Archive for the ‘Lehman Brothers’ Category

On August 17, 2007 – we posted the article below. In light of the events of the past few weeks, please take a few minutes and re-read this amazing piece of information.

Countrywide Financial

The are taking YOUR money and giving it to wealthy, unscrupulous, greedy people who have proven that they cannot manage money. They have made bad investments, taken HUGE salaries, purchased multi-million dollar homes – and are being bailed out by the very people they have cheated. What about that seems like a good idea to you?

What U.S. could learn from China

It’s been called ‘financial socialism’, ‘socialism for the rich’, and ‘lemon socialism’. But whatever it’s called, the Bush administration ‘bailout’ for financial institutions is the greatest transfer of wealth from ordinary working people to the rich in world history.

The proposed program to buy a mountain of non-performing housing loans and other worthless assets from banks and finance companies will cost an estimated $700 billion to $1 trillion U.S. dollars.

This money will come from U.S. taxpayers, most of whom are ordinary workers. It amounts to taking around $2500 U.S. dollars, or 17,000 RMB, from every U.S. citizen – and giving it to the banks and finance companies.

The cost for each family of four is around $10,000 or 68,000 RMB. This money could have been used for health care, for improved education, for scientific research, for social welfare program; for environmental protect; or a myriad of other socially useful purposes.

Alternatively, it could have been used to cut taxes for ordinary people, or even to help them buy their houses. Instead it is being donated to banks and financial companies whose managements and owners are among the richest in the world. These measures represent a massive redistribution of socially -produced wealth from working and poor people to the rich.

Learning from China

The argument of the Bush administration – echoed faithfully by the U.S. media – is that there is ‘no other way’. The claim is that the U.S. system, and the jobs of U.S. workers within it, can only be safeguarded by this transfer of wealth to the banks.

In fact, this argument is incorrect.

Obviously the government must act to protect banking and finance in an economic crisis of this magnitude. But if banks are bankrupt or insolvent, a fair solution would be to buy or nationalize the banks themselves, *not* their bad debts. Then the taxpayers would receive something of value – a stabilized and accountable banking system belonging to the people instead of worthless debts.

In China, such a solution would seem almost common sense. With its socialist market economy growing at about 10% per year, Chinas’ government banks play a key role in providing a stable foundation for the financing of Chinese economic development,

But the possibility of taking over or nationalizing U.S. banks has not even been mentioned by any mainstream U.S. political figures or mainstream media.

Instead, up to a trillion dollars or taxpayer money is being donated to institutions whose managements have shown themselves incompetent to manage their own funds.

Perhaps the economic interests of the powerful wall street companies, one of whose former CEO’s is U.S. Treasury Secretary Henry Paulson, has something to do with this ‘blind spot’.`

Over the years China has resisted intense pressure from Paulson and other U.S. officials to radically deregulate its financial markets. They have lectured China repeatedly on how deregulation of financial markets, and letting foreign financial capital operate freely in China – as in the U.S. – was in Chinas best interests.
“An open, competitive and liberalized financial market can effectively allocate scarcer resources in a manner that promotes stability and prosperity far better than government intervention,” Paulson said in Shanghai in March last year. “Time is of the essence.”

Now even the U.S. has been compelled to abandon this ‘open financial markets’ approach. With the sub-prime crisis now expanded into a full-blown crisis in the western financial sector, knowledgeable Chinese experts are thankful that China never accepted this laisez fair prescription for financial regulation.

“The U.S. crisis reflects regulatory problems in the U.S. and innovative financial products that ignored basic economic rules,” former Chinese central bank deputy governor Wu Xiaoling told a financial conference in Beijing recently.”

“The U.S. crisis today would be China’s tomorrow if financial products such as securitization are introduced without proper risk-control measures.”

Chinas’ cautious attitude, government banks, and regulatory framework have helped China to restrict its losses and write-downs from the credit-market crisis to less than 1 percent of the massive global total.

The feasibility of bank nationalizations, closer regulation, and banning certain types of transactions, such as derivatives, which carry excessive risk are all lessons which can be learned from China.

Banks, financial companies, and the wealthy should not be allowed to unload their bad debts onto ordinary workers and taxpayers. It’s sheer madness to allow them to transfer a trillion dollars from workers and taxpayers to themselves.

By Eric Sommer
China
Beijing

We have had many e-mails  about the post below. If you haven’t read it yet, now would be a good time to do so.

There is one section that the author highlights in his remarks, but we want to make sure it doesn’t get lost in the haystack.

THIS is what you need to be aware of –

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

Why isn’t this being shouted from every anchor desk from CBS to NBC to ABC to CNN to MSNBC? (We can guess why it’s not on Fox.) Where’s Lou Dobbs? Keith Olbermann? ANYBODY?!

Contact your Congressperson and Senators – tell them what you think of this plan.

This is a MUST READ for any voter in the United States. It is taken, in its entirety, with no additions or subtractions, from Mish’s Global Economic Trend Analysis, by Mike “Mish” Shedlock. Please read it, ladies and gentlemen, and read it NOW. This is what is being put forth in your name by your leaders to “save” you.

The New York Times has the Text of Draft Proposal for Bailout Plan. Given this is legislation, under fair use terms, here is the complete draft. My thoughts follow.

LEGISLATIVE PROPOSAL FOR TREASURY AUTHORITY

TO PURCHASE MORTGAGE-RELATED ASSETS

Section 1. Short Title.

This Act may be cited as ____________________.

Sec. 2. Purchases of Mortgage-Related Assets.

(a) Authority to Purchase.–The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States.

(b) Necessary Actions.–The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation:

(1) appointing such employees as may be required to carry out the authorities in this Act and defining their duties;

(2) entering into contracts, including contracts for services authorized by section 3109 of title 5, United States Code, without regard to any other provision of law regarding public contracts;

(3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them;

(4) establishing vehicles that are authorized, subject to supervision by the Secretary, to purchase mortgage-related assets and issue obligations; and

(5) issuing such regulations and other guidance as may be necessary or appropriate to define terms or carry out the authorities of this Act.

Sec. 3. Considerations.

In exercising the authorities granted in this Act, the Secretary shall take into consideration means for–

(1) providing stability or preventing disruption to the financial markets or banking system; and

(2) protecting the taxpayer.

Sec. 4. Reports to Congress.

Within three months of the first exercise of the authority granted in section 2(a), and semiannually thereafter, the Secretary shall report to the Committees on the Budget, Financial Services, and Ways and Means of the House of Representatives and the Committees on the Budget, Finance, and Banking, Housing, and Urban Affairs of the Senate with respect to the authorities exercised under this Act and the considerations required by section 3.

Sec. 5. Rights; Management; Sale of Mortgage-Related Assets.

(a) Exercise of Rights.–The Secretary may, at any time, exercise any rights received in connection with mortgage-related assets purchased under this Act.

(b) Management of Mortgage-Related Assets.–The Secretary shall have authority to manage mortgage-related assets purchased under this Act, including revenues and portfolio risks therefrom.

(c) Sale of Mortgage-Related Assets.–The Secretary may, at any time, upon terms and conditions and at prices determined by the Secretary, sell, or enter into securities loans, repurchase transactions or other financial transactions in regard to, any mortgage-related asset purchased under this Act.

(d) Application of Sunset to Mortgage-Related Assets.–The authority of the Secretary to hold any mortgage-related asset purchased under this Act before the termination date in section 9, or to purchase or fund the purchase of a mortgage-related asset under a commitment entered into before the termination date in section 9, is not subject to the provisions of section 9.

Sec. 6. Maximum Amount of Authorized Purchases.

The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time

Sec. 7. Funding.

For the purpose of the authorities granted in this Act, and for the costs of administering those authorities, the Secretary may use the proceeds of the sale of any securities issued under chapter 31 of title 31, United States Code, and the purposes for which securities may be issued under chapter 31 of title 31, United States Code, are extended to include actions authorized by this Act, including the payment of administrative expenses. Any funds expended for actions authorized by this Act, including the payment of administrative expenses, shall be deemed appropriated at the time of such expenditure.

Sec. 8. Review.

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

Sec. 9. Termination of Authority.

The authorities under this Act, with the exception of authorities granted in sections 2(b)(5), 5 and 7, shall terminate two years from the date of enactment of this Act.

Sec. 10. Increase in Statutory Limit on the Public Debt.

Subsection (b) of section 3101 of title 31, United States Code, is amended by striking out the dollar limitation contained in such subsection and inserting in lieu thereof $11,315,000,000,000.

Sec. 11. Credit Reform.

The costs of purchases of mortgage-related assets made under section 2(a) of this Act shall be determined as provided under the Federal Credit Reform Act of 1990, as applicable.

Sec. 12. Definitions.

For purposes of this section, the following definitions shall apply:

(1) Mortgage-Related Assets.–The term “mortgage-related assets” means residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before September 17, 2008.

(2) Secretary.–The term “Secretary” means the Secretary of the Treasury.

(3) United States.–The term “United States” means the States, territories, and possessions of the United States and the District of Columbia.

Weep For The Taxpayer

Notice that this bill raises the national debt. Notice that the bill is supposed to take into consideration “protecting the taxpayer”.

The reality is this bill does not and cannot protect the taxpayer. Rather this bill only promises to take the taxpayer into consideration. The Treasury will indeed take the taxpayer into consideration, then immediately discard any such ideas.

Inquiring minds are also noting “The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time.”

The idea behind the above statement is to allow for a continual dumping ground such that there will always be $700 billion in toxic garbage held under this program. As soon as any asset can be unloaded by the Treasury at cost, another toxic loan is eligible to be assumed on the books of the Treasury. This process can last for as long as two years.

Unconstitutional Provisions

Pay particular attention to section 8.

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

Essentially the law will state that whatever the Treasury does it is above the law. Such a provision is undoubtedly unconstitutional.

Weep For The Free Market

It’s time to Weep For The Free Market (or rather what little free market the US had left).

Weep For The Unites States of America

At taxpayer expense, Bernanke and Paulson are willing to bail out their banking buddies at enormous expense to the average taxpayer of this country. Bernanke and Paulson both should be fired. Instead Congressional sheep will baa yes to this bailout and Bush will baa yes when he signs it. It is a sickeningly sad that day for America that Congress will go along with this proposal that makes the US Taxpayer A Giant Dumpster For Illiquid Assets.

$700 billion will be wasted by this program and it is $700 billion the US does not have to waste. I ask that everyone vote against any congressman who votes for the passage of this bill.

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

In light of the nearly $1trillion ($1,000,000,000,000) financial markets bailout announced by your government this week, we thought you might like to see what Joe Gregory, former Lehman COO (what a sweet face…), did with some of his money – and wants someone else to do now. We wonder if he got as great a deal on his mortgage as he gave to some of your neighbors…..

By the way…it has been discovered that the home he is selling for $32.5million ($32,500,000) was purchased 18 months ago for $19million ($19,000,000) – that’s nearly a million dollars a month in appreciation!!!!! And this is his VACATION home. (Yeah…cheating people can be EXHAUSTING!)

Here’s the house – and some commentary…“Joe Gregory is Getting Out of the Hamptons.”