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September 21, 2008


I think McC is on the verge of a default due to his overuse of MBS's (morality backed secrities) and CDS's (credibility default swaps)

Just as bad is McCain saying those two men took tax payer's money in salary when both organizations were private companies. Of course Palin has shown the same ignorance.

Probably the only (well, there might be one or two other circumstances) time McCain has told the truth in the past year was when he said he didn't know as much about the economy has he should.

McCain's new commercials. (30 second actual commercial precedes.)

CDS's (credibility default swaps)

Who is the counterparty? The media? The American people?

My friends, I think we should call the McCain campaign's communications what they really are: sub-prime unreal estatements.

None of it matters.

As Steve Benen points out, now a McCain advisor is counseling that Obama's uppityness should be stressed in the campaign (echoing a southern piece of filth Republican Congressman from a few weeks ago).

The Republican Party is going full bore for the stupid, racist, white trash filth vote.

That's good for 49% in America. Throw in the 2% who will vote for stupid, racist white trash who promise to lower their taxes and you have a working majority.

Burn it down with real fire.

This looks like as close as we are going to get to a thread on the subject of the proposed Paulson plan, so here's my rant on the subject.

The proposal currently under discussion is based on a big lie. A really big lie. The lie is that what is happening now is at least partially a crisis of liquidity. If this were really true, the firms being bailed out could be supported via bridge loans of one sort or another (e.g. what was extended to AIG) with the intent of using them to get these firms through a temporary period of illiquidity.

This liquidity lie is based on taking advantage of popular ignorance, greed and/or fear regarding the sustainability of bubble level housing prices. Under the proposal in question Mortgage backed securities (MBS) will be sold to the US Govt under the pretense that perhaps they may be worth something after all, once the dust clears and prices recover from a temporary shock.

The idea is that we don't really know what the MBS are worth because of the currently frozen state of the credit markets. That is horse manure pure and simple - even cursory research regarding historical trends in price/rent and price/income ratios shows that even current off-peak pricing is unsustainable and housing prices still have at least 20-30% further to fall, from where they are now.

This means that that these securities are not as difficult to value as you might think - the difficulty in pricing them is due in part to their current holders engaging in mark to model pricing. It isn't that they can't sell this debt, rather they don't want to, because doing so would expose the real crisis.

While we do have a liquidity trap right now, that is only a symptom. The real crisis is a solvency crisis. The investment banks and hedge funds used too much leverage and got caught doing it. Mr Margin is calling on line 1. They are now, more or less all of them, insolvent.

As in broke.

To a lesser extent this problem is shared by some of the less careful of the major depository banks, and it is also in all likelihood shared by many smaller regional banks which are heavily exposed to bad loans within the CRE (commerical real estate) sector which historically lags behind the market for private homes but is showing many of the same trends as the latter.

The solution to an insolvency crisis is painful but conceptually very simple: recapitalize the insolvent institutions. This requires two things - (1) transparency in accounting, and (2) an influx of new capital from outside which dilutes existing shareholder equity. That is how it works - you open your books to outsiders who have money to invest in your firm, and after they've gotten a good look at how bad the situation is, they buy you out, either partially or wholly.

Period. End of Story.

In the private sector there is no other way of doing this, for the very good reason that outside investors would have to be insane to put their money into an insolvent firm under any other conditions.

That is not what we the taxpayers, are being asked to do.

What we are being asked to do is to make an outright gift to the insolvent firms on Wall St., without getting much of anything in return. That is because the proposed transfer of mortgage backed debt instruments in exchange for funds is being conducted without transparency (the decisions as to what is transferred and what is not are at the combined discretion of the firms involved and Paulson & co. at Treas with no requirement for public approval or disclosure), and without dilution of shareholder equity.

Essentially we get all of their most toxic securities and no control over these firms (either via new regulation or via equity stake) in return.

No private investor or sovereign wealth fund would accept this deal. Why should we?

Not because this is the only way to unfreeze the credit markets.

Rather, because it is the only way to unfreeze the credit markets while imposing no pain or loss of control over the very people who benefitted most from the bubble years and who are most responsible for making the bad decisions which created this situation.

We are being asked to reward failure, with one of the largest single transfers of wealth in our history from the middle class upwards.

You are going to hear over and over again in the media over the next couple of days that anyone who questions this, who objects to it or trys to impose conditions or restraints on this act of robbery, is responsible for destroying the credit market. The logic behind this flimflam is the same as in the old joke about the highwayman who told his victim that it would be illegal not to hand over the money:

"Why?" asked the victicm.

"Because if you do not", said the highwayman, "then I shall be forced to shoot you, and that will make you a murderer".

That Benen point is here. To the rest of what Thullen says, preach, brother, preach.

The old definition of chutzpah, of the man who kills his parents and then asks for mercy because he's an orphan, seems to be a point McCain passed a long time ago. There also seems to be a glimmer of positive meaning with chutzpah, a hint of audacity. To apply that word to McCain's 'campaign' is to make it represent something completely borne of deception and fraud.

SNL had a good skit on McCain last night.

"SNL had a good skit on McCain last night."

It's remarkably like the one I pointed out and linked to at 11:44 a.m. above, as it happens.

No, wait, I'm wrong, I apologize! Different sketchs!

Thanks, Cleek!

No, wait, it is the same sketch! I accidentally clicked on your blog, and the Wolves sketch!

No, wait, it is the same sketch! I accidentally clicked on your blog, and the Wolves sketch!

No, wait, it is the same sketch!

the link in your 11:44 doesn't go anywhere. there is no HREF in the A tag.

"the link in your 11:44 doesn't go anywhere."

Oh, I hadn't noticed it was broken. Here it is again.

@TLTIABQ: Thank you, thank you, thank you.

We have about five days to make the case to Congress and in the media that this bill is a ploy on a par with all of the the regime's power grabs so far.

All of them: the abuses after September 11 (Patriot Act, Homeland Security gobbling up multiple agencies and dispensing with any union representation, massive domestic spying), the Iraq invasion and occupation, the thousand-plus signing statements, and the bills to retroactively legalize the past crimes and power grabs (Military Commissions Act 2006, Protect America Act 2007, FISA Amendments 2008).

All of them -- all of them were political ploys to amass power, that did nothing that needed to be done. And Democrats in Congress made it possible down the line, so why I allow myself to hope this will be any different is unclear.

Why you should oppose the blank check.

Congressional contact info can be found here.

It's up to us. Don't wait for the press or the candidates to catch on. It'll be too late.

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