Thursday, September 25, 2008

Wall Street's Bailout:Charity or Payoff?

Why are the same Wall Street Robber Barons who rail against national health care, unions, minimum wage, and helping the average the home owner is now trying to get on the taxpayer financed 700 billion dollar gravy train? For the same reason that got them in trouble in the first place---greed. What happened to the Capitalist mantras of “financial survival of the fittest” or “pulling yourself up by the bootstraps”? It’s funny how those same individuals who call any government program to help the poor and working class “socialist” now have their greasy hands out for a piece of the largest bailout in history. I guess when it’s you and me, it’s “socialism” and when it’s them, it’s a matter of national imperative. To listen to Bush and Company, you would think this was a humanitarian rescue operation to some backwater country.

For anyone who wants to make this out as a Republican made crisis, let’s get this clear---it took both parties to blow this one. The Democrats and Republicans are both to blame for encouraging the unethical level of greed and unregulated environment which dominates the culture of Wall Street…and Washington. Let’s not forget either that these same soulless creatures who make their living off other people’s labor are the same people who underwrite both the Republican and Democratic parties. It doesn’t matter one iota to them which party wins since they own both. So don’t worry about whether or not there will be a bailout; there will most certainly be one. The real question is just what this corporate handout…err…I mean bailout, is going the American Public.

According to Bloggingstocks (http://www.bloggingstocks.com), there are 305 million Americans. At $700 billion dollars, that breaks out to roughly $2,295.00 per person. If you look just at working Americans (excluding retirees, kids, and I suppose illegal aliens), the cost jumps up to $4,635.00 per worker. Taking it from another angle, if the US Gross Domestic Product (GDP) is 13.8 trillion dollars, the bailout will equal approximately one year’s domestic product. The best example I think is that, according to the article, at 5% a year, it will equivalent to working 13 days for free (well, not exactly free, since your money will be going to pay some Wall Street mogul’s salary). Now, I don’t know about you, but that really ticks me off.

Should government, which is ultimately you and I, be involved in rescuing companies because their owners got to greedy; to sloppy; and made bad decisions? When you mess up your checkbook, does your banker say “awl shucks, forget about it. We’ll get the other depositors to make up the difference?” I don’t know about you, but my mother taught me personal responsibility and dealing with my own mistakes. However, rewarding irresponsibility is what’s happening here, except on a really big scale. And the kicker is, we’re going to get to make up their multi-million salaries to boot. So when this bailout is done, do you think Wall Street is going to thank the American People for the $700 billion “gift” by offering us some really good interest rates or great stock tips? Don’t hold your breath. This is corporate fascism pure and simple, where government is there to serve the needs and interests of Big Money while you and I just hope we can make our next mortgage payment.

By the way, does anyone have any idea just how many people can be feed with $700 billion dollars? How much healthcare for the poor and eldery could this buy? How many Headstart programs or other primary education resources could this buy? How much medical research could be accomplished with the same amount of money? How many roads could be paved? How many police officers, firemen, and EMS workers could this employ? Just asking.


History is filled with “what ifs” and “what were you thinking?” moments. Perhaps we think of presidents as in some way more intelligent than the average person. The reality is that most aren’t. We tend to put them on pedestals and then proceed to throw rocks at them. Presidents and the Presidency are in many ways shaped by the occupant’s personalities, the times they live in, as well as by events outside their control. Tom Craughwell has written a terrific book that looks at some of the biggest goofs, blunders, and horrific mistakes made by the men who’ve occupied the Oval Office. Below is an excerpt from the book. If you have an interest in history, politics, or human nature, I urge to you read this book.

"Failure of the Presidents" by Tom Craughwell

The Bay of Pigs Invasion
John F. Kennedy

A TOTAL FAILURE. Many of the men of Brigade 2506 believed fervently that they were the first wave of Cuban freedom fighters who would liberate their homeland from Castro. They were convinced as they storrned ashore that they would be supported overhead by some of the finest fighter pilots of the U.S. Air Force, and they thought that as they advanced into Cuba, the U.S. Marines would be right behind them. Whether the insurgents had talked themselves into this conviction or the trainers from the United States had made such a promise is still a subject of debate.

The air support promised by the CIA consisted of sixteen B-26 twin-engine light attack bombers. From an airstrip in Nicaragua to the Bay of Pigs was a journey of 1,000 miles, round-trip, which left a B-26 with enough fuel to provide less than forty minutes of air cover for the Brigade. Anything longer than forty minutes and the pilots risked running out of gas somewhere over the Caribbean.

On April 14, 1961, just three days from the invasion, Kennedy called CIA Operations Chief Bissell to ask how many planes he planned to use in the operation. Bissell told the president the CIA planned to use all sixteen of their B-26s. "Well I don't want it on that scale," Kennedy replied. "I want it minimal." So Bissell cut the number of planes for the invasion to eight. The next day, those eight planes attacked the three airfields of the Cuban air force, knocking out some of the aircraft, but not enough to cripple the fleet.

On the morning of April 17, as the Cuban militia pinned down the men of Brigade 2506, the Cuban planes that had survived the air strikes attacked the exiles from the air. Meanwhile, the B-26s, their fuel low and their forty minutes up, veered away from the beach for the flight home. The Brigade's commander, San Román, radioed his CIA handlers for help. "We are under attack by two Sea Fury aircraft and heavy artillery," he reported. "Do not see any friendly air cover as you promised. Need jet support immediately." When San Roman's request was denied, he replied, "You, sir, are a son of a bitch."

With the sea at their backs, no means of retreat, and no chance of advancing into the interior of Cuba, the Brigade was in a desperate position. Back in Washington, the CIA and the Kennedy administration concluded that the invasion would fail. In a conversation with his brother, Robert Kennedy, the president said he wished he had permitted the use of U.S. ships to back up the Cuban exiles. "I'd rather be an aggressor," he said, "than a bum."

On April 18, Kennedy authorized six fighter jets from the aircraft carrier Essex to provide one hour of air cover for the CIAs attacking B-26s over the beach at the Bay of Pigs. But the jets from the Essex and the B-26s missed their rendezvous because the Pentagon forgot to factor in the one-hour difference in time zones between the B-26s' base in Nicaragua and the beach in Cuba.

That same day, Kennedy's national security advisor, McGeorge Bundy, gave the president a status report on the invasion. "The Cuban armed forces are stronger, the popular response [is] weaker, and our tactical position is feebler than we had hoped," Bundy said. That was perhaps the kindest possible description of the Bay of Pigs operation.

As a humanitarian concession, the president permitted U.S. destroyers to approach the Cuban coast to pick up survivors. The ships were authorized to get within two miles of shore after dark, but no closer than five miles during daylight hours. The directive meant the rescue mission was beyond the reach of almost every man in Brigade 2506. A handful who had managed to swim to one or another of the bay's outlying cays were picked up, but the rest lay dead on the beach or were captured by Castro's forces.

At 2 p.m. on April 19, after two days of being pounded by militia, tanks, and the Cuban air force, Commander San Román and Brigade 2506 surrendered. "Everything is lost," Allen Dulles told former vice president Richard Nixon. "The Cuban invasion is a total failure."

Sixty-eight Cuban exiles were killed in the Bay of Pigs debacle; 1,209 were captured, and nine of them died of asphyxiation in a windowless sealed truck that took them from the beach to prison in Havana. After twenty days of interrogation, the prisoners were given show trials and sentenced to life in prison.

Soon after the conviction of the men of Brigade 2506, Castro made a public offer to exchange the prisoners for farm machinery. Kennedy leapt at the proposal. Immediately he formed the Tractors for Freedom Committee, chaired by former first lady Eleanor Roosevelt, with the purpose of collecting donations to purchase farm equipment for Cuba. But the group was not able to meet Castro's exorbitant demand of $30 million worth of capital relief, and it disbanded. The tractor deal fell through.

Negotiations between the two governments went on sporadically over the next twenty months. Finally, on December 24,1962, Castro announced that he was releasing the Brigade 2506 prisoners in exchange for $53 million in medicine and food from the United States. He also promised, "as a Christmas bonus," to permit 1,000 of the prisoners' relatives to emigrate to the United States.

The animosity between Cuba and the United States intensified after the Bay of Pigs debacle. Cuba allied itself with the Soviet Union, while America continued its policy of isolating Cuba economically and diplomatically. Soviet Premier Nikita Khrushchev viewed America's failure at the Bay of Pigs as a sign of Kennedy's weakness and inexperience, an assessment he felt was confmned after meeting Kennedy at the Vienna Summit of April 1962, where it appeared to some that Kennedy was sandbagged by Khrushchev's threat to cut off West Berlin from the Western powers. Within six months, Khrushchev was placing nuclear missiles in Cuba, an action that brought the world as close as it has ever come to all-out nuclear war.

In the face of the missile crisis, Kennedy held firm. The Soviets backed down, removing the nuclear weapons from Cuba, but the tension between Cuba and the United States has dragged on for more than forty years. During that time, political observers and historians have argued that the failed invasion actually strengthened Castro's grip on Cuba. Certainly Che Guevara thought so. In August 1961, at a meeting of the Organization of American States in Uruguay, he sent a note to Kennedy saying, "Thanks for Playa Giron [another name for the site of the invasion]. Before the invasion, the revolution was weak. Now it is stronger than ever."

Author Bio
Thomas J. Craughwell is the author of several books, most recently How the Barbarian Invasions Shaped the Modern World (Fair Winds Press, 2008) and Stealing Lincoln's Body (Harvard University Press, 2007). He has written articles on history, religion, politics, and popular culture for the Wall Street Journal, American Spectator, and U.S. News & World Report. He lives in Bethel, Connecticut.

Journalist, lecturer, and historian M. William Phelps is the author of eleven books, including his most recent, Nathan Hale: The Life and Death of America’s First Spy (Thomas Dunne Books, 2008). He lives in Vernon, Connecticut.


A friend of mine sent me this. It’s great! I just wish there was really someone out there who had the chutzpa to run on a platform like this:

WRITE-IN CANDIDATE

I have decided to run for President. After careful consideration, I decided that this was going to be my platform:

(1) Press 1 for English is immediately banned. English is the official
language, speak it or wait at the border until you can.

(2) We will immediately go into a two year isolationist posture to straighten out the country's attitude. NO imports, no exports. We will use the 'Walmart' policy 'If we ain't got it, you don't need it.'

(3) When imports are allowed, there will be a 100% import tax on it.

(4) All retired military personnel will be required to man one of our many observation towers on the southern border. (six month tour) They will be under strict orders not to fire on SOUTHBOUND aliens.

(5) Social security will immediately return to its original state. If you didn't put nuttin in, you ain't gettin nuttin out. The president nor any other politician will not be able to touch it.

(6) Welfare - Checks will be handed out on Fridays at the end of the 40 hour school week and the successful completion of urinalysis and a passing grade.

(7) Professional Athletes/Steroids - The FIRST time you check positive, you are banned for life. By the way, the FIRST time you attack your coach or fellow player, or get busted you’re history. I don’t care about your childhood. You are responsible for your actions.

(8) On second thought, one export will be allowed, Wheat, The world needs to eat. A bushel of wheat will be the exact price of a barrel of oil.

(9) All foreign aid using American taxpayer money will immediately cease, and the saved money will pay off the national debt and ultimately lower taxes. When disasters occur around the world, we'll ask the American people if they want to donate to a disaster fund, and each citizen can make the decision whether it's a worthy cause.

(10) The Pledge of Allegiance will be said every day at school and every day
in Congress.

(11) The National Anthem will be played at all appropriate ceremonies,
sporting events, outings, etc.

Sorry if I stepped on anyone's toes but a vote for me will get you better than what you have, and better than what you're gonna get. Thanks for listening, and remember to write in my name on the ballot in November. God bless America!

Anyone want to be my VP???

Poll Results

I asked what you thought about Sarah Palin's qualifications to be Vice President. Interestingly, we have 40% of you who said they were excellent while another 40% of you said poor. 20% thought her qualifactions were only fair. Actually, the results seem pretty reflective if the election itself--a near draw.

7 comments:

Lenny said...

Paul,

It burns my ass that the word "bailout" is used and that politicians and hedge funds talk about this falling on the taxpayers for the benefit of Wall Street. In fact, there is a better chance that "this investment" in the future of the taxpayer or, more accurately, Main Street, will turn a profit. Warren Buffet would like the deal but does not have the cash or the ability to borrow at the rates enjoyed by the treasury. This is being done for Main Street since its prosperity depends on the prosperity of the financial system. Those in Congress who are mouthing off are either running for office (and accordingly not giving a s--- about Main Street) or are terminally stupid, or both. WHATEVER YOU WANT TO CALL IT, IF THERE IS NO PLAN , WE ARE LOOKING AT A COMPLETE BREAKDOWN OF THE FINANCIAL COMPLEX; THEN A COMPLETE BREAKDOWN OF THE ECONOMY; AND THEN THE WORST DEPRESSION IMAGINABLE. WE ARE TALKING ABOUT BREADLINES AND POSSIBLE BLOODY RIOTS. WE ARE TALKING ABOUT TERRORIST ATTACKS ON OUR SOIL. WE ARE TALKING ABOUT A MOSLEM TAKEOVER OF OUR COUNTRY A LOT SOONER THAN IS CURRENTLY PLANNED BY ISLAM.

The "Average Joe" has no clue and listens to these idiot politicians (I call them traitors). They, in turn, contact their representatives or Senators and it steamrolls.

I pray good conscience prevails over political aspirations and terminal stupidity. In that way we will not become a third rate economic power owned by others, if we even survive.

Lenny

Linda said...

Hell, they won't let us invest in stocks of our choice with our Social Security monies, maybe even good stocks, if we are smart and lucky, but now they are forcing us, without our approval or even opinion to invest in failing stocks? What the hell is wrong with this picture?

Another Opinion said...

Now now Linda, be a good little worker. Don't think. Don't ask questions (whatever you do, don't ask questions). Maybe you can watch some mindless entertainment to numb the senses. How about getting a little deeper in debt by doing some impulse shopping? That should get your mind off things! And come Monday, you'll feel nice and refresh while serving the Machine.

highblue said...

Paul;

Your assessment of the situation is spot on, and this situation has been building towards a crescendo for many years.

Many people might find it hard to imagine in light of the financial fiasco we're now facing -- since our economy has never faced any threat in terms of trillions -- but we are still in an early stage of the process of bankrupting the financial system; Fannie and Freddie are not final notes in the crescendo. As difficult as it is to visualize any macro-economic picture (most of us don't think in terms of trillions), a much, much heftier systemic risk is on our horizon... on the entire world's horizon. And this is a systemic risk that geometrically outweighs all of the inherent risk in both Fannie and Freddie.

The notional value of the world's outstanding derivatives is now over $1.2 quadrillion. As you know, a quadrillion is 1000 times a trillion, so compared to all of the mortgage risk within Fannie and Freddie, this is a risk more than 1000 times greater than both of them combined. Worse yet, derivatives are an entirely and wholly unregulated market.

You may recall Warren Buffett's definition of derivatives. He called them "weapons of financial mass destruction." Mr. Buffett is absolutely correct.

Times seem tough in our economic system right now, and I completely understand why President Bush and many others might want to apply a bandage in the form of a bailout (though I don't agree with them), but it can do nothing to heal the festering wounds of derivatives in our financial system. A bailout may temporarily stop the bleeding for a year or two, but the wound will remain, and a temporary patch without treatment will only bring more suffering later as the wound festers and releases poison into the system.

In short, the worst is yet to come.

You may know that derivatives are carefully crafted financial instruments based on mathematical formulas. They're a form of hedging which can leverage risk against anything from unexpected weather patterns to fluctuations in the oil price, or from insurance risk to mortgage risk, and many larger companies tend to leverage the risk exposure within derivatives by taking on even more exotic derivatives... that's how we've come to the point of $1.2 quadrillion worldwide.

Derivatives are living contracts within an intricate worldwide weave of contracts that no one -- not a single person or any entity on earth -- has the intellectual capacity to comprehend, and the jumbled weave of those contracts has proven extremely sensitive to economic rogue waves like the current issues affecting Fannie and Freddie. The concept of the "butterfly effect" is entirely appropos.

As an example, when Long Term Capital Management was bailed out in 1998 to the tune of $500+ million, it became a textbook case in the influence that derivatives exert on our economic system. And it was bailed out by major banks and investment houses because the experts knew its failure would pose a systemic risk both to our economy and the world economy.

LTCM went bad essentially because of derivatives exposure, and there are four pertinent facts about it that relate to our current crisis: first, the cost of bailing out LTCM was about $500 million, but the cost of bailing out Fannie and Freddie is at least $700 billion, over 1000 times the cost of the LTCM bailout; second, LTCM had two Nobel Prize winning economists on its board of directors, one of whom created a mathematical model which was used to define overall risk exposure in the derivatives market; third, LTCM failed two years after the bailout, despite having two Nobel Prize economists on its board; and finally, the derivatives market today is at least 100 times the size of that market in 1998.

I'd offer a 100% guarantee that our current derivatives market now contains a minimum of $10 trillion in risk-related contracts somehow connected to Fannie and Freddie. All their mortgage contracts are hedged in the derivatives market, and those hedges will be offset by counterparties with added risk-related contracts intricately tied to Fannie and Freddie's original mortgage contracts. That's very likely the most pressing reason that avid proponents of a bailout in the Treasury Department or on Capitol Hill are feverishly trying to immediately infuse additional funds into those organizations -- to prevent or at least forestall a derivatives blow-up that might (would) cascade throughout world financial sytems.

They know there is indeed a true systemic risk in the derivatives market associated with Fannie and Freddie -- they're well aware of it -- but they're terrifed to tell the American people that a bandage of new funds is nothing more than a temporary fix. My guess is they don't want to be the bearers of bad news, and they hope that a temporary fix may allow them time to escape from public scrutiny before the bad news comes and the public begins hunting for people to blame (Treasury Secretary Paulson is conveniently retiring in four months, by the way).

The bad paper now held by Fannie and Freddie won't disappear, and it won't be magically transformed to good paper by throwing money at it. So my estimated $10 trillion in risk-related derivatives on Fannie and Freddie should begin to deteriorate in value over a fairly short period of time until the $10 trillion notional value becomes a toxic waste dump too.

What could happen if $10 trillion in contract value goes out the worldwide window? Who'll pony up $10 trillion to bail all of those companies out of their losses?

Since Long Term Capital Management posed a systemic risk with roughly $500 billion in derivatives, how much of a systemic risk can Fannie and Freddie pose with $10 trillion in derivatives connected to their business and assets? Truly a very somber question.

It's coming. A bailout is pointless.

By all rights, Americans should be allowed to keep their hard-earned money rather than wasting it to bail out overconfident gamblers in the credit markets... money can't help them now anyway.

"Throwing good money after bad" is a phrase that we should all repeat when we're asked for an opinion on this bailout.

Another Opinion said...

As Lenin once said, "we'll get them to sell us the rope we'll use to hang them with" when discussing Capitalism. These days, I'm less worried about the Communists and Socialists and more concerned about Wall Steet and Beltway crowd.
Either one would pimp out their own mother in a heartbeat.

Very good comment highblue. Very well said.

highblue said...

Thank you, Paul. And I'd like to make a suggestion here, if I may.

That is, anyone who believes, as many of us do, that this bailout is a bad idea (for any reason), and will likely produce no good, or lasting, or appreciable benefit to American taxpayers should take time to write a letter or send an email to their Senators and their Congressmen.

I'm sure you're aware that enough letters, emails, and phone calls on any important issue can get the attention of even the most hardened politician. In some cases, an influx of negative opinion from their constituents is exactly the excuse a politician might need to risk a vote against the party line.

I've written our Senators and Congressmen a simple message; "We will not vote for you again if you vote for a bailout."

A moderate volume of emails with the subject line "We Will Not Vote For You" would get their attention and offer them a potential "out" if party leaders try to force the decision upon them.

Defeat of this bailout may be up to the grassroots of our country -- some politicians supporting it seem to be falling back into CYA mode, which means they need some strong motivation from the people who put them there... the voters.

The fear of lost votes in the next election can be a strong motivator on the Hill.

Another Opinion said...

Excellent point highblue. For now at least, we still have the ultimate power---the vote. Lobbyists and the power brokers would like for us to think they call the shots, but it us--the People--who have the final say.