20081002 Thursday October 02, 2008

anti-fascist bailout proposal


I don't understand why nobody's proposing something sensible, like
having all the companies that invested in these idiocies get their
appropriate dose of "market intelligence" in return for their stupidity
and greed. In other words, there should be no "moral hazard" to set
precedent for future market shakedowns of the government ( "Give us our
free $700B or we'll lose you more than that in a day!!" ) ..  let the
companies that invested in this "lose" appropriately... otherwise the
entire concept of the market "rewarding" or "punishing" becomes
diminished.

Government's role in the "bailout" should be limited to back-stop
all the properties that actually go into foreclosure, or people that go
into unemployment, from the market decline. This is what the government
owes the people for it's lack of oversight of the market and the
fraudulent "ownership society" bubble they created for the purpose of
bolstering the lagging post-9/11 economy and enriching the market. It's
also what's going to preserve whatever tiny amounts of equity  people
managed to scrape together..... because otherwise, the bailout bill, as
written, will basically be an elaborate form of allowing foreclosures
to continue, taking even legitimate loans "underwater" in the process.
Nobody's considering the second order effect of allowing people to
suffer while bailing out the fat cats. Because that'll be a second
cataclysm that'll manage to hoover-up more of the middle class's assets
and send them on to poverty and tent-cities. That may be part of
"their" plan, but it shouldn't be part of ours.

The current "settlement" is a way for the players-still-standing to
continue stealing the savings of millions of Americans... people's
meager savings and equity will get eaten by bank fees that'll roll
straight back to the fat cats. See all these shenanigans have one and
only one purpose, which is basically a giant ponzi scheme ... where
"regular folk" -- homeowners -- are the chumps from which the ponzi
scheme collects. The rich basically figured out a way to motivate poor
and middle class people to save beyond their means...  just so they can
steal this money from them in foreclosure when they artificially dry-up
the capital-lending market and send the economy into depression
(similar to how they shutdown the "dot com"  industry during the last
downturn, w/ fatcats scavenging valuable remnants of cataclysm). These
externally-controlled, industry-targeted boom-bust cycles are like a
giant money hoover for the elite. Recall that only last year, record
bonuses were being handed out on wall street, while at the same time
foreclosure rates skyrocketed and nobody did a thing, or even noticed
the financial crack-smoking that had been going on for years. All those
bonuses came from theft... and the thieving had been so easy that Bush
kept on saying "the economy is fundamentally strong" to allow this
trickle-up fleecing to continue unchecked.

The stabilization needed is a deep-flush, worldwide, of every
single organization that took part in these shenanigans. They need to
fail, and die, and start over again, chastened, and hopefully growing 
some ethics and morals in the process. Everything else is bandaids and
simply doesn't work out mathematically.

And why should we even "care" about markets -- they're not even
real. The only real thing here is people... and their need for shelter,
food, health care, education, etc. Money/credit isn't even "real" here
either, but it is being used by government to abrogate it's fundamental
premise, which is to make sure its people have shelter, food, heath
care, education, etc. What we have with the bailout bill is the
beginnings of a true fascist coup: government control for the sole
purpose of facilitating the economic power of the few.  A non-fascist
government would be firstly concerned with the families directly
affected by foreclosure; the neighborhoods blighted by foreclosure,
vacancy, the job losses caused by the economic collapses, etc... a
non-fascist government would be bailing out all the people drowned by
the financial hurricane enabled by Bush/McCain/Gramm-Rudman and
implemented by hucksters of Wall Street. But we alread know how the
Bush admin responds to hurricanes -- as in New Orleans -- by
privatizing damaged public services and putting administration cronies
in charge.
...

My plan would force the banks that took the loans on these
properties to eat shit, financially, which includes going bankrupt,
etc. This means all the fancy packaged mortgage investment instruments
based on these go south too... which might be more of a problem for
foreign markets and investors than our own. It is simply not right to
"care" about markets, domestic, or foreign, lest they stop being
markets.
And why should we care if china is holding a bunch of bad assets now that this mess has been globalized?

My plan would have the government  buy up all the foreclosed
properties at a negotiated, fire-sale price, which would serve as
guaranteed  assets for any bankruptcy filings by these companies. The
government would then end up owning large chunks of actual real estate,
which over the course of time will significantly increase in value. A
guaranteed win for the US taxpayer, who would end up owning a bunch of
real property, and collecting on the "rent" from the current tenants..
the tenants being the foreclosed homeowners who now have their
renegotiated mortgage attached to their tax bill. Since this would be
priced less than rental in the local markets, people would stay in
homes and property, and equity of the people, would be maintained. And
the IRS collects money much more effectively than banks ever could, and
is happy to wait around forever to get repaid... with interest. Which
means there'd be a lot less "loss" than with the stupid privatized
bailout. The US Govt. already successfully used this approach in the
"New Deal" ( http://www.msnbc.msn.com/id/26825453/ ):

The Home Owners' Loan Corp., started under
Roosevelt in 1933 as part of the New Deal. The agency helped stop a
flood of foreclosures by buying $3 billion worth of defaulted mortgages
and refinancing more than 1 million loans at lower rates and longer
terms.

 

But
that's a crazy idea, right? Especially because it worked before and
actually turned a profit for the people instead allowing the elite to
suck up the people's spare change. The current deal allows for this,
and will have wall street regularly holding a $1T/day-loss "gun" up
against congress' head any time they need more "bailout"...

What's crazy to me is the new idiotic terminology that is
bandied about by the TV talkshow hosts. "Toxic loans" "like kryptonite
to the balance sheet" ... When cartoon-superhero concepts start being
used seriously in national discourse, you really have to start
wondering what's really going on....  because what's really going on is
that we might need MANY MORE TRILLION DOLLAR BAILOUTS before the whole
thing is settled: The amount of debt accrued by these shenanigans
appears to be far larger than conceivable... thus the cartoon
terminology subterfuge (from http://www.dailykos.com/storyonly/2008/9/21/9322/74248/245/602838 ):

As the banks piled up crappy mortgages, they heaped on ever more of
the credit default swaps -- and they still had no idea how to value the
things. Worse, they began to trade the swaps themselves as if they were
an investment, treating them like something worth holding instead of a
big bundle of cartoon bombs whose fuses were already lit. Since very
few loans were falling into default at the time, owning a default swap
seemed like a way to collect fees without ever paying out. Banks wanted
more, and more, and more. 

A secondary market for trading swaps exploded into
existence, and swaps were traded with absolutely no consideration for
the nature or quality of the underlying investment. Swaps changed hands
a dozen or more times, growing in "value" as they went. Worse still, no
one regulated who could buy a swap, so it was (and
is) perfectly possible for a company to acquire swaps that
theoretically cover billions of dollars in loans, even if that company
doesn't have a red cent on hand to cover those swaps should the loans
default.

How big did this market become? Here's business correspondent Bob Moon and host Kai Ryssdal on American Public Media's Marketplace from back in the spring.

BOB MOON: OK, I'm about to unload some numbers on you here, so I'll speak slowly so you can follow this.

The value of the entire U.S. Treasuries market: $4.5 trillion.

The value of the entire mortgage market: $7 trillion.

The size of the U.S. stock market: $22 trillion.

OK, you ready?

The size of the credit default swap market last year: $45 trillion.

KAI RYSSDAL: That's a lot of money, Bob.

As in three times the whole US gross domestic product, Bob. And the
truth is that Moon probably underestimated. The unregulated and poorly
reported credit default swaps may have actually passed $70 trillion
last year, or about $5 trillion more than the GDP of the entire world.

In other words, we don't need a bailout. At this point we need a total system reboot.

While
we wait for this reboot, let's consider, why is it so "efficient" to
have a free market for loaning money, when crap like this happens
regularly? What is so inefficient about having the source of the money
-- the government -- also be the sources for loaning to businesses and
individuals? What is the purpose of profit or competition in a
fundamental resource like capital? What next, privatizing the air??
Seems like it's just skimming money while providing a totally
unnecessary and useless service. Nationalize the banking industry!
While you're at it, the connected insurance industry which provides
some of the liquidity for loans makes no sense either -- nationalize
it! And then there's health care & pharmaceutical  industry which
routinely chooses corporate profits over public health -- nationalize
it!!

Posted by Niels P. Mayer in Politics at 20081002 Comments[0]