren Buffett is simultaneously advising Obama to support the deal, while he himself is investing in the company that stands to make the most off the deal.
McCain’s campaign is run by lobbyists from the companies that stand to make a killing off a no-strings government bailout.
The New York Times reports that the person advising Paulson and Bernanke on the AIG bailout was the CEO of Goldman Sachs - a company with a $20 billion stake in AIG.
The Obama campaign’s top spokesman pushing this deal is none other than Roger Altman, who Bloomberg News reports is simultaneously “advising a group of investors who are trying to prevent their shares from being diluted in the U.S. takeover of American International Group Inc.” - that is, who have a direct financial interest in the current iteration of the bailout.
Add to this the fact that the negotiations over this bill have been largely conducted in secret, and you have one of the most sleazy heists in American history.
**********
If this bill passes, it will be a profound referendum on the dominance of money over democracy in America. That - and that alone - would be the only thing an objective observer could take away from the whole thing.
Money will have compelled politicians to not only vote for substantively dangerous policy, but vote for that policy even at their own clear electoral peril. Such a vote will confirm that the only people these politicians believe they are responsible for representing are are the fat-cat recipients of the $700 billion - the same fat cats who underwrite their political campaigns, the same fat-cats who engineered this crisis, and want to keep profiteering off it. Any lawmaker who takes that position is selling out the country, as is any issue-based political non-profit group - liberal or conservative - that uses its resources to defend a “yes” vote rather than demand a “no” vote. This is a bill that forces taxpayers to absorb all of the pain, and Wall Street executives to reap all of the gain. It doesn’t even force the corporate executives (much less the government leaders) culpable in this free fall to step down - it lets them stay fat and happy in their corner office suites in Manhattan.
Even if they believe that something must be done right now, lawmakers should still vote no on this specific bill, and force one of the very prudent alternatives to the forefront. They shouldn’t just vote no on Paulson’s proposal - they should vote hell no. Our economy’s future depends on it.

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Monday, September 29, 2008 - Don’t cry for the bailout plan - Bipartisan support for the federal bailout plan has been offset by bipartisan opposition.

 http://channel-surfing.blogspot.com/2008…

A 228-205 vote killed the bailout plan today, with progressive Democrats and conservative Republicans joining to stymie the wishes of the White House and Congressional leadership.

Over the last week, the opposition has been painted as being composed mainly of Republican back-benchers, the younger, hardcore populist conservatives who lack the ties to Wall Street that the leadership has developed over the years.

The reality is far different. U.S. Rep. Rush Holt, the Democrat who represents Cranbury, Jamesburg, Monroe and South Brunswick in the House, was harsh in his criticism last week and others — Dennis Kucinich of Ohio, Peter DeFazio of Oregon, John Conyers of Michigan and Marcy Kaptur of Ohio — (Holt ultimately voted for the bailout compromise.)

Kucinich had distributed this letter to House colleagues this morning, according to his office:

If you are tempted to vote for this legislation because you think it will keep people in their homes, think again: in fact, Treasury will not be able to change the terms of bad mortgages because the Act does not require Treasury to purchase a controlling share in the underlying mortgage backed securities and collateralized debt obligations. The Secretary will be powerless to make any real and substantive change in the terms of mortgage. The Secretary will have NO power to avoid foreclosures and keep families in their homes.

I commend to your attention a letter I received last night from Frank Alexander, Professor of Law at Emory University. Professor Alexander testified before my Subcommittee on Domestic Policy on targeting federal assistance to help neighborhoods affected by the foreclosure crisis. He is an expert on housing law and community development.

Professor Alexander clearly demonstrates that the Emergency Economic Stabilization Act will not fulfill its stated goal of preserving homeownership.
Unless the Secretary of the Treasury is required to prioritize assets that will give the Treasury a controlling share in the underlying whole mortgage, the Secretary will hold bad assets with no power to make them solid again.

Because the rule prohibits amendments, and we do not have the opportunity to correct this terrible oversight, I must encourage you to oppose this bill so that it can be reworked and the oversight addressed. To be sure, the recent past has taught us the valuable lesson that action in haste can be more destructive than delayed action.

 Further UPDATEs - September 17, 2008, September 19, 2008.

From:    egale33 at yahoo.com
Subject: McCain Sees the Light:  “Regulate!”
Date: September 17, 2008

As America races towards its first billion-dollar campaign season – enough money to light a city spent essentially on nothing – one might begin to envy the Parliamentary system. In most modern democracies, you don’t vote for the personality, you vote for the party. You’re not fooled by labels or slogans. A party can call itself, “the party of change,” or call itself Tinkerbelle, for all anyone cares. All you have to do is look at the way that party has behaved in the past. If you like what they’ve done, then vote for them. You wouldn’t be fooled by a candidate who suddenly sees the light 50 days before the election. You’re smart. He’s Labour, he’ll vote with his party. He’s Tory, well, likewise.

Duh.

Yes. You look at the candidate’s party, their platform, and vote accordingly. Of course, the last thing you’d ever pay attention to is what someone promises during election season. After all, people say anything to get elected.

John McCain will spend millions of dollars to convince you that he’s not really a Republican. He wants you to believe that although he is in the party that has unfailingly opposed financial deregulation, that he is somehow different. You cannot find one instance of McCain supporting regulation of the finance industry – not a single instance – until, of course, the Day the Dam Broke, September 15. One cannot find a single John McCain advisor who has supported regulation, until today, the day that the failing banks changed our world. You have undoubtedly heard the New John McCain, who, 48 hours ago, suddenly became a big fan of finance market regulation. You’ll not hear anything about his association with Phil Gramm, the architect of unregulated mortgage markets, Phil Gramm, whom McCain said knows more about economics “than anyone.”

It’s too bad we have to submit to 2 years of selling us a president like a brand of shampoo. All we have to do is look at what they’ve done. What have the Republicans done? Have they ever stood up to “the markets” and said, “You’re playing with people’s money, their livelihoods, their retirements.”? When was the last time John McCain stood up to Phil Gramm and his card tricks and said we have to bring some order to these transactions, and they have to be above board? Never. Not once, oh, of course, until September 15th.

================

Posted September 16, 2008 On Huffington Press

Bob Franken: The Great Whine.

I agree. We have to be careful not to use words that are so heavy with emotion, that they drag the economy down by their own weight.

So OK: What’s going on right now is not yet a “Depression”. Perhaps, like Phil Gramm, we can call it a “Whine”

Whatever it is, it’s mighty damned sad… dreary. In this case, we can say that each “…day WITH ‘Whine’ is a day without sunshine”. That’s because of all the dark clouds on the horizon.

Obviously, this is no laughing matter.

What is happening right now is a meltdown that is scary, mainly because we have no idea how much worse it’s going to get. It’s also infuriating. For good reason.

There were plenty of warnings. For years, actually for decades, it has been clear that the money system had grown so deregulated it resembled the Wild West. Like any lawless frontier, it attracted and elevated slick, but incompetent hustlers whose only real skill was enriching themselves.

We’ve ended up with a Darwinian “Survival of the “Fittest” system, except in this case the only winners are those UNfit to have so much influence over how we all do survive.

They also recognize how to use their ill-gotten gains to control the lawmakers and opinion makers. As a result no one is willing to impose constraints, no matter how reasonable, or minimal.

Maybe, out of the ashes, we need to construct a saner system. We need to realize that those who benefit from operating our economy must be watched closely.

We no longer can tolerate an ethic that celebrates only profits without any regard for anything else, or anyone else.

We need to declare an end to the Age of Deregulation.

It’s time to create hen house monitors and give them the weapons and the authority to guard the foxes. While we’re at it, time to ignore all the fat cat propagandists who preach free markets as an excuse to keep government out of their business. Obviously what we’re discovering is it’s bad business.

Maybe we need to punish more of those who robbed us. If not prison, at least we could impose a “Whine Fine” against the slicks whose greed is taking us all down.

Maybe we won’t be so depressed because we’ll have less to whine about. And after that, we can turn to the really big task of setting limits on cliches.

============

The following is the original posting from September 15, 2008

Foreclosure Phil.

NEWS: Years before Phil Gramm was a McCain campaign adviser and a lobbyist for a Swiss bank at the center of the housing credit crisis, he pulled a sly maneuver in the Senate that helped create today’s subprime meltdown.

By David Corn, Mother Jones, July/August 2008 Issue.

 http://www.motherjones.com/news/feature/…

Who’s to blame for the biggest financial catastrophe of our time? There are plenty of culprits, but one candidate for lead perp is former Sen. Phil Gramm. Eight years ago, as part of a decades-long anti-regulatory crusade, Gramm pulled a sly legislative maneuver that greased the way to the multibillion-dollar subprime meltdown. Yet has Gramm been banished from the corridors of power? Reviled as the villain who bankrupted Middle America? Hardly. Now a well-paid executive at a Swiss bank, Gramm cochairs Sen. John McCain’s presidential campaign and advises the Republican candidate on economic matters. He’s been mentioned as a possible Treasury secretary should McCain win. That’s right: A guy who helped screw up the global financial system could end up in charge of US economic policy. Talk about a market failure.

Gramm’s long been a handmaiden to Big Finance. In the 1990s, as chairman of the Senate banking committee, he routinely turned down Securities and Exchange Commission chairman Arthur Levitt’s requests for more money to police Wall Street; during this period, the sec’s workload shot up 80 percent, but its staff grew only 20 percent. Gramm also opposed an sec rule that would have prohibited accounting firms from getting too close to the companies they audited—at one point, according to Levitt’s memoir, he warned the sec chairman that if the commission adopted the rule, its funding would be cut. And in 1999, Gramm pushed through a historic banking deregulation bill that decimated Depression-era firewalls between commercial banks, investment banks, insurance companies, and securities firms—setting off a wave of merger mania.

But Gramm’s most cunning coup on behalf of his friends in the financial services industry—friends who gave him millions over his 24-year congressional career—came on December 15, 2000. It was an especially tense time in Washington. Only two days earlier, the Supreme Court had issued its decision on Bush v. Gore. President Bill Clinton and the Republican-controlled Congress were locked in a budget showdown. It was the perfect moment for a wily senator to game the system. As Congress and the White House were hurriedly hammering out a $384-billion omnibus spending bill, Gramm slipped in a 262-page measure called the Commodity Futures Modernization Act. Written with the help of financial industry lobbyists and cosponsored by Senator Richard Lugar (R-Ind.), the chairman of the agriculture committee, the measure had been considered dead—even by Gramm. Few lawmakers had either the opportunity or inclination to read the version of the bill Gramm inserted. “Nobody in either chamber had any knowledge of what was going on or what was in it,” says a congressional aide familiar with the bill’s history.

It’s not exactly like Gramm hid his handiwork—far from it. The balding and bespectacled Texan strode onto the Senate floor to hail the act’s inclusion into the must-pass budget package. But only an expert, or a lobbyist, could have followed what Gramm was saying. The act, he declared, would ensure that neither the sec nor the Commodity Futures Trading Commission (cftc) got into the business of regulating newfangled financial products called swaps—and would thus “protect financial institutions from overregulation” and “position our financial services industries to be world leaders into the new century.”
***

Subprime 1-2-3

Don’t understand credit default swaps? Don’t worry—neither does Congress. Herewith, a step-by-step outline of the subprime risk betting game. —Casey Miner

Subprime borrower: Has a few overdue credit card bills; goes to a storefront lender owned by major bank; takes out a $100,000 home-equity loan at 11 percent interest

Lending bank: Assuming housing prices will only go up, and that investors will want to buy mortgage loan packages, makes as many subprime loans as it can

Investment bank: Packages subprime mortgages into bundles called collateralized debt obligations, or cdos, then sells those cdos to eager investors. Goes to insurer to get protection for those investors, thus passing the default risk to the insurer through a “credit default swap.”

Insurer: Thinking that default risk is low, agrees to cover more money than it can pay out, in exchange for a premium

Rating agency: On basis of original quality of loans and insurance policy they are “wrapped” in, issues a rating signaling certain slices of the cdo are low risk (aaa), medium risk (bbb), or high risk (ccc)

Investor: Borrows more money from investment bank to load up on cdo slices; makes money from interest payments made to the “pool” of loans. No one loses—as long as no one tries to cash in on the insurance.

It didn’t quite work out that way. For starters, the legislation contained a provision—lobbied for by Enron, a generous contributor to Gramm—that exempted energy trading from regulatory oversight, allowing Enron to run rampant, wreck the California electricity market, and cost consumers billions before it collapsed. (For Gramm, Enron was a family affair. Eight years earlier, his wife, Wendy Gramm, as cftc chairwoman, had pushed through a rule excluding Enron’s energy futures contracts from government oversight. Wendy later joined the Houston-based company’s board, and in the following years her Enron salary and stock income brought between $915,000 and $1.8 million into the Gramm household.)

But the Enron loophole was small potatoes compared to the devastation that unregulated swaps would unleash. Credit default swaps are essentially insurance policies covering the losses on securities in the event of a default. Financial institutions buy them to protect themselves if an investment they hold goes south. It’s like bookies trading bets, with banks and hedge funds gambling on whether an investment (say, a pile of subprime mortgages bundled into a security) will succeed or fail. Because of the swap-related provisions of Gramm’s bill—which were supported by Fed chairman Alan Greenspan and Treasury secretary Larry Summers—a $62 trillion market (nearly four times the size of the entire US stock market) remained utterly unregulated, meaning no one made sure the banks and hedge funds had the assets to cover the losses they guaranteed.

In essence, Wall Street’s biggest players (which, thanks to Gramm’s earlier banking deregulation efforts, now incorporated everything from your checking account to your pension fund) ran a secret casino. “Tens of trillions of dollars of transactions were done in the dark,” says University of San Diego law professor Frank Partnoy, an expert on financial markets and derivatives. “No one had a picture of where the risks were flowing.” Betting on the risk of any given transaction became more important—and more lucrative—than the transactions themselves, Partnoy notes: “So there was more betting on the riskiest subprime mortgages than there were actual mortgages.” Banks and hedge funds, notes Michael Greenberger, who directed the cftc’s division of trading and markets in the late 1990s, “were betting the subprimes would pay off and they would not need the capital to support their bets.”

These unregulated swaps have been at “the heart of the subprime meltdown,” says Greenberger. “I happen to think Gramm did not know what he was doing. I don’t think a member in Congress had read the 262-page bill or had thought of the cataclysm it would cause.” In 1998, Greenberger’s division at the cftc proposed applying regulations to the burgeoning derivatives market. But, he says, “all hell broke loose. The lobbyists for major commercial banks and investment banks and hedge funds went wild. They all wanted to be trading without the government looking over their shoulder.”

Now, belatedly, the feds are swooping in—but not to regulate the industry, only to bail it out, as they did in engineering the March takeover of investment banking giant Bear Stearns by JPMorgan Chase, fearing the firm’s collapse could trigger a dominoes-like crash of the entire credit derivatives market.

No one in Washington apologizes for anything, so it’s no surprise that Gramm has failed to issue any mea culpa. Post-Enron, says Greenberger, the senator even called him to say, “You’re going around saying this was my fault—and it’s not my fault. I didn’t intend this.”

Whether or not Gramm had bothered to ponder the potential downsides of his commodities legislation, having helped set off an industry free-for-all, he reaped the rewards. In 2003, he left the Senate to take a highly lucrative job at ubs, Switzerland’s largest bank, which had been able to acquire investment house PaineWebber due to his banking deregulation bill. He would soon be lobbying Congress, the Fed, and the Treasury Department for ubs on banking and mortgage matters. There was a moment of poetic justice when ubs became one of the subprime crisis’ top losers, writing down $37 billion as of this spring—an amount equal to its previous four years of profits combined. In a report explaining how it had managed to mess up so grandly, ubs noted that two-thirds of its losses were the fault of collateralized debt obligations—securities backed largely by subprime instruments—and that credit default swaps had been “key to the growth” of its out-of-control cdo business. (Gramm declined to comment for this article.)

Gramm’s record as a reckless deregulator has not affected his rating as a Republican economic expert. Sen. John McCain has relied on him for policy advice, especially, according to the campaign, on housing matters. The two have been buddies ever since they served together in the House in the 1980s; in 1996, McCain chaired Gramm’s flop of a presidential campaign. (Gramm spent $21 million and earned only 10 delegates during the gop primaries.) In 2005, McCain told a Wall Street Journal columnist that Gramm was his economic guru. Two years later, Gramm wrote a piece for the Journal extolling McCain as a modern-day Abraham Lincoln, and he’s hailed McCain’s love of tax cuts and free trade. Media accounts have identified Gramm as a contender for the top slot at the Treasury Department if McCain reaches the White House. “If McCain gets in,” frets Lynn Turner, a former chief sec accountant, “we’ll have more of the same deregulatory mess. I like John McCain, but given what I know about Phil Gramm, I wouldn’t vote for McCain.”

As a thriving bank exec and presidential adviser, Gramm has defied a prime economic principle: Bad products are driven out of the market. In John McCain, he has gained an important customer, so his stock has gone up in value. And there’s no telling when the Gramm bubble will burst.

David Corn is Mother Jones’ Washington, D.C. bureau chief.

————–

Matthew Lee, without mentioning Senator Gramm, makes it clear how old laws are being disregarded in order to hide the effects of changes in the law that were introduced by Senator Gramm. Read the following because it is to this point. You will find there also foresight to future forced bailouts that you will not read about in the conventional press.

Also, remember that AIG is actually the largest US insurance company, and the subprime lending part was just an unfortunate side-line that came about when people like Senator Gramm did by dismantling the firewalls from the post-depression of the 1930s had established. They were saying that less regulation makes for better economy and now we realized that it made for collapse. Now, what with the claims from Gustav and Ike destined to come in within 2-3 weeks? Can AIG remain standing or it will be flattened out? What then? Who will buy an insurance company with zillions in claims against them? The US government? Will Gramm give a damn then?

If you want to understand where McCain wants to take the country, read then the Gibson interview parts we bring in the excerpt, after the Bank of America - Merrill Lynch article, and think what all of this means with a National election in 7 weeks. Will Karl Rove pyrotechnics come to save the GOP day? It seems that talk on lipstick, pit-bulls and pigs will be part of this.

Bank of America - Merrill Would Violate 10% Deposit Cap, Laws Snubbed by Subprime

Byline: Matthew R. Lee of Inner City Press: News Analysis

NEW YORK, September 12 — Amid some gushing about Bank of America stepping in to scoop up subprime-damaged Merrill Lynch for $50 billion, an issue that has scarcely been raised is the law. In 1994 Congress said that no one bank should control over 10% of insured deposits in the United States. Bank of America has been at and over that deposit cap for years now. Merrill Lynch Bank USA, based in Utah, has $57 billion in deposits.  But in the subprime meltdown Bank of America’s regulators, most prominently the Federal Reserve Board, allow it to skirt the law, by defining all of the deposits it buys as, well, non-deposits.

   When B of A bought the discredited subprime mortgage lender Countrywide Home Loans, the Fed decided that since Countrywide’s deposits were technically in a savings bank rather than a commercial bank –  a distinction without a difference anymore, given that savings banks are now allowed to make small business loans as well — it could approve the merger. Click here for coverage from Inner City Press.

  As an investment bank, Merrill Lynch had been unable to own a “regular” bank. So it collected $57 billion in deposits through a so-called Industrial Loan Company in Utah. These are deposits insured by the FDIC; they should count toward any common sense reading of the 10% deposit cap.

  But the issues has barely been mentioned.  If the past is any guide, the Fed has probably already given wink and nod approval to Bank of America. While the Fed has some powers to override laws it if declares an emergency, it has not made any such declaration in this case. It’s just engaging in more and more routine law-bending.

Merrill Lynch: the rain has only begun to fall

  Merrill Lynch itself got directly involved in subprime, buying First Franklin from National City and holding subprime mortgage backed securities through Merrill Lynch Bank USA and yet another bank, Merrill Lynch Bank & Trust. Expect an argument to emerge that the deposits in both entities should be counted toward the 10% deposit cap, and that Merrill’s as well as Bank of America’s roles in the subprime meltdown should be considered and acted on.

In other financial meltdown news Lehman Brothers, owner of such subprime rogues as Aurora and Delaware Savings Bank, is declaring bankruptcy; AIG, which bought American General and its subprime business, is asking the Federal Reserve for $40 billion in loans. For year, Fair Finance Watch raised to AIG’s regulator, the Office of Thrift Supervision, issues concerning AIG’s subprime lending. But AIG pushed through, hiring ex-regulators as its lawyers to argue that various laws didn’t apply to it. Now the OTS’ largest institution, Washington Mutual, is said to be teetering. The chickens are coming home to roost, but will either the executives or the regulators be held accountable?————-

McCain-Palin Economic Platform: Bush Policy Extended, With Lipstick.
September 14th, 2008 . by economistmom

 http://economistmom.com/2008/09/mccain-p…
Here’s the part of Palin’s interview with Charlie Gibson where she explains(?) the McCain-Palin economic platform…  If you’re able to understand her explanation, let me know where you see the “change” from Bush economic policy –other than the lipstick, I mean…

***

Sarah Palin on Economic Policy:

GIBSON: Governor, John McCain and you are now talking about the GOP as a party of change. We’ve got a very sick economy. Tell me the three principal things you would do to change the Bush economic policies.

PALIN: And you’re right, our economy is weak right now and we’ve got to strengthen it, and government can play an appropriate role in helping to strengthen the economy.

***

PALIN: Our 6.1 percent unemployment rate is unacceptable, also, across our nation. We need to put government back on the side of the people and make sure that it is not government solely looked at for all the solutions, for one.

Government has got to get out of the way, in some respects, of the private sector, being able to create the jobs that we need, jobs that are going to allow for the families to be able to afford health care, to be able to afford their mortgages, to be able to afford college tuition for their kids. That’s got to be the principal here, reform government, recognize that it’s not government to be looked at to solve all the problems.

Taxes, of course, I think is one of the most important things that government can obviously control and to help with this issue.

GIBSON: What you said to me at the beginning I don’t think anybody in the Bush administration would disagree with. What do you change in the Bush economic plans?

PALIN: We have got to make sure that we reform the oversight, also, of the agencies, including the quasi-government agencies, like Freddie and Fannie, those things that have created an atmosphere here in America where people are fearful of losing their homes.

People are looking at job loss. People are looking at unaffordable health care for their families. We have got to reform the oversight of these agencies that have such control over Americans’ pocketbooks.

GIBSON: So let me summarize the three things that you’d change in the Bush economic plans. One, two, three.

PALIN: Reduce taxes, control spending, reform the oversight and the overseeing agencies and committees to make sure that America’s dollars and investments are protected.

GIBSON: So let me break some of those down. You talk about spending. How much smaller would a McCain budget be? Where would you cut?

PALIN: We’re going to find efficiencies in every department. We have got to. There are some things that I think should be off the table. Veterans’ programs, off the table. You know, we owe it to our veterans and that’s the greatest manifestation that we can show in terms of support for our military, those who are in public service fighting for America. …It’s to make sure that our veterans are taken care of and the promises that we’ve made to them are fulfilled.

GIBSON: So you’d take military off the table, the veterans’ benefits. That’s 20 percent of the budget. & Do you talk about entitlement reform? Is there money you can save in Social Security, Medicare and Medicaid?

PALIN: I am sure that there are efficiencies that are going to be found in all of these agencies. I’m confident in that.

GIBSON: The agencies are not involved in entitlements. Basically, discretionary spending is 18 percent of the budget.

PALIN: We have certainly seen excess in agencies, though, and in — when bureaucrats, when bureaucracy just gets kind of comfortable, going with the status-quo and not being challenged to find efficiencies and spend other people’s money wisely … then that’s where we get into the situation that we are into today, and that is a tremendous growth of government, a huge debt, trillions of dollars of debt that we’re passing on to my kids and your kids and your grandkids … It’s unacceptable.

I hear Doug Holtz-Eakin has been tasked with (demoted to?) “tutoring” Palin on economic policy these days.  Poor Doug…guess he’s got his work cut out for him.

—————–

From:    beanra at msn.com
Subject: 100 Year Crash: McCain advisor spurred $62 trillion derivatives market that will swamp global markets
Date: September 19, 2008

100 Year Crash: McCain advisor spurred $62 trillion derivatives market that will swamp global markets.

Lurking in the background of this weekend’s collapse of two of Wall Street’s biggest names, is a $62 trillion segment of the $450 trillion market for derivatives that grew huge thanks to John McCain’s chief economic advisor, Phil “Americans are Whiners” Gramm. That’s because in December 2000, Gramm, while a U.S. Senator, snuck in a 262-page amendment to a government re-authorization bill that created what is now the $62 trillion market for credit default swaps (CDSs).

I realize it is painful to read about yet another Wall Street acronym, but this is important because it will help you understand why the global financial markets are collapsing. And it will give you information to consider when you vote in November. CDSs are like insurance policies for bondholders. In exchange for a premium, the bondholders get insurance in case the bondholder can’t pay. As I posted, in the case of the $1.4 trillion worth of Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) bonds, the government’s nationalization last Sunday triggered the CDSs on those bonds. The people who received the CDS premiums are now obligated to deliver those bonds to the ones who paid the premiums.

***
Gramm’s 262-page amendment, dubbed “The Commodity Futures Modernization Act,” according to Texas Observer, freed financial institutions from oversight of their CDS transactions. =”Prior to its passage, they say, banks underwrote mortgages and were responsible for the risks involved. Now, through the use of [CDSs]-which in theory insure the banks against bad debts-those risks are passed along to insurance companies and other investors,” wrote Texas Observer.

How does this relate to Lehman’s bankruptcy? “[CDSs] were a key factor in encouraging lenders to feel they could make loans without knowing the risks or whether the loan would be paid back. The Commodity Futures Modernization Act freed them of federal oversight,” according to Texas Monthly. And it was due to these CDSs that Wall Street held an emergency session yesterday to try to minimize the damage of Lehman’s CDSs and other derivatives. Unfortunately, this session did not produce much thanks to the built-in lack of knowledge of the risks in these transactions that Gramm’s legislation ensured.

You are going to be reading more and more about CDSs over the months ahead — it will become as familiar as the phrase subprime mortgage was in 2007. Unfortunately, there were “only” $1.3 trillion worth of subprime mortgages and the CDS market is 48 times bigger than that — and more than four times bigger than U.S. GDP. And since nobody has ever had to deal with this volume of CDS unwindings, it is impossible to calculate how much they will cost.

One thing is clear. If you think America is a nation of whiners and this is a mental recession, I strongly urge you to vote for McCain. But if you take a look at how much you are paying at the gas pump, how much of your retirement will be wiped out in the months ahead, and how you will pay all those bills as the unemployment rate climbs higher, it might be worth considering whether you can afford to elect a man who relies on Phil Gramm for economic advice.

Quote of The Week: This From Thomas L. Friedman “Making America Stupid” and Follow Up From His Interview On Fareed Zakaria’s GPS/CNN.

“SORRY, BUT THERE IS NO SUSTAINABLE POLITICAL/MILITARY POWER WITHOUT ECONOMIC POWER, AND TALKING ABOUT ONE WITHOUT THE OTHER IS NONSENSE. UNLESS WE MAKW AMERICA THE COUNTRY MOST ABLE TO INNOVATE, COMPETE AND WIN IN THE AGE OF GLOBALIZATION, OUR LEVERAGE IN THE WORLD WILL CONTINUE TO SLOWLY ERODE.”

“THERE IS NO STRONG LEADER WITHOUT A STRONG COUNTRY. AND POSING AS ONE, TO USE THE CURRENT VERNACULAR, IS NOTHING MORE THAN PUTTING LIPSTICK ON A PIG.

Further:

“I respected McCain’s willingness to support the troop surge in Iraq, even if it was going to cost him the Republican nomination. Now the same guy, who would not sell his soul to win his party’s nomination, is ready to sell every piece of his soul to win the Presidency.

In order to disguise the fact that the core of his campaign is to continue the same Bush policies that have led 80% of the country to conclude we’re on the wrong track, McCain has decided to play the culture-war card.

Obama may be a bit professorial, but at least he is trying to unite the country to face the real issues rather than divide us over cultural differences.”

Than on GPS:

“When everybody says that he is going Green, this is not a Revolution but a party. GM did not tell us they had technology the last ten years, this - so they tried to sell more Humvees.”

Putinism is based on the price of oil. What Putin wants in his push on Georgia and the Ukraine is to reenergize Russia as he never accepted its fall to a level of secondary power. To weaken him we need an energy policy based on new technologies of renewable energy. We must then also convince Putin that we have no design on Russia because we cannot solve global problems without Russia - substituting the Czech navy will not do. Japan and Germany changed - where is our conversation to help Russia change?

AMERICANS WANT NATION BUILDING IN AMERICA. We do not have billions of dollars to throw around. Robert Watson (the man fired by President G.W. Bush from the IPCC) said that when you jump from the 28th floor you think that you are flying - it is only the sudden stop at the end that gets you. We built an economy on fossil fuels. We thought they were INEXPENSIVE, INEXHAUSTIBLE, and BENIGN. Now we realized that they are neither - they are EXPENSIVE, EXHAUSTIBLE and TOXIC.

ET (ENERGY TECHNOLOGY) is the future, and China and India are invited to LEAPFROG. That is we ate the appetizer, soup, and entree, and when they came to participate in the desert, we told them - you foot the bill.

They did not agree, and said it is their time to feast also. BUT IF WE SHOW CHINA AND INDIA THAT WE ARE USING THE NEW ET, THEY WIL COME ON BOARD ALSO. Simply - they will not want to be left behind suffocating from their own activities.

Like we had a Space Race to put the first person on the moon - we will have now an Earth Race so man can still live on earth.

***

In 2001, it was 575 votes in Florida, and the UN Supreme Court, that gave the election to the G.W. Bush and Cheney team and created the 8 years of the Oil & Cheney Presidency; Al Gore and the World were left boiling - melting ice-caps and churning hurricanes made progress - ask this week those in Houston who do not sit on oil-company Boards.

OP-ED COLUMNIST, The New York Times
Making America Stupid

By THOMAS L. FRIEDMAN
Published: September 13, 2008

Imagine for a minute that attending the Republican convention in St. Paul, sitting in a skybox overlooking the convention floor, were observers from Russia, Iran and Venezuela. And imagine for a minute what these observers would have been doing when Rudy Giuliani led the delegates in a chant of “drill, baby, drill!”

I’ll tell you what they would have been doing: the Russian, Iranian and Venezuelan observers would have been up out of their seats, exchanging high-fives and joining in the chant louder than anyone in the hall — “Yes! Yes! Drill, America, drill!” — because an America that is focused first and foremost on drilling for oil is an America more focused on feeding its oil habit than kicking it.

Why would Republicans, the party of business, want to focus our country on breathing life into a 19th-century technology — fossil fuels — rather than giving birth to a 21st-century technology — renewable energy? As I have argued before, it reminds me of someone who, on the eve of the I.T. revolution — on the eve of PCs and the Internet — is pounding the table for America to make more I.B.M. typewriters and carbon paper. “Typewriters, baby, typewriters.”

Of course, we’re going to need oil for many years, but instead of exalting that — with “drill, baby, drill” — why not throw all our energy into innovating a whole new industry of clean power with the mantra “invent, baby, invent?” That is what a party committed to “change” would really be doing. As they say in Texas: “If all you ever do is all you’ve ever done, then all you’ll ever get is all you ever got.”

I dwell on this issue because it is symbolic of the campaign that John McCain has decided to run. It’s a campaign now built on turning everything possible into a cultural wedge issue — including even energy policy, no matter how stupid it makes the voters and no matter how much it might weaken America.

I respected McCain’s willingness to support the troop surge in Iraq, even if it was going to cost him the Republican nomination. Now the same guy, who would not sell his soul to win his party’s nomination, is ready to sell every piece of his soul to win the presidency.

In order to disguise the fact that the core of his campaign is to continue the same Bush policies that have led 80 percent of the country to conclude we’re on the wrong track, McCain has decided to play the culture-war card. Obama may be a bit professorial, but at least he is trying to unite the country to face the real issues rather than divide us over cultural differences.

A Washington Post editorial on Thursday put it well: “On a day when the Congressional Budget Office warned of looming deficits and a grim economic outlook, when the stock market faltered even in the wake of the government’s rescue of Fannie Mae and Freddie Mac, when President Bush discussed the road ahead in Iraq and Afghanistan, on what did the campaign of Senator John McCain spend its energy? A conference call to denounce Senator Barack Obama for using the phrase ‘lipstick on a pig’ and a new television ad accusing the Democrat of wanting to teach kindergartners about sex before they learn to read.”

Some McCain supporters criticize Obama for not having the steel in his belly to use force in the dangerous world we live in today. Well I know this: In order to use force, you have to have force. In order to exercise leverage, you have to have leverage.

I don’t know how much steel is in Obama’s belly, but I do know that the issues he is focusing on in this campaign — improving education and health care, dealing with the deficit and forging a real energy policy based on building a whole new energy infrastructure — are the only way we can put steel back into America’s spine. McCain, alas, has abandoned those issues for the culture-war strategy.

Who cares how much steel John McCain has in his gut when the steel that today holds up our bridges, railroads, nuclear reactors and other infrastructure is rusting? McCain talks about how he would build dozens of nuclear power plants. Oh, really? They go for $10 billion a pop. Where is the money going to come from? From lowering taxes? From banning abortions? From borrowing more from China? From having Sarah Palin “reform” Washington — as if she has any more clue how to do that than the first 100 names in the D.C. phonebook?

Sorry, but there is no sustainable political/military power without economic power, and talking about one without the other is nonsense. Unless we make America the country most able to innovate, compete and win in the age of globalization, our leverage in the world will continue to slowly erode. Those are the issues this election needs to be about, because that is what the next four years need to be about.

There is no strong leader without a strong country. And posing as one, to use the current vernacular, is nothing more than putting lipstick on a pig.

From:  jaiganesh09 at gmail.com
Subject: 2nd Regional Training Course on Climate Risk Management: Science, Institutions, and Society
Date: September 9, 2008

2nd Regional Training Course on Climate Risk Management: Science, Institutions, and Society.

Greetings from ADPC!

The Asian Disaster Preparedness Center (ADPC) will offer the Second Regional Training Course on Climate Risk Management: Science, Institutions, and Society from 17 to 28 November 2008 in Bangkok, Thailand. The course aims to build the capacity of professionals to manage risks associated with climate variability, change, and extremes. It builds upon ADPC’s two decades of experience in disaster management, facilitating regional cooperation and building capacities of disaster management institutions, disaster management practitioners, and communities, and a decade of experience in institutionalizing climate information applications for disaster mitigation. It incorporates case studies and sectoral examples from climate risk management programs and projects all over Asia.

Upon completing the course, participants will be able to:

1) design early warning systems for climate-related risks;

2) design climate risk management, climate forecast applications, and climate change adaptation projects, and

3) develop tools to integrate climate risk management practices into development programs and policies.

The first CRM course offering was completed in May 2008 with 27 participants from 14 countries. For more details, please check out the course brochure at