UPDATE: 09-28-08 A DEAL IS STRUCK: MAYBE?
According to the Associated Press ...
"Congressional leaders and the Bush administration reached a tentative deal early Sunday on a landmark bailout of imperiled financial markets whose collapse could plunge the nation into a deep recession. House Speaker Nancy Pelosi announced the $700 billion accord just after midnight but said it still has to be put on paper."
"'We've still got more to do to finalize it, but I think we're there,' said Treasury Secretary Henry Paulson, who also participated in the negotiations in the Capitol."
"'We worked out everything,' said Sen. Judd Gregg, R-N.H., the chief Senate Republican in the talks. Congressional leaders hope to have the House vote on the measure Monday. A Senate vote would come later."
According to Politico.com ...
"In a sign that negotiations were growing serious earlier in the evening, a Pelosi aide collected BlackBerrys from the staffers meeting in her office so that no details would leak out."
Even Pelosi's people seem to recognize that fellow democrats cannot always be trusted with high-level financial news and was probably wise to prevent new which will greatly impact the markets from prematurely leaking. The American people should not find it a major surprise that many large players may have insider knowledge which can be used to create their own profitable opportunities. Perhaps not so blantant as buying a distressed stock before the issuance of good news, but by structuring a deal or covering a short position that remains open. Self-interest abounds in Washington and very few fear that the SEC will do a "Martha Stewart" unless they are seeking further media attention for their agency.
The devil behind closed doors ...
As with everything done behind closed doors and on an expedited basis, one must consider that the devil is in the details. Especially the details which cede a great deal of power to a number of individuals who are above the law and not subject to legal action for any malfeasance or wrongdoing. One can only imagine, at this early stage of the game, how a government which has made itself almost unauditable (by design) is going to handle this amount of money without full and complete transparency. We will watch for a written bill to appear soon -- hopefully with enough time for public comment and our legislators and elected officials to actually read the legislation before signing it into law.
Original Blog Entry ...
Democrats in front of the camera …
It is approximately 11:30 pm Saturday night and the smiling self-congratulatory face of House Speaker Nancy Pelosi (D-CA) is speaking before the assembled cameras – assuring everybody that a deal on the bailout is near and that the democrats (as well as others) have been working diligently overtime to develop a bailout program that will pass both the smell test and receive ratification by both sides of the aisle. Standing with Pelosi were congressional leaders including Senate President Harry Reid (D-NV) and the omni-present media-whore Chuck Schumer (D-NY).
According to the Wall Street Journal …
“Lawmakers and staff reconvened their meeting around 7:30 p.m. EDT in the offices of House Speaker Nancy Pelosi (D., Calif.), hopeful they could broker a deal on the much anticipated but exceedingly difficult-to-negotiate legislation that would have the federal government buy up billions of dollars of soured assets.”
" ‘We've had Warren Buffett on the phone tonight, other experts that we've been consulting,’ Sen. Kent Conrad (D., N.D.) told reporters as he walked through the U.S. Capitol. He declined to identify other people with whom lawmakers have consulted.”
“Senate Majority Leader Harry Reid (D., Nev.), in an appearance on the Senate floor earlier Saturday, said there are only a ‘handful of issues still lingering’ for lawmakers to finalize. He said his goal was for the Congress and the Bush administration to at the very least release an outline of the bailout plan before Asian markets open Sunday evening.”
Gee … would that be the same Warren Buffett who, acting in his own self-interest, invested $5 BILLION dollars in Goldman Sachs at a 10% perpetual interest rate and who would surely benefit from any legislation which directly benefits Goldman Sachs? Who are the others who were consulted and do they have a vested interest in the outcome. As with the democrats and special interests, you can be there will be some form of self-dealing in their version of the legislation.
Pinocchio and the plan …
Like Pinocchio’s nose which grew with each lie that the wooden puppet told, the democrat version of the bailout plan has grown from a three-page outline to hundreds of pages of draft proposals.
Truth-be-told, the House democrats can pass their plan at any time without an requirement for additional Republican votes. But they are scared of the potential repercussions should the plan be bogged down or, heaven forbid, fail to mitigate the liquidity crisis. The need fellow Republican legislators to provide cover for their cowardly inability to take action on their own. Perhaps it is because they know that any plan will be subject to follow-on legislation and the usual governmental mismanagement. They need bi-partisan support to protect their collective political asses.
It wouldn’t be a democrat plan without additional taxes …
According to Reuters …
“U.S. Democrats seek Wall Street tax in bailout plan”
“Democrats in the U.S. House of Representatives are pushing for a new Wall Street tax that would cover the potential costs of a $700 billion bailout being negotiated by Congress and the Bush administration.”
“U.S. House Speaker Nancy Pelosi, speaking to reporters after a meeting with fellow Democrats, said the fee could be assessed after five years if the non-partisan Congressional Budget Office determined taxpayers had lost money in the bailout.”
" ‘If after five years ... the CBO decides that the American taxpayer has lost money in this, then there would be a fee on financial institutions,’ Pelosi said, adding that she hoped the provision could be part of a final bailout deal.”
“Pelosi said that the Secretary of the Treasury could determine how to assess the fee.”
Like most democrats, she believes the American public is stupid and their concerns can be allayed by empty promises of punishing Wall Street for any losses that may accrue when the final numbers are tabulated.
This is sheer and utter nonsense.
One, nobody currently knows what Administration will be in power in five years or that subsequent legislation will not modify any agreement reached as part of the current bailout bill.
Two, Wall Street firms and other financial institutions do not pay taxes and penalties – they are not people, they are artificial constructs of law that simply pass all incurred costs and charges on to their clients and shareholders in the form of increased fees and reduced yields on investor monies.
And three, the fees and other charges will inure to the benefit of the United States Treasury and will serve as yet another source of revenue to offset the profligate spending of Congress or the reduction of the national debt. In either case, this is a tax on the already burdened American taxpayer.
Consider, for a moment, what Pelosi and her fellow democrats are saying.
Are they planning to calculate the interest costs on $700 BILLION ($1.2 TRILLION by my calculations) for the amount of time it is tied up in toxic securities and then deduct the amount of the good securities which have been sold to special interests at sweetheart pricing?
Will this plan cover the BILLIONS already loaned to various financial institutions by the Federal Reserve and the additional BILLIONS to the automotive and airline industries?
And why should this provision not be considered as just another tax on middle America to help pay for the excesses of a few.
In five years, the amount will be come incalculable by a government who cannot even audit most of their financial systems and which has lost BILLIONS of dollars in so-called accounting errors.
Waiting for the Republican side of the story …
I am willing to wait and see what the final bill looks like, but I am almost positive that it will be one crafted in secret, given to legislators with little time to read the bill, much less debate its provisions on the floor of Congress as is the normal custom for spending bills. I have little faith that the conference committee that reconciles the difference between the House version of the bill and the Senate version of the bill will not be tempted to insert additional compromise verbiage before the bill is sent to the President for his signature.
This still stinks …
The speed at which this bill is being hustled through the legislative process and the breathless pronouncements of elected officials in media releases – makes me wonder if this is an artificial emergency designed to panic the public into accepting a deal that will benefit only the special interests and represent yet another attempt to plunder the United States Treasury – and by extension, our pockets.
And what I did not hear is any word of claw-backs of bonuses awarded to various and sundry executives based on cooked books and the knowing sale of toxic paper. What I did not hear was a plan for the nationalized GSEs (Government Sponsored Entities) Fannie Mae and Freddie Mac which could require additional BILLIONS of dollars to resolve their precarious position.
And what I did not hear is the complete proposal, presented in bill form, for all Americans to see.
All I did see were some self-congratulatory democrat politicians that were seeking media exposure to convince the public that they have the solution we need to resolve the current financial crisis. Harry Reid’s comment about not knowing what to do, notwithstanding.
What can YOU do?
Observe your legislators carefully and watch how they will attempt to manipulate the situation for their political advantage.
Decide for yourself if this matter is that urgent that it be resolved over long nights and weekends when other serious business has been put on hold so Congress can adjourn for vacation or campaigning.
Know that the public will be screwed – and that it is only a question of how much money will be transferred from the public’s pockets to those of Congressional members and their friends.
-- steve Quote of the day: “If you would be a real seeker after truth, it is necessary that at least once in your life you doubt, as far as possible, all things.” -- Rene Descartes
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“The key to fighting the craziness of the progressives is to hold them responsible for their actions, not their intentions.” – OCS "The object in life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane." -- Marcus Aurelius “A people that elect corrupt politicians, imposters, thieves, and traitors are not victims... but accomplices” -- George Orwell “Fere libenter homines id quod volunt credunt." (The people gladly believe what they wish to.) ~Julius Caesar “Describing the problem is quite different from knowing the solution. Except in politics." ~ OCS
“The key to fighting the craziness of the progressives is to hold them responsible for their actions, not their intentions.” – OCS
"The object in life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane." -- Marcus Aurelius
“A people that elect corrupt politicians, imposters, thieves, and traitors are not victims... but accomplices” -- George Orwell
“Fere libenter homines id quod volunt credunt." (The people gladly believe what they wish to.) ~Julius Caesar
“Describing the problem is quite different from knowing the solution. Except in politics." ~ OCS