"It's a crap sandwich, but I'll still vote for it"- Republican House minority leader John Boehner.
Something absolutely astounding is going on in Washington today, as debate begins on the modified bailout bill in the US House of Representatives.
This is unbelievably bad, and I got closer and took a putrid whiff so you wouldn't have to....
- The essential problem here is that the decline in American home prices has forced a $500 billion in write-downs of bank capital as I write this, and the banks have only raised $350 billion in new capital to cover what amounts to their margin. Since the private sector, AKA prudent investors are not going to pony up new capital to the banks and investment organs unless the federal government underwrites the risk to shareholders, hence the reason for Paulson's plan, the Federal bailout.
What's wack (to put it mildly) is that this giddy little ex-Goldman-Sachs shill proposes to use your money not just to buy these mortgages and unidentified `other assets' but to buy them at inflated prices no investor with an IQ above double digits would pay. Fed chairman Ben Bernanke has displayed an unexpected talent for stand up comedy by referring to this as the "hold to maturity price". Rather than a bailout, this is a wholesale raid on the US treasury. And it gets worse.
- The bill gives Paulson the sole discretion to use your money to identify and purchase other 'troubled assets' at whatever price Paulson's decides is a 'hold to maturity price' - junk bonds, mortgage securities, auto loans, bogus venture capital scams, even shares in WC Field's famed One Penny Beefsteak Mine. And because it's at Paulson's sole discretion,he can bail out anyone he chooses to and eliminate competition to his pals on Wall Street.
- In Section 110, the Feds, after purchasing these mortgages at inflated prices have a mandate to `rewrite' the terms of these loans, including a reduction in interest rates, a reduction in the amount owed and changes in the loan terms.
So...guess what? Congress is going to use your money to gift deserving homeowners - translate that as 'likely Democrat voters' - some more unearned equity to tap to pay off their credit card bills. And if these deserving homeowners are determined as being unable to pay the home loan payments, Paulson wants to use your money to change the interest rate and the terms on their loans at your expense. If you scrimped and saved to put ten percent down to buy that modest home within your means and paid say, one point to bring your interest rate down to 5.5%, screw you, chump. You'll be paying to make things rosy for someone who bought in at three percent or nothing down and bought more than they could afford.
- Not only that, but section 109 gives Paulson and the Feds a mandate to lean on servicers of existing mortgages to 'mitigate foreclosures and to encourage servicers of mortgages to modify loans through Hope for Homeowners and other programs. Allows the Secretary to use loan guarantees and credit enhancement to avoid foreclosures.'
Servicers, for those of you who don't know is anyone in charge of administering and collecting on a home loan. Not only does Paulson want to mess with the garbage the taxpayers are buying outright, but it the bill gives him a mandate to lean on lenders to to lower credit standards and modify loan terms on the mortgages the Feds don't own, especially if 'deserving homeowners' and a possible foreclosure are involved.
To realize how insidious this is, be aware that mortgages are legal contracts between a borrower and a lender, and are then sold to investors on what's called the secondary market. If you bought say, $10 million dollars worth of mortgages at six percent as an investment and the contract for the dollar amount and the yield you were expecting on your investment could suddenly be altered at the whim of some bureaucrat, do you think you'd be in a hurry to invest your hard earned money in mortgages again ?
- But wait, there's more....Paulson gets the unlimited authority to hire whom he wants to administer this mess, according to section 108, because Paulson decides what constitutes 'conflict of interest' , what gets bought, who buys it or where and how they can go to work after they finish their sojourn in DC..a perfect recipe for bribery and corruption almost unparallelled in history.
This bill doesn't do what it's supposed to do, with is to provide confidence to clean out the blocked arteries of credit. The way to do that would have been to allow the Feds to either insure these loans ( at a fair price to the lenders) or to pick them up the same way any other investor of last resort would, at a deep discounts. What it does do is to punish every American Bank, Thrift and S&L who was prudent and played by the rules in order to reward Paulson's pals on Wall Street, keep the same corrupt politicians in charge of the mess, and rob the taxpayers in order to buy votes for the Democrats.
And of course, ultimately that's what this is all about anyway...presidential politics. The Democrats are more than willing to promote economic chaos if it will help them win the White House, no matter how much pain it causes 'the little people' .
The Democrats want to make this election about the economy and are thus exacerbating a 'crisis', just as they did with oil prices by refusing to allow any domestic drilling.And what's more, they want to be able to hang the failure for failing to fix the so-called 'crisis' on the Republicans, who's votes they don't need anyway in order to pass this license to loot the treasury.
It's a tribute to the common sense of the American electorate that they are opposed to this highway robbery by a vast majority.
Ali Baba and his Forty Thieves will probably try to push this through before sundown tonight.
Make your voices heard: 202-224-3121.
UPDATE: THE VOTE: 228 NAY; 205 YEA... Apparently Nancy Pelosi was primarily responsible by ginning up a particularly nasty partisan screed before the vote that blamed the Republicans and a "right-wing ideology of anything goes, no supervision, no discipline, no regulation" for all the problems with the financial markets, and accused them of being 'unpatriotic'. According to Boehner, this caused a few Republicans who were planning on voting for this travesty to change their minds, but I think it was more that they noticed that Democrats in contested districts were being allowed by the Dems congressional leadership to vote nay, and they rightly saw this as exactly what it was..a set up, with Pelosi deliberately coming off with a nasty, insulting speech in order to goad the House Republicans.
The reality is, the Dems want a 'crisis' to continue, at least until November 4th. It's how they feel they can win.
Congress is planning on adjourning until Thursday...keep up the pressure.
ADDENDUM: After the vote failed, you'll notice that the Dow climbed again once Wall Street realized that they would have to make do and conduct biz without access to our money. Some crisis, hmm?
And for those of you concerned about the supposed drying up of credit, as a public service, I've offered a simple solution to cure the credit crisis and save the taxpayers $600 billion dollars.
All the current occupant of the White House has to do is e-mail me, or have his people do it if he's otherwise engaged.