Opinion-Columns.com

A CHEAP SHOT AT CRAVING CHEAP CREDIT

Don’t Talk to Me About Craving Cheap Credit to Spend on Imported Goods.

It’s our cravings that are at fault, the fraudsters on Wall Street bray. Consumers demanded cheap credit and we just didn’t know what to do except provide it—even at the personal cost of having to take those hundred million dollar salaries. They made us do it, with their lifestyle demands. Wal-Mart wasn’t a scheme to wreck Main Streets across America, centralize all the purchasing in the Walton family private coffers—it was the cry of manic consumer demand for Chinese TVs and toxic toys for the kids.

We had a gun at our head to create credit default swaps out of the whole cloth that used to be collateralized lending. Remember when you went to your bank for a loan? In those creaky old horse-and-buggy days, the banker wanted some reasonable idea you were going to pay him back. He cared about such things, because it was your (and his) neighbors’ money he was lending. Your reputation might count for something back then, because he knew your reputation. But every month at the loan committee meeting, you were smiled or frowned upon.

I never craved cheap credit, worthless goods or seven credit cards. Credit cards weren’t even in common use until Visa and MasterCard rolled out in the sixties. Oh yeah, you might have carried a Texaco or Standard Oil card for buying gas, maybe had a department store charge account, but the swiping of card-readers came with the usury-friendly 18% interest rates for unpaid balances.

Texaco, Standard Oil or the department store merely got angry with you, cancelled the card and hounded you into court. Visa, MasterCard and the other big guys made a profit out of a great new business opportunity. Why make 5% warehousing, transporting and selling a sofa, when you can make three times that loaning out the money and the Congress of the United States will enable the process.

You can’t get a more prominent enabler than that.

Everyone jumped on the band-wagon of marketing and consuming because they had made the actual manufacture of goods a pauper’s business. No longer able to invent and build, the world’s most successful nation of inventors and builders turned to selling each other cheap crap and calling it the new economy. In a scant forty years, the core values of a nation were cored like apples.

So, the race was on and in four decades that race essentially boarded up the Main Streets of small towns, outsourced our jobs to the cheapest offshore producer, transformed us from the world’s largest lender to the world’s biggest debtor, put college educations out of common reach, changed the relationship between worker productivity and reward, busted the unions, set off an advertising based feeding-frenzy of consumption and—now that it has busted the bank—hands us both the bill and the blame.

Unlike your friendly neighborhood bank of forty years ago, the new-age swindlers who arranged a home mortgage or line of credit for the un-creditworthy, needed a place to offload the offal. Bingo, derivatives were invented—not regulated, but invented—the not regulated part was just another low and outside curve-ball lobbed to a well-fed and well-paid-off Congress.

Derivatives were a hedge-fund invention, a way to whistle up large fees and churn the money pump, essentially hiding rotten apples at the bottom of otherwise shining and radiant barrels of produce. The language in these shell-game contracts was so arcane as to be un-understandable to those who took their cut, closed their eyes, held their nose and shoveled them on down the line.

Rating agencies knew of the stink and approved them AAA in spite of it, for (what else) money. Mortgage bankers, investment bankers, rating agencies and insurers—essentially all the guys looking for bailouts now—knew and collaborated and stirred the conspiracy-pot for a classic RICO indictment.

Instead, Henry Paulson is Santa Claus to save the financial markets.

(TARP—Your Money at Work) those unregulated derivative contracts that allow investors to bet on a debt issuer’s financial prospects, loomed so big on balance sheets that they now drive every bailout decision.

. . . “The last eight years have been about permitting derivatives to explode, knowing they were unregulated,” said Eric R. Dinallo, New York’s superintendent of insurance. “It’s about what the government chose not to regulate, measured in dollars. And that is what shook the world.”

Don’t bother to save the co-conspirators, Henry. Rhett Butler nailed it when he looked deep into Scarlett’s eyes and said, “Frankly, my dear, I don’t give a damn.” As a taxpayer, I’m still reeling from the $11 trillion we’ve accumulated in national debt since Ronnie Reagan (the communicator) deregulated me out of my underwear.

Now you guys have come after the underwear.

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Media comment:

• Bloomberg-Treasury Seeks Asset-Buying Power Unchecked by Courts
• Guardian-UK-US Treasury takes on the house in high-stakes game
• Wall Street Journal-Paulson Presses Congress to Act On $700 Billion Bailout Plan
• Reuters-Treasury plan lacks taxpayer protection: Sen.Schumer
• Boston Globe-Can America afford it?

When Steven Pearlstein Writes, We Are Obliged to Pay Attention

Steven Pearlstein is, at least for me, one of the few reasons left to bother reading the Washington Post. Others who quickly come to mind are the two Danas, Milbank and Priest, but altogether they  whole lot number less than the fingers on one hand.

Political writers with equal skepticism for both sides are hard to come by, investigative reporters too far and in-between and top-notch writers on the economy almost non-existent. Pearlstein must have somehow missed the opportunity of a Harvard MBA. He is not of that ilk and a man of rare insight in a profession that has lost it along the way.

(Washington Post-A Delicate Balance, By Steven Pearlstein)

You know something's up when both the secretary of the Treasury and the chairman of the Federal Reserve give speeches calling for a new mechanism to allow them to manage the orderly liquidation of a major financial institution.

You have a sense that things are getting desperate when General Motors has to offer six-year loans at zero-percent interest to unload its gas-guzzling trucks and SUVs, and people openly speculate about how long it will be before the automaker runs out of cash.

And you can feel the foundation shaking under Wall Street when Fannie Mae and Freddie Mac have to pay three-quarters of a percentage point more to borrow money than the U.S. Treasury, which implicitly guarantees their debt, and top government officials feel compelled to reaffirm their support.

We're nearing that delicate point in the cycle when even the usual cheerleaders have hung up their pompoms, consumer and business confidence has disappeared and investors are driven mostly by fear rather than greed.

Well, we have been a long time wandering down this road. It’s not something we can boast of having come to honestly, because there’s been dishonesty aplenty and it feels more like the snake-oil days of the late twenties than it does the beginning of a new millennium. Distracted by the threat of computer meltdown as the millennium turned, we failed to see the true culprit—our native fascination with something for nothing.

Disaster takes its toll on credulity and the ten years after the ’29 crash dropped the nation to its knees, adding desperation after desperation, as Ford cars cost $500 a copy and no one had the five hundred. Hell, no one had five bucks, at least not to spare. There were three cures to this misery.

1. Franklin Roosevelt’s massive public works programs, a Democratic effort to pull the country back to a reasonable level of employment, that would not be matched until a Republican president Dwight Eisenhower launched the Interstate Highway program just after WWII.

2. World War Two itself, a struggle so intense that all hands were at work churning out the material of war.

3. The G.I. Bill, which educated beyond all precedent an entire generation of homeward bound military personnel from the war. Partly, the bill prevented the wholesale dumping of soldiery on a delicate jobs market, but the unintended consequence was to ultimately provide the best-educated workforce the nation had seen to date.

Sobering and useful circumstances all, yet they are beyond the living memory of only a diminishing few. Returning heroes begat the Boomers, the Boomers begat the exuberance of the fifties, the social upheaval of the sixties, the Vietnam seventies, Madonna eighties and Monica nineties. Unsure of what they had wrought and nervously peering into the new century, the World Trade Center fell and all the cats were let out of the box at one time.

My old daddy once said of an aunt of mine near the end of her days, “she spent her whole life worried she wouldn’t get what was coming to her—and now she’s afraid she will.” Spoken, dear old daddy, for a generation you didn’t live to see—from Wall Street to K Street to Congress, the Pentagon, the halls of Congress and deep into the heart of every man who ever drew to a straight-flush.

. . . A financial crisis is not a morality play. What matters most isn't the precedents that are set, the amount of taxpayer money that's implicated or whether people are made to suffer fully for their financial misjudgments. In the end, what matters most is that we get through it as quickly as possible with an economy and a financial system intact.

I have a problem with Pearstein's last paragraph. I absolutely agree that the financial crisis is not a morality play, but Band-Aiding our way through the present turmoil is not a goal he and I share. I don't so much care that the top investment bankers rake in major dough from throwing monkey-wrenches in the gears. I'm not even all that outraged by $5 million birthday parties or $50 million severance packages.

What I am scandalized by is the money that has been made available from Wall Street and the business community to pay off the most corrupt Congress in memory (and my memory extends through eight decades). Those who worried they wouldn’t get what was coming to them. If they finally do get what they have coming, it will be because

• Hedge funds are totally unregulated, lobbying and bribing their way past regulation.
• Military contractors (icons like Boeing and Lockheed-Martin) regularly commit fraud against paid-off Pentagon administrators, protected in turn by paid-off Congressmen and Senators.
• Earmarks are such a source of mutual profit between crooked representatives and their equally crooked constituents, that they threaten the basic terms of self-government.
• Healthcare has been made hostage to the profiteering of pharmaceutical companies, doctors, insurance companies and third-party providers.
• Congress is so swamped by bribery that the likes of Blackwater and Halliburton have burst the dam of public intervention.

Money, in quantities unknown to prior generations has served to buy every special interest, confound every legal recourse and overwhelm every civic responsibility. Each day a dozen major thefts and frauds are exposed against the common people by their industries, their institutions and their representatives. If we ignore what Pearlstein calls 'an economic morality play,' we will have lost perhaps the last chance to regain control of a basic ability to self-govern.

America is losing on all fronts as our small town merchants are destroyed, industrialized agriculture wrecks the safety and balance of our food supply, we declare the undeclared, spend the unearned, torture and bomb and lie our way through foreign policy as if we are telling truths.

A financial crash of epic proportion--a '29 style meltdown--would cause absolute havoc over the lives of the nation's mostly innocent populace. But what has been raised as tribute to our 'consumer economy' over the past thirty or forty years is a death-by-a-thousand-cuts to traditional American progress and prosperity. We are bleeding and helpless as Wal-Mart destroys our Main Streets, the insurance industry destroys our healthcare and off-shoring destroys our job base.

Welcome (you Boomers and the offspring you now find back in their upstairs bedrooms) to the 'service society.' If your life seems less productive, your family needs two (or three) jobs to survive, your kids got a crappy education, you worry about retirement and reach for Valium and Viagra to get through the week . . .

. . . dial 9 and remain on hold for 40 minutes while you are assured your business, or problem (or potential suicide) is very important to us.

Compared to where we find ourselves, Mr. Pearlstein, at the end of a forty-year pornographic consumerized massage, a morality-play might be a snap. If not exactly a snap, perhaps better medicine than Viagra or Valium.

But beware the side-effects.

In the substitute for morals that we have eagerly accepted and welcomed into the lexicon of what it means to be an American consumer, an economic meltdown might be the best medicine.

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Media comment;

• Dallas Morning News-Phil Gramm's alternate universe
• Detroit Free Press-Worse to come on foreclosures?
• CBS News-Paulson And Bernanke: Economic Melt-down "ongoing"
• MarketWatch.com-Options expert calls Fannie, Freddie shares 'worthless'
• Baltimore Sun-Fannie Mae, Freddie Mac meltdown?

 

AN ADVOCACY PROBLEM IN THE "WHAT'S NEEDED" DEPARTMENT

It hardly seems normal (or acceptable) to read in separate articles in my morning's Washington Post, that federal facilities right here in our country are running too short-funded to protect themselves. This, while Boeing and Northrop haggle over who is most deserving of a $40 billion contract for refueling planes. Further along in the tanker piece, one must suspend belief to choke down the admission that an end-contract for these planes may well exceed $100 billion.

$100 billion and yet the Federal Protective Service had its budget slashed by--who else?--Homeland Security. These guys (and women) protect nearly 9,000 Federally owned and leased buildings. The FPS used to be part of the GSA (General Services Administration), but that was in the days before this privatizing-crazed administration outsourced everything from V.A. services employees to armed guards and foreign quasi-military thuggery.

Security Provider Cuts Patrols
Federal Protective Service Faces Financial Problems

By Mary Beth Sheridan
Washington Post Staff Writer
Wednesday, June 18, 2008; B01

The police agency in charge of protecting many federal buildings is so short-staffed that it has cut outdoor patrols aimed at detecting suspicious individuals and car bombs, according to a report to be released today.

Well, what the hell, they're only suspicious individuals and suspected car-bombs, so what is that compared to the actual, known and recognized lobbying activity carried on daily in support of weapons. We gotta have weapons, people. Weapons are the only way through this era of planetary discontent.

Which brings up the question of advocacy in a government that has become so diffused and downright opaque in its character that no one knows who is running the show. Congress writhes in the impotence of no longer even knowing whom to subpoena and is forced instead to bore itself and its constituents in waves of meaningless committee hearings.

When it, tremblingly gets itself together, draws itself to its full height, puffs out its chest and actually serves a summons, it is ignored. Not only ignored, but dismissed without penalty. The list of powerful no-shows is long and infamous, running out the clock in the waning days of a presidency as well as a Congress. In circumstance after circumstance, from terror to torture, from collapsing bridges to a deteriorating National Mall, from contracting theft to congressional enabling, we have allowed our nation and its protections to be quietly slid out from under us.

Alarmingly, distracted as we are by American Idol, there is no advocacy for the deteriorating bureaucracy that runs the nation's business. Bureaucrat has become a dirty word and privatize has taken its place, although it is the hardworking Washington bureaucrat who kept us afloat in the years before Ronald Reagan made of him a laughingstock. Consider what privatization has brought us in the way of

• a military that cannot fight and includes bloated weaponry programs designed for wars that will not be waged
• a badly-named and unfortunately directed department of homeland security (I refuse to dignify it with capitals) that wastes money, squanders resources and loses its talented leaders while constantly bumping into the furniture on issue after issue
• a nation where rhetoric replaces reality, where bridges collapse on the way to fiscal responsibility and schools graduate the illiterate while leaving no child behind
• a business community shackled to the vagaries of investor-return, that ravages corporation after corporation in the name of quarterly profit, where no one is left to answer the phone.
• a service-industry oriented society where the taped message "your call is important to us" has replaced any interest in the customer service for which they are named
• the numbing daily assault on our sense of fairness and justice as one after another after another of our cherished values is crushed beneath a ceaseless lack of advocacy

The Washington Post continues;

. . . The protective service provides security for more than 1 million federal employees at about 9,000 buildings in the D.C. area and across the country. Caught in a cash squeeze in recent years, the agency has reduced its staff by about 20 percent, to 1,100 officers, the study said. They oversee about 15,000 contract security guards at the facilities.

. . . The report traces the protective service's difficulties to its absorption by the Department of Homeland Security in 2003. The service lost a $139 million annual subsidy it had received as part of the General Services Administration and slid into financial turmoil. The protective service responded by reducing officers and focusing them on overseeing the contract guards. The service said it would seek help from local police forces in responding to crime at facilities.

The report criticized that strategy, saying that it "has diminished security at GSA facilities and increased the risk of crime or terrorist attacks" at many buildings.

At many facilities, officers no longer patrol to prevent or detect crime, the report said. As a result, "law enforcement personnel cannot effectively monitor individuals surveilling federal buildings, inspect suspicious vehicles (including vehicles that could potentially bomb federal buildings) and detect and deter criminal activity," the report said.

The service also reduced officers' hours at many locations, the study said. Adding to the difficulties, many of the service's security cameras and X-ray machines have been broken "for months or years," the study said.

The report highlighted problems with contract guards, who generally work at fixed posts and do not have arrest powers. Oversight of the guards is inadequate, with some posts inspected less than once a year, it said.

In one incident, armed security guards stood idly by as a shirtless suspect wearing handcuffs on one wrist dashed through the lobby of a federal building with a Federal Protective Service officer in pursuit. The building was not identified in the report, but officers speaking on the condition of anonymity said it was a court-services facility in the District.

This is what neo-conservatism has wrought. Born of a reactionary response to the '60s counter-culture, conservatism panicked and dropped its pants to the likes of Norman Podhoertz and Irving Kristol, these 'new' conservatives who advocated the ignoring of America in an orgasm of foreign intrigue. Between this disguised liberalization of the old wire-rimmed glasses conservatives and the advent of the Harvard Business School's reverence for quarterly profit, America has steadily tanked.

For my own part, I am no teary-eyed liberal. Participant in all or part of eight decades, I believed then as now in being left the hell alone, doing the nation's economic dishes instead of stacking them in the sink and dusting under the beds of infrastructure. I do not believe in

• selling off the country's Interstate highways,
• allowing the airlines to destroy the safety and efficiency of air travel,
• outsourcing our military to Blackwater and Haliburton,
• bribing our congressional representatives
• or holding harmless the thieves and crooks who have hijacked American business for their own gain.

For over three-quarters of my life I held the belief that conservatism depended upon actually conserving something and I hold that belief today, even after the shame that every Republican president since Richard Nixon has brought to the term. Under their tutelage, we no longer have a currency that means anything, have become the largest debtors in the world, lost our manufacturing base, are well on our way to losing agricultural leadership as well and have steadily degraded our society into an orgy of selling each other whatever cheap crap can be imported from China--all in the name of neo-conservatism.

My old daddy taught me that you pay your bills, work hard, treat people fairly and make your way as well as possible through the life you were given to live. How he hated FDR's New Deal, not because the country was stronger than that but because he felt institutionalized charity denigrated and trivialized the private concern we all felt for one another as citizens.

Now his--and my--conservatism has been twisted and perverted into a state where it is no longer recognizable.  We have become the unwilling and unwitting victims of political hype and demagoguery of the worst kind--chained to our fate by the thievery of language. Mistaking the back-slap brand of  compassionate conservatism for something that actually conserved, we have had our roads, bridges, sewers, currency, rights to privacy, ecology, our world reputation, safety and international regard cashed in and traded for a lifetime of debt.

If you think Barack Obama will be able to pull us out of our fifty year slide into irrelevancy, I wish you well and hope you are right. I will vote for him because he is--above all--an advocate.

Amazingly, in this changed world where up has become down, he sounds very much like my old daddy.
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Media comment;

• GovExec.com-Study documents dangerous security gaps at federal buildings

"Having Been Unable to Strengthen Justice, We Have Justified Strength"

That's a quote concerning justice and strength from the dim past of 350 years ago--another proof that not much changes across the pages of history--by philosopher-mathematician Blaise Pascal, dead since 1662.

Barbara Ehrenreich writes in the Huffington Post; "The Democrats are feeling empowered -- in part -- by the resounding echoes of change that is ringing in their ears."

That would be a hopeful message, if it were true. But what is more likely to be ringing in their ears is a phone call from Squibb or Martin-Marietta. Meanwhile, what rings in the ears of the electorate (the 55% that is left of it) is the apathy and incompetence  of the long-awaited congressional control by Democrats.

Ehrenreich is not easily dismissed. She was a regular columnist for Time, currently contributes regularly to The Progressive and has written for the New York Times, Mother Jones, The Atlantic Monthly, Ms, The New Republic, Z Magazine, In These Times, Salon.com, and other publications. Author of some 20 books. The lady knows the territory and, to her credit, has not become inured to echoes of change ringing in ears.

We've seen the first act of the play yet to come, titled "Democrats Back in Charge." It's had a bunch of bad 2006 reviews. Spencer Tracy had it right about stage presence; "learn your lines and don't bump into the furniture."

Thus far, Democratic control has yet to achieve either goal. At a time when Democrats need desperately not to act like Democrats, Harry Reid tries to morph from wrestling-coach to statesman. It's just not in the man from Nevada. The hand is a bust. Pelosi, all wriggly and giggly from her moment of fame has shown herself to be too partisan a dominatrix of House discipline to serve her country in time of need. 

• We are no closer to getting out of Iraq than before
• The uncontrolled (and disastrously un-admitted) real estate bubble has imploded in a mire of  fraud and conspiracy
• Health care is an issue for tomorrow and tomorrow and tomorrow
• Impeachment of the most criminal administration in the history of the country remains 'off Nancy Pelosi's table.'
• A small and unheralded, largely unseen military dies on a daily basis to prove the unprovable staying of a headstrong president's course
• This new and toothless 'Congress of change' can't even enforce its will to bring testimony from a successfully defiant executive branch

Pelosi and Reid are terrified, not of impeachment (or the fantasy that it will complicate election 2008), but of their personal roll in the Democratic complicity that an impeachment trial would reveal. Every single step of the way, the Bush administration's murky wreckage of American ideals was approved by Democrats.

The ongoing whine that Pelosi & Co just can't get past a need for 60 votes in the Senate is ample evidence. Republicans were in exactly the same position. Had Democrats the will, had Pelosi and Reid the guts, Bush would never have been able to run off with the country.

Newt Gingrich and Tom DeLay at least had the guts not to give a shit. They stood there, guns blazing and dressed the theft of American politics as a Contract With America. Had Bush and Cheney not been so heavy-handed, the Gingrich-DeLay legacy would not yet be at risk.

American government has been on the take for decades, mainlining the intravenous drip of special interest money until the body politic tumesced from bloat. Democrats were (and are) in on the deal, a consideration that sets the stage for massive disappointment once November has come and gone. (Which November of which year has recently become a question, since we seem to have gravitated toward multi-year campaigns)

"Change" is a feel-good, but meaningless word. Defined as "Become different in some particular way, without permanently losing one's or its former characteristics or essence."

Parse that, baby. Become different (Democrat rather than Republican) without permanently losing former characteristics (power, greed) or essence (the best government money can buy). Justice doesn't happen to be a part of change in this context and we are full-circle, back to the brilliant observation of Pascal that in the absence of justice, strength will suffice. Or the promise of strength, the hope of strength, the vision or the image of strength, when strength itself has proven too costly.

This self-servingly constructed framework of government under whose foot we find ourselves has to be ripped apart and reconfigured to serve society. We need to pull the money out of legislating and I don't see a program (or even an admission such a thing exists) on the part of national or regional candidates.

I am uninspired that the very legislators who have pounded together these lobbyist- congressional- military- industrial- pharma- agri- oil complexes (nail by nail, like Jesus on the cross) are the ones upon whom we must rely to tear it all down. Don't ask a theologian to tear down the church.

Barack can't do that, nor can Hillary or John. Only citizens in the streets can do that and they are busy at the moment, lowing like cattle behind the fences government has erected for them. Unless.

Unless it all comes down on their (and our) heads in a massive failure of the American and world economies, a financial disaster of the breadth and scope of 1929. That would, essentially, change all the rules as it did in the aftermath of the Hoover administration, a time not too unlike our own.

There's little purpose in speculating on that scenario. If it happens, it will not be a subject of speculation, but one of reality and the cards will fall as they may--but certainly, they will fall.

I find it personally interesting that, in the wake of the most frightening upheaval Wall Street has faced in recent decades, that Henry Paulson and Ben Bernanke have contrived (some might say conspired) to keep the Dow-Jones happily above 12,000. They have done that by irrationally, unsettlingly and without precedent, opening the money pumps to private investment banks. The money in that pipeline does not exist. They printed it.

Your and my house, car, furniture and lawnmower is worth half today of what it was when George Bush took office.

You will not be aware of that, because it is not likely you have reason to keep up with international currencies. Within the United States, all seems well. The waters are quiet. Outside America, a financial tsunami has taken place and the dollar is on the brink of collapse. No one wants our currency. No one wants our debt. No one wants much of anything America has chosen to export in the past seven years.

It seems that, having failed to strengthen justice, we have pulled off the double-whammy of failing to justify strength as well. Meanwhile, the two candidates upon whom we pin our faintest of hopes in the most perilous of times, have descended to a controversy over which among them is or is not elitist.

The government we demand is, unfailingly, the government we deserve.
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Media comment;

• USA Today-Poll shows no change in Pa., Clinton up by 6
• Kansas City Star-Obama, rivals spar over 'elitist' remarks, but voters see nuance
• CNN-Congress wants to jolt economy - again
• Spiegel Online-Germany-The Madness of Ben Bernanke
• EuroNews.net-France-G7 finance chiefs push for financial market transparency

Conversations With the Clueless; (a discouraging look at where the Fed is taking us)

The Washington Post headline is Stocks Surge as Fed Offers A Boost and it’s written by T. M. Tse and Neil Irwin, who are staff writers and may be forgiven their sins. Certainly they are not Steven Pearstein (probably one of the finest business-writers extant today) even though he too is beginning to waver on Fed actions that ‘may prevent a serious meltdown.’

Serious meltdown is what we need, Steve. It may in fact be our only hope.

Unfortunately, no politician likes to see SM (sado-masochism or serious meltdown, take your pick) on his or her watch, and so we’ve had a half century of transgressions patched over and forwarded to the next bunch coming in. Getting down to the nitty and the gritty;

NEW YORK, March 11 -- The Federal Reserve took bold action Tuesday to revive the economy's ossified credit markets by offering to take over the risk of spurned mortgage securities, igniting a rally on Wall Street that sent stocks to their best performance in five years.

It annoys me when a national newspaper, ostensibly of some repute, characterizes an inflationary printing of money as bold action. It’s not. Bold action would be letting the fraudulently inflated markets take their well-deserved bath, while still preserving the value of the dollar. That's the job of the Fed, defending against inflation and supporting the dollar.

Ben Bernanke has failed miserably at both. I don’t damned doubt a rally was ignited, as Wall Street dodged another bullet and went out to celebrate.

When your securities stink so badly that no one will touch them, it’s a relief to have the Fed come along and haul your ashes. Ossified indeed. The credit market is road-kill, lying there with all four legs in the air, body swelling with the rot of gigantic fraud.

Setting aside earlier reservations, the Fed essentially made itself the lender of last resort to investment banks squeezed for cash by offering them up to $200 billion in new credit against their holdings of highly rated mortgage securities that no one else is eager to buy. This move, coordinated with four other central banks, was the most aggressive step the Fed has taken to address the spreading credit crisis.

Nice try, Tse and Irwin, but no home run there either. The Fed has not made itself lender of last resort, it has made the American taxpayer lender of last resort, without ever checking in to see if it was OK. The Revolutionary War was begun over just such an issue. Christ, that argument was over tea.

The Federal Reserve doesn’t have $200 billion, nor does it have the additional $100 billion it has promised each and every month until the cows come home (or don’t, in which case they become someone else’s cows) The Fed is

• watering your currency,
• destroying what little credibility the dollar has left,
• making every single thing you own worth less,
• shooing off any foreign interest in financing our astounding national debt
• and getting the Washington Post to present it to you as an aggressive step to address the crisis.

Does anyone ask any questions, or do Tse and Irwin just jot it all down in their notebooks?

Bernanke and Co. are doing this treasonous damage to the American economy in order to keep the Dow Jones Industrial Average up in the vicinity of 12,000. Their reasons have nothing at all to do with the integrity of markets. That went down the drain decades ago.

They are doing it to protect the assets of the CEOs on top, keep the hedge-fund shenanigans in play and let President Bush flee his office with the myth intact that he is not actually President Hoover reincarnated.

The Dow Jones industrial average of 30 blue-chip stocks responded to the morning announcement by jumping 250 points within the first moments of trading and ended the day up 416.66 points, or 3.5 percent, to 12,156.81. 

Another rabbit will have to be dragged out from yet another hat. At $100 billion a month, rabbits are easily come by.

But while the Dow's percentage gain was its steepest since 2003, the rebound in trading still left markets below where they'd been just a week ago. Nor did the move by the central bank address the underlying weakness of the economy triggered by widespread exposure to failing subprime mortgage loans, though the initiative did blunt the immediate threat: a run from even the safest high-grade bonds.

Underlying weakness. There you have it, you intrepid reporters. Even a blind pig occasionally finds a peanut and Tse and Irwin have found theirs, but misnamed it. Failing sub-prime mortgage loans should more properly and accurately read 'fraudulently packaged and mis-represented hedge-fund derivatives.' These bonds have already been declared AAA. The so-called (by crooked bond rating companies) safest have failed.

Now it gets complicated, but only slightly. In the rest of the world—that strange and romantic, dangerous and chaotic place outside America—the value of the dollar has dropped by half during this administration. Your
house, car, savings and hopes are all worth half what they were six years ago . . . and no one told you.

The Cliff Notes are that galloping federal debt ($3 trillion increased to $9 trillion), a savings rate that is less than zero, a huge buildup of personal debt, tax giveaways to the rich, an unfunded war and oil prices goosed by that war ($31 suddenly up to $104 a barrel) have made us a bad bet for the loaning of money.

Unfortunately, our thirst for debt is $1.5 billion a day. Uncle Sam has become a profligate uncle. Somebody has to come up with the dough or else the world is going to make us turn in our credit card.

Mostly, it’s been the Chinese. But understand this. A $100 Chinese investment in ten-year U.S. Debt, paid into our Treasury in 2000, is now only worth $50 and there are still two years to go on the loan. Foreign investors are less and less willing to fund us at that kind of loss, especially when they can buy us up at bargain-basement prices—as the Chinese and Dubai princes have been doing.

So much for blind pigs and peanuts, at least for the moment.

Until Tuesday, the central bank had been unable to reverse the downward slide of the U.S. economy despite a series of interest rate cuts and other steps to introduce liquidity into the system. The series of cuts to the federal funds rate had threatened to stoke inflation and, by driving down the value of the dollar, contributed to price rises in oil and other imported commodities. But these moves had done little to restore the confidence of banks, which have increasingly tightened the credit they offer to businesses and home buyers, even those with excellent credit.

Bingo. What might have restored confidence would be federal indictments, lengthy trials into the lending conspiracy and prison terms for some $100 million executives. Unfortunately for them, the prison terms would have been fairly evenly distributed among the CEOs of mortgage banks, investment banks, bond rating firms and hedge funds. Thanks to Bernanke, those are the very co-conspirators who are celebrating having just dodged the bullet of accountability.

The peanut again. This time under a shell in an economic shell-game (noun; A swindling sleight-of-hand game; victim guesses which of three shells a peanut is under).

All this was choking off already anemic economic activity. The government reported last week that the economy shed jobs for the second consecutive month. Consumer spending has softened, corporate profits have flagged, and both residential and commercial real estate have displayed new signs of stress.

In the past week, the vicious cycle accelerated. Bankers demanded that hedge funds and other investors holding troubled securities put up more cash to back them, prompting a sell-off of high-grade securities such as those issued by the mortgage giants Fannie Mae and Freddie Mac, to raise the money. Some investment funds, like one run by Carlyle Group of the District, could not meet these margin calls, and they defaulted. Rumors of trouble at one of the largest Wall Street banks, Bear Stearns, and speculation that other banks would soon disclose new, staggering losses, added to the mounting panic.

Some call it a vicious cycle, others characterize it as chickens home to roost or the horse gone after the barn door is closed. We have destroyed American agriculture by abandoning it to corporate interests, but the metaphor of the barnyard has not yet left us.

So the Fed moved Tuesday to auction up to $200 billion in Treasury securities, which will be available to large financial institutions if they put up collateral including highly rated mortgage-backed securities. The aim was to make Wall Street firms more confident about buying and holding these mortgage investments and provide an outlet for them. This could free up money for banks to lend.

Choke that one down, if you are able. Here you are (pretending to be an investor), holding junk bonds that were presented to you as AAA bonds. It said so right on the investment documents (a fraud by the bond raters) and here they are today, not worth a fart in a whirlwind (a compounded fraud, perpetrated across state boundaries, making it a RICO offense).

The Fed Chairman, Ben Bernanke, is going to take them off your hands--as collateral--for billions of dollars. You laugh hysterically and put the money under the mattress. This is supposed to make you more confident about buying and holding these mortgage investments, but you’re not fool enough for that, thank you very much. As for freeing up money, that’s safely under your mattress until your heart rate slows down and you venture forth yet again.

Helping liquidity? Forget about it, this shell game is about helping greedy investors who have done exactly as greedy investors are supposed to do—lost their investment.

After the announcement, the market for these highly rated mortgage securities showed signs of improvement.

I’ll just bet it did.

Economists and analysts largely praised the move, saying it goes further in directly addressing current problems than simply cutting a short-term interest rate, which adds to inflationary fears.

"They may have hit the right spot in the marketplace where the help was needed," said Bill Tedford, fixed-income strategist at Stephens Capital Management.

Cutting short-term interest rates is inflationary, but somehow printing $1 trillion a year is not. And Bill is right. They hit Bear Stearns exactly in the right spot, that spot that keeps them from going bankrupt as they deserve to do.

"The mortgage market has just been locked up," said Craig Elder, fixed-income senior analyst at Robert W. Baird & Co. "I'm not sure if it solves all of the problems, but I think it should free up a considerable amount of liquidity."

What we have (thus far) failed to lock up is the crooks and liars who created this mortgage market.

In announcing the program, the Fed also extended agreements with central banks in Switzerland and the European Union that allow them to borrow billions of more dollars from the Fed and inject this money into their financial systems.

What, me worry? Hey--it’s party time. Does the NATO Alliance extend to bailing out millionaires and billionaires? Unfortunately, Tse and Irwin had only analysts and strategists available for interview. Their analysis was understandably a little on the ‘wasn’t our fault’ side and their strategy leaned heavily on the ‘money under the mattress solution’ before the pension trusts find out their money is under that other shell.

Do not leave this Conversation With the Clueless without watchingThe Last Laugh--George Parr—Subprime on YouTube. It is not to be missed and explains the whole sorry mess in a mere nine minutes.

Enjoy.

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Media comment;

• Guardian-UK-Federal Reserve leads world central bank move by injecting $200bn
• Reuters-Economy.com says Fed action helps but not enough
• Wall Street Journal-Euro Hits Another New High As ECB Hints at Holding Rates
• Reuters-US STOCKS-Wall St slips on rethink of Fed plan, oil over $110
• The Age-Australia-Did Bernanke do it for Fannie Mae?

Smash the Presses Before Ben Bernanke Starts Printing

In about a year it will be the 90th anniversary of the establishment of the Weimar Republic, the nickname for post-WWI Germany and a moniker forever connected with the hyper-inflationary economy of Germany. That circumstance lead directly to the democratic election of Adolph Hitler and WWII.

In 1914, the German mark was worth about 25 cents, or four to the dollar. Nine years later in 1923, Germany had printed itself enough marks to make 50 million of them worth exactly one dollar.

Fed to Make $200 Billion Available To Lenders
Bank Seeks to Loosen Credit
(Neil Irwin and David Cho, Washington Post Staff Writers, March 8, 2008)

The Federal Reserve took strong action yesterday to restore order to frazzled lending markets while a new report showing unexpected job losses underscored the toll that credit markets are taking on the economy.

The world's financial plumbing is so clogged that the central bank sees a need for new steps to clean it out to prevent severe damage. Mounting panic in the credit markets is making it harder for Americans to get mortgages and is increasing the rates they must pay on credit cards and auto loans. Even solid businesses are finding it difficult to raise money to expand.

Ben Bernanke, who is the current chairman of the Fed is hardly a plumber. One can only wish he was.

Under his tutelage, we may as well take the book from the left hand of the Statue of Liberty and replace it with a can of gasoline. A torch in one hand, gasoline in the other, the perfect metaphor for an American economy so distorted and so finance-driven, it hardly deserves the name.

"Send us your investors, your huddled capital funds"

We are no longer a capitalist society and have not been one for some years now. We are an interest-rate dependent consumer society and the sole, wheezing, smoking engine left to support that house of cards is consumer confidence. Essentially, the American dream has become a confidence-game (noun: a swindle in which you cheat at gambling or persuade a person to buy worthless property).

The immediate problem is that a massive sub-prime mortgage fraud has sucked us dry of the basic fuel necessary for staggering on--confidence. There ain’t none left. The tank is dry.

Ben Bernanke is going to fill ‘er up on money. He and George Bush and Henry Paulson have connived between them a ‘stimulus package to bolster the economy.’ If you look up ‘bolster,’ one meaning is to support and strengthen and another is to add padding. I leave it to your judgment which definition most closely defines giving each taxpayer $300 to $1,200 of his own money to goose the economy in the sole interests of the above-named public officials' personal friends.

None but the Washington Post (deprived in these days of cutbacks of any true financial writer other than Steven Pearlstein) could possibly swallow without a fit of coughing, the swindler’s excuse that ‘the world's financial plumbing is so clogged that the central bank sees a need for new steps to clean it out to prevent severe damage.’ Who on earth fed WaPo that line? Certainly it was not vetted by Steve. I don’t doubt he choked on his coffee when he saw it.

The Fed said it will make $200 billion available to financial institutions in an effort to ease a crisis of confidence that is making it harder for families and businesses to borrow money.

"They're recognizing that financial markets aren't functioning well, and that that creates risks to the real economy," said Vincent Reinhart, a resident scholar at the American Enterprise Institute and a former senior Fed official.

Where do they get these people? Can I get a job at the Fed?

Financial markets have been looted, Ben. Wake up. This is not about families and businesses, this is about pumping up the worthless investments hedge-funds created. It’s about papering-over the hole in the missing billions before their major institutional investors sue them for fraud and send the whole crop of $100 million a year criminals off to Sing Sing.

Bernanke’s $200 billion is merely the camel’s nose in the tent. He proposed to create (read that print) $100 billion a month to prop up the banks for at least a year, but essentially for as long as it takes. Another ‘surge’ in an unwinnable war--anything it takes to get George safely back at the ranch before this whole swindle collapses on his head. Every 12 months (unless it’s not enough), Bernanke proposes to add $1.2 trillion to a money supply that totals approximately $7 trillion.

And the sworn duty of the Fed is to prevent inflation. Don’t cry for me, Argentina.

The dollar this administration has contrived to devalue by approximately half during its brief term in office, is now to be further demolished by stimulating, diddling, futzing with and printing their way over the edge of the cliff.  The printing press is to monetary policy as Viagra is to maintaining an erection. The one gives you a sore dick, but the other turns the United States into Argentina.

"A lot of what we've done has been mostly just to offset the tightening of credit that has arisen because of the financial situation," Fed Chairman Ben S. Bernanke said in congressional testimony last week.

Instead of simply cutting interest rates further, the Fed responded to this latest crisis yesterday with carefully targeted measures. The central bank said it will auction $100 billion to financial institutions, injecting money into the banking system by trading cash for troubled securities. The Fed will also make another $100 billion in cash available in exchange for securities issued by Fannie Mae and Freddie Mac, trying to restore confidence to the market for home mortgages.

The problems are the latest wave of a crisis in debt markets that began in August and reappeared again in November and late February. This crisis is one major factor in a pullback by consumers and businesses that has driven the economy to the brink of recession, or possibly over it.

• Lie #1: Offsetting the tightening of credit is (for Ben) easier than tightening the handcuffs on the criminals who profited from this fraud on the taxpayer.
• Lie #2: Measures were not carefully targeted, but recipients were. Wall Street will get its plumbing unclogged and you, dear taxpayer, will get the bill for it. (Before all this manipulation was factored in, your personal share of ‘unfunded debt,’ including tax breaks to the rich and an untaxed war, is—as of 8pm today-- $30,967.40. Family of four? Pony up $123,868.96.)
• Lie #3: No one is injecting anything. They are not ‘trading for troubled securities,’ they are buying bad debts with your tax money. They are bailing out criminals, so that no one will call them at their game, which has been to fleece the American public and blame it on ‘market conditions.’
• Lie #4: Bailing out Freddy Mac and Fannie Mae does nothing to restore confidence to the market for home mortgages, it merely supports fragile government backed institutions, who have been part of the game—again, with your dough. The same money you don’t have to pay child-care and health-insurance.
• Lie #5: There was no August crisis in debt markets. In August, we had the first indications of a purposeful financial fraud, committed against investors by a consortium of co-conspirator mortgage salesmen, mortgage bankers, bond rating companies, investment banks and hedge-funds. This will probably turn out to be the largest and most damaging Wall Street fraud ever to bring down an economy—far larger than the 1929 crash.
• Lie #6: A misnamed and lied-about ‘crisis,’ cannot possibly be a factor in anything other than the continuing cover-up of massive financial fraud.

Six lies is a lot of lies to pack into three paragraphs and 161 words. Amazingly, the WaPo failed to call a single one of them. No major newspaper in the United States has been carrying this as the widespread crime that it is. Steven Pearlstein has come the closest, which is why he no doubt spit coffee all over his office when he read the piece.

There is a cure for all this sickness and greed and fraud, but it will not be found in the halls of Congress, the meeting rooms of the Fed or within a new administration, no matter how much ‘change’ is promised.

Attempting to repair a half-century of financial malfeasance is as dreary a chore as trying to ‘fix’ communism. Just as Ronald Reagan never ‘won’ the Cold War (the wheels finally came off, while he happened to occupy the office), Bernanke, Paulson and Bush haven’t a clue about what to do. Other, that is, than run around with a torch in one hand, gasoline in the other, trying to calm crooked markets.

"The Fed has been running around putting fingers in dikes," said Diane Swonk, chief economist of Mesirow Financial. "Without that, the dike would have imploded, and water would have been spilling in."

Diane is closer to the truth than any of them. The dike will indeed implode and therein lies the only viable cure. An international crash.

The world danced around the Argentine problem, the Mexican difficulty and the Asian unpleasantness, but the financial capitals of the planet are not strong enough or flexible enough to waltz their way past an American crash.

From the ashes, we may be sufficiently humbled and perhaps even wise enough to do the things we haven’t courage enough to accomplish now;

• Oversee the absolutely uncontrolled hedge-fund industry that triggered this mess
• Disconnect business and industry from the IPO as a borrowing mechanism and send them back to traditional loans at traditional banks
• Do away entirely, completely and irrevocably with leverage
• Disabuse the investor of the charming fairy tale that uncontrolled growth is anything other than the definition of malignancy
• Return corporate stock certificates to their intended purpose of investment, rather than speculative instruments
• Make criminal the offer of stock options as incentives to management
• Consider laws initiating minimum-term (3-6 month) investment requirements to reduce the volatility of markets
• Tax capital gains as ordinary income
• Do away with the income tax
• Re-institute logical trade tariff policy

Those would be a few things that could be successfully accomplished following a crash. Add to those massive government investments in infrastructure, schools, public transport, alternative power sources, the de-corporatizing of agriculture and re-planning of our auto-centric and dehumanizing suburban sprawl.

Taking back control of the investment community would prevent the flight of scarce capital from the have-nots to the haves. Infrastructure investment, reorganizing agriculture, instituting tariffs and killing off the income tax are positive ways of creating good jobs at good wages. There is simply no political will to accomplish any of these goals, otherwise they would hardly have gained the half-century momentum that set us up for the current financial landslide, avalanche, tsunami or metaphor of your choice.

Meanwhile, someone please take the keys to the currency-printing presses away from Ben Bernanke.
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Media comment;

• Bloomberg-Most Read on Bloomberg: Carlyle; Bernanke on Mortgages; Ambac
• New York Times-When Ben Bernanke Speaks
• Financial Times-UK-Mortgage principal forgiveness will meet resistance from servicers
• Bloomberg-Paulson Says Deal `Very Close' With Congress on Housing Bill
• Wall Street Journal-Trichet Urges Dollar Unity

Elite? You Got a Problem with Elite?

Immigration—everybody’s hot-button issue--and America is once again arguing across the metaphoric back-fence and having the very devil of a time trying to balance fairness and equity.

BEING POOR--AND MAINTAINING YOUR POVERTY--IS A VERY EXPENSIVE PROPOSITION

The typical conservative leans back on his couch, meditatively stirs his Chivas and water with a pinkie and declares (with some considerable justification) "Well, it’s their own damned fault if they got in over their head. What the hell were they thinking?"

HAMAS AND THE TALIBAN--WINNING HEARTS AND MINDS ON A BUDGET, WHILE WE PISS AWAY BILLIONS

Just when you think every possible outrage has been committed in the name of George Bush's policy of pre-emptive war, something more comes from the blind-side to knock the wind from an already winded American experience.

BUSTED--THE COMING CREDIT-CARD MELTDOWN

A brutally frank and honest assessment of our past 30 years would make the argument there is little hope for the credit-addicted working poor but a '29 style crash. An entire nation has been sold down the river of hopeless wages and easy credit.