DOW under 10K & Cronyism Watch!

The Dow Jones Industrial Average dipped below 10,000 for the first time in four years. Guess that means that bailout/rescue bill didn't suddenly ignite the investing engine of the United States middle/upper class. Kind of a sad time with all the bouncing up and down of the stock markets. With the future of the market looking so rocky, this definitely isn't the best time to get in.

Nancy Gibbs writes a very poignant and well thought out article for Times magazine about the true winners of the financial crisis: frugal financial conservatives. I agree with her, the fact that there have been few voices that have encouraged the American people to do something that led to our financial might, save money, is disconcerting. After 9/11 we all remember President Bush telling us that the best way to fight back against the terrorists was to "go shopping". Now, while we are in a crisis it has still been the Administration's message that a reduction in spending is a sign of our economies weakness although our US savings rate has been going negative since late 2000. The only other time the US went negative in their savings rate was a period during the early 1930's... remember how that turned out? Not Pleasant.

Maybe more people should be listening to the Concord Coalition, one of personal favorite groups, when they talk about how saving and paying down the national debt instead of adding on 4 trillion (thanks, President George W Bush) can lead to a return to financial safety. Who would have predicted that spending more than we earn would lead to a credit crisis? I mean.. who'da thunk it?

The last item is today's Cronyism Watch:

Treasury Secretary fresh off his victory in passing a bailout bill (although not quite as empowering as he'd have liked) has decided that with that legislative mandate he'd do something that has become commonplace in this Bush Administration, hire friends and people from the industry to regulate themselves.

Paulson hired Neel Kashkari to oversee the Troubled Assets Relief Program and the newly created Office of Financial Stability. Mr. Kashkari worked as assistant Treasury secretary for International Economics and Development and had joined the Treasury Dept. in July 2006 and worked on several of Treasury's initiatives in response to the housing crisis - including the formation of the mortgage industry alliance Hope Now.

So, this fellow was suppose to be stopping the sub-prime mortgage crisis from developing further.. by forming an alliance of the people who got us into the mess to begin with. Wonderful. I guess his HUGE success in stopping any further problems from erupting got him his promotion to assistant Secretary and now his throne as the dispenser of 250 BILLION dollars by December 31st, 2008. Nice. So failure has been rewarded with promotion and powers never thought possible in US Financial history.

Seems like a typical Bush Administration story.. but something doesn't seem right.. It just isn't dirty enough. Was he someone important's roommate? Did he help someone cheat or hold great parties? Did he give/raise huge amounts of money for someone's campaign? Nah.. not really. Hmm.. well what did Financial Czar Kashkari do before he dedicated his life to public service at the Treasury Department in 2006? What's that? OH, HE WAS AN Vice-Presidential EXECUTIVE AT GOLDMAN SACHS! It seems as though Treasury Secretary Henry Paulson, himself a former topman at the Goldman Sachs firm, has been filling the Treasury chock full of his former buddies from Goldman Sachs. Paulson’s inner circle already includes former Goldmanites Dan Jester, a financial institutions banker, and retired banker Steve Shafran, who focused on corporate restructuring at Goldman. It also included Robert Steel, who has since left Treasury to become CEO of Wachovia.

I know that a bit of cronyism is perfectly normal in politics. Every politician, and in fact normal person, wants to surround themselves with people they trust. When it comes to the government though that person should also be able to do the job they were hired to do in a fair and competent manner. One would think that the ultimate picture of cronyism and nepotism was JFK appointing his brother, RFK, to be Attorney General but guess what? RFK was competent and did an OK job. FEMA headman Micheal "Heckuva Job Brownie" Brown was not.

What a joke this Administration has become. We have come to expect the worse from the Government and not even hope for a change. Whoever the next President may be, I wish them luck cleaning up that mess. They are going to need it.

Paulson taps bailout chief - CNN Money

Feel free to comment, I'd love to hear what you think!

Feds: No Taxpayer Bailouts... except to my friends

There is nothing I love more than a "... but that was my last time I'll do it.. promise" approach to spending taxpayer dollars. It's like bureaucrats, Congress, and the President totally forgot that we actually work to send those their way (or that China is willing to spot us just a few more billion everyday).

Treasury Secretary Paulson said on Monday, September 15th, that two bailouts were enough. No more bailouts. Apparently he had already forgotten J.P. Morgan eat up Bear Stearns with the help of our tax dollars but I'll forgive him just this once... So, on Tuesday, September 16th, guess what your trusty government did?

It held its ground! For almost ONE WHOLE DAY! That is amazing. They deserve a big round of applause. Seriously, clap at your monitor, they deserve it! So, this Bush Administration can be boneheaded and completely committed to an unneeded and unwanted war (remember, NO BLINKING!) but can't keep its own promises on our economy for more than a day.

I'm going to let you all in on a little secret... a very shameful, scandalous one: I supported Bush in 2000 (begrudgingly after McCain lost on Super Tuesday) because although he wasn't the greatest mind.. he seemed to be very resolute on keeping government spending down and controlling an economy that was headed in a new direction "up". I thought hey... Republicans love fiscal conservatism. I hope this guy will save our money - keeping it for a rainy day, cut wasteful spending - even on defense, pay down our national debt (or at least some of the interest), and possibly even get Congress to stop spending so much on Pork Barrel projects. Boy, was I wrong, huh?!

So why would the Federal Reserve, Securities and Exchange Commission (SEC), Treasury Department all get together to tell 20 CEOs from the biggest banks in America that after Bear Stearns/JP Morgan, Fannie Mae, and Freddie Mac they were done bailing out companies? Why were they letting Lehman Brothers die although it represented a HUGE 158 year old history of banking? Why were they letting Merrill Lynch go to the wolves? WHY?

Was it because all of a sudden, the Treasury Dept. was thinking? Had something finally clicked in Secretary Paulson's mind? Did President Bush wake from his 7 and 3/4 year slumber to replace his exact double? No. Not more than a 12 hours after sending this strong message to the Financial community, "No More Bailouts!", the Sec. Paulson was at it again. He had just decided it was in the best interest of the nation to spot AIG (American International Group) a measly 85 million... wait make that EIGHTY FIVE BILLION ($85B) dollars in federally insured loans to keep them afloat.

Again.. that nagging question, WHY? Why one company and not the other? Thankfully this all can be answered in one simple revelation. Treasury Secretary Henry Paulson's previous job: CEO of Goldman Sachs. He isn't exactly a balanced and unbiased player in the game. He was once top of one of the most powerful investment banks on earth.. and the majority of his friends (and more importantly, enemies) are still working on Wall Street. So, send a 2-year bailout to AIG.. and let Lehman Brothers (a chief rival) go to the dogs.. I just wished he would have used sound judgement and fiscal responsibility instead of party and personal politics in making these decisions.

Anyways.. Since when did capitalist economies not let companies you gambled and failed, actually fail? Ridiculous.

For a few more comments on the economy that I wrote four and a half months ago, click here

Links:

No Bailout: Feds Made New Policy Clear in One Dramatic Weekend - Washington Post

Enter The Slippery Slope...

As Banks are apparently lining up at the cliff's edge to fall into the chasm of defaulted sub-prime mortgages and unpaid loans the Treasury Department as arrived - a Knight atop his Noble Steed, the Congress at the call of the noble King, George W Bush, the Treasury will dole out approximately $300 Billion (yes, that is US Dollars) to rescue Fannie Mae and Freddie Mac. Aunt Fannie and Uncle Freddie are just too important to lose.. they are close to all of our hearts..



Now, wait a second.. did someone just say THREE HUNDRED BILLION DOLLARS? Yup, actually the Treasury will be authorized to use unlimited funds to keep the two giants afloat according to a plan that has passed the House of Representatives, waiting for Senate approval - which is very probable, and President Bush has promised to sign. So, how did the $300 Billion dollar figure come up? It is just an estimate generated by the Congressional Budget Office.

You are probably thinking.. well there must be SOME kind of maximum or cap to their ability to "save" failed banks. There isn't. All that we have to go on is a "Trust Me!" from Treasury Secretary Henry Paulson and a "Go Get 'Em Tiger!" from the Democratic leadership in Congress. That makes me nervous.. VERY nervous.

The bill that was passed in the House is over 700 pages! The Bill (which after a little digging seems to be H.R.3221) is wide-ranging and is riddled with flowery ambiguous language, problems - for average citizens, bailouts - for banks, rules-changes, and huge latitude for the Treasury Department to "fix" the problem. The bill is very expansive and seems to not be very well-researched or thought out. Example: The bill would allow the government to extend mortgage loans and it allows state governments to buy up foreclosed properties. This will help lenders who would basically get full (or inflated) payments from the government during this time of recession while the families forced out of housing.. get nothing. Furthermore, the Bill creates a slippery slope that opens the door for other banks who are failing (and even those who are not) to get money to stay afloat even with their unfair practices and idiotic sub-prime loans. The flaws to this Bill are so numerous that it really boggles the mind how a Congress would be so irresponsible in an effort to just so it can say it is doing 'something'. How Despicable.

Please call your Senator and encourage them to not this broken irresponsible bill. The Senate Bill name (it apparently does not have a number yet) is "American Housing Rescue and Foreclosure Prevention Act of 2008." I know, I know.. hard to be opposed to a Bill with a name like that.. but Titles are deceiving. If you don't know your Senator's office phone number simply call (202) 224-3121 and the Capitol switchboard operator will transfer you to the correct office. Please report back here on what your Senators think of this bill!


Link: House OKs mortgage rescue - CNN Money

Link: Text and Status of H.R.3221 - Thomas.loc.gov, the Library of Congress website