DU RED ALERT: CARPETBOMBERS NEEDED NOW!!!

[Subdivisions]

This is my first call for general assistance ever so I don't do this lightly and I desperately hope that you'll oblige me.

Toss me the Reynolds Wrap if you want, but this new proposal by Paulson that would give http://www.nytimes.com/2008/03/29/business/29regulate.html?_r=3&hp=&oref=slogin&pagewanted=print&oref=slogin&oref=slogin">the Federal Reserve broad new authority to oversee financial market stability is ominous to its very core. I don't have time to list the reasons why or write an essay just now but most of you will already know why giving the Fed this kind of power would be a huge mistake. Also, Paulson just today said that the Treasury would absorb any losses to JP Morgan that may result in liabilities up to $30 Billion related to their firesale aquisition of Bear Stearns, a FORMER proven foolish investment bank. That means that you and I will contribute part of our hard-earned income each paycheck to pay for the follies of a private bank. And so will our kids. And, so far, the past 7 years will be paid for by their kids, and their kids again.

So, I am asking DU to join the efforts of http://www.tickerforum.org/cgi-ticker/akcs-www?post=37808">TickerForum.org in their very hot campaign to stop this from happening.

On Thursday the Senate Banking Committee will meet with Secretary of the Treasury Henry Paulson and Federal Reserve Chairman Ben Bernanke. http://banking.senate.gov/public/index.cfm?Fuseaction=Hearings.Detail&HearingID=ec013d8f-fe1e-4fb6-a514-ab93be32ad38">More infor here.

Contact your Senator http://www.senate.gov/general/contact_information/senators_cfm.cfm">here.

Bear Stearns "Bailout": Get the pig men out of your pocket

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Reply to: [e-mail]
Date: 2008-04-01, 12:49PM PDT


Today on CNBC treasury secretary Hank Paulson confirmed what many have suspected, $29B bailout of Bear Stearns is coming out of the tax payers pocket. Contrary to the spin this bailout was not needed to "prevent a financial system collapse" because bankrupcy law was put in place to allow for a unwind of assets without rewarding the stock holders, bond holders and management. This plain and simple is a subsidy for the Wall Street PIG MEN, and will only be the first of many unless we work together and stop it.

Both the Congress and the Senate are holding hearings on the Bear Stearns bailout this week and you need to let them know what you think. Contact information for committee members is located at the bottom of this email. They will listen if enough people make a fuss.

Dr. John Hussman writes the following what Congress needs to understand about this "bailout" proposal (http://www.hussmanfunds.com/wmc/wmc080331.htm)

Last week, both the House and Senate launched inquiries into the actions of the Treasury and Federal Reserve in committing public funds to J.P. Morgan's acquisition of Bear Stearns. It is important for Congress and the investing public to understand several features of this transaction:

1) The provision of a "non-recourse" loan is outside of the Fed's mandate under the Federal Reserve Act. Specifically, the Fed agreed to provide a $30 billion “non-recourse loan” to J.P. Morgan, secured only by the worst tranche of Bear Stearns' mortgage debt. This is not in fact a loan - if it were, J.P. Morgan would be required to pay it back, unless J.P. Morgan itself was to fail. Instead of a loan, this is a "put option," which protects J.P. Morgan from losses on the collateral, regardless of J.P. Morgan's own financial status.

2) The effect of the Fed's guarantee is not to protect the public, but to protect Bear Stearns' bondholders. By purchasing Bear Stearns, J.P. Morgan will take on the responsibility for paying off about $75 billion in claims to the short- and long-term bondholders of Bear Stearns. Yet J.P. Morgan requires only $30 billion from the Fed do this. This suggests that Bear Stearns' "book" of positions (excluding liabilities to Bear's own bondholders) would be worth at least $45 billion if transferred, netted, or otherwise settled. There is no reason that the public should take a loss at all. Rather, the book should indeed be sold to JPM or a competing acquirer, and the proceeds (probably far in excess of $45 billion) should be used to pay the senior claims of bondholders. Any excess over $75 billion would be a residual for stockholders. Simply put, the bondholders of Bear Stearns, not the public, should absorb any loss.

3) The deal is being defended on the notion that the global financial system would have "failed" had Bear Stearns not been rescued. But the orderly transfer, netting and settlement of financial derivatives and other "qualified financial contracts" (QFCs) is precisely what Title IX of the Bankruptcy Act of 2005 was written to facilitate. In effect, the Federal Reserve and the Treasury decided to ignore existing law and provide a bailout to the benefit of Bear Stearns' bondholders at public expense.

4) For Bear Stearns to “fail” means that it may not fully repay its own bondholders, but it has never meant that Bear Stearns' customers and counterparties would be hurt – their accounts and contracts are precisely what J.P. Morgan is eager to purchase and can easily transfer. The misuse of public funds is assisted by blurring the distinction between “failure” of Bear's customer and counterparty obligations (which nobody wants and is neither likely nor necessary), and the “failure” of Bear Stearns's stocks and bonds to be successful investments. Why should investment losses be bailed out at public expense?

5) The financial markets were relieved following the deal, despite a virtually complete loss of the company's stock value (over $20 billion in a matter of months). The risk of financial panic was not about potential losses to Bear Stearns' bondholders either. Instead, the market's relief focused on a single assurance: that J.P. Morgan stood behind the customer and counterparty obligations of Bear Stearns. Even if the Fed provides temporary liquidity, this assurance can still be achieved without a “non-recourse” feature, provided that Bear Stearns' bondholders are not defended against losses.

6) During the upcoming hearings, Congress can improve public confidence about the U.S. financial system by clarifying this distinction between “failure” of a company's obligations to customers, and the “failure” of a company's own securities. In most cases, the capital (stockholders equity and long term debt) of investment banks such as Bear Stearns is an adequate buffer, so that even in the event of bankruptcy, customer accounts and financial contracts can be quickly transferred to an acquirer, without ever exposing customers to losses. The public should understand that the bankruptcy provisions enacted in recent years expedite the transfer of these obligations, without an extended delay (“automatic stay”). The primary effects of bankruptcy are losses in the value of stocks and bonds issued by the failing company.

7) It appears likely that increased mortgage foreclosures will occur, and that stock prices may decline further, but actions like those of the Fed and Treasury will not avoid these outcomes. Rising foreclosures are the natural downside of a speculative housing boom financed by easy credit and suppressed mortgage rates. Protecting the bondholders of investment banks is not an efficient way to help homeowners. With regard to the equity markets, the rich valuations of recent years were largely based on historically high profit margins (due to a declining share of GDP being paid to workers as wages and salaries). The realignment of these profit margins, and of stock values, is largely inevitable, and is not something that the government should spend public funds to prevent. These uncomfortable realignments will probably continue for a while, but the U.S. economy will recover.

8) The clear historical role of the Federal Reserve has been to manage the composition of Federal liabilities (by varying the mix of Treasury securities and monetary base - currency and bank reserves - held by the public). The recent transaction is a dangerous break from that role, in which unelected bureaucrats are committing public funds to facilitate private business transactions and selectively defend the holders of corporate securities. Only Congress has the Constitutional right, by the representative will of the people, to commit public funds. The Bear Stearns deal is a dangerous precedent and a dilution of Congressional prerogative.

Investors should not be in constant fear that the global financial system will “melt down” in the event of the bankruptcy of one large financial company or another. Though Bear Stearns apparently had the highest gross leverage (total assets to shareholder equity) among the large financials, and thereby provided a thin wall of defense for its stockholders, there was never a significant risk that the company would default on its obligations to customers and counterparties. Large U.S. financial companies are sufficiently well-capitalized that even in the event of outright bankruptcy, the only parties subject to loss are the stockholders and the bondholders of that particular company. The only instance in which this would not be the case is if the book value of the company was negative even after zeroing out all stockholder equity, long-term debt, and unsecured short-term debt.

In short, investors should have confidence in the ability of the capital markets to function without the need for government bailouts at public expense.


Senate banking committee phone #: [phone]

Look up your local representatives: https://forms.house.gov/wyr/welcome.shtml

Fax numbers for banking committe:

Transmit FAX to Lincoln Davis at 202-226-5172 (US House)
Transmit FAX to Ron Klein at 202-225-8398 (United States House)
Transmit FAX to Tim Mahoney at 202-225-3132 (United States House)
Transmit FAX to Ed Perlmutter at 202-225-5278 (United States House)
Transmit FAX to Robert Wexler at 202-225-5974 (US House)
Transmit FAX to Shelley Moore Capito at 202-225-7856 (US House)
Transmit FAX to Tom Feeney at 202-226-6299 (United States House)
Transmit FAX to Ginny Brown-Waite at 202-226-6559 (United States House)
Transmit FAX to Patrick McHenry at 202-225-0316 (United States House)
Transmit FAX to Luis Gutierrez at 202-225-7810 (US House)
Transmit FAX to Gary Ackerman at 202-225-1589 (US House)
Transmit FAX to Carolyn McCarthy at 202-225-5758 (US House)
Transmit FAX to Paul W. Hodes at 202-225-2946 (US House)
Transmit FAX to Gresham Barrett at 202-225-3216 (United States House)
Transmit FAX to Steve Pearce at 202-225-9599 (US House)
Transmit FAX to Dean Heller at 202-225-5679 (US House)
Transmit FAX to Melissa Bean at 202-225-7830 (US House)
Transmit FAX to Donald Manzullo at 202-225-5284 (US House)
Transmit FAX to Jeb Hensarling at 202-226-4888 (US House)
Transmit FAX to Geoff Davis at 202-225-0003 (US House)
Transmit FAX to Peter Roskam at 202-225-1166 (US House)
Transmit FAX to Robert Menendez at 202-228-2197 (US Senate)
Transmit FAX to Daniel Akaka at 202-224-2126 (US Senate)
Transmit FAX to Jon Tester at 202-224-8594 (US Senate)
Transmit FAX to Jim Bunning at 202-228-1373 (US Senate)
Transmit FAX to Richard Shelby at 202-224-3416 (US Senate)
Transmit FAX to Robert Bennett at 202-228-1168 (US Senate)
Transmit FAX to Wayne Allard at 202-224-6471 (US Senate)
Transmit FAX to Michael Enzi at 202-228-0359 (US Senate)
Transmit FAX to Tim Johnson at 202-228-5765 (US Senate)
Transmit FAX to Charles Schumer at 202-228-3027 (US Senate)
Transmit FAX to Evan Bayh at 202-228-1377 (US Senate)
Transmit FAX to Tom Carper at 202-228-2190 (US Senate)
Transmit FAX to Sherrod Brown at 202-228-6321 (US Senate)
Transmit FAX to Chuck Hagel at 202-224-5213 (US Senate)
Transmit FAX to Mel Martinez at 202-224-5171 (US Senate)
Transmit FAX to Bob Corker at 202-228-0566 (US Senate)
Transmit FAX to David Scott at 202-225-4628 (United States House)
Transmit FAX to Keith Ellison at 202-225-4886 (United States House)
Transmit FAX to Jim Marshall at 202-225-3013 (United States House)
Transmit FAX to Jim Gerlach at 202-225-8440 (US House)
Transmit FAX to Michele Bachmann at 202-225-6475 (United States House)
Transmit FAX to Kevin McCarthy at 202-225-2908 (United States House)
Transmit FAX to Ruben Hinojosa at 202-225-5688 (US House)
Transmit FAX to Al Green at 202-225-2947 (US House)
Transmit FAX to Randy Neugebauer at 202-225-5547 (US House)
Transmit FAX to Kenny Marchant at 202-225-0074 (US House)
Transmit FAX to Emanuel Cleaver at 202-225-4403 (United States House)
Transmit FAX to Charles Wilson at 202-225-5907 (US House)
Transmit FAX to Walter Jones at 202-225-3286 (US House)
Transmit FAX to Spencer Bachus at 202-225-2082 (US House)
Transmit FAX to Christopher Shays at 202-225-9629 (US House)
Transmit FAX to Stephen Lynch at 202-225-3984 (US House)
Transmit FAX to Christopher Murphy at 202-225-5933 (United States House)
Transmit FAX to Dan Boren at 202-225-3038 (United States House)
Transmit FAX to Frank Lucas at 202-225-8698 (United States House)
Transmit FAX to Judy Biggert at 202-225-9420 (US House)
Transmit FAX to Tom Price at 202-225-4656 (United States House)
Transmit FAX to John Campbell at 202-225-9177 (United States House)
Transmit FAX to Nydia Velazquez at 202-226-0327 (US House)
Transmit FAX to Melvin Watt at 202-225-1512 (US House)
Transmit FAX to Bradley Sherman at 202-225-5879 (United States House)
Transmit FAX to Brad Miller at 202-225-0181 (United States House)
Transmit FAX to Adam Putnam at 202-226-0585 (US House)
Transmit FAX to Elizabeth Dole at 202-224-1100 (US Senate)
Transmit FAX to Paul Kanjorski at 202-225-0764 (US House)
Transmit FAX to Barney Frank at 617-332-2822 (US House)
Transmit FAX to Maxine Waters at 202-225-7854 (United States House)
Transmit FAX to Carolyn Maloney at 202-225-4709 (US House)
Transmit FAX to Gregory Meeks at 202-226-4169 (US House)
Transmit FAX to Joe Donnelly at 202-225-6798 (United States House)
Transmit FAX to Deborah Pryce at 202-225-3529 (US House)
Transmit FAX to Michael Castle at 202-225-2291 (US House)
Transmit FAX to Michael Capuano at 202-225-9322 (US House)
Transmit FAX to William Clay at 202-226-3717 (US House)
Transmit FAX to Joe Baca at 202-225-8671 (United States House)
Transmit FAX to Peter King at 202-226-2279 (US House)
Transmit FAX to Ed Royce at 202-226-0335 (United States House)
Transmit FAX to Ron Paul at 202-226-9379 (US House)
Transmit FAX to Gwen Moore at 202-225-8135 (US House)
Transmit FAX to Albio Sires at 202-226-0792 (United States House)
Transmit FAX to Steven LaTourette at 202-225-3307 (US House)
Transmit FAX to Gary Miller at 202-226-6962 (United States House)
Transmit FAX to Scott Garrett at 202-225-9048 (United States House)
Transmit FAX to Christopher Dodd at 202-224-1083 (US Senate)

From RIGHT NOW until this hearing commences, we need to carpetbomb committee member offices with phone calls, faxes, and emails. We also need to send requests to our own mailing lists as well as make posts in other forums, Craigslists, and local radio call-in shows.

THE FED MUST NOT BE ALLOWED THESE BROAD NEW POWERS AND TAXPAYER FUNDS SHOULD NOT BE USED (ESPECIALLY WITHOUT CONGRESSIONAL AUTHORIZATION) TO BAIL OUT IRRESPONSIBLE PRIVATE FINANCIAL ENTITIES WHILE GOOD AMERICANS ARE LOSING THEIR HOMES, STRUGGLING TO AFFORD GAS TO DRIVE TO WORK, AND GETTING LESS AND LESS FOR THEIR FOOD DOLLAR!

Related links:

http://www.democraticunderground.com/discuss/duboard.php?az=show_topic&forum=102&topic_id=3247645

http://www.ustreas.gov/press/releases/hp896.htm

http://www.democraticunderground.com/discuss/duboard.php?az=show_topic&forum=102&topic_id=3250448

http://www.ustreas.gov/press/releases/archives/200803.html

http://www.ustreas.gov/press/

http://www.federalreserve.gov/

[ColbertWatcher]

1. You got it Texas. n/t

[southern_belle]

2. k & r

[BeHereNow]

3. And this will accomplish what?

Sorry to be so pessimistic, but after seven years of action on our part,
I can't help but notice that these bastards do what ever they want regardless
of public outcry.

Just sayin'

BHN

[Subdivisions]

4. So, are we then just to dis-engage and give up? Not me. n/t

[BeHereNow]

8. Sorry, I've reached the unavoidable conclusion that action makes me feel better- BUT

Has accomplished nothing of real consequence under this regime.
I'm tired of the disappointment.
Tired of the next "big thing" that we all agree IS
the smoking gun that will put an end to it-
so far, it just gets worse.

Carry on, I support you in spirit but must tell
you I don't see action making a bit of difference and haven't
for a very long time.

They concede on things that don't really matter to them
and continue to rape and pillage what does.

BHN

[Junkdrawer]

9. The OilGuys and the BankingGuys are the SameGuys...

They've been MostlyRulers for a long time. Now they're AbsoluteRulers...of a sinking ship.

And the burning question is: how long can we tread water?

[annabanana]

11. If you subscribe to the notion of infinite multiple contiguous

universes.. Your call might be the one that sets a universe off spinning in a better direction!

[SpiralHawk]

12. We always have hope...

[LSK]

17. giving up makes their job much easier n/t

[IamyourTVandIownyou]

5. "Maserati Welfare"

Those failed businessmen and brokers have to drive something, you know.

[snot]

6. VERY IMPT. if this latest application of "shock and awe" is to be averted! K&R'd.

[snot]

7. But has anyone got a form letter/e-mail people can use?

The only one I've seen is over the top, threatening impeachment of anyone who fails to oppose the plan . . .

[annabanana]

10. Thanks for alerting us..

I'll get to Chuck Schumer Wed. morning!

[Quantess]

13. Evening Kick

[Subdivisions]

14. Kick, 'caust this is VERY important! PICK UP YOUR PHONES!!1!

I'm kicking this because the more I listen to Bernanke and his quaking voice, the more we need to ensure that Congress DOES NOT LOSE the "power of the purse".

Please read or re-read the OP and do that thing you do so well, pick up your phone and call until it hurts!

If you would like more background on this issue, http://market-ticker.denninger.net">go read the coverage at Market Ticker.

[Hart2008]

15. K & R

[OmmmSweetOmmm]

16. I have had my tinfoil hat neatly in place. The Fed Reserve was created in reaction to the bank

crisis of 1907. Rumors were circulated about some banks being insolvent, which was not the truth, but the stocks plummeted. According to Zeitgeist the Movie, JP Morgan was behind the rumors. He along with John D. Rockefeller-Chase Manhattan Bank bailed the banks out and then the move for the Fed Reserve was in motion. Is history repeating itself here? All of a sudden, sweeping changes to the Fed are being asked for when Morgan Chase came to the rescue. BTW...Barack Obama in a recent speech mentioned that rumors were deliberately spread about Bear Stearns.

[FraDon]

18. Nationalize the Fed; nothing less!

Bear Stearns was the economic equivalent of WTC Building 7; a controlled take down, in the heart of Wall Street, for the private profit of the House of Morgan.

[Subdivisions]

19. Self kicking again...

http://market-ticker.denninger.net">READ THIS!

[PATRICK]

20. Patriot Act for the Economy

is what I expect it to be upon close examination. I hear there is another big hit coming in April(hedge fund bubble) that might panic people in true disaster economics manipulation. Probably as good a reason as any to bomb Iran.