Monday, September 29, 2008

The Crap Sandwich

Ali Baba and the forty thieves - AKA Pelosi, Chris Dodd, Barney Frank and Harry Reid

"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.


Anonymous said...

what i don't understand coming out of this is how the dimocrats have spun this to be the repubs fault.
numerous videos i have seen have the dims scolding the regulators testifying before congress.
barney frank stating in 2004 that there is nothing wrong and the regulators should shut up and be quiet.
so how do the dims do this?
are they screaming the loudest?
as i understand this ff is in favor of the bailout but only with certain pre-conditions previously enumerated in a separate essay.
if not then the bill should be voted down.
is this correct?

Anonymous said...

i don't know if i said what i wanted to or not.
previously ff stated that two things make the market work, profit & confidence.
if the feds don't back up the loans in question, then the market loses confidence, investors pull out, and the market goes down.
maybe even enough to cause a depression in the US. this is where the ripple effect ff spoke of comes into play.
if the bailout does not go through at all, does the US in fact go into a depression, or into some modified great recession?

Anonymous said...

"It;s a crap sandwich, but I'll still vote for it." With this one sentence rep Boehner summed up why the Republicans are in the minority. Unless they get their act together they will stay in the minority for the foreseeable future. Only idiots and people who lack the courage of their convictions vote for crap sandwiches.

I suspect Mr. Boehner is not stupid. He likely falls into the category of lacking any moral fiber. Neither type is suitable for public office.

Freedom Fighter said...

Hi Louie,
The Left is able to do this for one reason...they control the dinosaur media. Unfortunateky fo rthem, that media is rapidly losing credibility, which is precisely why th eLeft wants talk radio and the blogs censored.

I'm in favor of federal action to restore confidence in the markets, but this plan is an abortion. It is designed to bail out Paulson's buddies on Wall Street,give th eSecretary of th eTreasury unconstitutional power, and buy votes for the Democrats attrhe taxpayer's expense.

As I said before, either make the investment banks pay a fair market value to insure these questionable loans or buy the properties outright and either manage them or contract it out to private entrepeneurs for a percentage. And yes, that includes evicting non-paying residents and renting the propeties out at profit.


DW said...

FF I hope yer a stinking a liar! Otherwise, I'm angry...cuz, I want a bailout too.

Just a note on the government running rental properties, they can't. I've seen too many "housing projects" get bulldozed after only 40 years on the planet because they were drug infested, vermin infested, uninhabitable wastelands. That's what happens when the gov't gets into property management, it ain't pretty.

Freedom Fighter said...

Excellent point, DW! Let's stickwith my origianl proposal of letting private contractors run the propereties for a percentage...