Fannie and Freddie’s Turn at that Taxpayer’s Trough

You know how, when I go off grid on vacation or something, corrupt Bush officials tend to resign? Well, it looks like CalculatedRisk has that same power, only with our economy. While CR was hiking in the Sierra (man am I jealous), Fannie and Freddie were diving off a cliff on Thursday and Friday. And now, just as happened with Bear Stearns, Hank Paulson seems to be crafting a taxpayer backed bailout of the mortgage giants.

US TREASURY secretary Hank Paulson is working on plans to inject up to $15 billion (£7.5 billion) of capital into Fannie Mae and Freddie Mac to stem the crisis at America’s biggest mortgage firms.

The two companies lost almost half their market value last week as rumours of a government bail-out swept the stock markets, hammering share prices around the world.

Together, the two stockholder-owned, government-sponsored companies own or guarantee almost half of America’s $12 trillion home-loan market and are vital to the functioning of the housing market.

The capital-injection plan is said to be high on a list of options being considered by regulators as a means of restoring confidence in the lenders. The move would protect the American housing market, but punish shareholders in both companies.

CR, now back from the Sierra, has more

Golly. $20 billion for Bear Stearns. $15 billion for Fannie and Freddie. Meanwhile we’re still struggling to pass a housing bill that will help actual, human taxpayer families stay out of foreclosure. I guess there’s just not the money for bailing out real people, huh?

  1. bmaz says:

    No. To these financial kings on high, citizens, people, only exist via giant corporations and financial entities and funds. The “people” can only be served by assisting the corporations and financial entities and funds. If they die, we all die. It is about them, not us.

    I will say this though, I have a bit more sympathy for Fannie and Freddy than I do Bear Stearns.

  2. bell says:

    15 billion isn’t enough… might be a temporary bounce on short covering but this marks an interesting turning point in us$ financial dynamics…

    • bmaz says:

      Masaccio, you may be the perfect guy to ask. What are the ramifications if nothing was done for Fannie and Freddie and they were just allowed to die? Their mortgages outstanding exist on their own do they not? Couldn’t they just be bought or taken over by somebody, and new, better designed, entities to replace Annie and Freddie created with the money that is being proposed to be used to bail out these two?

      • masaccio says:

        Good question, but probably a bit too hard for me. Fannie Mae has assets, cash and securities of others, real and personal property, all of which can be liquidated. It has two kinds of securities: standard kinds of debt of various terms, and mortgage backed securities. It presumably has other routine debt.

        Its debt obligations also include contingent debt, because it has guaranteed the payment of principal and interest on the MBS securities. It has assets to pay those, the pools of notes secured by mortgages. The problem is that no one knows what their exposure is on that guarantee. And we won’t know anytime soon, because it the housing market is collapsing slowly. Presumably the big problems arise from securities issued in the past few years, and not with the older securities.

        I’m guessing that the problem would be easier than the work of the Resolution Trust Corporation, which means that their collapse is a reasonably manageable problem. The shareholders are toast, though.

        • bmaz says:

          This is likely a callous thing to say, but at some point shareholders being toast just is not a concern to me. And I am a shareholder here and there in various things (although I like to play new issues and then get out). But the markets were never originally designed to be guaranteed reservoirs of income and money for people, they were speculative. As a young kid, which means a long time ago, I remember my grandfather saying “the stock market is like going to a casino; never take any money there that you can’t afford to lose”. This country for too long now has quit making things, and quit doing things, and relied on money to make money all on it’s own that we are in a world of hurt. I would prefer some type of scheduled trashing of shareholders if it is to occur, like bleeding off the ones that got shares through executive compensation and options allotments etc. first or something of that nature (I am sure this is not practical). I dunno. Something has to give though.

        • sojourner says:

          “The shareholders are toast, though.”

          That statement sums up the whole issue, I think. It appears to me that shareholders are ‘protected’ in any failure such as we are seeing. Now, while I hate the idea of anyone losing money, that is an inherent part of the system, is it not?

          Where I am going is that the whole attitude by the Repubs over the last 20 years has been for government to take a laissez faire attitude — keep government’s hands out of the markets. Bush has even stated that as one of his primary beliefs. What is interesting, though, is that when it appears that shareholders are likely to lose money, some deal happens so that they don’t. Where is the free market in that?

          If shareholders DID lose money, a couple of things would happen. First, I think that they would become a LOT more selective about their investments. Second, I think that corporate governance would become much more strict — and shareholders would be a lot less likely to accept machinations under the hood so that their companies would stay out of trouble.

    • masaccio says:


      While I was traveling, I read Phillip Bobbit’s book, Terror and Consent, a massive tome, suitable only for vacation reading, where you have long stretches of concentrated reading while you aren’t tired from earning your daily bread. The motivation for the book is an effort to explain how the concept of the “market state” developed by Bobbitt in an earlier work, The Shield of Achilles, relates to the war on terror.

      There is a sycophantic description of the market state here; here is a descriptive passage from the article:

      The Nation State was defined and legitimated, in part, by its ability to ensure the material well being of its citizens. In contrast, the Market State earns its legitimacy by providing the opportunity to its citizens to advance their own well being. The Nation State is characterized by top-down, government centric solutions like the welfare state, that make absolute guarantees about the material outcome of its charges. The Market State simply says: we’ll guarantee a set of basic tools and an open playing field, but after that, you’re on your own to make of it what you will.

      emphasis added. The author explains that the greatness of the current president is that he understands this important shift. Compare my comment at 3 above with this charmer:

      The Nation State cannot simultaneously protect against these new threats while offering cradle-to-grave assurances of material well-being. For the fiscal solvency of our nation, one or the other has to give. And since the State’s core, irreducible function is the physical security of its citizens from external harm (as opposed to their material security), the responsibility for the later must be shifted to the citizen. The Nation State must cede ground to the Market State.

      Just wow.

      Here is an explanation from Bobbitt, a little less bombastic.

      Bobbitt doesn’t think much of the current administration, contending that it has failed to use the strengths of the country, law, freedom and order, to deal with the threat of the terrorists. He recommends a strong dose of public discourse on the statutory basis for dealing with the changes in the political environment. He sure does love outsourcing by the government of just about any duty, including intelligence, military contracting, and on and on. He thinks this is some natural process rather than a conscious choice by the crazy right wing, the loony billionaires seeking to undo the New Deal, and get rid of the Child Labor Laws.

      EW mentioned that she had read The Shield of Achilles, and that it was exasperating. So is this one.

      On bmaz’ working thread, I said I was concerned about the problem of using the internet to organize our own picture of the universe. This book is a perfect example of that problem. I put up a couple of paragraphs explaining Bobbitt’s complicated ideas, but I can’t convey the depth of his scholarship. I certainly cannot do a good job of arguing with it in a few words.

      At the same time, these people are constructing a world view that justifies the rapacity of the financial class. My point in comment 3 would fit the way this book is interpreted by the repubs.

      • emptywheel says:

        I like to say Shield was the most fascinating utterly wrong book I’ve ever read. So I’ve been considering Terror and Consent. Not for fun, bu to be prepared to see where their logical holes are.

        One problem with Achilles was that Bobbitt believes that the state will hold–in fact the so-called market state is just an invention designed to pretend that if capital gets its way the state will disappear, along wiht any security.

        So should I read Terror and Consent?

        • bmaz says:

          Phil Bobbitt is an asswipe. This Op-Ed in the NYT (about the Bush/Cheney wiretapping) is the only thing that has ever caused me to actually personally write their ombudsman. I sent a copy of my scathing letter to the dean of his University too; had an adversarial little email discussion with him.

          • emptywheel says:

            Adversarial? You?


            But I still think he’s useful. Take this passage from his op-ed:

            It made sense to require that the person whose communications were intercepted be a spy when the whole point of the interception was to gather evidence to prosecute espionage. This makes much less sense when the purpose of the interception is to determine whether the person is in fact an agent at all. This sort of communications intercept tries to build from a known element in a terror network — a person, a telephone number, a photograph, a safe house, an electronic dead-drop — to some picture of the network itself. By crosshatching vast amounts of information, based on relatively few confirmed elements, it is possible to detect patterns that can expose the network through its benign operations and then focus on its more malignant schemes.

            For this purpose, warrants are utterly beside the point. As Judge Richard Posner has put it, “once you grant the legitimacy of surveillance aimed at detection rather than at gathering evidence of guilt, requiring a warrant to conduct it would be like requiring a warrant to ask people questions or to install surveillance cameras on city streets.” Warrants, which originate in the criminal justice paradigm, provide a useful standard for surveillance designed to prove guilt, not to learn the identity of people who may be planning atrocities.

            That is a more honest statement of the mindset of those that supported this bill than anyone else I can recall making. It’s useful both because it’s a brazen description of what is really going on: the use of wiretapping to find terrorists and others, rather than the use of wiretapping to listen to terrorists and others–that is data mining. In that sense, it’s useful because then we can move on to questions about efficacy.

            But it’s also useful because it shows right where several of the blindspots were. For example, FISA was never about prosecuting spies–it was always about intelligence, which is why you had to use a process other than the probable cause law enforcement process. But that claim that FISA was about prosecuting terrorists–and also the non-admission that FISA was really about allowing intelligence AND prosecutions, suggests one thing–that one of the issues is prosecution. This is largely an attempt to create a new form of justice. And we see how well that’s working in the GItmo trials.

            • bmaz says:

              Yeah, I don’t disagree with that take particularly; but I had severe problems with the intellectually dishonest way that Bobbitt was selling his spiel. What he wrote maybe useful in the terms you note to you, me and the informed people that read here, but it went out to the rest of the freaking world that is not so possessed of the capacity to extract that limited usefulness. And if you will note the timing, it was right on the heels of PAA passage, I was hot under the collar and that type of bunk was very damaging at the moment.

            • masaccio says:

              A big part of this op-ed is taken from his book, beginning at page 308. He thinks that the Total Information Awareness program was a good idea, because it controlled spying on Americans. See pages 262 et seq.

            • MadDog says:

              By extension, their analogy says:

              We should be allowed to place cameras and microphones in every room of every home. This way we can find all the criminals and round them up. If you don’t do anything unlawful, you have nothing to worry about.

              Posner and Bobbit deem the 4th Amendment as an impediment to the efficiency of both the law enforcement and security state apparatus.

              Why have inefficiencies when it is simply easier to do away with privacy?

              As has been said many times before (but never ever enough), folks like this betray the very Constitution that they pretend to honor and that they pretend to understand.

              • bmaz says:

                Right. Their view of “controlling spying on Americans” is to have no effective controls. On spying on Americans.

              • emptywheel says:

                This is not quite right:

                By extension, their analogy says:

                We should be allowed to place cameras and microphones in every room of every home. This way we can find all the criminals and round them up. If you don’t do anything unlawful, you have nothing to worry about.

                It’s more like this:

                We should be allowed to place cameras and microphones in every room of every home. That way we can find a bunch of stuff that might be suspicious–like the fact that you favor the same falafel joint as someone we know to be affiliated with Islamic radicals–and based on that, we can then continue to treat you as a suspected terrorist. Sure, we’d like to delve further into whether falafel habits really correlate with terrorism, but because we’ve become so reliant on technical approaches and so incompetent on human approaches, we just can’t do that, so we’ll have to treat you like a suspected terrorist just to be safe.

                See, it’s not a question of “doing nothing wrong.” It’s a question of “doing nothing that–because of our other areas of incompetence–we think might be something wrong.”

                Also, no one has really talked about the intelligence of assuming every person who speaks with a person of interest can therefore lose her fourth amendment rights (I’m think of lawrence wright, who got tapped bc he was interviewing bin Laden’s family members for his book the Looming Tower.) There’s no filtering in that first to second degree of separation, it appears, which means all contact with a potential target makes you a target, whether or not you even know that person’s a target. Which suck for you if you like to fly regularly.

                • MadDog says:

                  You’re right of course. I just couldn’t think of a pithy way to say that. *g*

                  In their view of things, having a 99.99%+ instance of false positives, is a good thing. An assumption of guilt is safer than an assumption of innocence.

                    • Leen says:

                      Me too! One of my favorites Falafel joints the “Falafel King” is on Pearl Street in downtown Boulder Colorado. Started eating falafels there 30 years ago…still there.

                    • MadDog says:

                      Damn! Wouldn’t you know that someone with swiss cheese for a memory (me *g*) would claim credit for EW’s “History of the Falafel”?

                      What is the world coming to? Next thing you know, I’m gonna remember being Shakespeare:

                      Alas poor Yoplait, I spooned it well… LOL!

                    • MadDog says:

                      Judge: What’s the charge here Officer?

                      Officer: Under the influence, your Honor.

                      Judge: And what pray tell have they been imbibing?

                      Officer: Falafels and O’Reilly, your Honor.

                      Judge: Jiminy crickets! Not together?

                      Officer: Yep, and in public no less.

                      Judge: They go on the Watch List, immediately and permanently! No forgiveness, none, not ever!

                    • MadDog says:

                      I was wondering if she was remembering and riffing off my falafel story back in the day over at The Next Hurrah?

                      Marcy mentions one aspect of Turbulence and its conjoined sub-programs as “mapping social networks”. Ya’ll might of heard mention recently wrt to FISA stuff, how NSA and the other Intel Topguns are besides themselves to go after “community of interests” linkages. That is just another way of saying “mapping social networks”.

                      Just what do these folks mean by “community of interests” linkages? Here’s a tracking example:

                      Pakistani “Target”—>Target’s phone calls—>Taxicab driver in Islamabad—>Taxicab driver’s phone calls—>Taxicab driver’s Aunt Suli in Peshawar—>Aunt Suli’s phone calls—>Aunt Suli’s podiatrist in Peshawar—>Podiatrist’s phone calls—>Podiatrist’s brother in Detroit—>Brother’s Falafel cafe in Dearborn—>Falafel cafe’s phone calls—>Sister Mary of St. Vitus’ Dance Parish in Hamtramck—>Sister Mary’s order for a dozen falafels to go, but easy on the garlic.

                      As you can see, this “community of interests” mapping thingee has more than a few…ahemmm…”difficulties”…ahemmm in it’s execution.

                      And after the NSA spends a few kazillion dollars on all that neato computer hardware and “slick as shite” software, what the poor friggin’ NSA human analyst who has to look at the result finds at the end of the day, is a feckin’ spaghetti factory.

                      The moral of the story? That the NSA is a con-artist’s wet dream.

                      Everything, but every-feckin’-thing in the universe is connected. You know, kinda like 6 degrees of separation ad absurdum.

                      And one can tie the string between number of the points, but no matter how much reducio you might be doing, a finding of a causal relationship may be just chance. And small chance at that!

                      And as last we knew, Mary of St. Vitus’ Dance Parish in Hamtramck was under full 24×7 elint, comint and humint surveillance by alternating “Go Teams” of FBI, ATF, HomeSec and the Texas Rangers (huh?).

                      The falafels, by the way, were…ahemmm…dynamite!

        • masaccio says:

          I agree that the market state is an unworkable construct, one without staying power. I’d skip the book.

          The best idea in Bobbitt’s book is his insistence that we have public discussion of steps to deal with terrorism, and pursuant to this public discussion we pass laws and abide by them and by international norms. His best security ideas are a weak expression of the ideas in Thomas P. M. Barnett’s book, The Pentagon’s New Map, which is not credited. I liked Barnett’s book: his ideas seem to have traction in the Pentagon, and I think they make sense, a much better starting place for creating a progressive voice in international affairs.

            • masaccio says:

              And I think I’ll skip the Shield of Achilles. I’m moving to The Torture Debate in America, by Karen Greenberg, and a related source book, The Torture Papers.

              • bmaz says:

                Excellent choices. I have kind of selectively hunted and gathered in both a little; excellent stuff, but they are indeed a pair. I think there may be an updated version of the Terrorist Papers, so make sure you get that (assuming I am right about that).

  3. antibanana says:

    Brad DeLong has some interesting things to say about Fannie and Freddie. There are some persuasive arguments for not letting them fail. It’s not just private entitites that hold debt securities issued by Fannie and Freddie. For starters, many local governments hold them.

    That being said, any support provided by either the Federal Reserve or the Treasury to failing financial institutions should ensure that there are strict limits on executive compensation. No raises and no bonuses for starters.

    • emptywheel says:

      Agree, we have to save them. I even agreed, to a large degree, that we had to save Bear Stearns. But at some point, we need to start a public debate about what it means that we’ve made risk public but profits private.

  4. Leen says:

    Padding the pockets of those in need! All in a day’s work for the “compassionate conservatives” in the Bush administration.

  5. LS says:

    That Kramer guy said that he thinks that private entities will buy them out rather than the government or at least throw in a bunch of bail out money…he said he expects that kind of negotiating to be happening over this weekend.

  6. SaltinWound says:

    Fannie and Freddie seem much more important than Bear Sterns to me, as well as more tied in to the government. But Bear Sterns got a bigger bailout. Is there any ratonale for that?

    • bmaz says:

      In fairness, there has been no large “bailout” of Bear; there have been guarantees made and credit made available, and that was fairly unprecedented for that type of situation and opened up a big can of worms that we are now seeing play out, but technically not a “huge bailout”. At least that is my understanding.

  7. Professor Foland says:

    Roubini has a great article about some of the fiscal / economic choices. To my mind, he summarizes the one inescapable fact that no amount of financial engineering will ever paper over:

    The reality is that the U.S. has invested too much – especially in the last eight years – in building its stock of wasteful housing capital (whose effect on the productivity of labor is zero) and has not invested enough in the accumulation of productive physical capital (equipment, machinery, etc.) that leads to an increase in the productivity of labor and increases long run economic growth. This financial crisis is a crisis of accumulation of too much debt – by the household sector, the government and the country – to finance the accumulation of the most useless and unproductive form of capital, housing, that provides only housing services to consumers and has zippo effect on the productivity of labor.

    Politically, Brad Setser points out that China, Russia, Japan, and Middle Eastern SWF’s hold most of the bonds, to the tune of a trillion dollars or so. So sticking it to the bondholders is a foreign policy question.

    • masaccio says:

      I’m not sure how big a haircut the bondholders would have to take. Roubini has a discussion, but I don’t seem to be able to register to read it.

      My guess is that the mortgage backed securities have some equity if all the mortgages pay off. So, there may be a pretty good edge, particularly in the older pools.

  8. SaltinWound says:

    Bmaz, you’re probably right, I haven’t read the Vanity Fair article yet. I majored in Economics at Yale (before becoming a comedy writer), simultaneously taking classes in the grad school, I studied under a Nobel Prize winner, and it’s alarming to me how little I understand about today’s economy. In the twenty-five years since I graduated, everything has changed, especially in terms of all the investment options and derivatives. I’m reading Trillion Dollar Meltdown to try to get a handle on it. The old Keynesian theories and macro models were very elegant, they just don’t apply.

    • bmaz says:

      Oh, hey, you are undoubtedly light years ahead of me. I have my little ares where I half know what I am doing, and the rest of the time just try to be informed as I can. This is most certainly not an area where I have any root knowledge or expertise. I was calling it a big bailout at first too, but slowly came to believe that, while it was a huge and game changing thing, it wasn’t maybe technically a bailout. I could very easily be wrong on this. Also if the guarantees do in fact get exercised, then I suppose it morphs into a bailout automatically at that point. I should probably shut up on stuff I don’t really know….

      • AZ Matt says:

        Understand today’s economy?! Well, since the days of Reagan it has been the “GREED IS GOOD!” theory of economics. Combined with “I-Get-Mine, I-Get-Yours Too!” version. Added to the Alan Greenspan “I-Don’t-Really-Know-What-The-Fuck-I-Am-Doing-School” of economic market manipulation so we arrive at the “Bush-Couldn’t-Give-Shit” economic meltdown.

        I hope that clarifies the situation!


    • sojourner says:

      I was not an Economics major, but, like you, I think I had a pretty good grasp of the topic and the underlying theory. Also like you, I do not understand these new theories over the last 20 or so years. I think a lot of it comes down to putting lipstick on a pig — bad economic theory with a fancy name. Regardless, the outcome seems to be the same — and history appears to be proving it: Poor economic policies, with little or no regulation of the markets, beget corruption that damages the nation’s banking structure. It must then be bailed out and stood back up at great expense to the taxpayers.

  9. MadDog says:

    So, the way I understand things is:

    A. If no bailout of Fannie Mae and Freddie Mac, the regional banks won’t lend a red cent for home loans thereby killing off the already moribund consumer housing market. If a Depression ensues, tough! We holding onto whatever money we got and we gonna ride this one out. We be Banks, not fookin’ moneylenders!

    B. If Fannie and Freddie are bailed out, the regional banks “may” lend a single red cent (but not two red cents for heaven’s sake!) but only, and we mean fookin’ only! to their absolute!, bestest!, most credit-worthy customers, so while not personally killing off the already moribund consumer housing market, ain’t no way we putting our lips on that soon-to-be corpse for resuscitation purposes.

    Is that about right?

  10. MadDog says:

    In case you missed it, and totally OT, from today’s London Sunday Times:

    President George W Bush backs Israeli plan for strike on Iran

    President George W Bush has told the Israeli government that he may be prepared to approve a future military strike on Iranian nuclear facilities if negotiations with Tehran break down, according to a senior Pentagon official.

    Despite the opposition of his own generals and widespread scepticism that America is ready to risk the military, political and economic consequences of an airborne strike on Iran, the president has given an “amber light” to an Israeli plan to attack Iran’s main nuclear sites with long-range bombing sorties, the official told The Sunday Times.

    “Amber means get on with your preparations, stand by for immediate attack and tell us when you’re ready,” the official said. But the Israelis have also been told that they can expect no help from American forces and will not be able to use US military bases in Iraq for logistical support.


    “It’s really all down to the Israelis,” the Pentagon official added. “This administration will not attack Iran. This has already been decided. But the president is really preoccupied with the nuclear threat against Israel and I know he doesn’t believe that anything but force will deter Iran.”


    Complicating the calculations in both Washington and Tel Aviv is the prospect of an incoming Democratic president who has already made it clear that he prefers negotiation to the use of force.

    Senator Barack Obama’s previous opposition to the war in Iraq, and his apparent doubts about the urgency of the Iranian threat, have intensified pressure on the Israeli hawks to act before November’s US presidential election. “If I were an Israeli I wouldn’t wait,” the Pentagon official added.


    “No one here is talking about more than delaying the [nuclear] programme,” said the Pentagon source. He added that Israel would need to set back the Iranians by at least five years for an attack to be considered a success.

    • Leen says:…..25,00.html
      DF: Air Force jets aren’t training in Iraq

      Sources in Iraq’s Defense Ministry say for past month Israel using American bases to conduct overflights as part of rehearsal for possible bombing of Iranian nuclear facilities; IDF: Reports are unfounded…..119524.htm

      Post Wire Services

      Posted: 4:08 am
      July 12, 2008

      Israeli warplanes have been flying over Iraq and landing at US bases there in preparation for an attack on Iran, Israeli media reported yesterday.

      Israeli defense ministry sources said that, for a month, the fighter jets have been practicing at night in Iraqi airspace.

      Retired Iraqi army officers in the Anbar region reported that the jets were seen flying from Jordan and landing at an airport near Haditha.

      Last month, US sources disclosed that more than 100 Israeli jets and other aircraft took part in practice runs to the eastern Mediterranean Sea that demonstrated Israel’s ability to strike a target that far away, the same distance from Israel as Iran.

  11. freepatriot says:

    don’t get too jealous

    this past week hasn’t been the best week to hike in the Sierra Mountains

    I heard it hit 100 degrees on the floor of Yosemite Valley (trust me, you don’t wanna be there when that happens)

    I keep telling you guys, the best time to visit Northern California is October

    and there ain’t no good time to visit southern california


    • emptywheel says:

      As it happens, I WILL be visiting NoCal in October. Well, close–late september.

      But in several years of regular trips, there, there was only one time when I really wanted to be at teh BOTTOM of Yosemite valley. Me and some friends had hiked Half Dome bottom to top and back in one day. When we got back to teh valley floor, friends who had stayed behind had laid out a picnic table full of hors d’oeuvres and several bottles of wine. It was a full moon AND the perseid shower (the moon, obviously, dampened the fireworks, but at that altitude and clarity, not too much. So we just lay there on the valley floor, looking up at the full moon behind Half Dome and fireworks going off behind it all.

      One of the coolest nights ever.

      • bmaz says:

        Man, after hearing that, and keeping in mind your girls night out in Frisco, I think I’ll tag along on your next NorCal gadabout.

      • freepatriot says:

        it’s the only time of year that San Francisco is remotely habitable

        in September and October, the Sierras are warm during the day, and cool at night (just don’t go wearin any kind of “antler” hat)

        and ya always gotta watch out for the thunderstorms an stuff (the Sierras “Make” their own weather)

        for star watching, go to Nevada. it’s only about 4 hours from the Bay Area to the state line on Highway 120. But when you get near Sonora, take Highway 108, its quicker than 120 (cuz 120 goes thru Yosemite) and it goes thru a more beautiful pass (Devil’s Canyon, i think) If ya like 5000 foot granite cliffs, there ain’t nuttin better. when you get to Nevada, you’ll know it …

        anywhere in Nevada, clear ot the eastern scarp of the Sierras will do (outside Vegas an Reno, Nevada is kinda the same everywhere)

      • MarieRoget says:

        That sounds heavenly- Haven’t done those switchbacks down to the valley floor in quite a while, nor inhaled the wonderful scent of laying among the pine needles once down there. Pencil me in too, please **wink/nudge**

        • freepatriot says:

          why does everybody love Yosemite so much ???

          if you wanna go some places that are similar, but don’t have a million people wandering around beside you, try these two trips

          the forest on Highway 4 is just as spectacular. It just don’t have a big tourst trap in the middle of it (from the bay area, take 80 east to 12 east, and you’ll meet up with highway 4 east of Lodi, turn left and follow the pavement till you see Nevada…)(no, really, you should stop around Tamarack or Bear Valley)

          I can’t remember the highway number, but the Feather River Canyon is amazing. It’s north of Sacramento off I-5 near a town call Orovil. It’s more of a 6 or 8 hour drive from Frisco (tell em I said you could say that word)

          or, If ya like mountains, big fookin trees, AND THE OCEAN, go north out of Frisco on highway 101, and turn left on any highway north of San Raphael (aim for Ft Bragg)(and be careful you don’t accidentally walk into somebody’s “Garden” wink wink)

          you can find cheap motels and campgrounds on any of those trips. after labor day, there’s not much need for reservations (after October 1st, camping is free in most state parks)

          so come out to cali, listen to the trees, watch the mountains, relax

          it works for me …

        • skdadl says:

          When you exotic southern peoples do these things — lie down on desert canyon floors and gaze up at the stars — don’t you ever worry about certain kinds of reptilian beings kinda sneaking up on you and maybe nuzzling up to you?

          (Sincere question asked by nervous northern city person.)

          • MarieRoget says:

            Nah, you just brush them off (kidding). Yosemite floor is quite non-deserty, believe me, although I’ve seen some reptilian critters in the rest of the park. Staying fairly close to the campfire usually helps, but is no guarantee of warding off night visitors. My ex has a hair-raising tale of waking up in the Anza Borrego desert after a chilly night of stargazing to find a rattler snuggling up close to his friend’s mummy bag.

            I have my own hair-raiser involving a house boat, Trinity Lake, & a rather large black bear, but let’s not go there today…

                • Leen says:

                  After hiking in Glacier Park for around 5 summers in a row and being obsessed with grizzly books and stories I finally ran into one while hiking back to our cabin in 1999 just off the Blackfoot Indian Res between the town of Browning and Glacier Park.

                  The problem is I was returning with six kids (ages 9-14) who did not want to finish the longer hike with parents and I offered to walk everyone back to the cabin. Soon after passing a creek bed I turned back to look behind and a griz came out of the brush. One of the kids became aware of the look on my face and also turned to look and quickly let the other kids know what was up. We all stopped and stared (all I remember is their eyes were the size of half dollars) the grizzly looked at us and loped off. Thank you Great spirit. The kids (who had been coached on what not to do if they saw a griz) quickly bolted for the cabin which was not far away.

                  Too close for comfort

    • Mauimom says:

      and there ain’t no good time to visit southern california

      Au contraire. January and February, when the winds blow all the smog out, when you can see snow on the San Jacintos, and when you can go down to the beach and ride your bike along the bike path for miles [in shorts] = pretty damn good.

      Marcy, think of that when you’re in MI in February.

      • MarieRoget says:

        Oh yeah. Walking or biking the Venice/Playa Del Rey path early a.m. or @ sunset (or Huntington for that matter) is great & grand.

        Ever tried Oxnard/Channel Islands, Santa Barbara, Santa Inez (Lake Cachuma), or Jalama Beach up near Lompoc in those mos? I’ll bet you have. Some might think it “chilly,” but walking or biking up there on the coast around that time of year is kick ass.
        Thanx, Mauimom for reminding me of how good it can be around here.

      • emptywheel says:

        Hey now. I used to live in SD. I hated it. I really really missed having real seasons.

        To my mind, Utah has the best client in the country–plus, on Sunday mornings, you have the entire mountain to yourself.

    • PJEvans says:

      I resemble that implication.

      Visit SoCal in the winter or early spring – effectively December through March, maybe into April. You’ll probably be dealing with cool, dry, windy weather, unless we’re lucky and get rain.

      SF, September and October: the fog and the tourists have both mostly left.

    • randiego says:

      heh FP – beauty is where you find it, and SoCal still has it. One just needs to know where to look. I see it everyday…

  12. jackie says:

    Completely OT, but this is from the News feed..
    ‘JERUSALEM (AFP) — Israeli Prime Minister Ehud Olmert was under fire from the media on Sunday over fresh corruption allegations, with commentators saying the embattled premier’s political career was all but over.’

    We need to watch WHO takes over..
    If it is Benjamin Netanyahu (or like) the attack on Iran is a Go..
    Also as Mr Netanyahu was ‘on the ground’ both on 9/11 in NY and on 7/7 in London, look for black ops to be busy (although there is already increased signs of that, odd people dying/suciding in interesting places etc).
    Lots going on…

  13. masaccio says:

    Here is a description of the conservatorship rules for Fannie Mae and Freddie Mac. There is a bit of confusion about the stay rules. I think it means the conservator can stop actions from proceeding for 45 days, which should be plenty of time for the conservator to figure out what to do about existing litigation. I’ll offer a judgment that this is not a serious problem.

    I’ll offer another guess. As the author points out, the conservatorship provisions of the statute are “barebones”. I bet that the first step for a conservator will be to seek an order fleshing things out in a sensible way. For example, when we are appointed as receiver by a court or in an agency proceeding, we propose an order which gives us a bunch of powers not inconsistent with the statute authorizing a receivership, that incorporate operating procedures which make it possible to run things in a rational way.

    The big question is the value of the assets. I’d love to see some guesses on that, but haven’t found any yet.

    • MarkH says:

      The big question is the value of the assets. I’d love to see some guesses on that, but haven’t found any yet.

      I’d guess that part of their plan to trash the housing/mortgage industry is being capped off by talking down Fanny & Freddy, so they can push their stock & bond prices down and then buy ‘em back on the cheap.

      Already Bernanke and Paulson have said F&F are sound, so why should their prices drop? And, if they do drop, then buying them back on the cheap can only lead to nice profits later.

      I say we (US gov’t) should let ‘em manipulate the market down (as they have) and buy back cheap, so F&F remain stable and possibly even making a profit.

      It’s probably not entirely possible to head-off the Bushie shenanigans.

  14. freepatriot says:

    Yosemite ain’t a desert

    the problem is, it ain’t a forest anymore, either

    and most of the stuff that crawls on you ??? those ain’t reptiles …

  15. emptywheel says:

    Fresh off his huge victory on FISA, Bush is actually going to consult with Congress:

    Alarmed about the sharply eroding confidence in the nation’s two largest mortgage finance companies, the Bush administration will ask Congress to approve a rescue package that would give the government the authority to buy billions of dollars in stock in Fannie Mae and Freddie Mac and also lend to the companies to meet their short-term funding needs, people briefed about the plan said on Sunday.
    As part of the plan, the administration will also call on Congress to raise the national debt limit, people briefed on the plan said. And it will ask Congress to give the Federal Reserve a role in setting the rules for how big a capital cushion each company must hold. Giving the Fed a consulting role in the companies’ oversight is seen as yet another way to reassure nervous markets.

    No word in what the taxpayers get for taking on Freddie and Fannie’s risk.

  16. masaccio says:

    And here is Nouriel Roubini’s estimate of the losses to bondholders:

    notice that the hit that bondholders will take will be limited in the absence of their bailout. With a debt/liabilities of about $5 trillion and expected insolvency– as of now and in the worst scenario of $200 to $300 billion– the necessary haircut is relatively modest: either a reduction in the face value of the claims of the order of 5% (if the mid-point hole is $250 billion) or– for unchanged face value– a very modest reduction in the interest rate on their debt after it has been forcibly restructured.

    Courtesy of Econbrowser. And here is econbrowser’s opinion:

    The principle of “make those who caused the problem pay” has a lot of visceral appeal. But the principle of “don’t impose severe and gratuitous extra costs on those who had no role in causing the problem”– in other words, don’t make the housing depression much more severe just to teach somebody a lesson– has to be the basis for our policy decisions.

    My recommendation would therefore be for a managed bailout in which the stockholders, creditors and taxpayers jointly share the bill.
    And now we can haggle about the price.

    My question is just exactly why taxpayers have a stake in this disaster.

    • bell says:

      taxpayers have a stake it this because they have a stake in the value of the us$… when it is treated like toilet paper one can run into problems – see germanies past for a clear example… when a country continues to spend more then it earns while borrowing heavily from other countries to finance its debt it is a problem for those who use that currency as their source of exchange… when the private banking industry creates crazy boondoggles that favour them over those naive enough to play into their shenanigans – asset backed mortgages, and etc. etc., of which fannie and freddie are front and center in all of, then one can expect the chickens are going to be coming home to roost sooner then later.. the time appears sooner then later, but i suspect the federal reserve will pull out the stops necessary to keep the game going… for anyone who is interested, read “the Jekyll from treasure Island”.. one of the classic moves is ‘bail out’.. it gets used regularly and we are going to see here…

  17. masaccio says:

    And here’s an answer: a lot of financial institutions, including banks, hold securities issued by Fannie Mae and Freddie Mac. If these go into default, the solvency of the holders is threatened. Just another example of the way an efficient market links players so tightly that problems are hard to contain.

  18. bmaz says:

    Apparently, this is the deal on the way. From the NYT:

    Alarmed about the sharply eroding confidence in the nation’s two largest mortgage finance companies, the Bush administration will ask Congress to approve a rescue package that would give the government the authority to buy billions of dollars in stock in Fannie Mae and Freddie Mac and also lend to the companies to meet their short-term funding needs, people briefed about the plan said on Sunday.

    Separately, the Federal Reserve voted on Sunday to also open a lending facility for Fannie Mae and Freddie Mac, if they need emergency capital. The two companies would be able to post their own securities as collateral.
    The plan calls on Congress to give the government the authority over the next two years to buy an unspecified amount of stock in the two companies. Over the same period of time, it would permit the companies to have greater access to the Treasury, by expanding the credit line that each company has from the Treasury. Each company now has a $2.25 billion credit line, set nearly 40 years ago by Congress. At the time, Fannie had only about $15 billion in outstanding debt. It now has total debt of about $800 billion, while Freddie has about $740 billion. Today the two companies also hold or guarantee mortgages valued at more than $5 trillion.

    As part of the plan, the administration will also call on Congress to raise the national debt limit, people briefed on the plan said. And it will ask Congress to give the Federal Reserve a role in setting the rules for how big a capital cushion each company must hold. Giving the Fed a consulting role in the companies’ oversight is seen as yet another way to reassure nervous markets.

    • Loo Hoo. says:

      Great. The federal government playing the stock market. What could be more reassuring?

      , the Bush administration will ask Congress to approve a rescue package that would give the government the authority to buy billions of dollars in stock in Fannie Mae and Freddie Mac

      • MarkH says:

        Great. The federal government playing the stock market. What could be more reassuring?

        , the Bush administration will ask Congress to approve a rescue package that would give the government the authority to buy billions of dollars in stock in Fannie Mae and Freddie Mac

        If a Bushie is in charge of the trading, then they’ll buy high and sell low to let their Street friends make a killing.

        If a non-Bushie does the trading, then they could sell high and buy low to make money for the gov’t. (and secure Fanny & Freddy much better).

        The Devil is in the details here.

  19. BayStateLibrul says:

    This is big news.
    Come Monday morn, we got a crises a brewin…
    Bailing out Freddy and Fanny means that we are one step away from
    a run….
    Soros has it right.
    We are fucked.

  20. bmaz says:

    And here is a Bloomberg article on it that has better quotes and info from Paulson on behalf of the government.

    I still return to the question of why the two can’t be placed in a receivership or otherwise failed and better entities devised to cover the tasks. I am not advocating this in the least, just asking. So far, the answer has been because the shareholders are so many other financial institutions and foreign interests etc. But as painful as it is, I return to the thought that maybe it is time to let risk takers, whoever they may be, to actually assume the risk. It appears to me as if the “bailout plan” is just more unsupported debt financing and the same type of crap that got us where we are at in the first place. Just raise the debt ceiling. Just keep stiffing the children and the future. Who is going to cover? When does it stop?

    • bell says:

      bmaz – your question ‘when does it stop?’ is the same question one asks when playing musical chairs.. in the banking biz it is a question of, ‘who is left holding the bag?’ i believe the reason fnm and fre can’t be placed in receivership is since their inception the banks have used them like a piggy bank with the ‘guarantee’ of the gov’t behind them.. if the game was to stop, without the approval of the gov’t it would be the end of the us banking system as it presently stands… this is my limited understanding on fannie and freddie..

  21. freepatriot says:

    I’m not sure what was more fun this weekend:

    stutters mcsanford defending mcsame with the “Deer in the Headlights” defense

    or when newt gingrich tried to teach hannity a little “realpolitik”, democracy style, call it “free market political reality 1A”

    what’s more fun, two repuglitards arguing which is less like ronnie reagan, or watching the governor of south carolina do a live ronnie impersonation

    it just keeps gettin better every day

    can’t wait till the market opens tommorrow

    get the popcorn ready

  22. freepatriot says:

    here’s an off-topic baseball question (so you can all play along)

    sunday night baseball is beginning, and they’re playing in Shea Stadium tonight

    why is everybody having a grand old time celebrating Yankee Stadium, but nobody mourns Shea Stadium ???

    most of us hate the yankees, and I suspect most of us don’t really hate the Mets that much

    Is there anybody here from Queens ???

    I’ll bet most of us are from normal parents

    (ducking and running)

    Go Rockies

  23. bmaz says:

    This article by Gretchen Morgenson kind of sums up my frustrations, although it was clearly written before the bailout was announced.

    But even after both companies were found to have accounted for their results improperly, Freddie Mac in 2003 and Fannie Mae in 2004, Congress failed to act. As a result, Fannie and Freddie were allowed to become high-growth companies and stock market darlings.

    “These companies would have been fine had they been forced to be the cyclical utilities they were intended to be,” said Josh Rosner, an analyst at Graham-Fisher, an independent research firm in New York. “They would be healthy and able to help the markets in this time of illiquidity.”

    The surprise is not that Fannie and Freddie grew too large for the taxpayers’ good. That was to be expected among companies run by executives whose pay is based on profit growth.

    “It is crystal clear that the Fed not only made mistakes, they had the pompoms out, cheering for deregulation,” he adds. “Until people recognize why we are in this mess, I don’t see how we get out of this thing.” (My bolding)

    So the brilliant bailout plan will keep the freaking executives paid and maintain the status quo. Meantime, there will be a push to give more of the newfound regulatory power to “The Fed”, just as was proposed by all the geniuses in the wake of Bear Stearns.

    The problem is that “The Fed” is NOT the federal government. It is not the taxpayers. It is private businessmen, bankers and associated high rollers that serve in a quasi-governmental role, but are really privateers. As the bolded sentence above states, The Fed is the very group of self serving rich plunderers that put us in this position. When the wolves are attacking the henhouse, hire some wolves to watch the henhouse. Fucking brilliant. Or not.

    • freepatriot says:

      now ya lost me

      when you say “FED”, are you talking about the federal reserve board ???

      or the directors of fannie and freddie ???

        • freepatriot says:

          so basically we’re talking greenspan

          greenspan and gramm, the champions of deregulation

          wonder what they’re doin now …

          W and deregulation did my country in …

          oh fuck, now I writing country western songs, shoot me quick …

    • masaccio says:

      That’s exactly what I mean when I say I want my pound of flesh from the failed money boyz and girlz, at Fannie Mae, IndyMac, Countrywide, Freddie Mac, and all the rest of the playerz.

  24. masaccio says:

    One advantage of a conservatorship is that the current management gets fired. No DIP in these conservatorships. And the stock options? Can you say under water? Then we sue for malfeasance. A running start on payback.

  25. strider7 says:

    I was fortunate to be able to watch this whole fiasco evolve from an objective perspective.Realators were “recruiting buyers”. Babes in bikinis waving banners and giving away Humvees to get people into these open houses.You didn’t even have to have a job or any ability to money down.The lender required the buyers to get personal mortgage insurance.The lenders didn’t want these loans to be paid back.They were covered,backed by the PMI and made as many transactions as possible without the fear of responsibility on the loan.The insurance companies were the ones who would inevitably be responsible.So these insured mortgages were bundled and sold again and again based on the assurance that these notes were guaranteed by the insurance companies.These bundled notes were sold as AAA backed securities.The people who invested in these securities didn’t have any liabilities because they were insured so they kept investing as if they were a commdity.No one wanted to look at the contents of the bundle in fear of the fact that their worthlessness would be exposed.As long as the pmi companies backed them who cares.Finally these bundles of shit had to roll down to someone and the first accountability was at Bear Stearns and they had already leveraged these securities 30 to 1 by the time they needed the bail out
    This was all done by design.It was not an issue of irresponsibility
    What a scam.
    So the fix is to make the individual banks responsible for the loans they make.
    they’ll pass the buck to the broker and the broker will pass the responsibility to the salesman who sets up the loan.Now their will be fines levied on the responsible parties

  26. Leen says:

    Democracy Now…..washington
    Five Ways Wall Street and Washington Set Us Up for the Crash: Author Nomi Prins Explains Where Congress Went Wrong on Lending

    The worst of the economic crisis may be far from over. That was the message of Federal Reserve Chairman Ben Bernanke Tuesday. He indicated that the housing and financial turmoil will persist deep into next year. The Senate, meanwhile, is deliberating a bill this week that would provide government-backed loans to 400,000 homeowners on the brink of foreclosure. We speak with former investment banker turned journalist and author, Nomi Prins, about “Why the Economy Went South.” [includes rush transcript]

  27. Leen says:

    Washington Dispatch: Mother Jones has learned that a parade of high-level Israeli officials are on their way to the White House over the next two weeks to discuss Iran policy. Here’s where the two countries differ on what to do next.

    By Laura Rozen

    July 10, 2008

    Red Lines…..hreat.html

    • MadDog says:

      I saw that last week, and with today’s Sunday London Times report (my comment # 26 which you replied to), I’m guessing the revised Israeli attack plan will be shopped around various places to get vetted by Deadeye’s remaining minions.

      Regardless of the plan’s chances of success and the “cauldron of hell” ME consequences it will entail, I’m sure Deadeye will personally give it his “Okey, Dokey!”

    • masaccio says:

      That’s more than 3 times the cost of the S&L bailout, which cost about 161.1 bn of which the taxpayers ate 124.6 bn, or 77%. I wonder how big our share will be this time. I mean, are we talking Social Security or Medicare?

    • BooRadley says:

      Thanks for all your fine work on this.

      Below is a link to some fine investigative reporting by the Milwaukee Journal Sentinel.

      House of pain
      Caught up in a suspicious deal enabled by lax lending standards, a man now owns a house he can’t afford and never wanted

      It breaks down at the micro level, where some of these fees went. Is there anyway for Fannie and Freddy (or some government agency) to try and go after the people who were clearly fraudulent in their dealings? It just seems to me as though, because we’re dealing with mortgages and then securities made up of mortgages, that there ought to be a pretty decent paper trail?

      Also, HUD has an office in each state, could they be a bureauocracy that is helpful to law enforcement? It seems to me that this requires resources at both the federal and state levels. (I think I stole that from Sara).

  28. PJEvans says:

    I like Persian food (it makes my tastebuds very happy) – is that one or two degrees of falafel?

  29. Leen says:

    Congressional hearings are needed to forestall an attack on Iran

    Interview with Scott Ritter
    July 12

    Former UN weapons inspector Scott Ritter discusses the likelihood of a U.S. attack on Iran and the smokescreen of diplomatic progress, how Iran’s recent promise of retaliation has raised the stakes by ensuring limited U.S. strikes would be inadequate, how facts and reason are irrelevant since the neocons in command believe they can generate their own realities, the need for Congress to reduce the level of tension not increase it with their current pending Iran war resolutions, how the War Party’s aggressive rhetoric towards Iran only helps their hardliners, Iran’s nuclear program as pretext for regime change, the dubious origins of the “smoking laptop,” the possibility of the use of nuclear weapons by the U.S. against Iran and the need for American business to demand Congress put an end to the march to war.…..-ritter-5/

    #####Let’s take Scott’s advice and if you have not all ready called your reps to ask, demand, beg for congressional hearings on Iran…do so TOMORROW.

  30. FrankProbst says:

    Krugman weighs in:…

    Here’s what I don’t get. Fannie and Freddie were supposed to handle only non-shitty loans. The market has tanked so badly that some people are walking away from their non-shitty loans, which is why Fannie and Freddie are in trouble. The argument now is that we have to bail them out, because otherwise, no one will want to make non-shitty loans.

    Does anyone else see that the logic here makes absolutely no sense? For starters, we could just use the bailout money to start yet another company (”Hello, Felicia!”) that only makes even-less-shitty non-shitty loans. There’s also the fact that making non-shitty loans is essentially the whole point of a bank. If people are really trying to argue that NO ONE is going to make non-shitty loans without Fannie Mae or Freddie Mac, they’re essentially declaring the end of capitalism. Is this really what they’re saying.

    I’m sorry, but I just don’t see the big deal about either of these companies failing. Yes, the stockholders will take a bath. Yes, it will be harder in the short term for even well-off people to get a mortgage. But both of those things are going to happen anyway. (In fact, they ARE happening.) Yes, we can throw billions of dollars at these companies to soften the blow, but why not just save the money and let them tank?

  31. Hmmm says:

    W/r/t Bobbit’s ‘market state,’ wouldn’t it be less euphemistic to call it the ’surveillance state’? Does Bobbit compare and contrast the economic burden it would place (is already placing) on the US, on the one hand, with East Germany or the USSR on the other, where it has worked oh so well before? And if so, is anyone confident that this kibosh on social security and social welfare expenditures would truly be enough to pay for the absolutely crushing expense that any remotely meaningful universal surveillance state would mean? Insert obligatory cartoon reductionist ‘one watcher for every citizen’ reference here. Insert obligatory refutation to claim that it’s soooo much cheaper these days because of computers here. Lastly, has Bobbit analyzed the social and money costs that will inevitably come due later when those who have not, for whatever reason, fully provided for their own retirement, exhaust their funds? Or is Bobbit more of a Soylent Green kinda futurist?

    Shorter me: Aside from the ‘market state’ being wholly unworkable in numerous ways, fundamentally evil in nature, and not not NOT needed in the first place, well hell, I’m on board!

    • bmaz says:

      Heh, I have not read his books, what I know of Bobbitt is from the Op-Ed I referenced above and some research I did on him after reading that craptastic Op-Ed in preparation for writing him and his superiors scathing letters. But my take is that he indeed may be a Soylent Green weenie.

  32. PetePierce says:

    I have had a policy for years that if Bush, Rove, or anyone key past or present in the Administration showed up on TV, or teevee as it is spelled here, the thing with a picture and sound that has the football games, when your team is so crappy you stop going live and its quarterback admits to being a serial dog killer, and files bankruptsy because he owes the millionaire team owner several million dollars because he’s playing flag football at Leavenworth, I would mute the sound.

    Now I have found a way to save a lot of time and I just exercised the manuever with a Karl Levin from Detroit Michigan and a babbling senile Dick Lugar (old white men seem to predominate the US Senate–if it’s a senator it’s white 99% of the time). When anyone from Senate or Congress comes on the TV, I mute them.

    After FISA I know they are lying if their lips are moving particularly in the stupid remarks by nearly every Democrat and all Republicans in the House and Senate.

    It would seem that although Marcy and Bmaz do a splendid job and I am much better informed by continuing to read them and their links, sadly the majority of the blogs are about a Congressional or Senate fuckup–and it keeps getting worse so I no longer believe that this is a country whose government can ever work.

    • MarieRoget says:

      Yes indeed, skdadl, Happy Bastille Day back to you. It’s marked by parades, fireworks, & bistrots filled w/les francais on holiday. Being in Paris on July 14th is like being in DC on July 4th, only w/a/ croque monsieur in one hand & a glass of really good red in the other:

      Fireworks Over the Eiffel Tower Celebrate Bastille Day

      “Liberté, Egalité, Fraternité” – I always recall what Orwell wrote in Down and Out in Paris and London, that it’s written even over the pawn shop doors in France.

  33. JamesJoyce says:

    Are there similarities between the Keating 5, the Savings and Loan rape of Americans and the present situation with the pending taxpayer bailout of “”tax exempt corporations”" like Fannie Mae and Freddie Mac?? History repeats??

    • bmaz says:

      Sure they are both bastard children of the repeal of the Glass-Steagall Act as Reagan was assuming office (in fairness, I think it actually occurred in the last gasps of the Carter term, although against his wishes). In different ways for sure, but the marks of the beast are there. Tack that onto the fact that the Bushies then went and enlarged the “Enron looophole” that allowed the expansion of the derivative speculation, and you get to where we are today on many fronts.

    • MarkH says:

      Are there similarities between the Keating 5, the Savings and Loan rape of Americans and the present situation with the pending taxpayer bailout of “”tax exempt corporations”” like Fannie Mae and Freddie Mac?? History repeats??

      In the sense that there are career criminals who like to do the same crime over and over if they’re not caught.

  34. Leen says:

    The Diane Rehm show will be focused on

    Monday July 14, 2008

    Join the show: 1-800-433-8850 ([email protected]) or contact us

    10:00Ongoing Turmoil in the Financial Markets

    Guest host: Steve Roberts

    Guest host Steve Roberts and a panel of experts discuss the ongoing difficulties in the mortgage and credit markets. They will discuss the fate of Fannie Mae and Freddie Mac, and what measures Congress and the Federal Reserve are considering to help ailing financial institutions.

    Dean Baker, co-director of the Center for Economic and Policy Research and co-author of “Social Security: The Phony Crisis” (Portfolio)

    Alan Fishbein, Director of Housing and Credit Policy, Consumer Federation of America.

    Vincent Reinhart, Resident Scholar at American Enterprise Institute and former director of the Federal Reserve Board’s Division of Monetary Affairs.

  35. abinitio says:

    That $15 billion is only the initial down payment. There’s more billions that you and I will be pledging. In fact our wages will be garnsihed for a couple generations to pay of all this debt.

    Meanwhile Bob Rubin (Clinton’s Treasury secretary, former chairman of Goldman Sachs, current chairman of Citi) – the architect of the repeal of Glass-Steagall and the subsequent consolidation of investment and commercial banking; Bob Raines, former CEO of Fannie and another of Clinton’s whiz kids; Hank Paulson, former Chairman of Goldman Sachs and current Treasury secretary; Easy Al Greenscam, former Fed chairman and current advisor/partner at PIMCO – the bond giant that owns a megaton of Fannie & Freddie bonds; as well as the CEOs and senior executives of many a Wall Street firm including banks and hedge funds have already stashed all their billion dollar bonuses probably in the Caymans. Note no one is asking them to return any of that fraudulent loot.

    Welcome to the land of the bipartisan consensus. The land of crony capitalism. Where wealth is efficiently transferred from middle class Americans to the financial-corporate-political elite in historical quantities.

    Our grandchildren as they continue to pay off the debt will say grandpa and grandma really gave away the store – for what?

  36. rapt says:

    Sorry I’m late again folks – had some hands-on stuff to do over the weekend.

    I’ll refer to PetePierce who said in 124, “…I no longer believe that this is a country whose government can ever work.”

    I’d say that is quite obvious to anyone looking, but apparently it is not to a policy decision contributor or a commenter who’s first priority is the maintenance/improvement of wealth. That includes most of us doesn’t it? I was chatting with a talkative friend the other day who was moaning her losses in Fannie Mae. “It was always supposed to be such a secure, no-loss stock, backed by the govt… Now look what’s happening.” When I asked her politely why she didn’t see it coming, she seemed somewhat clueless. Smart as a whip really, but still clueless; eg she still owns a bunch of bank stocks.

    I’ll share this bit of insight with some of those who don’t want to hear it: The current economy is on the rocks. Already. Sure there is plenty of inertia; the crash, or more accurately, the transfer of wealth upward, one might say is long and slow, padded by the transfer of debt to the taxpayer as each crisis rears its head. I expect this long slow pace to accelerate fast at some point soon, but that may just be my doomsayer side speaking.

    If you think the govt is likely to survive with a dead economy, look again; the two go hand-in-hand, wed at the altar of greed. This is evident in all the national news, both faux and bloggy, but I have a local example too. Walmart slid in and bought a small shopping center in the nice part of town although they already have two stores in the outskirts. Some uproar of course. The move was “unstoppable” due to loose zoning. Our Planning Commission, after the fact, began to formulate rules to control big boxes. At the same time, it approved a huge retail development on virgin farmland inside the city, the financing of which was based on easy credit of a couple years ago. Residents were evicted, No Trespassing signs erected, but not a clod of earth has been turned. I suspect the developers are waiting for a turnaround in the credit market. Best of luck to them. O yes, and the retail market here was nowhere near big enough to actually support such an enterprise. Less so now.

    If I sound like I welcome this type of failure, I must admit that yes I do. The fifties model is long out of date.