Marcy Kaptur for President!

P.S. I got married yesterday. ;)

All,

Seems Bernake and Paulson can't leave well enough alone. The problem with the idea of US taxpayers assuming the bad debt held by these various banks, brokerage/banks, and other entities for pennies on the dollar is that it still won't solve the problem. If the US sets up another SIPC-like entity, its purpose will be to assume the bad debt of once-mighty institutions. These bad debts they have are from the fact that the many bad mortgages they approved over the past 10 years are not getting paid, so they themselves can't make good on their promises to pay other creditors and holders of mortgage-backed bonds that they issued. To lose this bad debt, they will pay the new proposed gov't agency a few pennies on the dollar and the agency will then assume the bad debt. Those owed the money will now have to go to that agency to get payment, and since it will be a gov't agency, they can simply say "No." (Try suing the gov't to get money it owes you. Good luck.) So what is planned here is simply a huge fraud against not just the taxpayers who will be on the hook for literally TRILLIONS of dollars (not the few billions of the S&L bailout days, but *trillions*-- the total debt is $26 trillion. Consider the US GDP in 2006 was $16 trillion, and that puts it in perspective for you). Not that all the debt these entities have is bad, but a substantial amount of it is, with more to be added as on-the-edge mortgagees will think they can forego paying their mortgages and just stop trying to. So while the big institutions like Morgan Stanley and AIG, etc., will somehow magically survive and not be held accountable for their insanity of the past 15 years, everyone else who is owed money by them will in effect get the shaft-- who knows, they might be lucky to get 5 cents on each dollar owed them, and that will require taxpayer largesse (at gunpint of course) the likes hasn't been seen in decades, perhaps ever in the history of modern finance. And who are these other institutions? Smaller banks, other corporations, international institutions, foreign governments, basically, everyone else. It is these other entities that we the people are in closest contact with and rely on for our economic solvency.

So it is easy to see that they, the institutions in trouble AND the gov't, would be acting contrary to fiduciary trust and malfeasantly. In short, what they are suggesting is criminal. But since they make the law, well, guess it isn't. But they don't make the law-- Congress does. To create this new "agency", they need to get Congress to pass a law permitting it. If they are allowed to do this, we the taxpayer will be saddled with a degree of debt and a general economic burden that will be hard to come out from under in the lifetimes of anyone able to read this. In addition, America's financial reliability will be seriously downgraded all over the world, negatively affecting our ability to conduct business on a national and international corp-to-corp level for decades to come. In effect, our collective credit rating in the context of the world will be downgraded badly-- worse than what happened to AIG, I can assure you. We will be blowing the "full faith and credit" part of the deal that fiat money systems require.

A new agency is not the solution. What is? Let the chips fall. Because guess what, they are going to fall anyway. This new plan will postpone the day of reckoning maybe by a few months (coincidentally *after* the Nov general elections) and the debt will only get worse, as the instruments that embody the debt are all time-based.

Contact your Congressoid and let him or her know that if they vote for this kind of solution, you will vote for their opponent in the upcoming general election. But you must act fast-- they plan on voting next week as early as possible on hastily-crafted week-end marathon legislation that will create this new agency and stick it to us yet again. Do NOT let them do this to us! Go to http://www.house.gov/ and find your Congressoid's email, phone, fax, whatever information and let them hear you say "No! Not on my watch!" I suggest not just contacting their office in Washington DC but also their regional offices where they are sure to pay a bit more attention to you.

Oil, gold, and commodities-- still there, Matt? Yes. Still in? Yes. Still think there's strong upside? Yes. Holding? Yes. If I decide to bail I'll be the first to admit it. But I think we are far from bailing-mode. I mean, the US would have to get a whole lot of cash from someplace, and I am not sure sovereign wealth funds from Dubai and other such places buying up our historic sites are going to be enough to cover the losses.

Mainstream press doesn't want to say it, but some commentators are: the takeover by the US gov't of Fannie and Freddie is a major move toward nationalizing the banking system-- whether they want to do it or not. We complain about other countries doing this, but here we are, taking Step One. The Next Big Step will be to go from conservatorship to receivership. This is like going from being a 1-cigarette-a-day smoker to a 3-pack-a-day smoker in one fell swoop, with the same implications for one's health (financial, in this case). Will the gov't do this? I think so. Reason being, the stock values for Fannie and Freddie are already down to pennies on the dollar, and the housing foreclosure trend shows little sign of abating. The big holders have lost their shirts and they seem unlikely to be able to do anything about it; in fact, they appear o be totally M.I.A. But the real bag-holder is the US taxpayer, who will be "paying" on this little move for the next 100, maybe 200, years, along with paying for our various endless wars in the Middle East. [For those who may not know, receivership is the gov'ts way of saying to a corporation: "You are bankrupt. You don't want to admit it and file Chapter 11, fine, so we will force it on you, at gunpoint if necessary." Receivership is a corporation's eulogy.]

I don't need to go over all the same stuff the mainstream media is now discussing about how important Fannie and Freddie are, how much we depend on them for mortgage loans being available, etc. The factor working against these two giants of neo-feduciary quackery, and thus against all of us, is time. US mortgages have a lot more defaulting to do. The more they default, the worse the financial situation is for Fannie and Freddie (and us). The gov't, placing them in conservatorship, is saying "You have screwed the pooch, thus you won't make a move without clearing it with us first." Only I'd like to point out that they have chosen two veterans of the banking & finance industry to take over these institutions. Um, aren't these guys from the same cadre of brain-donors* who got us into this mess? Frankly I'd be more down with this idea if they placed Perkins from fifth floor Accounting over at the GSA in charge. I mean, after what these pack of mini-car-driving circus clowns have done, just how much worse can a gov't accounting bureaucrat be at running a pair of multi-trillion-dollar banking and finance institutions? Not much more.

I am going out on an even longer limb here and am going to discuss the Nov. election. My prediction is simple: Palin will bring in the other 5% of the popular vote that McCain needed to get the last three or four states in play. He will win the election. (As an aside, I think that Sarah Palin will probably be the first female president the US gets-- but not for another 4-8 years). What this means for US fiscal policy is that for the most part, things will continue as they are, only any controversial moves that have been delayed due to the timing around this upcoming election will be taken, including placing Fannie & Freddie in receivership. I also happen to think the US will finally attack Iranian nuclear facilities, probably some time in December. I am not sure what the immediate consequences of that will be, my crystal ball is fuzzy there. But the key point is that as far as mortgage messes and inflating the USD goes, it'll be more of the same. As for the recent EUR move downward vs. the USD, and the dropping of oil prices, again, you have the election timing to thank for it. The powers that be know that in order to keep a rich-people-friendly administration on Pennsylvania Ave., they need to check their greed just long enough for the sheeple to find the extra two feet of rope they need to hang themselves, and indeed, it'll happen. Oh and for the record, I will not say I liked the idea of Obama winning, either. He seems very long on ideals and very short on actual plans. And it is true to say that McCain and Palin have more experience running ships that Obama has-- in Palin's case, a lot more, relatively speaking. So I am no fan of either ticket, but for different reasons. (We have a serious leadership crisis in this country and indeed, I could say it is a world-wide leadership crisis. But that's a topic for another post.)

So that's the latest of my yarns spun onto a blog page. Hope you had fun!

---

* Would like to direct your attention to this post. Note the following:

"But they're not going to trust that money with just anyone. So they've replaced the companies' CEOs — the guys who led the firms into risky investments and failed to react swiftly during the first rumblings of the subprime-mortgage meltdown — with new ones: Herbert M. Allison Jr., the former head of retirement-plan manager TIAA-CREF and the finance adviser on John McCain's 2000 campaign, will take over at Fannie; and David M. Moffett, a former Carlyle Group executive and vice-chairman of U.S. Bancorp, will take the reins at Freddie."

A key McCain campaign insider is taking over Big Monster Bank #1. A former Carlyle man is taking over Monster Bank #2. Those unfamiliar with this bastion of Illuminati brotherhood can read about it here. And just who in our current political history have been members of this group? You guessed it! As if prevailing upon them to make the sacrifice of investing heavily in defense department suppliers and requiring their advice and input on state matters, GW has also burdened them with the back-breaking duty of assuming fiduciary and operational control over Freddie Mac.

Man, my heart goes out to them! It's rough up there at the top!