Fiscally Irresponsible, Part IV

Good one from Kim Peterson, below.  I am still in awe about the lack of accountability that was attached to these handouts.  The initial proposal sent down from the White House specifically stated that in addition to no accountablity, that even congressional oversight would not be permitted.  Here’s what Kim says:

How is it that an ATM can give my exact balance at any time, but banks can’t say what they did with $1 billion in bailout money?

Because no one forced them to. The government is handing out money like Halloween candy — no strings attached. No strict rules on what banks should do with the money or how they should account for it. Only after the fact did people see the money go to executive bonuses and other non-essentials.

Yet another uh-oh moment for the U.S. Treasury, which is getting raked over the coals for its incompetence by a congressional watchdog.   Read More…

Posted Jan 09 2009,  by Kim Peterson

More:
Treasury Defends Bailout Bait & Switch
$50 billion of bailout going to employee bonuses
Fiscally Unsound Part II

Personal Attacks – McCain’s Only Hope

John: When you flip flop on the issues, when you can’t win by talking about your own platform, all you can do is wage personal attacks.  So, kitty-cat, good luck with your spineless, chicken ‘S’ campaign.

McCain can’t debate experience, because his VP has none.  He can’t debate the war, because everyone agrees we need the $10 billion per month here in the USA.  Now he can’t (and won’t) debate the economy:

Over the weekend, John McCain’s top adviser announced their plan to stop engaging in a debate over the economy and “turn the page” to more direct, personal attacks on Barack Obama.

In the middle of the worst economic crisis since the Great Depression, McCain wants to change the subject from the central question of this election. Perhaps because the policies McCain supported these past eight years and wants to continue are pretty hard to defend.

But it’s not just McCain’s role in the current crisis that they’re avoiding. The backward economic philosophy and culture of corruption that helped create the current crisis are looking more and more like the other major financial crisis of our time.

During the savings and loan crisis of the late ’80s and early ’90s, McCain’s political favors and aggressive support for deregulation put him at the center of the fall of Lincoln Savings and Loan, one of the largest in the country. More than 23,000 investors lost their savings. Overall, the savings and loan crisis required the federal government to bail out the savings of hundreds of thousands of families and ultimately cost American taxpayers $124 billion.

Sound familiar?

In that crisis, John McCain and his political patron, Charles Keating, played central roles that ultimately landed Keating in jail for fraud and McCain in front of the Senate Ethics Committee. The McCain campaign has tried to avoid talking about the scandal, but with so many parallels to the current crisis, McCain’s Keating history is relevant and voters deserve to know the facts — and see for themselves the pattern of poor judgment by John McCain.

See “Keating Economics: John McCain and the Making of a Financial Crisis” http://www.KeatingEconomics.com 

Watch the video to see why John McCain’s failed philosophy and poor judgment is a recipe for deepening the crisis:

http://my.barackobama.com/keatingvideo

It’s no wonder John McCain would rather spend the last month of this election smearing Barack’s character instead of talking about the top priority issue for voters.

But if we work together, we can make sure the focus stays on the economy — and how to fix it.

Please forward this to everyone you know.

Thanks,
David Plouffe
Campaign Manager
Obama for America

Fiscally Unsound, Part III

Hey, as long as our government is taking care of the communist countries, right?  This economy is not fine, it’s not ”fundamentally sound” as McCain says…it needs change (badly!) As I’ve said before (Part I, Part II), the Democrats are now the Fiscally Responsible Party. 

The Republicans are more concerned with Big Business than Americans; more concerned with Communist and Persian Gulf countries than America. 

From Jim Jubiak:
http://articles.moneycentral.msn.com/Investing/JubaksJournal/feds-bailed-out-china-not-the-us.aspx  

Feds bailed out China, not the US

 

How is the deal cobbled together by Treasury Secretary Henry Paulson, the former Goldman Sachs (GS, news, msgs) CEO, bad for U.S. stocks and bonds and for the U.S. economy? Let me count the ways:

 

• The deal adds $5 trillion in debt to an already stressed national balance sheet. That basically doubles the U.S. national debt and can’t help but push the U.S. dollar lower and U.S. interest rates higher in the long term. The U.S. government is going to have to sell more Treasury bonds to cover its new debt.
• Taxpayers are on the hook for somewhere between $25 billion and $200 billion. That’s money that will have to come from higher taxes or from more government debt.
• The need to sell more debt to fund this takeover will lead to higher interest rates in the Treasury market. (This is besides the rising tide of the annual federal debt. The Congressional Budget Office puts the deficit at $407 billion for fiscal 2008 and a record $438 billion for fiscal 2009.) Treasury yields are the benchmark for everything from mortgages to credit cards to corporate loans. Higher interest rates on Treasurys will push up mortgage and other interest rates.

• The combination of faster growth in the money supply — as the government sells more bonds — and a weaker dollar will add to forces pushing inflation higher in the United States.
• The decay in the financial fundamentals of the U.S. government could finally lead to the United States’ loss of its triple-A debt rating. A downgrade would force the U.S. to pay higher interest on its debt.
• Higher interest rates will lead to lower economic growth. The Federal Reserve calculates the U.S. economy can grow at 2.5% or so before it risks setting off inflation. The extra debt burden from this takeover will make it hard for U.S. growth to hit even that relatively modest target.
• And, yes, after being asleep for years as the problem grew and grew, the Treasury may not have had any alternative if it wanted to prevent an immediate meltdown in the U.S. mortgage market and in the U.S. financial system in general. But if the Treasury is serious about starting to shrink the mortgage obligations of Fannie Mae and Freddie Mac starting in 2010, the price of an immediate fix could be a double-dip slowdown in the housing industry in 2010. Less mortgage money available from Fannie and Freddie in 2010 sure isn’t going to help the housing industry sell houses.

Good for them

For China, on the other hand, the results of the takeover are almost uniformly positive:

• The rescue bails out the banks and central banks that had put too much money into mortgage paper backed by Fannie and Freddie. At the end of 2007, Chinese banks held $376 billion in what the financial markets call agency debt.
• Now the commercial banks in China — and the Chinese government — don’t have to worry about problems at Fannie and Freddie turning into problems on their balance sheets. Chinese banks are now free, therefore, to make more risky, ill-considered loans to domestic companies.
• The People’s Bank of China can forget about the yuan appreciating too quickly, which would increase the cost of Chinese goods and cut into Chinese exports. Now the Chinese government can manage its exchange rate without worrying that buying more dollars to depress the price of the yuan would increase its exposure to something like a meltdown at Fannie or Freddie.
• The U.S. intervention into its financial markets clears the way for the Chinese to intervene as deeply as they want without any foreign criticism. Who can say the Beijing government shouldn’t intervene to prop up Chinese real-estate prices after what the U.S. government just did? Chinese real estate has suffered an even worse drop than U.S. housing prices, with some cities showing a 70% drop from their peaks.
• Pro-growth advocates in China just got another boost. China’s advocates of fiscal discipline and the need to fight inflation were probably fighting a losing battle anyway, since politicians everywhere are reluctant to risk the wrath of the unemployed just to cut a percentage point out of inflation. Recent actions and speeches out of Beijing indicate the government is gradually revving up the growth engine again. More-radical pro-growth officials have also advocated new policies that would prop up the prices of stocks and real estate. The huge U.S. intervention to prop up real-estate, bond and stock prices helps make their case.