Countdown to the "d" word

President Obama said today that any economic stimulus package must be broad in scope and swiftly executed if we have any chance of staving off the coming economic crisis. Well, he may not be technically President yet, but he has already taken over Capitol Hill two weeks early. As it turns out, though we are 1 year into this recession as proclaimed by the Economic Board, we are actually much closer to the beginning of the crisis than we realize. We are not turning any corner any soon; we are not on our way out of it, we are still on our way in.

All of the Government's efforts to avert a disaster have only delayed it. When the final numbers of 2008 start to roll out momentarily, they will be worse than we thought and the worst is yet to come. It appears that a depression is imminent and the truth is that all of the Government action thus far was not to minimize a recession to keep it mild and/or shorter, it was an attempt to derail a depression and unfortunately that train is still barreling towards us like bullet. Furthermore, all that money that the taxpayers funneled into the financial markets went onto the books of the same greedy folk who helped us into ruin and all they cared about was helping themselves.

The economy needs another helping of funds, even more than it did the first time; a fact that was accurately predicted by many and now the makers of that plan have fallen into sudden obscurity. Have we heard anything from Paulson or Bernanke this year? Not a peep. This awakening will be oh so very, very rude. We are already in a depression; let's see how long it will take for the media to pop out the "d" word.

Maybe we'll get some truth back into the system. I would rather know exactly what I'm dealing with instead of being lulled into a false sense of security that things are better than they really are; that is a damning position to be in; planning for the wrong situation completely. The have been telling us to plan for the worse and hope for the best when in truth we need to plan for disaster and hope for the worst; full survival mode is required.

False Positive: Trying to Evade Gloom and Doom

May I be so bold as to go down that road. The road that I am trying to steer away from, the road that has been trampled lately, the road of gloom and doom that appears to be enveloping me despite myself. Not that I have been seeming all that positive lately but in my mind I really was trying. After all, we have to elevate ourselves above the fray if we want to survive.

Today is Tuesday before Christmas and I still have no gifts; well I finally ran out tonight to get a few "school gifts" realizing that tomorrow was the last day of school for the year. I absolutely do not like waiting for the last minute to shop because I hate having to jockey for position and wait on endless lines during the holiday shopping season yet here I am. Now, I have no choice, I have to do it all tomorrow or else.

I wish I wasn't so plain-minded when it comes to shopping then I would have had it all done already. Unfortunately, if I don't have any money or I feel my cash stream is finite, like losing a job, I will not shop, I go into lock-down; I simply will not buy another thing - I am frozen. I haven't even been to the supermarket. I have tried to do the holiday shopping since I was laid off, I have gone to the mall and all the usual discount retailers and I haven't seen anything I want to buy; not one thing has moved me.

Now the financial news shows are raising the red flag, don't buy gift cards at retailers that may not make it past January 2009 for the disconcerting reality is that this is one of the most dismal shopping seasons in decades and many retailers simply will not make enough this holiday season to survive. How the heck is the average person supposed to know which retailers are not going to make it? I try to do a little internet research and I can find plenty of lists of those that have closed under-performing stores or have simply died in 2008. So far, I have not been the most successful finding a good clean list of those that are in jeopardy outside of my own observation...this seems like everyone. Consumer spending is nearly 70% of GDP so if we don't spend; it seems that the economy is doomed anyhow.

You turn on the news and it is nothing but gloom and doom; how many years has it been since we've seen this statistic, this performance, this cycle, and the finality that this downturn will last through next year for sure. Though every guru keeps repeating the mantra that people should prepare for the worst, the reality is that most people really do not have a rainy day fund - that was what credit cards and home equity lines of credit were for. Now that those sources are dried up, most of us do not have the funds we need to survive. Today, commercial builders are begging the government for help because their debt is coming due to the tune of $160,000,000,000.

The bailout road is now on black ice; just slipping and sliding with no clue; everyone is slipping and we have no clue where to turn. How do we know who will survive? Last night, my husband and I were discussing where to invest; now is the time to adjust our 401ks. They keep telling us bargains are to be had in this market and we should steer ourselves towards those. So, I was thinking about companies that may benefit from the proposed infrastructure investments; caterpillar came to mind, they will be providing equipment I said. This morning I woke up to find out I was wrong, wrong, wrong. Caterpillar announced today that it was cutting salaries of all senior management and preparing other cost cutting measures to aid in its survival through next year.

I don't have a crystal ball and neither does anyone else but things really, really, really do not look so good this time around. I am going to keep looking for that light at the end of the tunnel but this tunnel seems awfully long already.

The Audacity of Wall Street Bonuses

I just finished reading an article in today's New York Times reporting on Wall Street bonuses that having been tied to profits we now know were based on way too much risk, created a culture of greed so severe, they played Russian roulette with our money.

Now that all of the money is lost and many Wall Street firms are bankrupt with the rest blatantly staving of death with large infusions of taxpayer dollars, the culture of greed still has not subsided. Though many firms have introduced more oversight with respect to the earning of future bonuses, most Wall Streeters will still see bonuses this year, smaller maybe, but still a bonus.

It took the Dow Industrials 76 years to hit 1000 in November 1972 and another 14 years to reach 2000 in January 1987. After that, it took another 4 years to reach 3000 and 4000 was reached 4 years later in February 1995. By May 1999, a mere 4 years later, the Dow had reached 11,000 and boy were we jumping. The sheer intensity of the rise certainly reset all of our mindsets. In the early 2000s, instant millionaires abounded, individual wealth on paper reach staggering proportions. Wall street bonuses catapulted into unheard-of millions. Everybody wanted to be rich. Since hindsight is 20/20 we can look back and draw our conclusions effortlessly.

If we are to sum up the data, the Dow retreated to less than 9000 in 2003 and after roaring to 14,000 in July 2007, is back to less than 9000 again. the last time it was less than 9000 was in early 1998. We are back to the levels not seen for a decade and what happened during that decade? The most amount of money that could be borrowed was borrowed and the most amount of money that could be spent was spent, all of this while the intrinsic value of the market was inflated due to the swirling fiscal excess.

We now have found out that all the money we spent should not have been spent and all the money that was borrowed definitely should not have been borrowed. Now we all have to suffer and pay the piper. So, why do all those Wall Streeters still get bonuses when no money has been made and especially when the taxpayer has granted most of those firms hundreds of billions to survive?

What is Good for the Goose is Not Good for the Gander

What a difference a weekend makes. This is starting to become a familiar refrain in the financial market milieu - on Friday a bank or major financial institution is on the verge of collapse, then the  government decides over the weekend whether they are "too big to fail," and lo and behold, on Monday, the biggest bailout you've ever seen is rolled out with surety - the taxpayer is once again convinced of the "rightness" of the bailout and the stockmarket rallies on the news as the government goes on the hook again for the "good of the economy." 

There I was lamenting on Friday over the death of my bank and now it has been super-revived by the government, I should have known that it wouldn't be allowed to fail. As I was caught up in the rain dance of the Automakers, praying for their own shower of cash, I was starting to be lulled by the actual possibility that the government spigot was slowing to a trickle. Oops!  

When major (and well-respected) economists jump into the fray to declare why the major financial institutions cannot fail and why the Automakers should be allowed to fail and why one or the other outcome is good, better or best for the ailing economy...you start to wonder what parsing words are left to convince the conspiracy theorists that Treasury Secretary Hank Paulson, Mr. $500,000,000,000 golden parachute Wall Street investment banker, is simply not helping his friends. You do start to wonder whether the claims that the "rich" are simply carrying out the biggest heist in the history of the United States, having found the most effective umbrella, TARP, no less, (what are the odds?) to transfer taxpayer dollars into their coffers. All of this unfolding under the gleeful and ever watchful eye of the outgoing President who, many say, is simply completing his final, grand, mission.

As the Citi Sleeps

As I watch my bank die, I ponder all of the consequences of it as I have now grown accustomed to its stellar online services and being a beneficiary of its free services. I for one am not sure how I will survive without my free interbank transfers which I use on a regular basis. I have had accounts at many banks over the years, but no one has had as great a website as Citi. In addition, they have long combined all accounts, whether asset or liability, banking, brokerage, credit cards and savings, to figure your total worth to them which in turn determined your monthly checking account fees. Both my husband and I came into our marriage with varying forms of Citi accounts that once combined practically guaranteed that, for the most part, we would enjoy free checking, a nice benefit for us poor folks who would never qualify otherwise since we would never have the rather hefty account minimums required. 

Over the years we have been fortunate to save quite a bit in fees. Odd things would happen though, if we paid down our credit card, this would reduce our stake dipping us into to monthly fee territory or when we moved our brokerage account to a discount online broker dipping us into monthly fee territory again. Then one day, our mortgage having been sold multiple times eventually landed at Citi. At first I was not excited to have that much exposure to Citi after they had gone through a rather irksome period a while back when they seemed to snub their noses at their less than wealthy account-holders. I even cancelled my citicard because they p'd me off. But I was back on track when it came to light that by merely linking our mortgage account to our checking account, the amount of our worth to Citi would guarantee free checking for life so I changed my tune pretty quickly though having to see the entire mortgage amount staring me in the face everytime I log on sometimes is a little disconcerting. 

Now the powerhouse Citigroup stock is less than $5 and they are thinking about selling themselves. No amount of Saudi investment and countless billions in bailout funds has been able to help them stave off the devastation caused by that 3-word financial instrument that keeps rearing its ugly head; credit swap derivatives. They will be the bane of our existence because they are difficult to understand and impossible to comprehend. And ironically, Treasury Secretary Henry Paulson's decision to jettison the fundamental intent of the TARP bailout by not purchasing those toxic assets from banks dealt another decisive blow to the Citi umbrella. 

What will happen if they choose to sell themselves in part by spinning off vital assets like the credit card business or the mortgage business? What will happen if they choose to sell themselves in whole? Whatever happens, the world will change for me, spinning off any assets will reduce by stakehold, my worth to Citi or if Citi sells itself and ceases to exist, I will have a new bankmaster. In any event, I will most likely lose my free checking privileges. 

Boy, it can be very easy to start protecting the monster when it serves your purposes. If I was on the other end of the stick, I would surely be spouting off about how they deserved their fate in varying degrees of negative yada, nay-yada. But now as I watch my bank fail, I realize that they have somehow been good to me and I will be sad to see them go especially when I have to start paying those monthly fees again.

Observations On Another Down Day

The stock market woke up today, fresh from another delusional rallying stupor, looked around and noticed that the economy is bad and tanked over 400 points...again. It keeps sinking when it recognizes reality and rallying for no other reason than it is tired of sinking. Citigroup stock is at $6.45, GM at $2.79, Ford at $1.26 and so on; what more indication do we need to convince ourselves that things are not so good? 

More companies are on the brink of requesting bailouts and those who already got them still whine for more. So we ask our Treasury Secretary, where did all the money go? and he decides not to tell us. The only place where that $350,000,000,000 infusion of bailout dollars trickled down into is the pockets of the CEOs, upper management and shareholders in the form of dividends. This is what happens when all of these financial corporations get capital infusions in return for shares - business as usual. Except this time around they are not lending us any money at all. Who are the fools as we watch the economic disaster continue to roll out its red carpet before us while our hard-earned tax dollars wind up in the hands of the connected few? 

All we see are so many stores going out of business and though we are initially shocked by the revelations, we consumers begin circling like hawks. We look around and scoff at the huge beckoning signs, "up to 30% off original prices," "nothing held back," and the ubiquitous "everything must go," as we turn our noses up at the paltry bargains, most of which are priced only 10-20% off. We mutter to ourselves and to our fellow shoppers that the bargains are not so good, one shopper asked me "where's all the stuff for 30% that they promised? For a nation of shoppers who have been handed coupons for the last few years regularly giving us 20-30-40% off the item of our choice and enticed by the seemingly endless clearance sales offering 40-50-60% off, we are not so moved by a liquidation sale where prices revert back to original prices with a puny amount off. We shoppers have all been trained to seek better bargains. We all want to buy something but we are afraid to spend too much.

The only thing I've learned about spending lately is the opposite of the lessons I have been adhering to: be prudent and wise, save for a rainy day, don't spend what you can't afford and do what you can to suspend instant gratification. I am not so sure anymore because all the money I scrimped to save is gone and right now I don't have much money to purchase what I really need. Only the connected few have it the best, when times are good they spend and when times are bad they still spend. Case in point, witness the auto executives flying in on their private jets to beg Congress for our money.

Bankruptcy May Be a Better Deal for Automakers

A serious message for the Unions is coming; the Corporate trough is going to run dry and hopefully they will pay heed before the public trough does too. One of the big 3 automakers is going down, with or without government funds, stranding many Union employees and pensioners. Bankruptcy is coming to one of the big three; the writing is on the wall so why not stop the bleeding and do it now. Ch. 11 is now an accepted form of business restructuring and allows a company to work its way out with dignity than the current embarrasment of begging that we are witnessing before Congress. 

No doubt this will be a bad situation but it is always better to have that operation sooner than later if you want to survive. Begging for a government bailout only delays the inevitable; when a company is burning $5,000,000,000 a month, they shouldn't be saved no matter how revered they are. It will be much cheaper for the taxpayer to help those workers and pensioners who are stranded by a bankruptcy filing than to fear the filing and throw good money after bad. The workers will be given unemployment and other government compensation, benefits will be turned over to the Pension Benefits Guaranty Fund and this one of the three (most-likely GM) will be forced to revamp and retool the company. 

Most importantly, the company will be able to re-negotiate debt and employment contracts and shed its pension and healthcare obligations and most of all change its dinosaur management structure. This company will then emerge leaner and meaner and on par to seriously compete with foreign carmakers who are not crippled by legacy costs and who can manuever through this economic downturn because they are already on the road to the cars of the future. In fact, Congress approved $25,000,000,000 in September to fund energy-efficient vehicle research and manufacturing. So the first car company to choose Ch. 11 and restructure will have access to plenty of development cash to get going. 

Simultaneously, the Unions will get the message loud and clear, the playing field has to be leveled; any identifiable reasons for Union members to be overly compensated and overly benefitted more than any other American worker have long since evaporated. They have managed to hang on and bleed their hosts dry but they need to adapt to survive just like everybody else. They are stronger and more organized but if their host runs out of money, everyone will lose. If they are willing to renegotiate their contracts to be more in line with the type of environment in which most of us work and contribute more to their healthcare and retirement plans in particular then their host and themselves may survive. 

All the Unions have to stand up and come into the 21st century where most of us have been toiling for a decade. There is no such thing as a free lunch. Alan Greenspan stated this fall that he was surprised at the meltdown; he didn't see it coming because he believed in the ability of markets to self-regulate; companies would always protect their shareholders by delivering real profits and accountability. Unfortunately when the greedy get going; there is a stampede. Everyone has to reign in excess including the Unions. 

Hank Paulson Has Gone "Rogue"

This week, the revelations about Treasury Secretary Hank Paulson changing tax rules and refusing to divulge the recipients of the Congressional bailout funds began to raise eyebrows now that the election is over and we have time to pay attention. Well, today we have our answer.

Secretary Paulson appeared before Congress today stating that he decided not to use the funds for what they were originally intended, to buy up troubled mortgage assets and, in fact, he had decided it was a better idea to inject capital into banks instead in return for preferred stock. Essentially he has spent and will continue to spend the $700,000,000,000 bailout funds in any way that he sees fit. Folks, he has gone "rogue."

Actually, capital investment in banks may be a better investment for us taxpayers in the long run than buying up toxic bank assets but shouldn't he have informed Congress first? He does not have the authority to use Congressional funds for any other purpose than Congress intended or does he?

Originally Paulson appeared before Congress with a 3 page ransom note requesting the money with no strings and even though cooler heads prevailed within the maelstrom and protections were written in on behalf of the taxpayer, the bailout bill was stuffed with so much pork so if Congress got theirs, I guess, Mr. Paulson would get his.

He is only back before Congress because they have to vote on giving him the additional $350,000,000,000 because they only released half of the funds to begin with. He has proposed a new plan for the remaining funds; to buy up other debt securities mainly credit card and auto loan debt that were packaged and sold to investors in the same way as mortgage loans. This also may not be a bad idea but are we sure he will even do what he says since he hasn't so far?

Mr King of the Universe will do whatever he wants with our taxpayer dollars and Congress will allow it. The Congress doesn't know who to give the money to either; everybody wants a bailout. American Express asked for $3,500,000,000 today. AIG already got theirs and then some. GM has been begging for $25,000.000.000 for a week. Personally I don't think AIG should get any more and GM's Union-contracted labor costs are too high and will drain the company regardless. But it is too late, the animals are out of the barn and nobody knows who to save first, the cows, the pigs, the goats or the chickens. So it will wind up as Barney Frank says, that the funds will be given out until they run out.

The Bernanke-Paulson Coincidenza

What do the Chairman of the Federal Reserve and the Treasury Secretary really have up their sleeves. The slow trickle of truth unfolds. The Federal Reserve waived the rules today to allow American Express to become a bank so that they can have easy access to Federal Reserve funds whenever they want to. Goldman Sachs became a bank. Morgan Stanley became a bankl We really didn't ask why because Bernanke and Paulson have convinced us that it had to be so; we had to save our financial institutions.

In addition, Treasury Secretary Paulson single-handedly changed tax law section 382 allowing companies to assume the debt of acquisitions thus off-setting their gains and significantly reducing their taxes. This loophole was closed in 1986 by Congress precisely to prevent companies from misusing this statute to circumvent their tax liability. Perhaps the treasury saw the benefit of giving good companies incentive to buy up losing companies but they don't have the authority to change tax law. Wells Fargo used this statute the very day it was unhinged to snap up Wachovia out of Citibank's grip successfully reducing its tax liability by $25,000,000,000.

Amidst off this, Paulson and Bernanke came begging congress for a $700,000,000,000 bailout package to rescue our financial institutions. Basically this gave them a multi-trillion dollar pot of funds to dole out to whomever they want to and now they don't want to give us all of the details for any of it. These Kings of the Universe have plundered the taxpayer, plundered the Federal Reserve and plundered the Treasury with virtually no oversight.

The two highest financial institutions in America have been hijacked by Bernanke and Paulson for in the process of saving our financial institutions, they have undone all of their own regulations. This can't be any accident. This doesn't look good.

Fine Time for a Rally: Dow jumps 889 points

This is all I heard or read today right off the top of my head: GM is begging the government for money to buy Chrysler, Consumer Confidence is at 38, the lowest it has been on record since the index began in 1967, the Case-Shiller Index which measures median housing prices in the top 20 U.S. cities is down another 16.5%, Whirlpool has joined the daily layoff brigade announcing its own 10% reduction and a bleak outlook along with most other retail for 2009, average consumer debt is now $17,000 per household, AIG is asking for still more money after already receiving $127,500,000,000, the Governor of NY revised this year's deficit upward to nearly $2,000,000,000 and next year's deficit at $12,000,000,000 and projected NY State job loss of 160,000, recession begets depression, its going to get worse before it gets better, the whole world is on the verge of a global recession, the Federal Reserve is having 2 days of meetings to decide how much more to cut the federal funds rate as if there is any more to cut and how will it help at this point since all the major financial institutions and corporations are getting bailed out anyhow, yet somehow, the Dow rallied on this expected rate cut to the tune of 889 points.

Double take. I must have taken a different boat to work today. The economic fundamentals couldn't be weaker; fine time for a rally.

Frozen Credit Markets: What They Are Not Telling Us…

…And why they are not telling us. Those three toxic words driving the financial crisis and the credit freeze: credit default swaps (CDS). They cannot tell us because it is too big to comprehend and too hard to explain. CDS contracts are essentially bets on the bets on the bets that the underlying financial instruments, mainly mortgages, would continue to be profitable. The bets on the bets on the bets are a whole lot bigger number than the underlying mortgages themselves. MIT caliber mathematicians came up with those statistical models; risk moves towards zero when divided into infinitesimal slices shared by a greater mass of investors. Of course this is only good when underlying values increase; nobody calculated the downside. Whoops! First we have to understand credit default swaps...

From wikipedia:

“In layman’s terms the CDS is essentially an unregulated insurance policy. It guarantees the performance of a security instrument, e.g., a mortgage. The buyer of the CDS pays the maker a fee or “premium” (think insurance) for protection against a loss. Historically the US Treasury has not classified derivatives as “insurance,” and therefore they trade free of any government regulations. Because of that, the firm selling the CDS is not required to set aside any reserves from the premiums received to insure against possible future loss claims. This obviously makes the sale of the Credit Default Swaps extremely profitable and default loss payments very expensive.”

“Credit default swaps are the most widely traded credit derivative product. By the end of 2007 there was an estimated $45 trillion to $62.2 trillion worth of credit default swap contracts outstanding worldwide.

Today, AIG asked for even more money; we the taxpayers have already loaned them $85,000,000,000 then another $38,500.000.000 and now they want another $12,000,000,000. If you insert AIG in where it says "the firm" in the above quote then you will understand AIG’s problem. They sold a lot of CDS and all of those mortgage losses mean potentially trillions in loss claims; that’s a heck of a lot of payouts. Insurance is good when everyone pays premiums but only a few collect; there are simply too many people collecting due to these defaults. All of those failing mortgages mean billions, even trillions, in insured defaults.

Adam Davidson of NPR stated that “The pure size of the CDS business is enough to make a failure of AIG a threat to the entire global economy…The fear is…if AIG collapsed, banks would stop lending money to each other. The Treasury Secretary and the Federal Reserve Chairman, Paulson and Bernanke respectively, know this and that is why they keep pumping the money into the credit markets. Over $2,000,000,000,000 has been committed by the Treasury and the Fed so far but the banks are not budging, they are still not lending money to each other; the credit freeze is not thawing. With trillions of CDS sold, no one knows how deep it goes. All of this money may just be a drop in the bucket.

The next President is going to have to understand this because this economic chasm is like quicksand. It is going to swallow up a whole lot of dough. NPR tried to explain it and 60 Minutes tried to explain it but it is too monumental an amount to comprehend and maybe it is better if we don’t know and just hope that some institutions become greedy enough to start lending again. This is essentially what we are left with to solve this crisis, hope. Huge risks yield huge rewards, the American taxpayer has already taken on that premise. If we can convince more institutions to put equity into this new game then fear diminishes and lending begins. Thus, the big outlay on the part of banks around the world. But then again, maybe we shouldn’t be running on so much debt after all. What point expansion if the debt overcomes the gains in the end?

What Happened to John McCain?

Most Americans had respect for John McCain whether or not they agreed with his politics. That respect has been severely strained for some and completely broken for others. He has allowed Sarah Palin to whip his supporters into such a far right frenzy with all the trappings of ignorance and prejudice that they all have lost sight of reason. This is a shame considering that John McCain was the first to declare earlier this year that he wanted to run a "clean" campaign.

The Dow has nose-dived 2000 points in the last 5 days to less than 8,600 points; my brain still cannot comprehend. The Federal Government through the treasury and the Federal Reserve has committed trillions to rescuing the economy without any negligible effect. This downturn is so serious, even the rich are losing money. Yet, all we hear from McCain-Palin is nasty attacks about Barack Obama's connection with Bill Ayers, the 60's era anti-Vietnam Domestic terrorist turned educator, who Obama worked with on education reform.

Joe Conason of RealClearPolitics.com wrote today:

"Entering the election's final weeks, the rhetoric of the former maverick and his lipstick-toting pit bull, Gov. Sarah Palin, has turned so ugly and inflammatory that their rallies have begun to sound like lynch mobs."

"What these concluding weeks have told us about the Republican candidate, to the shock and surprise of many of his admirers, is that he misunderstands the meaning of honor. Evidently he believes that the credit he accrued for suffering bravely for his country in Vietnam somehow licenses him to campaign as crudely and deceptively as he can, if that will help him to win. He seems not to realize that the respect he earned so many years ago requires him to uphold a higher standard of decency in politics."

Even Cindy McCain has jumped into the fray declaring that Obama, who has lobbed his own attacks on MCain though he has not sunk as low, has run the "dirtiest campaign in American History." What? The heights of denial to which the McCain campaign has sunk will require years of therapy to unwind, for all of us. Obama has kept calm, continues to evoke a Presidential aura and push his economic policy to salvage America; meanwhile McCain's supporters are so rabid, it is clear that they are beyond listening to his economic prescriptions. Ever thought a 1/2 black man with a funny name could be President? McCain really thinks so and he is fighting against it like mad.

Bailout Bill Stinks

Oh how our Congress people, House and Senate, held their noses to sign the new bailout bill which was suddenly more appealing because it included an additional $110,000,000,000 in what are essentially earmarks. So, the last great act of George Bush’s Presidency, which has been characterized by reckless and excessive government spending, is to alleviate the credit crisis by enacting the largest most reckless government spending bill with the purpose of bailing out Wall street in the name of saving Main street. The House and the Senate drank it, swallowed it and made it better by increasing the monetary size of it. I’m glad they got that straight…not!

Democrats and Republicans should be ashamed at their own shortsightedness that all they could do to solve the credit crisis was to take the one and only $700,000,000,000 offer from the Bush Administration, courtesy of appointees Paulson and Bernanke, and make it even more egregious than it already was. After the House bill was soundly defeated on Monday, not one solitary Congressperson or Senator could offer another approach that would achieve the same end without selling the taxpayer a bridge to nowhere? The best they could do was take the same bill, triple the number of pages and to take a phrase from Ted Stevens, almost but not totally disgraced Senator from Alaska who was head of the transportation committee when he resigned, “stuff that bill like a turkey.”

In the interim between Monday’s failure and Friday’s begrudging acceptance of this disastrous piece of legislation, the Federal Reserve pumped hundreds of billions more into the monetary system so in essence we, the taxpayer, spent more than $1,000,000,000,000 this week on the premise that we had to do something. There is a difference between needing a solution and accepting a bad solution out of sheer ineptitude. If I were Barack Obama I would abandon this race and let McCain win. He might have to repeat his “thing with Hilary” but I would let the Republicans take George Bush’s mess and go down with that ship. After all the expenditure and economic disaster yet to come, I say, let them have it.

Denouement

It is a foregone conclusion that the Senate will pass the aptly renamed Economic Recovery Act that the House failed to pass on Monday. It has now ballooned from 110 to over 400 pages and includes all kinds of incentives, essentially additional expenditures, to make it palatable for those who were formerly against it.

At this time, we the public are completely in the dark about what these additional expenditures are only that the bill includes an increase in the threshold for FDIC insured deposits from $100,000 to $250,000 and that it includes tax breaks for whom we do not know. Unfortunately for the taxpayers, these are unfunded tax breaks; what's another few billion added to the tab?

I still contend that there were other alternatives to loosening the credit markets, which is the fundamental problem that needs correction, without taking a bad $700,000,000,000 bill and adding sweeteners to it. The bill is still poison; it will still kill us but now it will taste better going down. Cold comfort.

What a Difference a Weekend Makes...

Much clarity has been given to certain situations though many more waters have been muddied...

The Bailout Fails: In a vote of 228 Nay vs. 205 Yea, the House of Representatives failed to pass the $700 billion bailout package with a resounding 2 to 1 nay on the part of the Republicans. Thank you Republicans. There, I said it. I am happy this bill did not pass because I did not know all of the details and I think it was too large a sum to make such a hasty decision.

I understand that this is really about Commercial Paper and not bailing out Wall Street but then don't put forth a bill with little explanation granting vast powers to Treasury Secretary Hank Paulson, who is from Wall Street and has private interests (mainly Goldman Sachs) to protect. There are many other methods, all equally valid, that would assist in returning liquidity to the Credit markets. This is about confidence in lending; banks and others are all undermined by their own lapsed judgment in lending. The Federal Reserve is doing all it can by dropping additional hundreds of billions into the global markets but still the Commercial paper market remains frozen. If banks don't lend to each other then small businesses and individual borrowers suffer the most. It is possible that the Fed is overextending itself, more to follow on this I am sure.

The rest of it is that the markets do need to correct; we accept correction in every other market except this one? In any case, a bailout package should, at its core, provide relief to struggling home owners; there has to be a provision to allow borrowers to re-negotiate their loans with a fixed interest rate between 6.5% to 7% and a longer loan term of 40-50 years. The point is the loan amount remains the same but the payments become more affordable and when the markets return to health these borrowers will be able to refinance to a shorter term loan or better interest rate. This way the prudent people who did choose affordable loans do not feel punished for being prudent.

Dow drops 777.68 - A Day That Will Live in Infamy: The Dow suffered one of the worse days in history dropping nearly 500 points the instant the House vote was closed; it was already hovering around $280 points down pre-vote. We watched it in real time; most of my coworkers checked in on the CNN Money site which crashed momentarily; MarketWatch, my preferred choice, stood firm though refreshed at an agonizingly slow pace. All hell instantly broke loose; political spin, partisanship blaming; John McCain claiming credit for bringing together the bailout package then having to sidestep himself when it failed damningly by his own party. Ouch. Also John McCain appeared with Gov. Sarah Palin in a joint interview to save her from remarks she made about Pakistan that he criticized Obama for saying in the debate. Double Ouch.

Saturday Night Live Palin Skit Dead On: Yet another Sarah Palin skit was unveiled on Saturday night this weekend with a send-up of Gov. Palin's interview with Katie Couric. All it required was Tina Fey, who does a very convincing comic caricature of Palin, essentially espousing verbatim Palin's exact phrases from the interview. Hilarious but sad; Palin is living the Peter Principle. Enough said.

Last But Not Least: This is the most engrossing reality show on record as we watch our economy and politics explode, the Republican party implode and the Democratic party standing to bear the brunt of this economic disaster if Obama is elected. He will be blamed if the devastating outcomes of this debacle persist over the next 4 years and of course, it will be doubly damning because he is 1/2 a black man. Sad but true. At the end of the day, politics and fear aside, we all have to give ourselves a financial housekeeping. Plan for the worst and you will survive. The net effect of all of this is that decrease in consumer spending will kill our GDP splintering all industries and the credit card market will be next in line to send up its wave of bad debt. It does not look pretty out there. What were the economic terms that we had before "market correction?" Depression, recession, inflation? Think about McCain & Palin leading us through these times...try not to cringe while doing so.

Who Would Want to Lead This Country?

How is it that Sen. John McCain, a rich old white man from Arizona can command the same poll results as Sen. Barack Obama who is clearly promising us a different America? John McCain can be the same as George Bush and practically unoriginal but Barack Obama has to be the most extraordinary black man to even have a chance to be President.

How do Americans let the Republican party convince them that Barack Obama is elitist because he worked hard to attain the education that we routinely tell Americans will pave their way for a brighter future? Yet, John McCain, the son and grandson of Admirals who benefited from his military connections and his wife’s wealth, were it not for being a POW, gets a free pass from being labeled “privileged.”

After today’s antics with John McCain’s rush to Washington to be the hero of the proposed bailout plan, then watching the plan unravel under stress of a protest plan submitted by conservative house Republicans and the injection of Presidential politics – Barack Obama was compelled to be present - then not saying much but staking his appearance at tomorrow’s Presidential debate on an outcome coupled with Sarah Palin’s utterly unintelligible answers in her interview with Katie Couric, an interview where many of the questions were similar to those previously asked by Charlie Gibson, and she still did not have any good answers for, which clearly shows that she should not have been sequestered and should have been given the opportunity to practice and now appears to be undermined by a lack of confidence, and you have the recipe for campaign disaster. Thank goodness the campaign is run by Karl Rove acolytes; what will they pull out of their hat tomorrow?

On another note, with Washington Mutual (WAMU) seized by the FDIC this evening becoming the worst bank failure in U.S. history, underscores the urgency of some sort of bailout plan. Deciding on what avenue to take now seems to be the bane of Congress and the American people, none of us having the breadth of knowledge and understanding of complex financial instruments and how this all functions in today’s global economy, except Congress is supposed to go on recess tomorrow so they can all run home and campaign making a push for a decision tomorrow guaranteed to yield nothing less than disaster.

While the rest of the world is laughing at America, they are because if I didn’t witness this in real life, I would think that I was watching a movie; a satirical circus pageantry envelopes the most powerful country in the world while it attempts to choose the next leader of the free world and heal the economic calamities befalling it. An educated black man arises to save the people from ruin because the maniacal white man, who comes complete with the charming, but disarming, sidekick hailed as mavericks as they unleash their diabolical plan for world domination, finally and suddenly implode leaving trail of Republican destruction behind them.

Sadly, this is not a movie, this is the great meltdown of 2008. If you choose McCain-Pailn, you deserve your own stupidity and the boat you rode in on it or you choose Obama-Biden, who though better suited for the job, will face the greatest odds challenging a Presidency in the history of the nation with little margin for error. Good luck with that.

Bailout or Else: The GOP Politics of Fear in Full Swing Yet Again

Having now presided over the biggest economic collapse in recent history, George W. Bush and friends are out to convince the American people that the best and only solution is to hand over $700,000,000,000 to the Treasury Secretary to bail out Wall Street and that it should be done expeditiously and with as minimal oversight as possible. This Administration has perfected the Karl Rove politics of fear methods so completely and, unfortunately, so successfully that they have no qualms rolling it out whenever they need to force the hand of the American people.

Right now we are witnessing almost to the letter the same playbook used to rush us into war 6 years ago. Tonight the President spoke on television right before Congress is to go on break, like he did 6 years ago, giving us the old “act now or doom will befall you” speech. These same tactics were employed during Bush’s re-election campaign and are now being employed in more extreme fashion in John McCain’s campaign. So far, they have been successful at these methods even though the outcome has always been disastrous for the American people.

Though the Congress is trying more diligently this time around to mitigate the damage of hasty decision-making; this plan seems destined to come to fruition in some form albeit with greater restrictions. Why isn’t anyone else coming up with an alternative solution? Why is this expensive bailout the only way to bring order to the markets? While the GOP continues with their lies, fear and deceit, the American people are once again swept up into a situation where they are taken for a ride and this time around instead of fearing the GOP; they fear the intelligent black man who actually does want to help them.

Bailouts 'R Us

The Federal Government is now the money store. Financial companies get in line, they’re practically giving it away, even foreign banks will get a piece of the bailout pie. Small business people, we need to unite! When do we get our bailout? I would like the Federal Government to forgive the SBA loan used to purchase a franchise that, due to a series of unfortunate events, failed leaving us with mountains of debt. We accepted our lessons, licked our wounds and moved on pledging to pay down that debt while resigning ourselves to the enormous damper on our lifestyle for many years to come. We did not make any money or recognize any return on this investment; we took our knocks, plotted a new course of action and pressed on.

I know that our failure will not bring down world markets but it brought down ours. We were not greedy, we didn't overextend ourselves, we were not reckless and we worked very very hard. Sometimes things just don't work out but thankfully our prudent decision-making and prior savings allowed us to weather the financial setbacks that befell us. From our standpoint, the Wall Street bailouts, mortgage bailouts and other free passes are difficult to swallow. Besides struggling to pay for our own debt, we now have to pay for others. We know many small business-people; all are carrying a huge debt-load and struggling to make ends meet day-to-day. Where is their break? Where was ours?

America should forgive the SBA loans of small businesses that failed, are currently failing or are drowning in debt; this would help a lot and go a long way to helping another vital sector of the economy get back on their feet. So airlines, car companies, and others get in line…behind us.