Nitwittery Run Rampant

A brilliant compilation of quotes that Austrian Filter put together demonstrating either how clueless Bernanke and Paulson were in the leadup to the financial meltdown, or that they were simply lying.

A couple of favorites:

October 15th, 2007 – Bernanke: "It is not the responsibility of the Federal Reserve - nor would it be appropriate - to protect lenders and investors from the consequences of their financial decisions."

February 28th, 2008 – Paulson: "I'm seeing a series of ideas suggested involving major government intervention in the housing market, and these things are usually presented or sold as a way of helping homeowners stay in their homes. Then when you look at them more carefully what they really amount to is a bailout for financial institutions or Wall Street."

August 10th, 2008 – Paulson: ``We have no plans to insert money into either of those two institutions.” (Fannie Mae and Freddie Mac)

September 8th, 2008 - Fannie and Freddie nationalized. The taxpayer is on the hook for an estimated 1 - 1.5 trillion dollars. Over 5 trillion is added to the nation’s balance sheet.

Financial Roundup (Attention: Not for the Faint of Heart

Let's see what happy news we have today. This guy gives 30 reasons why we will be in Great Depression 2 by 2011 (Look at his picture. Why is he smiling?). Foreign autos are piling up at the dock in Long Beach (now that's a happy picture). George Bush sells us down the socialist river. The Washington Post must have received something from King Paulson to publish this piece of crapola article fawning about his exploits (many of them extra-legal), while President Bush cowered in the background. A more realistic look at King Paulson can be found here where we find proof that he is more concerned about how history sees him then anything else and so must rapidly revise the truth.

Automaker Bailout and Uncovering TARP

This is an interesting argument about why the government should not bailout the automakers. The most fascinating part, however, was a summation of the $700 billion bailout and what a disaster that has been. I append his bullet point summation:

Since $700 Billion Bailout Passed

• The S&P collapsed from 1114 on October 3rd to 848 on November 17th. This is a drop of 24%.
• Paulson did not use the funds as requested.
• Bernanke promised to disclose how taxpayer money would be used but has refused to do so.
• Bloomberg has filed a lawsuit against the Fed under the Freedom of Information Act to find out just how Paulson has used the money.
• Not a single job was created with the money.
• Fannie Mae has announced it may need another $100 billion.
• Freddie Mac proclaimed it had negative net worth.
• AIG received another $37 billion.
• Cities and Auto companies now want a share of the $700 Billion.

There was not a single positive result out of the money that was spent.

King Paulson in Control

Henry Paulson, King of America, is in control and on the beat, folks. He has lent out $2,000,000,000 (2 trillion) to troubled institutions, that would be $2 trillion of the taxpayer's (yep, you) money, but is refusing to say where the money is going. When you are a king, you don't have to tell people what you are doing with their money, that's the point of being king!

Opening Pandora's Box

What happens when you start handing out money, willy-nilly, to anyone who you think needs it?  Everyone starts coming to you hat in hand, holding out their tin cup.  Today GM/Chrysler, tomorrow...who knows.  Thanks so much Hank and Ben. 

Oh, and did I mention that GMChrys wants to hand off some toxic pension obligations onto the government at the same time?   Ha, ha, ha, hey, it all make sense.  If the government is buying mortgage crapola, they may as well take on pension crapola as well. 

King Henry Issues Orders

You've got to love this. Hank Paulson is forcing banks to take government money whether or not they want it. As the writer notes this was tried once before...by Herbert Hoover (whom economists claim "sat around and did nothing" during the great depression). Too bad King Paulson doesn't read history because he is repeating it, and I'd be willing to bet, making a major mistake...again.

A Day That Will Live in Infamy

Yesterday, October 3, 2008, a day that will live in infamy, our (idiotic) congressman handed off to the executive branch even more power than they've already allowed President Bush to grab in the past eight years. These are simply more steps down the Road to Serfdom. Thanks so much Congressmen.

CNET has a good summation of the mess that this bill is, which included more power for the IRS to snoop on Americans in the name of "terrorism." Didn't hear about that, did you? Let's see, I think we've experienced this before. Oh yeah, The Patriot Act.

As noted by CNET the true cost of all of this mess so far is somewhere around $17,000 per American household. The Treasury Department can now "guarantee" home mortgages (i.e. make the taxpayer pay for other's foolish decisions) and even reduce a mortgage a "reasonable amount" if it so chooses. So much for ten centuries of contract law, vaporized by cowards. Oh, and former Goldman Sachs CEO Henry Paulson can come up with "appropriate standards" of executive pay for companies that dump their toxic waste on us. Yeah, I'll bet he will reign in their pay.

Nice to know that King Paulson will implement this bill as quickly as possible. I'll bet there won't be any fraud waste and abuse in that!

Henry Paulson: King of America

Apparently Henry Paulson (and whoever his successor is in a new administration) is about to be crowned "King of America" and by Congress at that. He will have essentially unlimited power to do whatever he wants with money supplied by Congress. His decisions will NOT be reviewable by the courts. Wow, sounds like a king to me. Nothing like a catastrophe to make Congress act quickly and without realizing the implications of their actions. Goodbye Democracy. Welcome Emperor!

The Bush administration seeks ``dictatorial power unreviewable by the third branch of government, the courts, to try to resolve the crisis,'' said Frank Razzano, a former assistant chief trial attorney at the Securities and Exchange Commission now at Pepper Hamilton LLP in Washington. ``We are taking a huge leap of faith.''

We are indeed. These guys can be trusted...can't they? Also notice George Bush's proclamation that he is all for the free markets and capitalism...except when he isn't. Consistent. Very consistent.

An Historical Week (of Government Intervention)

What to say of the events on Wall Street this past week? Probably the best summation for what it will mean in the future is this article from a Weekly Standard (U.K.) editor, which is full of excellent quotes of which I will post one:

President George W. Bush, Fed chairman Ben Bernanke and treasury secretary Hank Paulson all declare their preference for free-market solutions and a desire to minimise moral hazard. But they sound like François Mitterrand in mid-1983 when he abandoned his socialist programme commun in the face of capital flight and a collapsing franc, all the while proclaiming his devotion to socialism.

Just so. Fortune magazine weighs in on what the bailout might cost (begin at 1,000 billion and adjust upward). This will tie the hands of any coming president on any social or financial issue, what little the U. S. can afford will be poured down the black hole of bailing out the investment banks.

Joe Nocera at the New York Times weighs in with an excellent analysis of what the government did and whether it is going to be useful at an article appropriately entitled "All Hail Mary Pass, But No Receiver in the End Zone." A couple of the more stupid ideas the Treasury has put into place: 1. Banning short selling of financial stocks. This is a real joke. I find it ironic that President Bush said of short sellers: As President Bush put it Friday, short sellers are “intentionally driving down particular stocks for their own personal gain.” Hmm, I don't think he blamed speculators when oil prices ran to $150 per barrel, nor did they outlaw speculation in oil. Disgusting. Nocera's theory (probably pretty accurate) is that the SEC is trying to coverup their own culpability by banning short sales of financial stock.

Then again, maybe the S.E.C. is trying to cover up its own culpability in this crisis. Four years ago, the agency pushed through a rule that allowed the big investment banks to take on a great deal more debt. As a result, debt ratios rose from about 12 to 1 to more like 30 to 1. Guess what Lehman’s debt ratio was when it went bust? Yep: 30 to 1.

At best all of this will calm the markets and "kick the can down the road" for a few days/weeks/months. This is always and everywhere the government's approach to disasters and it never works. It ends up making the situation worse than it would have been. See the book "Fiat Money in France" for a guidebook on what is likely to happen.

How is the Economy in Reality (as opposed to Government statistics)

This is a pretty sobering article. Some highlights:

Secretary Paulson brings back the ghosts of Herbert Hoover: ‘The US banking system is sound…’

In an eerie echo of President Herbert Hoover in 1930, during a Presidential campaign against Roosevelt, following the stock market crash and collapse of numerous smaller banks, Paulson recently appeared on national TV to declare "our banking system is a safe and sound one."

Government manipulation of economic data:

The economic reality is not reflected in official US Commerce Department or Labor Department statistics. There the data is constantly being "revised" to hide the grim reality in an election year.

My good friend, economist John Williams of California, has meticulously tracked such "data revisions" for more than 25 years and found the manipulation of reality so alarming that he founded an independent subscriber service titled "Shadow Government Statistics" (http://www.shadowstats.com/ ), where he makes best estimate calculations of the reality not the official mythology.

Williams estimates the "real" unemployment rate (as opposed to the imaginary figures put out by the government) at 13.7%. Yeah, it's ugly.