People, even those wonderful people on Air America don't have the details;

1) Mortgages are NOT the basis of proposed "bailouts" of investment banks. First, investment banks
are not subject to the same regulatory and oversight systems as traditional banks.."investment banks, Goldman-Sachs, for example, had several years of 80% profit margins, a result of manipulation of markets. How did this all transpire? Begin with legislation that allowed "securitization
of mortgages", turning them into "investment grade materials", broken up into parts and pieces..

2) Mortgages were used as COLLATERAL with which to BORROW huge sums, to combine with mortgages, credit card debt, retirement benefits, etc, to USE to manipulate markets with their huge
financial assets. The important detail is LEVERAGE..and investment banks LEVERAGED their mortgage
based collateral at a rate of over 30-1, which could only occur having deregulated "leverage"..

3) It is the LOANS that banks are asking the American taxpayer to bail out..NOT the mortgages, which is the REASON Paulson (ex-CEO of Goldman-Sachs) is NOT providing DETAIL on bailouts..calling the mess, "confusing, beyond comprehension"..which is simply untrue, as bankers rush to push through bailouts before dillegence is done-before Americans can comprehend.

4) Investment banks were AIDED IN THEIR LOAN PROCUREMENT BY THE FED, who are complicit; check the record: when has the FED EVER HELD INTEREST RATES THIS LOW, THIS LONG..? This was done to allow investment banks to continue to borrow, again and again, against their mortgage collateral..

5) And also to manipulate markets..which such large sums did, for YEARS..how do we know? What reason do investment banks have to hold collateral-securitized mortgages OFF THEIR LEDGERS, IF
they didn't KNOW?...(that's what they did-now we can't determine the values, because they were held off ledgers..AND accountants, in yet another piece of deregulation, were paid by the banks, NOT by
outsiders who could provide honest oversight.

6) We also KNOW that "derivatives" were valued at $800 billion in 2001, when Bush took office..now they are valued at $62 TRILLION...which is linked to the largest transfer of wealth from the middle-class to upper class, of all U.S. history. Kevin Phillips, conservative economist, writing in his books,
"American Theocracy" and "Bad Money" documents that in 2001, 30% of the American economy was
in "manufacturing", while 10% was "financial services"..by 2006, those percentages had reversed; now 10% were manufacturing, and 30% was "financial services", nearly all in "investment banking".

7) When a group can throw this sort of money at markets, they can manipulate them higher..as gas-oil went up, "speculators" were driving prices by selling "oil futures" back and forth to one another, at higher and higher prices, to inflate their profits..the same was done with other commodities, including food..but it's a ponzi scheme..and at some point, it goes bust. It has.

8) We have to see the FED as complicit in this manipulation, as interest rates should have long ago gone higher to protect the value of the dollar, which is the next shoe to drop..the Euro may displace it as the basis of the international monetary system, which will cause our money to become valueless..
Oil will be denominated in Euros..and food will become an issue, for all Americans..

9) Look up "Security Operations Systems" on Google; you will find rationale for Senator James Imhoff of Oklahoma and Donald Rumsfeld's proposals for a military to be used against a civilian population to provide "ORDER"...

10) Read Bill Blume's, "Killing Hope" and recognize that what the CIA perpetrated in South America
in the 70's-80's was "destabilization" of entire countries, so U.S. corporations could go in and pillage
resources..having blown through U.S. natural resources which we have used to run our economy over the last 150 years..understand, that's what's going on in the middle-east today..AND NOW, by
corporate exploiters today in our own country...

I think everyone already realizes that the unbridled greed and Republican economic policies are the real cause of the meltdown.
And we're are not going to reward this behavior.

NYT article on Paulson bailing out AIG to save his old firms bacon.

http://www.nytimes.com/2008/09/28/business/28melt.html

Gresham's law is commonly stated: "Bad money drives out good."

Gresham's law applies specifically when there are two forms of commodity money in circulation which are forced, by the application of legal-tender laws, to be respected as having face values in a fixed-ratio for marketplace transactions.


http://en.wikipedia.org/wiki/Gresham%27s_Law

An example is the US dollar, which the US government pledged to redeem for 1/20.67 ounce (1.5048 g) of gold until 1934. The value of dollar coins and, later, dollar notes was very close to the commodity gold value at that fixed rate. In 1934, Franklin Roosevelt declared via (Executive Order 6102) that the dollar would henceforth be redeemable at a rate of 1/35 ounce (0.887 g) of gold. This arbitrary, abrupt change in the government redemption value, along with severe restrictions on the private sale of gold, created a permanent dislocation between the face value of dollar notes and the market value of gold bullion. By 1971, the difference between the nominal rate (1/35 ounces) and the market rate of exchange between the dollar and gold had grown so wide due to the printing of so many dollars that the US gave up the 1/35 ounce exchange rate (the Nixon Shock), and was forced to let the dollar float freely against gold.

Great first post Nonclassical.

You give the details as to why the "high horse" explanation that blames the crisis on homeowners doesn't make sense.

Excellent post non-classical. It's great to have somebody explain this stuff.

I'm going to send this to all my friends and Congress people.

The email traffic into the Congress has shut down the system.

I guess people are a little upset about this bailout thing.

Anyone else know about this audio file?

I think its worth a LONG HARD LISTEN. Yes, its poor quality audio, but listen closely. Another reason we are lucky that this bill did not pass....

http://www.youtube.com/watch?v=Hx9syKEsoCg

See also

http://thepiratebay.org/torrent/4418763

DEM LEADERS.. WAKE UP!

I have read and heard better bailout proposals from some of the best economists and others but unfortunately the polictians who are making the decision either having read or heard of them and seem like they really don't want. They are only concerned about maintaining the gravy train they is Wall Streetl. They want to give away the Treasury now and discuss the reform details later. This is so ass backwards it would comical if it wasn't so serious. Now is the time to debate the provisions that support Main Street and not Wall Street. After this is done they should make any Wall Street corporation that wants to participate sign a binding agreement that holds them accountable for the amount they borrow. I they don't want to sign then can go the commercial financial market and try to secure a loan through the banks. I don't think it would be long before they decided to sign to avoid the complete collapse of their of their business.

The arrogance of the President to speak this morning trying to scare us into accepting this bill is beyond words. Does he know that the we know that this is only a reason to raid the Treasury and give it a few Wall Street firms. Just about everyone who is involved with the power to write this bill has a confict of interest. This is a bank heist plain and simple and Americans, whether Democrat or Republican, know that it stinks and that we are being ripped off. Let Wall Street collapse. Let them bail themselves out with the money they stole from us and now they want more! I say that Congress should be talking about criminal charges and how to get the money back instead how to pay the CEO's. This is just a red herring to distract us from what they should be discussing and to slip this bill through without any type of oversight, regulation and punitive provisions to punish those who caused this economic disaster.

The FDIC is trying to prevent Main Street banks from issuing credit or loans to artifically inflate the situation to make it look worst than it is so that we will panic and let them push this bailout through. If we give them what they want there will be nothing left to run the country. There will be nothing left for health care reform, education, the infrastructure or anything else.

We need to wait and see what happens in the next 3 weeks to see how this plays out. After all the "free marketers" have always said that we need to let a unregulated market regulate itself and it will do what is best for everyone. As Randi says "corportize the profits and socialize the losses". I think we all have had enough of that kind of economic policy and now is the time to put an end to it.

Dear nonclassical: WE ARE NOT AIR AMERICA.

Note to all listeners: Lehman is bankrupt. It is a BUSH CRIME FAMILY BUSINESS.

Now, ask yourself why this turkey wants the bailout? HE wants our money.

[quote name='LilaTheGreat' date='Sep 30 2008, 12:55 PM' post='173488']
Gresham's law is commonly stated: "Bad money drives out good."

Gresham's law applies specifically when there are two forms of commodity money in circulation which are forced, by the application of legal-tender laws, to be respected as having face values in a fixed-ratio for marketplace transactions.

footnote: though Gresham, one of my ancestors, was credited with the fine quote he was not the originator of that phrase. I don't remember right now the name of the fella who did say that first but I'll try to remember to look that up. He was reputed to be an honest man, 'cept when he stole that gold for Elizabeth, and ancestoral records indicate he gave credit to someone else..even when I was growing up, 'don't throw good money after bad' was a family mantra.

Great post...will probably become a classic.

But bad mortgages--bundled up into neat, undefinable, A-rated packages and thrown onto the market... and bought by (among others) investment banks (AND consumer banks), driven by the promise of a double-digit return and secured by the (fraudulent) A1 rating--were very much the cause for many of those bank failures or near-failures... Those bailouts cost taxpayers in many other countries billions and billions!

You're right, nonclassical, investment banks (and hedge funds) had no supervision, and that was deliberately kept that way for years on the part of the US (and the UK)... but consumer banks did... but they fell into the trap anyway because of the failure (or fraud) or the rating agencies... and their own greed and gullibility...


Yes, and the problem is that most of these mortgages had no equity in them... and without equity, there is no collateral... and no leverage...


BAD LOANS, even!

I believe that the domino stones are still falling because of the mortgage crisis... there are still banks going in the red and having to put these these bad investments on the books... and that will go on for a while...

These (fraudulent) financial products were so tangled and confusing, that nobody understood what they were buying, not even the bank managers... that was the trick behind it that worked well for quite a few years...

I don't know what Paulson understood, I"m sure a lot, because last year at the G8, he was (along with Gordon Brown) instrumental in keeping these murky financial dealings just that... murky and undefinable... and unregulated!

Well, Paulson knew what he was giving in return for the 700 billion... a bunch of bad loans and insolvent banks! And I'm sure he knew what he wanted to do with that 700 billion... he just didn't want to tell those donating the money

I'm no financial expert by any means and I'm only giving my unqualified opinion. But, I think there is another bubble that is bound to burst sooner or later... it's called the 900-billion-dollar consumer-credit-card debts... If people start defaulting on those.. then we'll have the next financial tsunami... I hope I'm wrong, but it's my big fear...

I'll try to answer some of your other points when it's not 4 am and I'm a little fresher in the head...

Btw... I agree with the others... great post! And even greater FIRST post

I'm a rookie myself, so I'll let others officially welcome you to the board

Great post ANG !!! You did a great job in explaining what the hell is going on ! Thank YOU!

Get some ZZZZZZZZZZZZZZZZZZZZZZZs

GK

Thank you NC!!!! Great heads up! We all appreciate info, especially when our MSM keeps the "lights out". Welcome to the BOARD! Looking forward to your posts.

Gatekeeper

While I agree with neo-classical's post I still don't think that goes to the real "root cause" of the problem.

The "root cause" is the "need" for corporations to continually grow at ever greater rates, and to provide outrageous bonuses to executives when they meet those growth targets.

This insane unsustainable and arbitrary"need" for constant growth necessitates the need for creating the only schemes available to meet these growth requirements, namely ponzi schemes ... yes, eventually these schemes will collapse, but those involved don't care, they've already made sure that their wealth is looked after in much safer financial instruments.

Oh, and NC is just discussing the "first level" of this scheme ... all those highly leveraged instruments, created out of debt from already highly leveraged mortgages, are then again broken up and recombined into still more levels of even higher leveraged financial instruments .... the $62 Trillion NC mentions is only one of the lower levels of the fraud pyramid, there's actually around $1000 Trillion worth of ponzi schemes out there just waiting to crash.

Looks like the Senate is picking up the ball:

http://www.sfgate.com/cgi-bin/article.cgi?.../MN8Q138U8G.DTL

The article's short of detail -- mostly rehash of events to date. But it indicates a possible Senate vote TOMORROW.

Keep those servers wheezing...

Oh believe me, I do see them as complicit.

This is why once Democrats are back in office, the first thing they should do, is KILL THE FED.

Kill it DEAD. Outlaw it.

Return the control of the money supply to it's Constitutionally proper place, the U.S. Treasury, and get the banker class the fuck out of that process ENTIRELY. Only with public control will the people have accountability.

We can't fire members of the FED, but we can damn sure fire members of the government. THIS is the point of the public commons.

We should not be paying interest on our own money to private bankers. Seize the assets of the FED, do NOT pay them back, indeed, LOCK UP the members of the FED so they cannot manipulate the economy any more.

Then do as Randi suggested. Get GAO in there to shift through the mortgages, and assist individuals who know who owns their paper to determine the precise nature and stability of each loan. Allow individuals to renegotiate their loans at lower rates.

The REAL WORLD value of these assets has NOT changed. The only thing that is changing in ANY of these markets, be it mortgages, oil, or the market generally, is PERCEPTION of their value.

This is a jack. As I said before, this couldn't be more of a stick up, if it'd been accompanied by a revolver and a ski mask.

This is how old white guys steal. And they've had centuries to get very good at it.

HOWEVER, the other lesson you should take away from South America is that these shock doctrine tactics CAN BE RESISTED.

I keep pointing to Argentina as an example because the primary thing the people there said, was "No mas!" And other countries in the region have basically said the same thing, quite literally telling the international version of the FED, namely the IMF, to go fuck itself, and refusing to pay back their loans.

I forget which Third World leader said it, but his quote was, "Do our children have to die just to pay back our loans?" And the answer came back, yes, yes, yes.... because millions of children DO die, from malnutrition, and easily preventable diseases, because the national infrastructure is ENTIRELY devoted to debt repayment, rather than social services for it's own people.

I personally - and I'd be willing to bet rightwing or leftwing, MOST Americans - are willing to resist that outcome with their last ounce of breath. They simply have to understand that that is the intended direction these corporatists are leading us in. Towards slavery.

We need to say to the FED and the rest of these criminal corporatists, GO FUCK YOURSELF.

The simple truth is this. And it is a truth our forefathers who created this country knew ALL TOO WELL.

The truth is, THEY ONLY HAVE POWER AT OUR CONSENT.

Whatever power they have, we have given it to them, and we can taketh it away just as fucking easily.

If tomorrow, every single person in this country just decided to tell all these credit card companies to go fuck themselves and not continue paying on these indentured servitude cards a 22% or higher, the problem would end so fast, it'd make your head spin.

What was the lesson Rosa Parks gave us? To simply say no.

Or in Jefferson's words, "To place before mankind the truth of the matter in terms so plain and fair, as to command their assent."

Add my thanks to the pile, nonclassical.

Unfortunately, I think the Senate, not surprisingly, is going to find a way to follow through on this heist in spite of the House's recent vote and the voters' objections.

I am not surprised that McCain and Clinton have committed themselves to aiding and abetting. That's who they are - reverse Robin Hoods -"rob the poor to give the the filthy rich already. I am disappointed that Obama has joined their band.

As usually, Dennis Kucinich has nailed what is really going on. (check his website or his recent appearance on "Democracy Now"). Cynthia McKinney is not as clear about what to do about this mess as Dennis is, but she is on the right track and I know she talks to Dennis. I will vote for Cynthia McKinney in November. Maybe we all should.

Thanks, GK, I will now I'm all Sarah'd out... and all spun out... and pundited out...

... and so sick of that face and that voice, I could scream!

Zzzzz Ang...

Dear Folks,

Now we know the Senate has passed the bill..House is next. I think they will pass it, as obviously they just don't get it. I know Senator Murray of Washington State a bit, and am surprised she voted for it..Cantwell didn't; listened to her constituency.

That is a reversal of their postitions on ceding George W. Bush war powers..I'll have to ask Senator Murray when I see her next.

Look folks, we need to see that the SECRET is what has been held "off the ledger"..it's a big secret, and it's what investment banks will be selling to taxpayers...because it's a secret, credit has frozen up..THAT's what's at FAULT...

anyone looking would figure out that we simply need to admit there was no oversight, and NOW oversight needs to happen..THEN we must all realize what it means that Paulson is unwilling to allow mortgages to go before a judge to re-work..because THAT Would require exposure-no more SECRET...and THAT is what Paulson-Bush especially will not allow, in ALL versions of this nonsense..hmmnn..because they'd find out how much borrowed money was used to leverage...it would all become public. Now, if the House passes legislation, it NEVER WILL...

Dear FOlks,

IF you were a slimy George W Bush-Paulson-"K STREET" investment bankers (read Kevin Phillips' "American Dynasty" for link between Bush-"K STREET") and you had this huge SECRET that noone could EVER find out, or you and a lot of your friends would go directly to jail, how would you HIDE THAT SECRET..? Well, you'd HAVE TO make certain that however you hid it, no judge or legal authority could ever open it up..and you'd want to hide it in plain sight, but so as (if you're a George W Bush neocon) you'd actually,
outrageously BENEFIT from hiding it...you'd want to TIE IT to something so outrageous that noone would look deeply at the other part of it..the SECRET part..and, you'd want to make certain all this transpired at the very end of your administration...and get the next administration on the hook, implicated, IF THEY EVER FOUND OUT THE SECRET...hmmmnnn....sounds just like the first Paulson,
4 page bailout bill..which has nothing to do with the SECRET..which is that the collateral-"securitized mortgages" were BUNDLED with borrowed-leveraged money..

You'd want to make certain that was never unraveled, so you'd appoint a secret group to oversee the buy-backs...a group of your handpicked insiders..sort of like the 911 commission was...only even fewer..they'd be "experts"..from the private sector they are already a part of...now what would you come up with to CAUSE everyone to GO ALONG WITH such a public burial of such a large SECRET???...???..and how would you turn it into a win-win-win????..hmmmnnn....

For readers here, I met Amy Goodman 3 years ago; she's my hero. I also met James Yee..like to arrive at such events 2 hours ahead, and see who there is to talk with.."Democracy NOW!" is the best...but sometimes, just sometimes, they miss this sort of thing, but you can never call into Randi or Rachel (line's always busy) to let them ponder it all...

An interesting Concept NC! "taking Bundled Mortgages" and Hiding "borrowed Leveraged money" with these loans, which is highly questionable ...is not something Wall Street would want to come to light! This could be the reason for such a PUSH for a Quick Passage. What would happen to WS and the Banking institutions should the public realize what exactly had been done in the NAME of GREED. The NAMES of individuals responsible for such chicanery Must come forth, IF we are to truly prevent this attitude from ever raising its UGLY HEAD. Profiting without solid Over-Sight is what Free Market entrepreneurs want. Reagan sought to remove the C&B, to create a laisee- faire capitalism. We have had it....and LOOK what it has done to the country! We are Broken and battered!

Congress MUST Become representative of the people...NOT the Brigands of Wall Street!

The ANSWER does not lie in this BS Bail-out, BUT in the RETURN of TRUE CHECKS & BALANCES which existed PRIOR to the Reagan Administration! We NEED true OVER SIGHT! AND conducted by HONEST MEN of integrity! This could be Hard to Find! Enough Said.

Would that be one quatrillion?

Dear Folks,

well, the House has also passed the SECRET bailout..and sure enough, PULBLIC TRANSPARENCY IS
FOREVER DENIED..

the American people have absolutely no influence on these corrupt leaders..now we are in the stew
of, as more mergers occur, such scandal becoming bigger, more monopolized corporations becoming more self-serving short term in their own interest...

Dear Folks,

heard on NPR today (boy has NPR lost relevance as they have turned "right") an author state that in a meeting prior to bailing out AIG, there were three Bush administration insiders related to Goldman-Sachs and the current Goldman CEO..turns out that AIG owes Goldman $20 BILLION, likely in insurance claims against losses..hmmmnnn..needless to say, after allowing Leyman Bros. to fail (a competitor) AIG was to be bailed out..

we need to keep an eye on the parts and pieces as they fall into place..learned that Vietnam era, at the University of Washington...

Does it bother the rest of you that Obama voted for this crap? That he did not offer alternative solutions? That just like with FISA, his lame excuse for voting the wrong way is that he will fix it when he's President? He can't remake the laws he voted as Senator to pass. It's crap.

I notice Randi and pretty much everybody else has chosen to focus on the VP debate. It's easy to make fun of Caribou Barbie. It's not easy to justify your chosen candidate's appallingly bad decision during a major US financial crisis.

I'm writing in Dennis Kucinich for President. He was my first choice. Hillary was my second. I had mustered up enthusiasm for Obama and understand he would be light years better than corrupt, senile McCain. However, since we still use the outdated electoral system and not popular vote and the AZ election is a foregone conclusion, I'm going to make my little statement and write in Kucinich.

I don't have any respect for either Obama or Hillary ("I held my nose and voted yes") over this. The bailout is a huge blunder and the country is screwed.

obama is not a liberal...he is better than the alternative but that is about it

Neo-Conservatism has no loyalty to Candidate, to party, to Country, Etc. It's loyalty is to the 'gleaning' of Wealth, and the "control" of the power structure! The agenda that has been put together facilitates this Loyalty.

If a politician, a political party or a country want to Be Onboard with this agenda, then the Profit "modus opernedi " must be followed! Sarah Palin is the epitome of an "empty suit" wanting disparately to be filled. She will do "anything" to be part of this agenda. ANYTHING! McCain, has made major shifts from his 2000 Maverick personna, to the point of nauseating capitulation. His belief system is as sick , as the man is physically. And you are willing to get "picky" over what Obama has been doing? He's a black man trying to reach the pinnacle of power, without capitulating to the corrupt philosophy that has Flooded our country....the government.

Yes! He has made a shift toward the middle! WHERE else does someone with an honorable Quest go, in a country Not willing to have a "president of color" make the decisions for the next 4 years. He realizes, I am sure, that the odds for at least several assassination attempts on his life is extremely high! The Neo agenda has no room for Change to their policies, to their "vision" of a totally committed nation to the Views of the fascist corporatists....where there is NEVER Enough, and "anything goes" as long as we [Corportists] win. "It's good for AMERICA". Is IT?

I love Dennis to death but he will never win the presidency. At least not any time soon, because he is too liberal. Especially since he's not even effectively campaigning anymore. I think if you were to ask him he'd tell you to vote Obama. He was at the convention supporting him after all. Obama is probably more left than he seems right now. He can't appear to be too left leaning or he will loose people, and honestly he is our best hope right now. He already has enough working against him, as gatekeeper said, to be risky about the way he appears to voters. HE can't get away with the things a white man could get away with. Just deal with it. It does bother me that Obama voted for this bill, but I trust in Obama and I have to believe that he will do what he can to get us out of this hole. Whereas I don't trust McCain or any of the third party candidate to do a thing.

I mean Nader was on CSPAN badmouthing Obama and saying "Oh well they nominated him because they wanted a black president, they are going to be highly disappointed." It's like "fuck you Nader" maybe if you came out and you were advocating about things more than during an election year people would take you seriously. He went on the tv and all he did was trash liberals and say both parties are republicans. This is why we don't like you Nader, do you not get it? Obama has been campaigning for 2 years. You just popped up in May or June and said you wanted to run for president again, and no one was surprised. Then you sit there and say that you are better than Obama because you are not in congress and therefore not a politician. You are as much a politician as anybody else running for pres. Don't act like you aren't. Sorry that turned into a rant about Nader. But he really pisses me off.

I really wanted Feingold to run..I am settling for an Obama who has manipulated his "centricity"..beginning with the left, to beat Hillary...by the way, my sister accompanied Hillary to the International Education trip in China..and my sister wouldn't vote for her..too corporate bought and sold. And Obama? Hmmmnn...his speech to AIPAC, his vote contradicting his "stand" on illegal surveillance, do not bode well..he has a hopeful international perspective..

Kucinich is his own man. I voted for Nader, as his life history deserves our votes. Sorry if that offends. He is right on the issues, but then I lived in and taught in Europe for almost 4 years..which is definately a broadening experience.

THere is a new book out, "The Tyranny of Oil", which goes a LONG way to identifying the SECRET I mentioned earlier..it definately WAS investment banks, who along with oil companies (they became oil companies themselves, purchasing-owning oil reserves, pipelines, etc, who manipulated oil futures..SPECULATING, except now they became oil companies..

the SECRET is still being held SECRET...it isn't being discussed ANYWHERE..there was a show on NPR
today, on international perspectives, that delineated that NOONE is doing TRANSPARENCY..which is all it will take to CURE this whole problem..

it is the lack of TRANSPARENCY that has CAUSED this all..as investment banks HIDE their assets-deals-loans-leverage...