Of course Congress had to wait till October to pass the $700 billion socialization of the American economy: October is, after all, the month best known for the Bolshevik revolution that brought Vladimir Lenin and gang to power in Russia.

How fitting, then, that the Senate and then the House will no doubt approve a measure that will have taxpayers bailing out bankers and putting the U.S. government into the business of running banks and mortgage houses (of course, it already does so with Fannie Mae and Freddie Mac and AIG.)

No one seems to be talking about the hidden cost of going from school to school and library to library to purge them of ancient texts that actually refer to the United States as having a free market place.

One thing that should by now be readily apparent: this crisis is really not about subprime mortgages and really never was. It is about the invention of a alternate banking system that was not regulated or really supervised in any way…a system that operated at a level of greed and probable criminality the likes of which we haven’t really seen in this country since the days of the robber barrons.

And, guess what? The robbery is still ongoing! Of course the bailout will end up costing $700 billion and probably more, even though we are being told it is unlikely to in the end.

Of course taxpayers won’t get their money back. Of course the proposed limits on executive pay will be worthless; companies will skirt this by just paying executives more with things such as stock options in place of straight salary, thus getting around the rule (provided it passes, of course.)

If Lenin weren’t so waxed lying in state in Red Square, he’d be smirking at what is happening in the U.S.

But as the great-grandfather of the October Revolution, he would certainly understand.

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Tags: $700 billion, bailout, fannie, freddie, housing bailout, mortgage bailout, paulson

In a move that should surprise no one, the FBI, says CNN, has opened an investigation into Fannie Mae, Freddie Mac, Lehman Brothers Holdings Inc., and American International Group, the four companies now at the very heart of the proposed $700 billion dollar theft–I mean taxpayer bailout–plan being pushed by Bush and gang in Washington.

This apparently brings to 26 the number of financial insitutions under law enforcement scrutiny just in the past year.

CNN quotes two law enforcement officials as saying the FBI is looking for “potential fraud” by the four giant and now collapsed companies.

Faster, Faster, Faster

Meantime, perhaps the FBI should also take a closer look at why the Bush administration is in such a hurry to ram through the Congress this enormous rip-off of the American taxpayer in order to rescue some fat-cat Wall Street big wigs who drove their companies and the U.S. economy into the ground.

We are being told we must act quickly…yesterday if possible. Don’t ask any questions. Don’t provide oversight. Don’t permit judicial review. Don’t hold hearings. Don’t consult experts. Don’t hold anyone accountable. Just hand the $700 billion over to the very sleeze bags who brought the country to its fiscal knees.

Don’t help people who face forclosures. Don’t limit executive pay for the CEOs of failed companies. Don’t attach amendments to increase unemployment insurance. Don’t change the bankruptcy laws to allow judges to change the terms of a mortgage to help keep someone in their home.

No. Don’t do any of these things. Just fork over the greenbacks. Sign the big check. Shut your mouth. Close your eyes. Plug your ears. And, while you are at it, hold your nose because the stench from this crap will burn through your throat.

Recently, China executed some key industry executives who were responsible for tainted products being exported to other countries, tarnishing China’s still developing reputation.

Maybe China is on to something? The Chinese, after all, brought us citrus fruits, gunpowder, paper, fireworks and now, corporate executions. Isn’t there something to be learned,then, from the Chinese when it comes to dealing with this financial crisis??

Tags: AIG, fannie, FBI, fraud, freddie, lehman, mortgage-fraud

NOTE: Image below is $15,000 Cash . . . pretty nice, huh?

If someone came into your home and held you at gunpoint and forced you to fork over $15 thousand dollars in cash (provided, of course, you kept such a large amount at home), you’d call the cops as soon as you could, wouldn’t you? In fact, if you had a gun at home, you might even try and shoot the bastards before they could get away with your money.

But what happens when it is the U.S. government that is about to break into your house and make off with that much money? Whom do you call? Batman?

And yet, that is exactly how much money, thus far, the current round of government bailouts of big financial institutions is costing American households.

When you add up the $700 billion dollars of taxpayers’ money the government wants to spend to buy up all that bad debt out there, with the money already pledged to take over Fannie Mae and Freddie Mac, AIG and to help broker the Bear Stearns/JPMorgan Chase deal, “A $700 billion fund would push the total pledged to combat the crisis to $1.8 trillion, or $15,000 per U.S. household, says a Reuters analysis.

No Help For The Rest Of Us

While the big boys will apparently get their burdens lifted, so far, there is nothing in the proposed plan for those who are about to foreclose on their home, or can’t find a job, or can’t afford health insurance or can’t afford gas for the car or heat for the home or food for the table.

In fact, this past Friday, even after the bailout was announced to a stunned world, the average rate on a 30 year, fixed rate mortgage actually went up to 6.11 percent from 6.07 just the day before, says the Associated Press. We are clearly not out of the woods yet!

Would the alternative be worse? Maybe. Maybe not. But I can tell you this: This entire bailout is happening so fast , in such a crisis atmosphere, red lights should be blinking and alarm bells sounding from sea to shining sea.

Photo Credit: Neville’s Financial Blog

Tags: bailout, banking, banks, Economy, financial crisis, Henry Paulson, investment bank

Who would have thought that a relatively small number of people who couldn’t pay their sub-prime mortages would bring about the end of the American economy as we knew it? The latest development is an extraordinary one. As CNNMoney.com put it: “In an unprecedented move, the Federal Reserve Board is lending as much as $85 billion to rescue crumbling insurer American International Group…” Translation: the government has just loaned AIG $85 billion of YOUR taxpayer dollars.
The feds will, in turn, get a 79.9% chunk of the company. It is apparently hoped that when the company is eventually liquidated, the bailout bucks will be repaid to taxpayers.

Wanna bet!!!

Of course, this now global economic mess was not really the result of some folks going belly up on their subprimes. The real cause is the absolute greed of the investment community which felt itself immune from reality after the virtual protection given it over the past seven years or so by the Bush administration.

And, let us finally put aside this myth that European and Asian nations are smarter about these sorts of things than we are. Turns out they were just as stupid, greedy and, yes, maybe even criminal!

No matter. The bottom line is, we are now the proud owners of a giant insurance company that probably will soon be no more, as well as the mortgage titans Freddi Mac and Fannie Mae.

Getting back to AIG,if you think you had a bad economic year ( and there is a pretty good chance you did) just look at “poor” AIG–it lost some $18 billion in nine months and saw the price of its stock drop more than 91%.

Where do we go from here?

Damned if I know!!! And, I think it is safe to say from the way the past few days have played out, no one else knows,either.

I keep reading how the only thing that will save the day will be the resurrection of the real estate market in this country. But I don’t buy that any more than I believe it was just the real estate debacle that caused this world-wide economic crisis.

A whole bunch of things need to be changed, big time, before the economy settles down and returns to something akin to normal. It is easy, glib even, to point the finger of blame on the subprime lender who was, after all, just trying to put a roof over his/her head and ignore the far bigger and more sinister forces at play here: lenders, speculators, regulators, to name but a few.

And, whether John McCain or Barack Obama captures the presidency, the global economy will not be nursed back to health without these other cancers being aggressively treated.

Tags: AIG, American Insurance Group, Economy, socialism, taxpayer

Not too long ago, I wrote for this blog that when Congress passed a plan to help Fannie Mae and Freddie Mac, it amounted to a taxpayer bailout of these two mortgage giants. There were those who took issue at the time with my use of the word “bailout.” Sadly, as the events of the past few days clearly show, I was right.

I say sadly because what will likely happen down the not too distant road will be a situation where taxpayers, all of us, will end up paying through the nose to bailout greedy lenders, irresponsible borrowers, and lax regulators.

And here is the real rub: no one can be certain this will really make right, that which is wrong with our economy at this point in time!

The conventional wisdom is that the government’s seizure of Fannie and Freddie will soon lead to lower mortgage rates as banks and other lenders become more confident about extending credit. This, in turn, is supposed to raise the housing market in this country from the dead and, presto, before you know it, all is right with the world again.

Want to buy a bridge I’m selling real cheap?

If there is one thing we should have all learned from the past few months, it is that the so-called conventional wisdom is–excuse my French–a bunch of crap.

Over the past several months, various experts have told us that the credit crisis would soon end once it roared through all those sub-prime loans. Well, that didn’t happen. Credit got so tight that even a blue blood with many silver spoons in his mouth would find it difficult getting a mortgage.

Over and over, “experts” told us that we would soon hit the bottom of how far down home prices will go…only to see home prices continue dropping with no real end in site.

A very short time ago, we were assured that Fannie and Freddie would make it through this crisis just fine, thank you.

Actually, maybe I can sell you two bridges if you still believe in the “conventional wisdom.”

Does anyone know what is going on here?

I’m afraid that is what it all boils down to–does anyone really, truly know what is going on here?

Don’t waste too much of your time thinking it over, I’ll answer my own question: NO! No one really does know what is going on–or, more to the point, perhaps, how to fix the problem. They are throwing darts at the board hoping one might find its target.

At least Treasury Secretary Henry Paulson appeared somewhat honest the other day when he said, according to Reuters, that he “could not estimate how big a burden this (the government’s seizure of Fannie and Freddie) would mean for taxpayers until the extent of declines in the mortgage market were fully known.”

You don’t need any conventional wisdom to tell you what that means–hold tight to your wallet, the government is about to pick it clean!

It doesn’t really do much good, of course, to fret about how we got into this mess to begin with–that Fannie and Freddie were allowed to grow too big, too powerful, too needed!

What is important is what lies ahead. Right now, I will submit to you, the ship of state is drifting in a sea of ice with no radar, no lights and no real captain at the helm.

Maybe this will change in November with the election and maybe not. So many different forces are at play, some the U.S. can do nothing about, though Americans do like to believe we can always do something to fix any situation.

Here’s the bottom line my friends–the next time you hear someone on TV talk about conventional wisdom, turn your set off. The next time you read an article about conventional wisdom, click to a different site.

Anyway, that’s my conventional wisdom. Take it with a grain of devalued salt.

Tags: bailout, fannie mac, freddie mae, Henry Paulson

Concern is mounting among some analyst types that nonresidential building–which till now has somewhat made up for the decline in residential building–is heading south because of banks.

The New York Times reports today that the experts are worried because banks have weakened due to losses on their mortgage loans and that this may make them start tightening up on lending to nonresidential projects the way they have for residential ones.

And, there is some slight evidence coming in to support this concern: Nonresidential activity fell in July by 0.7 percent–that hadn’t happened apparently since December 2007.

Meantime, according to the latest Commerce Department figures, construction spending “took a bigger than expected tumble as housing activity dropped to the lowest level in SEVEN years…” reports the Associated Press.

Tags: housing, mortgage mess, real estate

35.3 percent. By any measure, a staggering number. It is by how much new home sales have dropped from July 2007.

But we are in one of those wierd times when figures seemingly contradict one another and “trends” are hard to keep up with.

For example, while it is true that new home sales are down more than 35 percent since July 07, last July sales of new homes actually went up, though not much…2.4 percent, according to the Commerce Department.

Here’s the catch,though.

The National Association of Realtors, says the Associated Press, reports the “number of unsold properties hit an all-time high, an indication that the worst housing slump in decades is far from over.”

Why the confusion?

When things are in flux–especially the economy–it is not all that uncommon for “trends” to seemingly contradict one another. But that often has less to do with the reality of the situation than with the way in which we tend to see the world–in terms of black and white, rather than many shades of grey.

For instance, another new report just out–Standard & Poor’s/Case-Shiller U.S. National Home Price Index–shows that home prices dropped by the sharpest rate ever in the second quarter–15.4 percent during the period April to June, reports the A.P.’s economics writer Jeannine Aversa.

But, of course, it is this very drop in home prices that has brought about a mini-buying boom in parts of Southern California for people with excellent credit who are seeking and getting houses at relatively cheap prices. See what I mean about shades of grey?

Adding to this period of flux and uncertainty is the open question of what will eventually happen with Fannie Mae and Freddie Mac? Both have an enormous impact on mortgages and both, some fear, may soon be in dire need of the very government bailout they claimed only a few months back they didn’t want nor need.

What happens with Fannie and Freddie will , to a large measure, help define the housing situation in this country for some time to come…their fate is THAT important.

In the meantime, we all have to take headlines with a grain of salt…The headline of Monday will surely be challenged if not flat out contradicted by the headline of Tuesday…and on it goes.

Like I said, things are in flux. Uncertainty rules!