Barney Frank: Expects government to recover most if not all bailout costs

[HamdenRice]

Something I've been trying to explain for much of the day.

http://www.marketwatch.com/news/story/congress-may-seek-add-stimulus/story.aspx?guid=%7BC107DC6D-03B6-4287-AD0D-5FD67819FC86%7D

"The secretary said there won't be a collapse, and we don't want to panic people, but we were reaching a point where people wouldn't be able to get car loans, home loans," Frank said. "We would see a shut down of lending and people's money market funds."

Frank added that he expects the government to recover most, if not all, of the money used to buy the bad mortgages from the nation's banks by selling them later on.

<end quote>

The main quibble I have with this is that the reporter says that the money is being used to buy "the bad mortgages." Actually the money is being used to buy the good mortgages and make them liquid again for resale.

Also here:

http://www.cbsnews.com/stories/2008/09/21/ftn/main4463431.shtml

"I agree with the secretary, it's not going to ultimately cost all these hundreds of billions - we'll recover most of it, maybe all of it - but I do think at this point the people making over $1 million a year, a surtax on their incomes, that's one way to get the people who made these mistakes to contribute to the cost of undoing it. But I do stress, I'm speaking only for myself here."

<end quote>

President Clinton actually made $500 million for the Treasury on his Mexican peso bailout, so Frank's suggestion is well within reason.

Wow, an eventually cost free plan to avoid a great depression. Yet many DUers are screaming, "let it all collapse."

Barney Frank is chairman of the House Financial Services Committee, and one of the most liberal members of the House.

I suspect he knows what he is talking about.

[ddeclue]

1. There is NO WAY this is free

so sell your dog and pony show to someone else, we're not buying - and 500 million is not not even pocket change compared to 1 TRILLION dollars.

This will devalue the dollar and cause dramatic inflation and spikes in the price of gas. Don't be surprised to see OPEC switch to Euros and dump the dollar if this happens.

[HamdenRice]

5. Yeah, that Barney Frank, he doesn't know what he's talking about

After all, he's only chair of the House Financial Services Committee.

[Mojorabbit]

24. Not gonna happen

no way, no how. A lot of these are toxic stuff on the banks books. No way we will come out ahead or else no bailout would be needed.

[HamdenRice]

27. You do realize the govt made money on several prior bailouts right? nt

[Mojorabbit]

30. I do

and there were solid assets when those bailouts happened, we were not in hock up to our eyebrows and needing to borrow billions every day to fund two wars, and we still had a manufacturing base. The dollar will fall, oil will skyrocket. If 70 percent of our economy is consumers spending it just ain't gonna happen. People are pulling in their spending. It is a bandaid. Nothing more.
I am scared to death about this because I think it will be a miracle if they pull this off.

[HamdenRice]

32. Oh, I see. The actual land of America is not a real "solid asset"

compared to the Mexican peso or the Chrysler corporation's brand identity -- the land that ultimately backs up all those mortgages.

Thanks for explaining that.

[tama]

36. Nope, not an asset

It's not even farmable land, because it's been ruined with mortage financed buildings, asphalt etc. And as for use as homes, the urban sprawl is coming to end with the end of cheap oil and automobile society.

[HamdenRice]

40. OK, so to discuss this with you we have to be in ...

cloud cookoo land. OK, urban and suburban land is not an asset.

OK.

I guess we'll have to agree to disagree on that one

[tama]

52. No

to really discuss with me you'd have to show a shread of sanity.

[endthewar]

56. If only half of this nation would be financially responsible for this bailout,

would you want to be in that half?

[Mojorabbit]

42. They will sell our assets

without blinking an eye to other nations. They already are doing it. We do not have an underlying healthy economy for the average working person. That is the difference. We used to have that. I will repeat, if 70 percent of the economy is the consumer and people are losing their houses and jobs and are pulling back on spending then this will not work. Housing values will continue to plummet. I read somewhere that 09 is when millions more of mortgages will reset. People will default. Things will get worse.
I don't believe it will work.

[ddeclue]

43. What's your point? I've personally met the man and spoken with him privately at the 2005 FDP conven

tion in Orlando.

He's a smart guy but he doesn't have any monopoly on intelligence or information or wisdom.

And if you think you can predict the future in this story then you are kidding yourself.

The law of unintended consequences is going to bite you in the ass on this one:

Hyperinflation
Gas prices and oil prices through the roof.
OPEC switching to the Euro and the dollar turning to toilet paper

There are so many ways this can and will go south on us. It's safer just to let it fail. If we don't let it fail there needs to be a huge paradigm shift out of the "Reaganomics" era and back to the mixed regulated economy that existed between the 1930's and 1970's.

Doug D.
Orlando, FL

[endthewar]

55. And Bush is the President of the United States

Doesn't make him a great leader.

[babylonsister]

2. Thanks for some sanity, Barney Frank and HamdenRice. nt

[Eric J in MN]

3. If those mortgage-products were valuable, the private sector would buy them.

This is a trash-for-cash plan.

[bean fidhleir]

68. Exactly. Frank is trying some sleight-of-tongue here, or doesn't understand what he's talking about

and is just repeating what some scammer is telling him.

If the Treasury could "get our money back", they'd never be given the chance. The whole point is that somebody's going to take a giant bath, and the scammers want it to be us not them.

[Junkdrawer]

4. OK. Let's make banks legally obligated to repurchase the "cleansed" securities....

If you sell us $100 million in "troubled" securities, one or two months from now, you have to buy $100 million in "repaired" securities.

[Kurt_and_Hunter]

6. Barney Frank C-SPAN interview on bail-out:

rtsp://video1.c-span.org/project/economy/econ_news091908_frank.rm

[Turbineguy]

7. PIMCO's Mohamed El-Erian says the same

and I for one, trust him.

[HamdenRice]

18. Do you have a link? I would find his perspective fascinating! nt

[Turbineguy]

70. Sorry, no link

but a friend told me he was speaking on CNBC yesterday

[bemildred]

8. Yeah, and I expect they are lying as usual.

How is this not more "trust me" from the guys that fucked things up?

[HamdenRice]

9. You realize that Barney Frank is a liberal Democrat, right? nt

[bobbolink]

No, I don't think there's any such realization....

Shoot first, ask for the facts later...

sigh....

Barney Frank is one of the few heroes of poor folk..... One of the few "good guys".

[bemildred]

19. And I think you don't know anything about me and are jumping to conclusions.

Poor folks are not doing too well, and if Barney is their champion, he's doing a lousy job.

[bobbolink]

22. then go ahead and run for office, and let's see you do a better job.

:shrug:

I sure as hell don't see many Dems and "progressives", including here at DU, doing much for poor folk.

Maybe you could do better.

[bemildred]

25. Weak answer.

So I guess you are running as a Republican or a Libertarian or something? When did we start having to run for office to have an opinion about politics?

[bobbolink]

37. Dearie, talk about "weak"--calling Barney Frank a liar is about as weak as it gets.

Calling people who are working hard to try to pull this nation out of the hole it's in and trying to get homeless people housed... calling those people LIARS is more than an "opinion"..... it's just ugly.

I"m sick to death of that kind of ugliness.. post facts, THEN you won't be so damned weak.

[bemildred]

39. He's a politician. He is a liar.

He's a Democrat, I would vote for him anytime, but he is a liar, and I'm not drinking KoolAid for him or anybody else. Not even Obama.

[bobbolink]

46. So, maybe you are, too.

I'm so very glad you have that handy-dandy little red "x" by your name.

Bye now.

[bemildred]

47. Adios. nt

[Mojorabbit]

28. I love Barney Frank

but
"The Wall Street Journal quoted Congressman Barney Frank, D-Mass., in 2003 as criticizing Greg Mankiw "because he is worried about the tiny little matter of safety and soundness rather than 'concern about housing.'"

Frank, chairman of the House Financial Services Committee, rejected a Bush administration and Congressional Republican plan for regulating the mortgage industry in 2003, saying, "These two entities – Fannie Mae and Freddie Mac – are not facing any kind of financial crisis." According to a New York Times article, Frank added, "The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing."
http://www.wsj.com/article/SB106851042414562400.html?mod=article-outset-box


he is not omniscient nor perfect.

[bobbolink]

51. Thanks for posting actual facts rather than just accusations.

I appreciate that.

[bemildred]

16. I know exactly who Barney Frank is.

I trust him more than Arlen Specter, but not much.

[cali]

35. how interesting that you link him to Specter. And the OP is one of the

few people here who actually seems to know something about the subject at hand.

[bemildred]

41. Hi Cali.

I'm glad I was able to stimulate your thoughts.
:hi:

[TexasObserver]

10. No, the money is NOT being used to buy good mortgages.

You are clueless in this matter, and if you had any real knowledge of finance, history and the history of bailouts, you'd know that. Please stop parroting the business talking points you hear on business channels.

If the mortgages were good, the companies would not be failing. Which part of that simple fact do you not understand?

[HamdenRice]

12. Facts? Data? Do you have any at all?

The purchase price of the mbs will be discounted. So just what do you think they will be discounted by? Could it possibly be by the amount of non-performing assets? And could that tpossibly mean that the Treasury would not be paying for foreclosed, non-performing mortgages?

[TexasObserver]

33. As I said, it's clear you were not paying attention 20 years ago.

It's clear you have no knowledge about the bank and S&L failures of 20 years ago. If you did, you wouldn't be mouthing GOP talking points, as if they represent knowledge and understanding.

Please explain how you know the mortgages will be good ones.

And then explain how they can be good, but the companies which own them are cratering because of them.

[HamdenRice]

38. "mouthing GOP talking points" -- Yep Barney Frank, spouter of GOP talking points

I am very familiar with the S&L crisis having lived through it, and having taught a university course on, inter alia, real estate finance that spent several sessions on it.

Having designed several asset backed securities back in the 90s, I can tell you that you can know which mortgages are good by analyzing (1) the prospectus filed with the SEC, (2) the registration statement filed with the SEC, including all of the exhibits and (3) the spread sheets and print outs that are held by the trustee of the mortgage backed security trust that have an exact listing of every individual mortgage in the trust and how each mortgage is performing.

Now, if you want to know why the mortgage backed security trust, or the company that holds the securities, can crater, try reading this:

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x4059821

[TexasObserver]

53. Yes, GOP talking points.

Since you refused to answer my question and attempted to avoid it by representing you have knowledge of these matters (without demonstrating knowledge), I'll tell YOU what happened.

Three hundred billion was spent to take up the slack on failed banks and S&Ls. Performing loans from those failed S&Ls were moved easily, but they were not the bulk of the loans held by the failed institutions. The bad paper was divided into secured and unsecured, and both sets of paper were put out to bid. Organizations, usually some form of collection agency or sleazy group of bandits, bought the bad paper in bundles, for cents on the dollar. Then they tried to collect something, anything, on such bad paper.

Homes that had already been foreclosed upon were held by the RTC, and sold long afterward for far less than their original debt.

The reason they want $700 Billion or more is because loans are not performing. When they don't perform, Bank Examiners for the Office of the Comptroller of the Currency require the banks to write them off against the bank's capital. As the bank's capital plummets, so does its ability to do business.

You remain lost in the fantasy that these loans are going to produce profit. They aren't. They can't. Not at the face value of such mortgages. The good mortgages will be easily moved, but they are not the reason for the bailout. They will go to existing lending institutions, not fly by night groups like the vultures. You marketed cheesy investments for vultures picking over the remains of the Reagan-Bush Bust. That seems to be the extent of your knowledge of the boom and bust of the late 80s and early 90s. You arrived with a group of vultures, set on picking through the remains.

Your comments on the reliablity of the SEC filings are laughable.

[HamdenRice]

73. You seem to have no actual information

You do realize that the performing mortgages are pooled with non-performing mortgages, right?

I confess that it's hard to argue over the facts with someone like you who has absolutely no information whatsoever.

[Kurt_and_Hunter]

48. There are no "good" and "bad" mortgages, as someone as smug as yourself must know

If housing prices decline, eventually all mortgages become bad. If prices go up enough even the most irresponsible mortgages are sound. (If defaulted on there's tons of value to make the lender whole)

So this goodness and badness that you seem to think is an intrinsic property is subject to future developments.

No mortgage that is not currently in default is bad, just more or less risky.


If a course of action firms up the housing market (hypothetically) then a portfolio of risky mortgages could turn golden overnight. And visa versa.

[TexasObserver]

54. Of course there are good and bad mortgages.

BAD MORTGAGES:

1. The insurance is unpaid.

2. The insurance is lost and is not replaced.

3. The borrower is in bankruptcy.

4. The borrower is in economic default.

5. The loan security is worth less than the debt on the property.

6. The borrower is chronically late on a marginal loan.


A bad mortgage is one that cannot be moved for a fair market value, and there are millions of them. And guess what? They're the reason for the crisis, not the performing loans. If you and your pal think this crisis is about performing loans, you need to stop, go back, and start over.

[girl gone mad]

57. doesn't make any sense.

Prices have been declining for months now. Not all mortgages are going bad as a result.

Even if prices rise soon (about as unlikely in most cases as flooz and pets.com stock becoming valuable again), the underlying problems still exist. People got mortgages they could never afford under any circumstances. Way too many overpriced houses were built. Banks passed risky mortgages off as AAA debt to investors. The confidence in our banks and in our economy has been severely damaged.

Whole neighborhoods are now virtual ghost towns. The best we could hope for would be to bulldoze these vast housing tracts down and return the land to farmers.

[stranger81]

11. if this were true, then private actors would be stepping up to buy up the trouble institutions

themselves -- they'd be breaking even on the "bad" debt, and making money on the assets.

What's your dog in this fight, given that you're so sanguine about handing over $700 billion? That's not what I would call a "cost free plan," and there's certainly no guarantee it would "avoid a great depression." Do you work for a hedge fund or something?

[HamdenRice]

14. I have no "dog in this fight" other than that I hope the entire financial system

doesn't collapse this week. Oh, yeah, I guess my "dog in this fight" is that I'd like to be able to buy groceries so I can eat, which none of us will have if the system falls apart. DemocracyNow had a guy on saying that if the system collapses, you'll need gold to buy groceries. You must be one of those fortunate people with lots of gold who doesn't care whether we go through that.

I also like rational, correct information.

[David Dunham]

15. We will LOSE big time if a Dem Congress stops the bailout.

Kos and some other people at Dailykos are suggesting that the Dems should let the bailout proposal die until after the election. They foolishly assume that most of the Repubs will not vote for a bailout. In fact, most of the Repubs will support the bailout because the corporate funders of the Repub party strongly want it. With no bailout, the stock market and economy will quickly tank in the next few weeks, and the Repubs will correctly blame the Dem Congress for killing it. In that situation, we could even lose NJ, CT and maybe even NY, all of which depend on Wall Street. Repub pres and Repub Congress (at least the House) would be the result.

[bemildred]

29. "Here, quick, shove this up your ass, don't ask questions!"

Obama says "No blank check", and Obama is kicking their asses.

[Kurt_and_Hunter]

31. Do you believe that???

Jesus H. Christ... Obama will be first in line to support whatever the final bill is.

[bemildred]

34. You sound bitter, disillusioned.

You need to "Keep Hope Alive!". Remember how good times were back when "The Man From Hope" was President?

[clear eye]

13. I'm sorry, but Frank doesn't have a good track record on big economic decisions.

He may be trying to fool himself into downplaying the pain caused by his championing of mortgage institution deregulation. He thought that was all going to turn out great, too.

[galileoreloaded]

67. Frank is grasping at straws, justifying his job and trying to keep it as long as he can...nt

[magellan]

17. If they're so valuable, why does the Fed have to buy them?

Why the crisis?

Look, I'm willing to be open-minded and I trust Frank over any Repub or Bush** croney. But with a rash of failed currency injections already behind us and terms of pure greed written into the original draft of this bailout, his (and your) optimism seems more like wishful thinking.

My god, Frank admitted on CNN earlier this evening that just a week ago he and the others had no idea things were this bad! If they hadn't even grasped that much on their own, I don't see how he can be so certain of the future in this uncharted territory.

[HamdenRice]

20. In a liquidity crisis normal rules don't apply

As I've explained, part of the problem is that mbs were sold as "investment grade securities" to banks and insurance companies who legally had to hold investment grade securities for certain purposes. Once those securities are downgraded, they're not investment grade any more. Most of the market for them dries up.

If an mbs is in default, even though it has value, almost no institutional investor will buy it.

Moreover, there is simply too much fear. Banks are not even making inter-bank loans and settlements. Thursday the settlement system ground to a halt, which means that banks weren't willing to trust each other's loans -- even though they were obviously solvent.

[TexasObserver]

58. Barney Frank is talking out his ass.

He's bought the Bush scare tactics lock, stock and barrel. Just because he's frightened and clueless doesn't make this a good idea. It probably means some of his primary backers are staunchly behind the bill, and he's doing their bidding.

[Junkdrawer]

21. WHO WILL BUY THE "FIXED" SECURITIES?

I'm thinking that, unless we force the sellers to be buyers, the Treasury will be sitting on huge piles of "fixed" securities.

[HamdenRice]

23. Read the super super excellent "This American Life" piece on

the origins of the crisis. The main thing they point out at first is the the problem of the $70 trillion pool of global savings managed by people desperately looking for somewhere to park it. That's what got us into this in the first place.

If the US fixes these securities, and gives it their seal of approval, there will be a market.

But your idea works too as insurance -- if you bring stuff in to get fixed, you have to buy it back when it's fixed.

[Junkdrawer]

26. Your bank just missed going belly-up because you bought too much mbs...

and you underestimated how many people would default on their mortgage due to bad economic times.

I guessing you're going to wait until "recession" is a long forgotten term before you touch an mbs again.

[pberq]

44. Recover the money????

In the article below, Robert Borosage describes in layman's terms the situation. How is it possible that the government will be able to recover the money from bad loans? Where will the money come from if the borrowers don't have it?

http://www.ourfuture.org/blog-entry/2008093922/behind-financial-debacle-conservative-misrule

Behind The Financial Debacle: Conservative Misrule


By Robert Borosage

September 22nd, 2008 - 11:00am ET

. . .The immediate cause is the inflating and busting of the housing bubble. Federal Reserve chairman Alan Greenspan will be remembered for stoking a bubble economy. Coming out of bursting of the dot.com bubble, Greenspan lowered interest rates and kept them there. With his war and tax cuts, President Bush racked up record deficits. Struggling with stagnant incomes, Americans took on record debts. Foreign creditors, like Chinese central bankers happy to loan us money to buy their goods, flooded the U.S. with dough. With mortgage rates low, housing prices rose. An unregulated shadow banking system began marketing exotic mortgage-backed securities across the globe. As the housing bubble grew, brokers hawked shakier and shakier Alt-A and subprime mortgages. Ninja loans—no income, no jobs, no assets—became the rage.

Since the brokers sold off the mortgages immediately, they had a stake in making the loan, not whether the loan would be repaid. The banks and investment houses sliced and diced the loans into ever more exotic securities, which got prime ratings, although no one really knew what was in them. European banks and others bought more and more of the stuff. To escape capital limits, they invented credit default swaps in which companies like AIG guaranteed the loans in case of default. That totally unregulated over-the-counter market soared to $60 trillion. Banks set up off-balance-sheet entities to evade capital limits. Investment houses like Bear Sterns and Lehman Brothers borrowed at 30 times their capital to speculate in these markets. Wall Street’s executives were pocketing tens of millions from the take.

The regulators turned their heads. Greenspan not only fueled the cheap money; he cheered on the exotic mortgages, even while refusing to acknowledge, much less limit, the housing bubble. The Securities and Exchange Commission exempted five major investment houses from their normal capital requirements. Fannie Mae and Freddie Mac’s executives profited personally as their enterprises started buying Alt-A mortgages.

Everything was great so long as housing prices went up. When they topped out, the bottom fell out. Defaults and foreclosures soared. Suddenly, no one knew what the value of the securities they held was, much less what was in the balance sheets of other banks. Much of the exotic paper turned toxic; no one wanted to buy it. As the banks slowly were forced to write down its value, they had to raise capital. With everyone trying to sell at the same time, the values went through the floor. Bear Sterns, Lehman Brothers, and Merrill Lynch collapsed into bankruptcy or fire-sale mergers. The insurance giant AIG and Fannie and Freddie were taken over by the federal government.

And now, Washington is gearing up for the largest bailout in history, throwing an estimated $700 billion more to buy up the toxic paper from the banks to keep the entire financial system from collapsing.

. . . (more at link)

[ddeclue]

45. They're too big to fail and we're too small to matter..

For decades now, ever since the days of Ronald Reagan we’ve heard the conservative Republican mantra repeated over and over:

Privatize, deregulate, and downsize government.

There’s never been a merger they’ve been against – banks, airlines, oil companies, credit card companies, insurance companies, energy utilities and phone companies.

We were told there was only an upside to these mergers, never mind that they increased corporate power at the expense of consumer, labor, citizen, and government power. Never mind that these mergers made it harder to find a job, harder to bargain for a fair wage, harder to bargain for a fair price and harder to enforce rules to protect people, the environment and even national security.

Now we are being told that these merged institutions are simply “too large to fail”. Where was that important piece of information when they were asking us for permission to merge?

There’s never been an industry that’s had too little regulation for them – Savings and loans, airlines, telecoms, energy companies, real estate, stock brokerages, and banks. Their claim was “just get the government out of our way and we’ll make all of you rich”.

Well somebody got rich, but it wasn’t most of us.

They’ve effectively privatized health care already and turned it into a commodity that the poor and middle class increasingly can not afford – over 45 million Americans are without health insurance today because a family of 4 has to pay $1200 a month for basic coverage a figure that is rising 10 to 20% a year and those who have it are still likely to be bankrupted by the first major medical problem they face.

When the people have cried out for affordable healthcare, they haven’t been told that they were “too large to fail” but rather that they were “too small to matter”. So what if you go bankrupt because your spouse had a heart attack or cancer? That’s a problem for the marketplace to resolve.

Now they want every American to bail out insurance giant AIG but they won’t provide those same Americans with affordable health care coverage because they’re too big to fail and we’re too small to matter.

They’ve privatized a college education too.

Beginning with the GI Bill after World War II and reaching its peak in the 1960’s and 1970’s, the government treated a higher education as a national investment in our most important asset – “We the People”.

Loans and grants like the Pell Grant made it possible for anyone who studied hard and worked hard to go to college and have a better life for themselves and their children.

Since the 1980’s however, they have increasingly decided that college is for them and their children – not you and yours. If you can’t afford $60,000 up front for your college education, they’ll loan it to you at expensive rates – if you qualify for the loan that is.

And they aren’t satisfied with privatizing college, they want to privatize primary and secondary education too through school vouchers which are not enough to pay for private school but are enough to defund public schools and bankrupt them.

They don’t believe in public schools because:

Your dreams are too small to matter –theirs aren’t.

Owning your own home used to be the American dream too.

Wages have been nearly stagnant for a decade now because our good jobs have been shipped overseas where these companies that are too big to fail can find workers who they can pay a few cents an hour, workers without representative democratic government to protect them and workers without a right to collectively bargain for their labor – rights we have taken for granted in this country for a century or more now.

Meanwhile the price of a home has climbed 10 to 20% a year in many places and to force housing prices upwards in spite of these flat wages, the banks have created risky loan packages to artificially inflate demand that were ultimately doomed to fail and then resold them to institutional investors on Wall Street to make a quick buck and avoid the inevitable consequences of these doomed loans.

Had they not been allowed to play these financial games, had an agenda of common sense regulation ruled rather than corporate greed pushed through by corporate lobbyists, housing prices would have tracked the flat wages because the law of supply and demand would have forced the issue.

Now they tell us that these Wall Street investors are “too big to fail” – Well what about the rest of us?

When it was Bourbon Street, they dragged their feet to help those trying to recover from Hurricane Katrina and it was too little and too late. Apparently the Lower Ninth Ward and Coastal Mississippi were too small to matter.

When it was Main Street with hundreds of thousands of homeowners being foreclosed upon, that “wasn’t the government’s problem – we should let the market work” we were told. We were too small to matter too.

They’ve also largely privatized our company pensions by turning them from a guaranteed payment by our employer for a lifetime of hard work into a risky 401K or IRA investment in a stock market where it is becoming increasingly clear that there are two levels of transparency available – one for the ultra-rich who are given the real story and one for the rest of us who have to fend for ourselves amongst all the marketing hype that passes for financial news on TV and in the newspapers.

We’ve seen these investments go up in smoke at places like Enron and now it appears that we are at the edge of a disaster that will make Enron and the 1980’s S&L crisis look “bush league” If you’ll pardon the pun – they’re too big to fail and they are going to take us down with them if we don’t help.

For decades they’ve been about privatization – they were all about privatizing their profits and not sharing the wealth - now that they’ve gotten into trouble they have all become socialists overnight who want us to help them socialize their debts. Why?

Because they’re too big to fail – we’re too small to matter.

They’ve tried to privatize our social security safety net, arguing that that money would be better off invested in the stock market and trying to claim that Social Security was going to be insolvent in a few decades if we did nothing.

Thank God we did exactly that when George W. Bush pushed this plan a few years ago – nothing .

Had we let them invest our Social Security money in the stock market, Social Security would be insolvent right now not in 20 years.

They’re too big to fail – but hey - your grandma’s too small to matter.

The conservative Republican economic dogma has failed spectacularly this week and now they want the rest of us – the ones who are too small to matter – to bail them out without any strings attached. They don’t want us to hold them accountable for their colossal blunder, they just want a trillion dollar ($1,000,000,000,000.00) blank check from us so that they can try the same thing again.

I say now is the time to take our country back. Now is the time to take our dreams back. Now is the time to take our future back from all those who think that “Greed is good” and that we don’t matter.

If they want our help, it must be with strings attached:

• It’s time to elect a new leadership to the White House that puts people first – put Obama in – show Republicans the door. If we keep voting for more of the same leaders we will get more of the same results.

• Demand real regulation of key national industries like banking, investments, healthcare, telecommunications, airlines, and energy.

• Break up these big monopolies that are “too big to fail” and enforce the Sherman Anti-Trust act. Prohibit any more buyouts of companies not already in Chapter 11 bankruptcy.

• Restore common sense bankruptcy laws in this country – if they’re too big to fail, we should have the same kind of protection too – reverse the recent changes to bankruptcy laws that are strangling families finances.

• Put caps on credit card interest rates that are prime + 5%. These companies are making obscene profits and trapping regular people in debt for their entire lives and giving them no chance to get ahead.

• Cap executive salaries to some reasonable ratio of the lowest salary paid by that company – I would say 250 to 1 is reasonable to me. If the stock room clerk makes $20,000/yr, the CEO should make no more than $5 million. Many of those responsible for this mess are walking away with tens of millions in bonuses and golden parachutes while their employees get to file for unemployment and use up their dwindling savings and find an even lower paying job.

• Raise the minimum wage to exceed the poverty level by a significant amount. At the very least it ought to be $10/hr – which is what the 1969 minimum wage would be today were it adjusted for inflation.

• Make those who profited the most in short term capital gains pay the most to clean up the mess. The motivation to turn a quick buck on Wall Street has short circuited the real productivity in our economy and created a hollow economy where little real wealth is being created in terms of actual goods and services and substituted a phony paper economy in its place.

• Require those who sell goods and services in this country to abide by American health, safety, labor and environmental laws unless they can demonstrate that their own laws constitute a higher standard. Tax any company who moves offshore to avoid these American laws an equivalent amount plus a penalty to create a financial disincentive to doing so. They are avoiding the costs but we end up paying them with tainted pet food and vegetables and lead based toys for our children.

• Pay off people’s defaulted mortgages first and let that money “trickle up” to the lenders rather than paying off the lenders and leaving the borrowers hanging. This way Wall Street gets its money but Main Street gets it first.

• Make affordable health care and education universal basic rights of all Americans, not commodities to which only the rich can afford.

We are all in this boat together – if they’re “too big to fail” – it’s time that the rest of us start mattering again.

Doug D.
Orlando, FL

[Olney Blue]

50. Very good post, Doug.

[suffragette]

69. Consider posting this as a thread

Very well said.

[MadHound]

49. Wow, so even Frank is trying to sell swampland

Sorry, but we're not bought and paid for corporate whores Barney, and at least some of us weren't born yesterday and see through your shit. Recover most of it, lord, if it wasn't so stupid I'd be :rofl:

Wake the fuck up people, they're getting ready to screw us over again with this bailout.

[endthewar]

59. It's only about $3,000 per tax payer

Don't see what everybody is getting all upset about. :crazy:

[sam kane]

60. Barney Frank is Newt Gringrich

and Newt Gringrich is now Barney Frank. I couldn't believe what I heard on the radio today from those two. That kind of crossdressing in way too weird for me. I'm tired of these interesting times...

[Marsala]

66. Well, it's not so astonishing...

...if you think of it as Frank supporting a massive government intervention and Gingrich opposing it.

[tavalon]

61. HamdenRice

Do you have a good idea that this plan will work? I'm opposing based on the strong suspicion that it won't work but while I am smart, I am no macroeconomist. What do the macros say about this plan?

[HamdenRice]

64. No one can predict, but if the feds do nothing, a great depression is highly probable

Your question, will it work, is of course the central question. Much of the answer to that is conditioned on what happens in the coming political struggle. To paraphrase an NPR commentator, if the Treasury Secretary who implements this is Phil Gramm in a McCain administration, it will be a giant boondogle and corporate giveaway that won't solve anything. If the Treasury Secretary who implements it is Paul Krugman or Robert Reich or maybe even Robert Rubin in an Obama administration, it may not only work, but earn hundreds of billions for the Treasury.

The fact that Barney Frank has announced the administration has caved on equity participation by the government increases the chances that the feds will make money -- perhaps hundreds of billions -- on the rescue. It's as though we're offering to buy parts of the richest, most powerful financial institutions at fire sale prices because of what may well be a medium term liquidity crisis.

The key question, though isn't whether the feds make money; it is whether the rescue will create liquidity in the short term -- enable the world's financial institutions to interact with each other. Global liquidity (interbank transactions) almost ended last Thursday. That means no cashing of pay checks, no atms, no cash throughout the entire economy. A DemocracyNow commentator said if that had happened, you'd need gold to buy groceries. A commentator on CNN last night said that Paulson had told associates that on Thursday we came very close to bank lines -- ie runs on virtually all the banks in the country.

The task for the feds is "making a market" in mortgage backed securities, which are the basic building blocks or "money" of the banking system. In that sense, it's not so much a bailout as the feds becoming lender of last resort (not gift giver of last resort) to the banking system.

Given the power of the feds to help solve the problem at the bottom (the homeowner) by forcing changes in contracts and controlling interest rates, and the power of the feds to solve the problem at the top (making a market), I don't see why this is beyond the ability of a competent administration to solve.

[tama]

71. The Effing Great Depression

is allready inevitable as it has been for ages (only thing that was uncertain was the exact timing), so better start dealing with it.

Time to fill up the popcorn stash and watch how Interesting Times of interplay of Peak Oil, Climate Change and Systemic Crisis of Capitalism rewrite history. And learn gardening and caring for friends and neighbours... :)

[tavalon]

72. Thank you for taking the time to explain your point of view

It makes some sense and my concern is predicated on exactly what you pointed out. Depending on who is minding the store, this is either a boondoggle or a reasonable solution. Thing is, I personally doubt the way this is being presented. It makes me predisposed to believe it is a farce, otherwise why must it be done TODAY,NOW,NOW,NOW!!!!!!!!! I'm well aware of what has happened in the last week, but the Feds should have been more on top of this. If this is a genuine, well thought out solution, why is it being rolled out this way, with this time frame. Even if it is a good idea, rolling it out like the "Patriot Act" makes me think, well, "Patriot Act", you know?

Something needs to be done, without a doubt. The doubt, for me, comes in with this specific bailout, with the specific way it's being marketed.

[femrap]

62. Hi mole!

Aren't you glad that there isn't a law against being stupid???

ETA: Derivatives and credit swaps have no value....they are not assets. They're just pieces of paper.

WASF!

[mhatrw]

63. You are enabling a giant ripoff, HR.

It's a ripoff. It's the most massive transfer of wealth in history.

Here's what it would take to get my vote: If we can fully nationalize the health care and defense industries at the same time.

[KewlKat]

65. We have about as much of a chance of

recovering the bailout money as we have that Iraq's oil revenues will pay for it's rebuild.

[Romulox]

74. Iraq will pay for itself; people will meet us with flowers. nt