A good description of the REASON for the Bank Bailout Fund

I found this comment by Robert Birdwell on this site and believe Robert best describes the real reason behind the so called bailout . I post his comment unchanged as it appeared

http://www.moneymorning.com/2008/10/02/senate_bailout_bill/
Comment by Robert Birdwell on
3 October 2008:
For all of the intellectualizing, a critical point has been missed. From 1970 to 1995, we all had the most powerful tool on earth, Title 18 U.S.C. Section 1964©). The congress was conned into inserting an exception into the law. That supposedly innocuous exception removed the standing of any citizen to sue for any injury as a result of any conduct in the sale or purchase of securities, and gave exclusive standing to sue to the United States. To defeat RICO, all the United States had to do was refuse to prosecute those committing securities fraud. Injured parties were left waiting for prosecutions that never came. Thus, injured citizens had no actual recourse.

1995 was also the very time banks wanted into the securities business in a big way. It was shortly after the 1995 exception that these morphing chimera called derivatives entered the market. Soon, every type of loan, mortgage, car loan, and credit card debt, was bundled and sold as derivatives. Investment Banks and brokerage houses could not get enough debt to package and sell. The fees were huge, and easy to come by.

As derivatives became worth less and less, more and more were packaged and sold. The United States SEC and the DOJ had the exclusive power to oversee, regulate, and prosecute the criminals, since all of these securities trades were done in interstate and foreign commerce, but the SEC and the DOJ were never in the fight and intentionally refused to do so.

The perfect vehicle was the insane notion that the value of your home was going to increase exponentially, forever. Unwitting people were talked into refinancing, or selling, their existing homes and talked into participating in the greatest real estate market in history. It didn’t matter if you made $10 per hour, refinance your home and buy another one you can sell for a huge profit before the payment increases. What could possibly go wrong. You were dealing with real estate and financial experts. Everybody was doing it. It was the smart thing to do and you are not stupid! Besides, all of these people are licensed and regulated by the government!

The people running the investment banks in Europe and Asia were primed to buy into these miracle investments. They invested big.

When these began to sour, it was the foreign banks and investment houses that wanted to find a back door. That back door could only exist if the Americans bought back all of the bad paper. Threats of an economic Armageddon were made. China and others would dump our currency and debt. Sanctions would be imposed. Our economy would be destroyed. Trade would end.

The Bush/Paulson remedy was to hypothecate the future production and wealth of American citizens by creating a gigantic fund - guaranteed by the citizens of the United States - that would be used to buy back the worthless paper being held by foreigners.

$700 billion, $5 trillion, you pick the number. It doesn’t matter. Not one penny will go to help American citizens in the process of losing their homes. Not one penny will go to companies being forced out of business. Not one penny will go to domestic credit. Banks don’t need it. Banks create money out of thin air when you sign a note. Your note creates the money, more notes (federal reserve notes), but you have to pay it back with money already existing that you generate from your work.

Your life, and that of your family, for generations to come, has been pledged, by congress, as security to pay all of this back. Money you didn’t steal, but money you have to pay back.

The Emergency Economic Stabilization Act of 2008, is not what the name implies. Welcome to slavery, indentured servitude.


We can overrule it. And overrule it we must

A better Plan to save Wall Street and the taxpayers" money.

A better plan to stabilize the financial markets is to simply let the Federal Deposit Insurance Corporation take over the insolvent companies and form a holding company and reopen as one large institution. Just as when the FDIC takes over smaller banks the same rules should apply here. The new holding company can then operate the new banks keeping the good accounts and spinning the bad ones to a second operating company to work through them eventually restoring some of them and liquidating the rest. If any legitimate debt holders are established then stock could be issued to these legitimate debt holders ( likely bond holders). After a period of time this new company could do a stock offer selling the entire company back into the private sector. Problems solved, seven hundred billion of tax payers money would be saved. The cost of the new company would be returned back to the taxpayers from proceeds of the sell of the stock at the return to the private sector from government operation. The fat cats on Wall Street could be returned to work for the new company but like all reorganizations at a lower cost to the new company allowing it to return to health much faster.

Both Wachovia and Washington Mutual as well as all the community and regional banks that are or become distressed should be included in the new Holding Company thus making a network of bank outlets available to allow loans between banks to be unfrozen and allow the system to do a restart with these outlets being secure and adding the desperately needed stability to the entire banking system. If a bank becomes weak it needs to be added very quickly keeping the system calm.

The changeover could be done over a weekend without any disruption of any kind. Each of the banks taken over would continue to operate under it's present name and corporate structure except that the boards would become advisory only with the final authority being held with the new holding company. Over time most of the banks could be either spun off or several combined under a new corporate configuration and then spun off or sold. The stability of the entire banking system would be the most important goal.

The Federal Reserve System looks at all the deposits at all the banks as one total, so this new bank would not alter the loan patterns from what it would be with if all these various banks that would be part of the new holding company were operating separately. All the bad things being claimed by Mr. Paulson would be avoided with this plan and the best part of this plan are NO TAXPAYER costs beyond the administrative cost of the new bank holding company.

This plan takes a second look at the way the taxpayer’s money is used and avoids benefitting those that caused the problem to begin with. They took unnecessary risk and have lost so the bailout should take the control of the future out of these either corrupt or incompetent executives hands and allow a time out for our banking system to stabilize and get back on track.

The one caveat I have for the new Holding Company, which plans to put these bad debt mortgages in, is that a provision in the restructuring should provide a way for people that are in these mortgages to be able to stay in the home. One idea would be to renegotiate the value of the property back to an equity position with the caveat that they could not sell their home, for eight to ten years or some other appropriate time frame. The reason that I would like to see this put into the terms for use of this agency to stabilize the mortgage market is that if something isn’t done the power structure that will be controlling this new agency will likely sell off these homes at a larger loss than leaving people in the homes or working out something for them. If this doesn’t happen many insiders, the money crowd, Wall Street types you know the folks that got us in this mess to start with will come in and buy these properties up for pennies to the dollar at leaving the homeowner homeless the taxpayer on the hook for the costs and the rest us no better off than we are now. There could be a deed restriction on these homes that required them to pay the proceeds of the write-down out of the home or of the equity of the home as a penalty for moving too fast. The whole idea for this bailout is to stabilize the mortgage market, financial market, and the economy.

The Wall Street BAILOUT and FreeTrade

Just watched a movie called Bordentown. It was about hundreds of Young Mexican women that are raped and murdered in a factory town there. The story was set with an American reporter from a large city newspaper covering the story. When she had finished the story the paper then refused to print the story because of a new NAFTA type deal coming up for Central America and the corporate owners did not want the bad publicity. They said in the movie the wage was $5.00 per day 12 hour day. The newspaper boss reminded the reporter that the news was Freetrade, Globalization and Entertainment. Fits does it not?

When will you Conservatives get it? Bush is not a Conservative he is a NEOCON, "NEW WORLD ORDER" GLOBALIST. The rest of the world defines that as a NEOLIBERAL, which means using the power of government to affect social and political change.

The damage to our nation being done now with this "no strings" bailout of the Wall Street to protect the base of the Republican party from the risk they should have to absorb is just amazing. It is still more amazing the refusal of otherwise conservative folks, to not see through this scam.

These folks paid taxes at a reduced rate (15 percent tops ) because they were supposedly exposed to risk. Now the crony companies are lining up to get these properties at fire sale prices. So here we go taxpayers buy the stuff and bail them out only to sell the same stuff to crony companies to resale at huge profits. Perfect plan for Wall Street bad for the rest of us.

I know I sometimes offend folks that believe themselves to be conservatives yet I believe them to be neocons. I have a hard time with unnecessary wars, trade deals that don’t protect our workers, and the often seemingly stacking of the deck against middle class , working class folks.

The Truth About Abortion and PRO-Life and Change ?

This article is only another example of the struggle we face as a nation. The two parties will exploit anything they can to try and get that small group that will in the end settle elections. People of FAITH can be a strong group that a minority desiring control can use to build towards a small majority. Christians today have been found as necessary for the otherwise smaller Republican party. There is not likely any way the small number of wall street high income folks and corporate people could win elections with out adding other groups . They have learned to attach people of FAITH to them by using their platform as the draw. Also noone desires to pay taxes so another group can be added.

The abortion issue is a difficult problem for Christians to deal with. I am PRO-LIFE in every situation except when medically both mother and child will die anyway if the baby remains, and even then every attempt to save the child when delivered (in what ever way it can be delivered) should be done. The truth of the abortion issue is that the Republican establishment will never let it go away. If abortion was outlawed, the most faithful supporters of their party might then look elsewhere at other issues as to who to vote for. If you faithfully vote Republican now because of their pro-life platform they will never allow that to change. Unfortunately abortion is too good politically to lose as an issue. Once again the sheep are being sheered. Things being what they are I think improving the lives of women to the point none would ever want an abortion might be the best hope we may have to stop abortions from happening.

This business about which party will bring the most change kind of brings to mind the book "Animal Farm,” where all the barnyard animals want to get their freedom from the human farmer. The farmer somehow was removed and they were working (so they believed) for the benefit of themselves collectively. Before long, the story was about the Pig then living in the house and getting most of the benefits from the collective efforts of all the animals on the farm. The Christians that have become for the most part Republicans are like the animals in the barnyard believing voting Republican will help stop abortion, make the country more moral and create a better world to raise their children. The sad truth is like the Pig in Animal Farm the benefits go mostly to high income folks on Wall Street and International Corporations that move the very livelihoods these grass roots families need disparately to be able to provide for their children.

A Simple fix for Social Security

A very simple solution to the funding and saving of Social Security can be found in a simple reorganizing of the way FICA funds are handled. The first thing is for Congress to establish a National Savings and Security Bank. Next all Americans would have an account that their FICA funds are deposited in. The next step is to apply the fractional reserve requirement used by other banks. The next step is instead of a simple IOU being used to replace the surplus funds that are presently being paid by FICA withholding with a promissory note. A recent year the surplus was more than $365 Billion. The note or loan would then be funded by account credit and not by removing the actual funds from the bank. Yes if you are thinking this would be money creation you are correct. Banks create account credit every day. The fractional reserve requirement means only a fraction of the funds lent have to be on hand to be available for withdrawal. Additional loans could be made to local and state governments for their project needs. The opportunity to deposit extra money as a side fund to be received at retirement in additional to the normal Social Security could also be added. Some kind of profit-sharing method could be used to determine the earnings of the side fund. The existing program would remain the same.
If this very simple change had occurred at the beginning, the funds would be in the trillions today. If started immediately, it would save the program. The payments of the loans with interest plus the FICA would balloon the value of the funds many times the value of just the FICA alone.