Episode 18 – Shoe-a-cide Watch

An Iraqi reporter hurled a shoe at George Bush in a fit of frustration, while Jeff and Glenn hurl all they’ve got at the Washington Elite in the 18th Episode of PoliTalk. Unlike the Iraqi, however, the PoliTalk guys hit their mark this week: Illinois Governor Rod Blagojevich for his outlandish fraud; Caroline Kennedy for her lack of credentials (does it really matter); the “Big 3″ car companies for ponying up to the trough, and the politicians for filling it; Bernie Maddoff for his unbelievable, unscrupulous $50 billion ponzi scheme that hurt countless innocent people, and the makers of really bad television for leaving Glenn and Jeff off the political talk circuit for yet another week.  Get your real political analysis here at PoliTalk.

Listen to the current installment of PoliTalk and get yourself informed, inspired, entertained and ready for the day… spread the word… tell two friends, and so on and so on…

You can get the PoliTalk Podcast from Podcast.com and iTunes.

Episode 17 – Survival of the Weakest

Elected officials again show profiles in political weakness by buckling to pressure to bailout the big 3 auto manufacturers. As if the lessons of the financial bailout weren’t disastrous enough (fool me once, shame on you, fool me twice, shame on me…). As if caught in a web of bizarre reverse Darwinism, only the weak shall survive. If you’re strong enough to run your business well, you only have to worry about banks freezing credit, the economy crippling your business and making ends meet. But if you fail spectacularly, I mean really, really badly, well, then you are rewarded. John Thain, CEO of Merrill Lynch, is reportedly seeking at $10 million bonus this year.

The car makers, who have essentially run their dinosaur-of-a-business into the ground, are now seeking $35 billion in federal money to prop them up.  AIG… well, we know the story there. So the lesson to all you kids out there: don’t work too hard, take your private jets whenever possible, seek out-of-this-world compensation for something you really haven’t done, and if you fail, don’t worry, the federal government will be there to bail you out. But if you’re one of those who live lives of quiet desperation, who live a decent, unremarkable life, but maybe you’re on the brink of financial disaster — you get screwed. Welcome to the new world economy. We’re mad as hell, in a funny, intellectually, riotous, quirky, lovable kind of way. You’ll laugh, you’ll cry, you’ll ask for more. Catch the latest episode of PoliTalk: where politics and policy meet real people.

Listen to the current installment of PoliTalk and get yourself informed, inspired, entertained and ready for the day… spread the word… tell two friends, and so on and so on…

You can get the PoliTalk Podcast from Podcast.com and iTunes.

Special Episode of PoliTalk – The Bailout Bill Insurance Program

“The financial rescue package contains a provision that permits troubled financial institutions to apply for insurance (federal guarantees) and could prevent an outlay of $700,000,000,000. Furthermore, it can cut interest rates substantially, keep troubled homeowners in their homes, and certainly end the credit crunch,” says Michael S. Zarin, President, Wellfleet Investments LLC.

In this special episode of PoliTalk, Glenn interviews Michael to better understand his perspective. Michael first came to us via one of our blog postings that he commented on.

If you listen to only one program about the financial crisis that the US and the World faces, listen to this!

Michael lays out the case for a provision in the new Bailout Law that will allow the US Government to get us out of the credit crisis without spending the $700 billion.

Listen to this podcast and spread the word… More people need to know about this!

You can get the PoliTalk Podcast from Podcast.com and iTunes.

Financial Rescue Plan Provision Can Save $700,000,000,000

We got a great comment on our blog entry, Financial Bailout Bill Passes House. It was written by Michael S. Zarin, President, Wellfleet Investments LLC.

It is worth posting as its own post:

The financial rescue package contains a provision that permits troubled financial institutions to apply for insurance (federal guarantees) and could prevent an outlay of $700,000,000,000. Furthermore, it can cut interest rates substantially, keep troubled homeowners in their homes, and certainly end the credit crunch.

The purchase assets provisions of the bill, buying paper at much less than its face value, will not put the financial institutions in enough funds to mitigate the credit crunch.

In fact the guarantee provision could even go too far in that direction. Administered sensibly by the Treasury Department it could be just right – if they would do it.

How?

If I’m a banker holding 13% sub prime mortgage paper now worth 40 on my books instead of 100, and I get a US Government full faith and credit pledge (insurance, really a guarantee) behind that debt, my lousy paper is worth way more than 100 right now. Maybe 120 or more. No one wants that. Inflation.
Big time.

So, when the banker comes in to get his insurance, he should pay a fee and, most important, agree that the interest rate on his paper will drop to, say, 3.5. He has to agree, because the US government can’t change his contract unilaterally.

In that way, his paper is worth 100. He sells it. He’s back in cash and the credit crunch is over. Regulations should cut back on the permission that sunk Lehman – ability to leverage cash 30 times. Twenty times does it nicely enough.

If you want to punish him because he was a bad boy, cut the interest a little so he only gets 90 cents on the dollar instead of 100. Less than that. No good. Because he won’t be able to do enough business and end the credit crunch.

New point. The homeowner who is paying 13% or whatever on the sub prime debt, a victim or a risk take or whatever (we’re at saving the economy not punishing him, his family and us now) should have his mortgage rate reduced to 5% so that he can pay his monthly charges. A sub prime mortgagor (interest rate, say 7and 1/2% or more) who has enough household income to do that should be part of the program. See below for the others.*

The difference between what the banker gets, say, 3.5%, to bring the paper to 100, and 5% ,what the homeowner pays, should go to the federal government to pay the costs of the program and any anticipated defaults.

That’s a program that works and benefits the economy, the taxpayer who lays out no money now, the financial sector and the homeowner.

*For another program, are we, as taxpayers better off if the guy who can’t pay all of his mortgage is thrown into the street, or do we really pay more to keep him in other housing, welfare and so forth. Maybe he should be subsidized some to keep him in his home. As I say, that’s another program.

The program outlined above works. Secretary Paulson has given no assurance that his plan works.

Bailout Bill Signed Into Law

President Bush today signed the largest financial bailout bill in the history of the world. The financial bailout bill represents over $700 billion dollars that the US Treasury will have at its desposal to purchase bad debt from financial institutions with the goal of easing the ever tightening credit crunch that is currently spreading throught the world.

Financial Bailout Bill Passes House

In a vote of 263 for and 171 against, The US House of Representatives passed the updated Financial Bailout Bill that was passed yesterday by the US Senate. The Bill now moves to the President, where it is expected to be signed into law without delay.

Republicans and Democrats Both Put Politics Before Country

That’s right Speaker Pelosi, get close to getting a bill passed then politicize it before the vote… Is this your vote as Speaker? What were you thinking?

Oh and let’s not forget the Republicans for trying to scapegoat Pelosi for why the deal did not pass. If you don’t like the Bill, say it. Don’t play politics in an economic crisis.

So let’s be clear, both parties are showing their inability to work together, especially in a time of crisis. — Glenn

House Republicans: Heroes or Villains?

The fact of the matter is we don’t know. The US House of Representatives killed the Bailout Bill before it left the House. The markets, to say the least, were not happy and expressed it by losing over a trillion dollars in market value today with the DJIA dropping over 777 points today.

It is hard to tell whether they are right or not. The market clearly thinks they are wrong. However, I still keep thinking about the fact that I pay my mortgage on time and live by my own financial decisions. That said, the idea of my tax dollars going to buy bad debt from companies that made bad decisions, just doesn’t sit well with me. It is incredibly hard to wade through all the various speculation of what awaits us in the next days, weeks and months.

However, as I said before, it is odd that the solution to a problem that was 20 years in the making has a solution that was developed in just days. Part of the other problem I have is with George Bush. He is like the “Boy Who Cried Wolf”. He just has no credibility left. So when he says we need it, one can only look to other sources for confirmation. So then we turn to the Democratic Leadership. I am sorry Barney Frank and Chris Dodd, but you just don’t sound convincing as to why we need to push $700 billion worth of additional debt onto the taxpayers. This was not helped by Barney Frank today playing the political blame card. Let’s face it, between the Democratic Leadership and the Administration, the Bill was not sold to the House Republicans or the the American people.

Now we get to our Presidential Candidates… Barack Obama makes daily calls with the Demoratic Leadership and the Administration. John McCain (allegedly) suspends his campaign on Thursday (which does not seem so suspended) to immediately got to Washington to provide “leadership”. Both candidates show up on Friday for what seems to be a photo op and a post meeting press opportunities. Neither one of them talk with any more confidence or details than anyone else in Congress or the Administration.

So that leads us with the House Republicans. They seem to be the true “Mavericks” of this drama. They kill the Bill and now the Congress goes on “Holiday”.

Maybe, we will find that The House Republicans have it right by forcing the Administration to use their existing laws and regulations to resolve this problem… maybe not. Either way, history will be written over the next days, weeks and months.

I suspect that whatever happens, a lot of people will find themselves without any more political capital and hopefully without their political jobs! — Glenn

Bailout Bill Shot Down in the House

The US House of Representatives stopped the Bailout Bill dead in its tracks with a vote of 228-205. On this news, the stock market went into a dive. At the time of this blog entry, the DJIA was down 673 points. It seems like the only thing that will stop the free fall in the market will be the close of the trading day.

The Proposed Bailout Bill – Get it Here

The Proposed Bailout Bill

It seems to be hard to find on any mainstream website (why is that?), but the bailout bill is available on a PDF. You can download the bill that was posted by the VoteCole.info Blog by clicking here.

According to CNN, the major provisions of the bill are:

• The $700 billion would be disbursed in stages, with $250 billion made available immediately for the Treasury’s use.

• Curbs will be placed on the compensation of executives at companies that sell mortgage assets to Treasury. Among them, companies that participate will not be able to deduct the salary they pay to executives above $500,000.

• An oversight board will be created. The board will include the Federal Reserve chairman, the Securities and Exchange Commission chairman, the Federal Home Finance Agency director and the Housing and Urban Development secretary.

• Treasury is allowed the option to take ownership stakes in participating companies under certain circumstances.

• Treasury may establish an insurance program – with risk-based premiums paid by the industry – to guarantee companies’ troubled assets, including mortgage-backed securities, purchased before March 14, 2008.