Putting Lipstick On A Pig

Bailout passes Senate, House foes soften
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Senate passes $700B financial bailout loaded with tax cuts, other goodies, to lure House votes
WASHINGTON (AP) -- After one spectacular failure, the $700 billion financial industry bailout found a second life Wednesday, winning lopsided passage in the Senate and gaining ground in the House, where Republicans opposition softened.

Senators loaded the economic rescue bill with tax breaks and other sweeteners before passing it by a wide margin, 74-25, a month before the presidential and congressional elections.

...the Senate added $110 billion in tax breaks for businesses and the middle class, plus a provision to raise, from $100,000 to $250,000, the cap on federal deposit insurance.

...the Securities and Exchange Commission to ease rules that force companies to devalue assets on their balance sheets to reflect the price they can get on the market.

As revised by the Senate, the package extends several tax breaks popular with businesses. It would keep the alternative minimum tax from hitting 20 million middle-income Americans and provide $8 billion in tax relief for those hit by natural disasters in the Midwest, Texas and Louisiana.
http://biz.yahoo.com/ap/081001/financial_meltdown.html

Despite claims of "bipartisanship", this bailout found passage through nothing more than good 'ol Pork Barrel Politics. Particularly the inclusion of alternative minimum tax protection. By including this piece of bacon, senators were forced to vote for the bailout or face opponents who would claim they voted to "raise taxes" by voting no for the bailout. How pathetic!

Is there even one sentence in this bailout package that even addresses the cause of this financial crisis? Is there even one sentence in this bill that suggest the Federal Reserve should be severely regulated or abolished for it's involvement in creating this mess? Is there on sentence in this bill that seeks an investigation of the US Treasury and Hank Paulson's conflicts of interest regarding this financial crisis? Is there even one sentence in this bailout that seeks an investigation of the Presidents Working Group on Financial Markets and their involvement in the manipulation of our "free" financial markets? No there isn't. The legislative body of this government is too chicken to go after the crooks on Wall Street, and in our government, that put this country into this financial quagmire and stole an entire nations financial future. The US Senate is a bunch of nut less cobs ignorant of the vast tentacles this financial monster poses and the financial destruction that is sure to follow whether the House of Representatives changes it's mind or not. $700 BILLION is not going to kill the monster, it won't even succeed in slowing it down. It will only make the inevitable complete destruction of our financial system that much more painful in the end.

DO NOT FOR A MINUTE believe the rhetoric out of the Senate this evening that this bailout is "for the American people". Far from it. That load of crap is being spewed in the hopes of selling the bailout to the public in a cocky effort to save their asses at the polls next month. When was the last time the legislative body of our government did a damn thing for the American people? This money is for the fat cats on Wall Street and Hank Paulson's portfolio of stock options at Goldman Sachs.

Paulson’s impressive interest conflicts
The actions of Treasury Secretary Paulson since the first outbreak of the Financial Tsunami in August of 2007 have been directed with one apparent guiding aim—to save the obscene gains of his Wall Street and banking cronies. In the process he has taken steps which suggest more than a mild possible conflict of interest. Paulson, who had been chairman of Goldman Sachs from the time of the 1999 Glass-Steagall repeal to his appointment in 2006 as Treasury head, had been one of the most involved Wall Street players in the new securitization revolution of Greenspan. Naming him to head the Government agency now responsible for cleaning up the mess left by Wall Street greed and stupidity was tantamount to putting the wolf in charge of guarding the hen house as some see it.

Paulson showed where his interests lay. He is by law is the chairman of something called the President's Working Group on Financial Markets, the Government’s financial crisis management group that also includes Fed Chairman Bernanke, the Securities & Exchange Commission head, and the head of the Commodity Futures Exchange Commission (CFTC). That is the reason Paulson, the ex-Wall Street Goldman Sachs banker, is always the person announcing new emergency decisions since last August.

Two weeks ago, for example, Paulson announced the Government would make an unprecedented $85 billion nationalization rescue of an insurance group, AIG. True AIG is the world’s largest insurer and has a huge global involvement in financial markets.

AIG’s former Chairman, Hank Greenberg—a close friend of Henry Kissinger, a former Director of the New York Fed, former Vice Chairman of the elite New York Council on Foreign Relations and of David Rockefeller’s select Trilateral Commission, Trustee Emeritus of Rockefeller University—was for more than forty years Chairman of AIG. His AIG career ended in March 2005 when AIG's board forced Greenberg to resign from his post as Chairman and CEO under the shadow of criticism and legal action for cooking the books, in a prosecution brought by Eliot Spitzer, then Attorney General of New York State.

In mid September, in between other dramatic failures including Lehman Bros., and the bailout of Fannie Mae and Freddie Mac, Paulson announced that the US Treasury, as agent for the United States Government, was to bailout the troubled AIG with a staggering $85 billion. The announcement came a day after Paulson announced the Government would let the 150-year old investment bank, Lehman Brothers, fail without Government aid. Why AIG and not Lehman?
What has since emerged are details of a meeting at the New York Federal Reserve bank chaired by Paulson, to discuss the risk of letting AIG fail. There was only one active Wall Street banker present at the meeting—Lloyd Blankfein, chairman of Paulson’s old firm, Goldman Sachs.

Blankfein later claimed he was present at the fateful meeting not to protect his firm’s interests but to ‘safeguard the entire financial system.’ His claim was put in doubt when it later emerged that Blankfein’s Goldman Sachs was AIG’s largest trading partner and stood to lose $20 billion in a bankruptcy of AIG. Were Goldman Sachs to go down with AIG, Secretary Paulson would have reportedly lost $700 million in Goldman Sachs stock options he had, an interesting fact.

That is a tiny glimpse into the man who crafted the largest bailout in US or world financial history some days ago, the failed TARP—Troubled Asset Relief Program—a proposed $700 billion financial stabilization scheme which, in Paulson’s original version would have allowed him or his Treasury successor to use $700 billion, with no oversight or accountability, to buy bad or worthless assets from financial institutions he deems worthy of help.
[From] Financial Tsunami: The End of the World as We Knew It
by F. William Engdahl
http://www.globalresearch.ca/index.php?context=va&aid=10392

The $55 trillion question
The financial crisis has put a spotlight on the obscure world of credit default swaps - which trade in a vast, unregulated market that most people haven't heard of and even fewer understand. Will this be the next disaster?

There is at least one key difference between casino gambling and CDS trading: Gambling has strict government regulation. The federal government has long shied away from any oversight of CDS. The CFTC floated the idea of taking an oversight role in the late '90s, only to find itself opposed by Federal Reserve chairman Alan Greenspan and others. Then, in 2000, Congress, with the support of Greenspan and Treasury Secretary Lawrence Summers, passed a bill prohibiting all federal and most state regulation of CDS and other derivatives. In a press release at the time, co-sponsor Senator Phil Gramm - most recently in the news when he stepped down as John McCain's campaign co-chair this summer after calling people who talk about a recession "whiners" - crowed that the new law "protects financial institutions from over-regulation ... and it guarantees that the United States will maintain its global dominance of financial markets." (The authors of the legislation were so bent on warding off regulation that they had the bill specify that it would "supersede and preempt the application of any state or local law that prohibits gaming ...") Not everyone was as sanguine as Gramm. In 2003 Warren Buffett famously called derivatives "financial weapons of mass destruction."
http://money.cnn.com/2008/09/29/magazines/fortune/varchaver_derivatives.fortune/index.htm?postversion=2008093005


In Financial Food Chains, Little Guys Can’t Win
The current negativity occurred because of wild, casino-type operations of big finance players, creating liabilities way beyond anything we could have reasonably expected. This looks a lot like theft on a spectacular scale — of our wallets, our peace of mind, our futures.

Second, according to what I hear from my betters in the world of finance, the most serious problems are not with the bundles of subprime mortgages themselves — a large but not lethal quantum as far as I can tell — but with derivatives contracts tied to subprime and other dicey debt. These contracts are superficially an attempt to “insure” against risks of default, hence the name “credit-default swaps.” In fact, they are an immense wager — which anyone with lots of money or borrowing ability can enter — about how mortgage-backed bonds, leveraged loan bonds, student loan bonds, credit card bonds and the like will perform.

These wagers entail amounts many times larger than the total of subprime loans. In fact, there are roughly $62 trillion in credit-default swap derivatives out there, compared with about $1 trillion of subprime mortgages. These derivatives are “weapons of financial mass destruction,” in the prophetic words of Warren E. Buffett. (Apparently believing that the worst is over, at least for one big investment bank, Mr. Buffett is now investing in Goldman Sachs.)

The swaps market has been unregulated. It has been just a lot of people making bets with one another. Some of them made incredibly fortunate payoff wagers against the mortgage bonds, using credit-default swaps as their wagering vehicle. I am not sure who the big winners are, but they are out there, and the gains were big enough to cripple the part of Wall Street on the losing side of the bets.

Almost no one (except Mr. Buffett) saw this coming, at least not on this scale. But let’s get back to the man of the hour. Why didn’t Mr. Paulson, the Treasury secretary, see it? He was once the head of Goldman Sachs, an immense player in the swaps world. Didn’t people at Treasury have a clue? If they didn’t, what was going on in their heads? If they did, why didn’t they do something about it a year ago, when saving the world would have been a lot cheaper?

If Mr. Paulson and Ben S. Bernanke, the chairman of the Federal Reserve, didn’t see this train coming, what else have they missed? What other freight train is barreling down the track at us?
http://www.nytimes.com/2008/09/28/business/28every.html?_r=1&em=&adxnnl=1&oref=slogin&adxnnlx=1222894170-tNjxjXkaH8PCXhliJFBy7Q


Treasuries Gain as Growth May Slow Regardless of Rescue Plan
Oct. 1 (Bloomberg) -- Treasuries rose on speculation the U.S. will enter a recession regardless of whether lawmakers approve a plan to rescue the financial system.

The rescue bill ``is not going to switch on a light, so to speak,'' said Francis Mustaro, who heads a group managing about $500 million at J&W Seligman & Co. in New York. ``I see more layoffs coming, and I see more business failures. You have to start thinking about Treasuries as a core holding going forward for the next year or so.''

U.S. economic growth will slow to 0.51 percent by the fourth quarter, according to the weighted average of forecasts in a Bloomberg survey. One-third of the 83 respondents, including Morgan Stanley and Goldman Sachs Group Inc., expect gross domestic product not to grow at all or to contract.

Ten-year rates may fall to 3 percent in coming months as expectations for economic growth and inflation deteriorate, Mustaro predicted. They haven't moved below 3.1 percent since 2003, when they touched an intraday low of 3.07 percent, the lowest since at least 1962.

``People are focusing on the fact that when you move beyond this vote, you get back to the data fundamentals, and we're staring at what could be a very steep recession,'' said Martin Mitchell, head government bond trader at the Baltimore unit of Stifel Nicolaus & Co.

Treasuries extended gains after the Institute for Supply Management reported its factory index dropped to 43.5, the lowest since October 2001, from 49.9 in August. A reading of 50 is the dividing line between expansion and contraction.

The U.S. probably lost 105,000 jobs in September, the most since 2003, a Bloomberg survey showed before the government reports the figure on Oct. 3. ADP Employer Services said private-sector U.S. jobs fell by 8,000 in September, and revised its August estimate of job losses upward by 4,000 to 37,000.

Traders have increased bets the Federal Reserve will lower interest rates at the end of the month, futures trading shows. Contracts on the Chicago Board of Trade show a 100 percent chance the Fed will reduce its 2 percent target for overnight bank loans by at least a quarter-percentage point on Oct. 29. The odds were 80 percent a week ago.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aq.8SDrxwWVs&refer=home

World begins to notice U.S. irreponsibility and hypocrisy
SAO PAULO, Brazil -- Astounded by the U.S. government's failure to resolve the financial crisis threatening the foundations of the global free market, fingers of blame are pointing at America from around the planet.

Latin American leaders say the U.S. must quickly fix the financial crisis it created before the rest of the world's hard-won economic gains are lost.

"The managers of big business took huge risks out of greed," said President Oscar Arias of Costa Rica, whose economy is highly dependent on U.S. trade. "What happens in the United States will affect the entire world and, above all, small countries like ours."

In Europe, where some blame a phenomenon of "casino capitalism" that has become deeply engrained from New York to London to Moscow, there is more of a sense of shared responsibility. But Europeans also blame the U.S. government for letting things get out of hand.
Amid harsh criticism is a growing consensus that stricter financial regulation is needed to prevent unfettered capitalism from destroying economies around the globe.

And leaders of developing nations that kept spending tight and opened their economies in response to American demands are warning of other consequences -- a loss of U.S. influence globally and the likelihood that the world's poor will suffer the most from greed by the biggest players in global finance.

"They spent the last three decades saying WE needed to do our chores. THEY didn't," a grim-faced Brazilian President Luiz Inacio Lula da Silva said Tuesday.
Even staunch U.S. allies like Colombian President Alvaro Uribe blasted the world's most powerful country for egging on uncontrolled financial speculation that he compared to a wild horse with no reins.

"The whole world has financed the United States, and I believe that they have a reciprocal debt with the planet," he said.
http://news.yahoo.com/s/ap/20080930/ap_on_re_la_am_ca/lt_meltdown_pointing_fingers_2

Investors start fresh gold rush
“Fiat money, in extremis, is accepted by nobody,” Alan Greenspan, the former chairman of the US Federal Reserve, told lawmakers in Washington almost a decade ago. “Gold is always accepted,” he added.

The “in extremis” scenario was for years only a possibility in the mind of die-hard gold bugs, but the financial crisis is leading regular investors – from the ultra-rich to middle-class savers – to believe that the environment in which Mr Greenspan said fiat money would be worthless is now around the corner.

The investors’ response is a rush into physical gold not seen since the second oil crisis in 1979, bankers say. The shift into gold coins and bars is so extreme that it is causing shortages at refineries and mints around the world.

“This is absolutely unprecedented,” says Mark O’Byrne of Gold Investment, a company that sells bullion to retail investors in Dublin and London.
http://www.ft.com/cms/s/0/9ce251de-8f37-11dd-946c-0000779fd18c.html?nclick_check=1

Remember, only gold and silver markets are NOT rigged
Dear Friend of GATA and Gold:

Even though U.S. Treasury Secretary Henry Paulson was quoted yesterday, as in the Bloomberg News story appended here, as saying that the U.S. government would use "'all the tools at our disposal' to protect the financial markets". ...

And even though the U.S. government and most Western central banks are now desperately and openly rigging the currency markets with their swap agreements and the stock markets with short sales regulations and government-brokered mergers. ...

And even though Western central banks have been openly selling, leasing, and swapping gold for years now, often at strategic moments. ...

Please remember that we have the solemn assurances of Kitco Senior Analyst Jon Nadler, Resource Investor's Tim Wood, CPM Group Managing Director Jeff Christian, market analyst Paul van Eeden, and a few other worthies that government is not -- repeat, NOT -- intervening in the gold and silver markets in ANY way. Gold and silver are merely incidental commodities -- NOT what they used to be, money, and not even potentially money -- and their prices are of no more interest to governments than the price of seaweed.

That is, when Secretary Paulson said he would protect the financial markets with "all the tools at our disposal," he meant "ALMOST all tools at our disposal," and would have said so if only Nadler, Wood, Christian, or van Eeden had been present to remind him.

And exactly what does Secretary Paulson mean to protect the financial markets against?

Why, THEMSELVES, of course -- the threat that an actual market price, rather than a government-approved price, might develop somewhere in the fantastic, overarching illusion that crony capitalism and central banking have made of what used to be markets. These days, if you want a market, you're stuck with Ebay -- at least until that too is nationalized.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
http://gata.org/node/6701


Bob Chapman, The International Forecaster
"De plan boss, de plan!" So starts the next episode of "Fantasy Island" in the latest government-sponsored remake of the classic TV series. But instead of Ricardo Montalban and Hervé <http://en.wikipedia.org/wiki/Herv%C3%A9_Villechaize> Villechaize playing the roles of Mr. Roarke and Tattoo, respectively, we have Hanky Panky Paulson and Buck-Busting Ben Bernanke in the lead roles. The name of the episode, appropriately enough, is "The Paulson Plan." The capsule for the episode reads as follows: Hanky Panky and Buck-Busting Ben decide to renovate the Goldilocks Matrix, giving it a major overhaul, and attempt to redefine the word: "fantasy." Indeed, The Paulson Plan, so-called, may be the most vivid product of a fertile imagination since "Alice in Wonderland" and "The Wizard of Oz," which quite frankly are more believable than the reasons given for the implementation of the "The Paulson Plan."

Oh, we must help the poor sheople by easing the credit-crunch so they can get more loans and get deeper into hock (like more loans is what they somehow need), and so their savings accounts and pensions plans can be saved as we hyperinflate the dollar. Oh, we are sooooo concerned about the welfare of the poor, helpless sheople! We have to save them from destroying themselves, because only we, the masters of the universe, know what is best for them. (Judy, get the barf-bag - quick!) You just don't understand. The corrupt, graft-laden, insider-trading-saturated, fraud-based, Ponzi-scheming system that we have used to rip you off and steal you blind for over a century must obviously be saved so we can keep screwing you ad infinitum. After all, isn't that what sheople are for, to be fleeced and sheered, fattened and slaughtered? You know your place. You are all bleating, ignorant sheople, so come lick our boots - and give us the damned money!!! Oh, there, there, now. We're sorry to take such an imperious tone with you. There, there, just give in to our demands like good little sheople and, in time, everything will turn out juuuuust fine --- NOT!
http://news.goldseek.com/InternationalForecaster/1222883895.php