From The Guardian UK
By Dean Baker

The US financial system will remain in tatters even if the bail-out succeeds beyond anyone’s wildest dreams. The core problem is the large and growing volume of bad loans, which currently exceeds $700bn by most estimates.

While this has usually been identified as a sub-prime crisis, it is really a larger problem of bad mortgage debt. Sub-prime loans are over-represented because by definition these were the most risky loans to the most vulnerable segment of the population. However, the default and foreclosure rate on all housing loans has soared far beyond the normal range.

The reason for surging default rates is simply the collapse of the housing bubble. House prices nationwide have fallen by almost 20% since their peak in the summer of 2006. In some cities the decline has been more than 30%. As a result, tens of millions of homeowners are now underwater, owing more than the value of their homes.

The loss of home equity is also leading to higher default rates on credit card debt, car loans and all other types of consumer loans. People who could have drawn on home equity to pay other debts no longer have this option.

While the drop in house prices has led to the recession and the financial crisis, the fact that prices are continuing to fall worsens both problems. At this point, the bubble is only about 60% deflated. House prices still have another 10-15% to fall, and considerably more in many markets that are still seriously inflated.

Read more Bail-Out

From This Can’t Be Happening
By Dave Lindorff

Boy, investors don’t fool around do they?

When they see a dud, they let you know it. And that’s exactly what they’ve done with regard to that $700 billion bailout bill Congress passed on Friday.

The measure, largely developed by Treasury Secretary Hank Paulson on a Napkin over crepes with Ben Bernanke, the Fed Chairman, as they were discussing the collapse of the American financial system two weeks ago, was never really about rescuing that system. It was about figuring out a way for Paulson to extract his buddies at Goldman Sachs from the debacle of all those mortgage-based derivatives they and he had created to turn crap into gold.

Congress, which knew better, and which, last Monday, under an avalanche of angry calls and emails form taxpayers who were being hit with the bill, initially rejected this ripoff, caved in when the lobbyists arrived, suitcases full of cash, and when Paulson and Bernanke warned them that failure to act would lead to a new Great Depression, and perhaps the imposition of martial law (the Bush administration backed this latter threat up by dispatching an active military unit to duty within the country, for the first time since the Civil War, noting that it could be used for “crowd control” purposes as needed).

So on Thursday evening the measure passed and was rushed to the President’s desk for signature before Congress could change its addled mind.

The market promptly dropped by 1.5 percent the next day.

Read more Markets

From The Boston Globe
By James Carroll

How much is 700 billion? The mind registers the number with such imprecision as to make it meaningless. One blogger proposed this way of grasping the figure: As a stack of $100 bills, it would reach 54 miles high. But who can imagine that? On the other hand, someone at the Smithsonian once calculated that counting to one billion, at the rate of one digit per second, would take 30 years. By that scale, counting to 700 billion would take 21,000 years.

Come again? That stretch of time takes us back to the cave painters of Lascaux, the glacial age, the last Neanderthals. The mind is not helped.

By a nice coincidence, though, the financial rescue package of $700 billion duplicates a number that was also in the news last week - the Pentagon budget. In the fiscal year just beginning, the Defense Department will spend $607 billion on normal military costs, and an additional $100 billion on the wars in Iraq and Afghanistan. (As of June 30, 2008, Congress had appropriated $859 billion for the wars; Congressional Budget Office projections assume further costs of $400 billion to $500 billion as the wars wind down). But for the coming year, $700 billion is the Pentagon’s nice round number (this includes neither Homeland Security nor intelligence costs).

Step back. All of last week’s hand-wringing hoopla over the emergency bailout stands in stark contrast to the utter indifference with which politicians approved an equivalent layout for the military - an approval so routine that it was ignored in the press and by the public.

Read more $700 Billion

From True Blue Liberal
By Stephen Lendman

Over 200 years ago, Thomas Paine wrote a treatise on government in which he said “a republic is supposed to be directed by certain fundamental principles of right and justice, from which there cannot, because there ought not to, be any deviation. (It) is executed by a select number of persons, who act as representatives, and in behalf of the whole, and who are supposed to (govern) as the people would do were they all assembled together….

When a people agree to form themselves into a republic (they) mutually resolve and pledge themselves to each other, rich and poor alike, to support this rule of equal justice among them….A republic, properly understood, is a sovereignty of justice, in contradistinction to a sovereignty of will.”

Since its founding, America was never governed by Paine’s principles. Never less so or more disgracefully than under George Bush.

This article follows from an earlier one titled Grand Theft America. On the crime of the century. The greatest one ever. Unbridled excess gone awry. An economic system built on a foundation of greed and fraud. Threatening the country with insolvency and ruin. World economies with it. Plundering the national treasury to save it. Bailing out criminal bankers. Rewarding fraudsters with public funds. Making the world safe again for capital (or trying to) and heading it for an even greater calamity ahead. Maybe next time (or this one) one no financial engineering can fix.

An Update on the “Bailout”: The Emergency Economic Stabilization Act (EESA)

EESA defrauds the public. Fleeces the treasury to reward criminal bankers. Arranged secretly behind closed doors. The $700 billion is just for starters. Another $150 billion was just added to it (discussed below). Trillions will be pilfered for this scheme. Millions of innocent people will suffer grievously. Crumbs at best are in it for them. Read the rest of this entry »

From AlterNet
By Garrison Keillor

Where were the cops?

It’s just human nature that some calamities register in the brain and others don’t. The train engineer texting at the throttle (”HOW R U? C U L8R”) and missing the red light and 25 people die in the crash — oh God, that is way too real — everyone has had a moment of supreme stupidity that came close to killing somebody. Even atheists say a little prayer now and then: Dear God, I am an idiot, thank you for protecting my children.

On the other hand, the America’s federal bailout of the financial market (yawn) is a calamity that people accept as if it were just one more hurricane. An air of crisis, the secretary of the Treasury striding down a hall at the Capitol with minions in his wake, solemn-faced congressmen at the microphones. Something must be done, harrumph harrumph.

The Current Occupant pops out of the cuckoo clock and reads a few lines off a piece of paper, pronouncing all the words correctly. And the newscaster looks into the camera and says, “Etaoin shrdlu qwertyuiop.”

Where is the outrage?

Poor Senator Larry Craig got a truckload of moral condemnation for tapping his wingtips in the men’s john, but his party proposes to spend 5 percent of the GDP to buy up bad loans made by men who walk away with their fortunes intact while retirees see their 401(k) go pffffffff like a defunct air mattress, and it’s business as usual.

John McCain is a lifelong deregulator and believer in letting brokers and bankers do as they please — remember Lincoln Savings and Loan and his intervention with federal regulators in behalf of his friend Charles Keating, who then went to prison? Remember Neil Bush, the brother of the C.O., who, as a director of Silverado S&L, bestowed enormous loans on his friends without telling fellow directors that the friends were friends and who, when the loans failed, paid a small fine and went skipping off to other things?

Read more Stealing

From TruthDig
By Chris Hedges

The passing of the $850-billion bailout pulled the plug on the New Deal. The Great Society is now gasping for air, mortally wounded, coughing up blood. It will not recover. It was murdered by the Democratic Party.

We are on our own. And don’t expect any help from Barack Obama and Joe Biden, who lobbied hard for the bill and voted for it. Ignore their rhetoric. Look coldly at the ballots they cast against us. We, as citizens, have only a handful of representatives left in Washington, most of whom were left sputtering in rage and frustration on the House floor. The sad irony is that some of them were Republican.

“This was the largest single act of class warfare in the modern history of this country,” Rep. Dennis Kucinich, D-Ohio, who led the fight in the House against the bailout, told me by phone from Cleveland. “It is a direct attack on the American people’s ability to be able to stabilize their homes and their neighborhoods. This single vote will define the careers of everyone. We are back to taxation without representation, to markets that are openly rigged.”

“We buried the New Deal,” he said of the vote. “Instead of Democrats going back to classic New Deal economics where we prime the pump of the economy and start money circulating among the population through saving homes, creating jobs and building a new infrastructure, our leaders chose to accelerate the wealth of the nation upwards. They did so in a way that was destructive of free-market principles. They ripped away all the familiar moorings. We are in an uncharted sea where the traditional roles of the political parties are being switched. The Democrats have unfortunately become so enamored and beholden to Wall Street that we are not functioning to defend the economic interest of the broad base of the American people. It was up to the Republicans to protect not just a so-called free market but the American taxpayer and attempt to block this. This is an outrage. This was democracy’s Black Friday.”

Read more Betrayal

From The Washington Post
By Harold Meyerson

“There’s no question that we have to change the subject here,” a senior Republican operative told The Post’s Michael D. Shear in a story published Saturday.

The “subject” in question is the economy and how to fix it. As Americans have taken their eye off the ball — that is, off John McCain’s sterling qualities of character and command — by focusing on the economy, Barack Obama has surged into the lead nationally and in many key battleground states.

So long as the candidates talk about that pesky economy, McCain’s handlers have realized, McCain will continue to swoon. Thus the campaign has announced that it will go on the attack again on the momentous topics of Obama’s ties to the Rev. Jeremiah Wright and Bill Ayers, the onetime Weatherman who has been a University of Illinois education professor for nearly two decades.

Campaigning on Saturday in Colorado, Sarah Palin accused Obama of “palling around with terrorists” by associating with Ayers, citing as her source a New York Times story from that morning. In fact, the story concluded that the Obama-Ayers “relationship” consisted of both men attending the board meetings of two Chicago organizations and that there had been no contact between the men, other than bumping into each other on the sidewalk (they live in the same neighborhood), since Obama went to the U.S. Senate in January 2005.

Read more Pals

From The Seattle Times
By Froma Harrop

Accomplished Googlers can probably find the original talking points off which dozens of conservatives made essentially the same case: The Community Reinvestment Act of 1977 caused the financial crisis. For example, a Wall Street Journal editorial lumped CRA together with far-more-plausible causes of the meltdown. This liberal-inspired law, it complained, “compels banks to make loans to poor borrowers who often cannot repay them.”

In fact, the CRA had about zero to do with today’s problems. Its accusers are “know-nothings,” Aaron Pressman writes on BusinessWeek.com. He says the law “was actually weakened by the Bush administration just as the worst lending wave began.”

The CRA requires federally insured banks and thrifts to lend in the low-income neighborhoods where they take deposits, but consistent with safe banking practices. It was created to stop redlining, the practice whereby banks refused to lend money in certain areas — read minority neighborhoods — regardless of their residents’ credit histories.

The most obvious clue that CRA did not cause the mess is its date. The musical “Annie” opened in 1977, and the Eagles’ “Hotel California” was the No. 1 song. That was a long time ago, 31 years, to be precise. If the CRA created this time bomb of lousy loans, why didn’t it go off in 1980 or 1996?

The writing of crazy mortgages for low-income people — loans with exploding interest rates, brutal fees and no demands for documentation — was a post-2003 phenomenon. In 2004, the Bush administration actually slashed CRA regulation, freeing small banks and thrifts from its toughest standards.

Read more Blame

From The S.F. Chronicle
By Robert B. Reich

The Mother of All Bailouts may be necessary to unfreeze our capital markets, but it won’t unfreeze the American economy.

Bailout or no bailout, we’re heading into deep recession. One of the first initiatives that Congress and the next administration will need to take will be an economic stimulus package. But not even this will remedy the underlying problem: The earnings of most Americans haven’t kept up with the cost of living. That means there’s not enough purchasing power to keep the economy going.

Adjusted for inflation, the incomes of nongovernment workers are lower today than in 2000. They’re barely higher than they were in the mid-1970s. The income of a man in his 30s is now 12 percent below that of a man his age three decades ago.

Per-person productivity has grown considerably over the past three decades and has continued to rise even in the lackluster recovery of this decade.

But most Americans haven’t reaped the benefits of these productivity gains. The benefits have gone largely to the top.

The top 1 percent of American earners now take home about 20 percent of total national income. In 1980, the top 1 percent took home just 8 percent. Inequality on this scale is bad for many reasons, but it is also bad for the economy.

Read more Bottom-up

From This Can’t Be Happening
By Dave Lindorff

The grassroots rebellion that led to the House’s rejection of the Bush Administration’s Wall Street bailout bill on Monday flamed out on Friday, overwhelmed by a massive lobbying campaign by Wall Street and by a propaganda push in the corporate media in favor of passage.

The House, which had voted 228 to 205 against a bailout at the beginning of the week, voted 283-171 in favor of an even more expensive plan only four days later, after the Senate passed a bill containing over $100 billion in tax breaks (mostly for the wealthy), and after House leaders added a bunch of those infamous “earmarks” to buy the votes of reluctant House members. (Sen. John McCain, who has vowed as president to veto any bill containing earmarks, voted for this whopper of a bill, earmarks galore and all.)

Interestingly, one of the things that was used to frighten members of Congress into passing this unprecedented bill was a swooning stock market, which plunged into record low territory for the year on Monday and Thursday. Yet after rising modestly during the morning, reportedly on “anticipation” that Congress would pass a bailout, once the vote was in, the equities markets all started heading south and hitting record lows for the year–even lower than they’d gone on Tuesday after the initial House vote against the bailout. Clearly investors weren’t particularly optimistic that throwing almost $1 trillion in borrowed money from taxpayers at banks and investment houses would do much for the nation’s struggling “real” economy. (Why is it that conservatives who love to say that “throwing money” at problems won’t work when those problems involve the lives of poor and working people, but they seem to think that throwing money at rich people and rich corporations will “work”?)

One reason for investor pessimism is no doubt news that car sales and housing prices in September slumped to record lows, and that the September jump in unemployment was the highest since the 9/11 crisis in 2001. Another was probably the inclusion of a provision in the bill as passed by both House and Senate that allows the Treasury to buy bad debt not just from US banks, but from foreign banks as well. As several critics of the plan have observed (but as the corporate media have failed to report, to their undying shame), this means that American tax dollars will be flowing out of the country to shore up the balance sheets of foreign institutions, in the name of keeping overseas investors in the market for US treasury securities.

Read more Revolution