Update, Sept. 20, 2008: It’s now even worse than when I wrote this a couple days ago. Today President Bush has announced that he’s asking Congress to take $700 billion more of your money to pay off bad mortgage-related assets. This will be another crushing blow to the national debt and to the whole concept of personal responsibility, individual liberty, and limited government.
Within the past few days, the national debt – that huge colossus of future pain waiting to gobble up everything in the end, the accumulated burden of decades of fiscally insane policies, the vast cesspool from thousands of corrupt politicians and cronies over half a century – was simply doubled (in effect) in an instant by a tiny handful of men. It was done without a Congressional debate and vote of our elected officials. It was done without public oversight. It was done without the least shred of Constitutional authority. Two companies, Fannie Mae and Freddie Mac, sought to avoid the disastrous fruits of their questionable labors. These companies, after pouring hundreds of millions of lobbying dollars into Washington D.C., were able to simply turn their incredible debt over to you and me. Their debt is now yours. Bon appetit. The Economist had this sober comment about these two institutions back on July 14, 2008:
FANNIE MAE and Freddie Mac, the two government-supported mortgage giants at the centre of America’s housing market, pose a particularly acute problem for the Bush administration. Not only are they too big to fail. They are almost too big to rescue.
They hold or guarantee some $5.2 trillion of the nation’s $12 trillion of mortgages, backed by the thinnest wafer of capital, meaning their collapse would imperil the already paralysed American housing market. Yet as Joshua Rosner, an analyst at Graham Fisher, a research firm, points out, nationalising them, a stark choice for the government since their shares tumbled last week, would “result in a doubling of the federal deficit, a further collapse of the dollar and unthinkable implications for the Treasury’s cost of funding in the debt markets.”
This was done by a secret government involving the likes of the former CEO of Goldman Sachs, now the Secretary of the Treasury, and the Federal Reserve Bank, an unelected, unaccountable institution that has never been subject to an independent audit and is clearly contrary to the intentions of the Founding Fathers. They rule – and they decided that they needed to bail out some of their friends, at your incredible expense. Other bailouts of financial institutions have followed, removing the curative power of failure in allowing bad companies to reap the rewards of their greed and corruption. We will bail out many more organizations, allowing the government to take them over. It’s nationalization of industry. It’s national socialism, coupled with the insane deficit spending and inflationary policies that brought down the Weimar Republic and other nations.
While these unelected officials continue their power grab over financial markets and carry out the most fantastic looting of a nation in the history of the world – stealing trillions of dollars from you, me, and our children, all in the name of “preserving confidence” and “for our own good” – the American people have been deluded into thinking that this is healthy. They feel grateful for the bold actions that their wise leaders are taking to help them out.
It’s like the people in Noah’s time being grateful for the bounteous water supply that is coming their way.
What’s happening now, this week, this month, seems monstrously different than the corruption we’ve seen in past generations. It’s dreadful. I don’t mean that financial disaster will sweep this nation soon (though it could), but it is our liberty where the real disaster is. Unelected men seizing vast amounts of power and wealth. This isn’t good. It’s a tsunami of corruption and debt.
But on the plus size, the Packers are having a great season, and I’ve officially become a Packers fan. So it’s all good. Go Pack!
It’s not my debt. A gang of violent thieves have lost money on a criminal enterprise and gotten themselves into debt. They’ll try try to repay their debt by more thievery, or they’ll threaten their debtors. I owe nothing to the thieves, though I may pay them out of fear.
Greed has accomplished what legislation could not.
Your numbers are way off. According to CBO, there is only a 5% chance that this will increase the budget deficit by $100 billion. So assume that actually happens (and it might not). That would be an increase in the budget deficit of 25%, not 100%, and would barely make a dent (like 1%) in the national debt. But not taking action would increase the deficit too, because tax revenues would fall dramatically as companies fail. Furthermore, the government will be able to sell the assets once the market stabilizes and recover some, and maybe most, of those costs.
And the owners of all the firms that are being bailed out are taking a serious bath. Their stock holdings are being reduced by a minimum of 80% and sometimes as much as 95%. Its the folks that those companies owe money to that are being bailed out. In the case of Fannie and Freddie, those folks believed that their investments were safe because of the implicit backing of Fannie and Freddie by the government, which created them. Whether that belief was justified or not is arguable, but disavowing the governments backing at that moment in time would have put the full faith and credit of the United States in doubt and the ensuing panic would have dwarfed what we are seeing now.
Republicans are opposed to nationalized health care, but they don’t seem to have a problem with nationalizing the financial markets.
If I may employ a euphemism from Battlestar Galactica:
We’re all frakked.
HI All,
Frankly, I think the government should have let the companies they just bailed out take the plunge. Perhaps we all would have learned something that way. Instead, the government has bailed these folks out, at the expense of all of the taxpayers, and the only thing we’ve learned is that we can do whatever risky and illegal business transactions we want, and there won’t be any consequences since the government won’t let us fall. Or perhaps maybe the folks in office had something to lose if these companies failed, so it was a matter of self preservation. In any event, we’ve no one to blame but ourselves for putting these folks in office, and not voting them out when they’ve proven to be incompetent and corrupt. Guess there’s one more reason to become better informed in this year’s election. We’ll see if folks actually do that though.
Catholic Defender
Catholic Defender: Good point, but there’s really no way to “vote people out”, we only get to vote people in. What if all the candidates presented are corrupt?
Also, very good points on the blog post. Let the companies who have been fiscally irresponsible tank when by all rights inherent in a free market they should fail. Sure it would hurt for a little bit…but mainly those who do not have their houses in order. Some sting there might galvanize more people to action.
It’s like the people in Noah’s time being grateful for bounteous water supply that is coming their way.
Awesome comparison. I may borrow it in the future! 🙂
Lemm, do you really think those CBO numbers could possibly be accurate?? What source do you have for that? The burden that the US government is taking on through these bailouts FAR exceeds a few hundred billion dollars. It’s mammoth.
And can anybody explain where Goldman Sachs et al. gained the Constitutional authority to arbitrarily have taxpayers bail out failed companies?
No cross reference to the BofM Gadianton verses?
“And can anybody explain where Goldman Sachs et al. gained the Constitutional authority to arbitrarily have taxpayers bail out failed companies?”
It happened when the Americans decided that they’d rather have a beer with “W” than John Kerry. The Secretary of The Treasury serves at the pleasure of the elected President, as do all others that matter in the Executive Branch. That’s why American presidency is called “Imperial Presidency”.
One could, of course, speculate that there could have been a way of buying out foreign investors’ debt from Fannie and Freddie and let them go belly-up. That would have created some very wealthy lawyers.
So you are saying that we would have had an elected Secretary of the Treasury if we elected Kerry?
😉
I think in the distance I can hear Gordon Gecko laughing…
Everyone have their food storage ready? There will be, no doubt, a depression equal to or greater of that of the 1930s.
The current national debt looks like a pigme compared to the $53 trillion coming in 32 years.
I remember when Pres. Hinckley spoke in October conference in 1998 about a portent of bad weather ahead with regards to the affairs of the world. As is to be expected of a prophet, his timing was impeccable. Almost immediately afterwards began a series of events that have led us to where we are today as a nation. I remember exactly where I was and what I was doing when I heard those words. I hope others did as well.
Trust not in the arm of the flesh is all I can say. Plant gardens, store up what you need for a year or more, work on a plan of self-sufficiency. If you do find that you will have a need for money, look into more stable, universal forms of currency (such as gold or even food) and keep just enough on hand to meet your needs in an emergency or crisis. Learn a side trade that you can market or barter with for goods and services in case your main career becomes irrelevant.
Find out what you would need to do to develop your own sources of water (rain, well, local stream, lake or river), food, clothing, and shelter. Most of all, work out a plan to cooperatively share with your neighbors so that all have what they are in need of rather than holing up with guns and suspicions.
Cooperativism is not socialism nor is it communism. It’s just good common sense to make friends with your neighbors and figure out how to get along before they become your enemies by coveting your own preparations in times of hardship.
A little luck and a little government are necessary in life, but only a fool trusts either of them.
dang. i did it again. I posted via my wife’s account accidentally. “Shannon Watson” was actually supposed to be me. 🙂
How can anyone ever support the corrupt Republican party after this massive theft that benefits GOldman Sachs and their cronies?
Here’s the scoop from Peter Schiff:
By committing trillions of tax payer dollars (not the “hundreds of billions” that Paulson predicts), the plan will save commercial and investment banks from certain bankruptcy. In his statement today, Paulson made clear that Congress must pass new legislation to allow the Government to acquire even those loans too poorly collateralized to currently qualify for GSE or FHA absorption. The losses baked into these mortgage products, which Wall Street has been reluctant to even estimate, will now be borne wholly by taxpayers.
In his press conference, Paulson assured us that this plan was designed to safeguard our savings. But in typical government fashion, the plan will have the reverse effect as savings is wiped out through inflation. He also claims that the plan will safeguard home equity by keeping real estate prices high. Since when did high home prices become a strategic national priority? If the plan succeeds, the gains for home sellers will simply be matched by losses for homebuyers, who end up paying inflated prices, and taxpayers, who get stuck with the losses when those buyers default.
Paulson’s distress and confusion was clearly evident when he fielded questions from reporters. The first asked Paulson to describe his fears regarding the probable economic consequences of government inaction. Paulson provided no answer and promptly exited stage right.
When the U.S. government owns all mortgages, the real estate market will be completely subject to political, rather than financial, concerns. Will foreclosures be outlawed? Will loan term easements and principal reductions become standard campaign issues?
While it is dizzying to predict how this plan will be implemented, it is fairly simple to foresee the macroeconomic consequences. The U.S. dollar will be shattered beyond repair. The government simply has no means to make good on the trillions of new liabilities. Interestingly, while both Paulson and President Bush acknowledge that the plan will put “significant amounts of taxpayer dollars on the line,” they did not mention any tax increases. Given the politics, no such move is forthcoming. The printing press is their only solution.
The government has also decided to insure all money market funds, adding trillions more in unfunded liabilities to the Federal balance sheet in the blink of an eye. Of course, since bad real estate loans are not the only toxic assets on the balance sheets of financial institution, we will also need to absorb other classes of asset-backed securities, such as those backed by credit card debt and auto loans. So while the move ensures that depositors will not lose money, is does insure that the money itself will lose value. Is the trade-off really worth it? Washington thinks so.
Further, since I assume the plan will apply to all mortgage debt, U.S. taxpayers will also be on the hook to bail out foreign institutions that loaded up on the financial sludge. However, once the government takes them off the hook, do not expect them to re-invest the windfall back into other U.S. dollar denominated assets. This get-out-of-jail free card will likely scare them straight. The global mass exodus from the U.S. dollar and Treasury debt is about to begin: do not get caught in the stampede.
To all you Christian “values voters”: Read your Bible!
he Republican party is the party of big business. They are playing on your ignorance and prejudices to get you to vote against your own economic interests. And every 4 years, you line up to vote like sheep for the party that is raping you I think the following Bible verse is particularly relevant given the current financial meltdown. I hope all of you so-called “Christians” will keep this verse in mind when you enter the voting booth in November to vote for that sweet hockey mom from Alaska, who is nothing more than a carefully crafted distraction by the super-rich to get you to vote against your own economic interests. They are hoping you are as stupid as they think you are. Prove them wrong.
Cindy McCain’s dress at the Republican Convention cost $300,000. Do you think the Republicans give a crap about you Walmart-shopping Baptists and Mormons? All they care about is money. John Edwards was crucified for a $400 haircut, yet no one bats an eye when Queen Cindy wears a $300,000 dress. Her dress costs more than most of you will earn over the next 6 years. But hey, at least Sara Palin is a god-fearing hockey mom who wants to ban books and outlaw abortion even in cases of rape and incest.
James 5 (NIV)
Warning to Rich Oppressors
1Now listen, you rich people, weep and wail because of the misery that is coming upon you. 2Your wealth has rotted, and moths have eaten your clothes. 3Your gold and silver are corroded. Their corrosion will testify against you and eat your flesh like fire. You have hoarded wealth in the last days. 4Look! The wages you failed to pay the workmen who mowed your fields are crying out against you. The cries of the harvesters have reached the ears of the Lord Almighty. 5You have lived on earth in luxury and self-indulgence. You have fattened yourselves in the day of slaughter.[a] 6You have condemned and murdered innocent men, who were not opposing you.
I can’t believe oil jumped $16 in one day. America is broke. We’re all in trouble.
http://www.ldsartcollector.com/blog
People throw terms around like they actually exist…”free market”, “democracy”, “freedom of speech” etc.
The gov’t as a whole doesn’t have our best interests in mind.
I watched Glenn Beck’s show the other night. He suggested we’d have one or a combination of these: depression (1930’s), stagflation (1970’s), or collapse (Soviet Union, 1980’s).
I like what Shannon..I mean ROB said about not trusting in luck or government.
go Pack!!!
It makes more sense to cheer for a football team than be involved in democrats versus republicans–
at least you know that the opposing football players probably have the same beliefs (politically or any other)–
whereas the two parties “pretend” to be different–
ha!
i have always found it very interesting to hear LDS preface things they say “politically” with:
“I’m not a conspiracy theorist”–
and yet be able to read the Book of Mormon without blinking–
???
it’s all ABOUT conspiracy, and we’re not supposed to apply it to the “real” world–
*sigh*
I’m voting third party.
I’m scared. I’ve never been scared before. I’ve spent the last 30 years planting gardens, putting up food, cooking with wheat and learning to “do without”–
but I am SCARED!!!
I just came up from the basement after counting my buckets of wheat–
and I third and fourth what the person said about community–
I PLAN to feed my non-LDS neighbors–
I’m kind of glad I don’t live in the “mormon corridor”, because it might be a touch harder to share with those who have more $ than I and haven’t bothered to store food–
I know people in my ward who go on cruises (something I’ve never done) while I’ve given myself a headache preserving food.
Now, I’m not a “cruise person”, and I LIKE preserving food, so I’m not trying to be a martyr . . .
but I’ll give homemade ww bread to my neighbor with my vegetarian chili happily before I’ll rush to the house of my cruise taking “saints” and push a loaf of bread at them–
my bad–
–and the cruise takers have a LOT more $ than I–
have never experienced unemployment–something we’ve had a good share of . . .
Packers? Ugh. Go Bears!
Anyway. I wonder how many games, million dollar players, and other things we’ll have a new perspective on in the coming months.
I’m an “investigator”, Mormon Buddies, but really enjoy the comments, insight, and fun stuff Jeff puts on here. I especially love the whacky posts from the people that obviously KNOW way more than we do.
I must say that the storage pholosphy of LDS seemed so weird to my Baptist mind not too long ago now drips with wisdom and foresight.
This entire mess is nothing more than a result of our corrupt culture of greed and selfishness. The reality of this is so apparent now and WE are the only ones to blame. We decry the “leaders” that we have, yet you and I voted them into the roles that they are in. ALL of them: Green, Dem, Rep, libertarian. WE DID THIS. They didn’t violate a trust, the filled our wallets like we asked them to.
The question here is: “what are we going to do about it?” Are we going to continue to complain until we are blue in the face or are we going to find real people that are like you and me to go in and have the courage to stand up to power and fix these issues?
I must admit that it’s easy to complain. Doing anything else is putting me outside of MY comfort zone. Yet I know that I would be better than anyone “serving” me in any state or government office. Why? Because I’ve lived a REAL life with faith, debt, children, marraige, taxes I can’t afford, unlawful ticketing, budgeting, car repairs, etc…. So have YOU.
The Tsunami approaches. Why are we just watching it come in? It’s still far enough out to protect ourselves and our families. More importantly, we can save our neighbors and our nation.