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

Fannie, Freddie now under Feds

I reported awhile back about Fannie Mae and Freddy Mac's slow but sure demise and the Federal plan to "rescue" it using hundreds of BILLIONS of tax-dollars. Well.. it quietly passed the Senate after my original post and has become law. Now.. SURPRISE, the Federal Government has announced its intentions to take over the two failing mortgage giants.

This sort of news makes me sick. You realize that the government is heading in just the WRONG direction and there isn't much you can do about until November. What makes the Feds think that they can run the two mortgage giants any better than they were already run? Is it the massive deficits or multi-trillion dollar national debt they've been running? I would challenge anyone to come up with one.. just one example of a time the Federal Government took over an industry or company and succeeded in turning it around without either throwing gobs of money at it or tweaking the numbers.

I know I've been focusing on the 2008 Elections like much of the country has been and it seems that the House, Senate and President are trying their hardest to appeal to voters or create some kind of legacy. The legacy that they stuck us with will cost us billions of dollars, distracts us from other root causes of the current economic slowdown, and sets a terrible example.

Remember that slippery slope? Well.. it's here now and we are merrily rolling down it without looking back or fighting back. What's next? If as a nation we've decided to use our government and tax-dollars to save or salvage any industry that has trouble and any company that goes under (which we haven't) I'd like to know who is the next to be put under the supervision of the US Treasury Department. Hmmm... the US Auto Industry is having problems, Ford and GM are losing money by the bucketful, the vegetable market is always iffy, Housing construction is not doing too well, some tech companies are going under... the list goes on and on.

My rule is that unless we are at full-scale war (I'm talking World War III style) the government should regulate the economy by indirect means... don't let it put its grubby hands on your money.. they don't let go.

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