Trouble Beyond the Emergency Bailout

NEWSWEEK

Published Oct 4, 2008

From the magazine issue dated Oct 13, 2008

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' Big Government to the Rescue ' : Readers were clearly frustrated by the struggling economy and political gridlock over the bailout. "Washington is stumbling blindly through an economic minefield while we watch helplessly from the sidelines," one said. Another resented the "zero-oversight policy that all but begged Wall Street to get drunk on greed, promote ridiculous credit schemes, crash into a fiery inferno, retire in style and bill us for the wreckage." And one simplified things: "If we keep spending beyond our means, we'll have one financial crisis after another."

On ' The Ur-Text of a Tabloid Age ' : "I wonder if the bailout crisis is causing angst in the National Enquirer's offices. What to cover now: the breakdown of the American economy or the rumored breakup of Brangelina? Lehman Brothers or the Jonas Brothers?"
Nina Gaspich, Chicago, Ill.

Rescuing a Crumbling Economy
How interesting that the very proponents of smaller government when it comes to the interests of the little people are now ready to become big government and rescue Wall Street fat cats ("Big Government to the Rescue," Sept. 29). Aren't these the same leaders who championed free markets and deregulation for the past three decades? Why should they be bailed out while people are losing their homes because of the greed and deception of these very firms? A bailout that does not include help for those in lower income brackets who have purchased reasonably priced homes would be grossly unfair. Perhaps all at-risk loans for first homes under $250,000 should be restructured depending on the income of the owner. Certainly bankruptcy courts should protect the homes of these people first. And it would be a crime to allow the perpetrators of this debacle to make millions from taxpayers.
Mary Bagwell
Atlanta, GA.

Bundled mortgage securities insured with credit default swaps sold by pseudo-bankers (mortgage brokers) and real-estate agents on steroids? Who needs regulation when juvenile delinquents can run things? This crisis has been caused by pretend loans for pretend buyers from pretend adults with pretend insurance. And now the Wall Street suits are running to Mommy for a nearly $1 trillion bailout. Mommy, confused, scared and forgiving, admonishes her brats and caves in. Socialism for greedy, immature capitalists, and scraps and debt for the peasants? Why are we surprised? They should be required to pay it back, say at 5 percent of future profits. What a concept—that banks requiring us to pay our debts be required to pay theirs.
Tom Evans
Bemidji, Minn.

In your cover story, Fareed Zakaria erroneously claims that this crisis "should put an end to false debates about government versus markets. Governments create markets, and markets can exist only with regulation." The market is created by human instincts, not by the government (and democracy was born in the market, not from any great philosophies or ideals). Neither the market nor government is perfect, but the difference is that the former punishes incompetence and the latter subsidizes it. Whom would you rather have running things, those who punish incompetence or those who subsidize it? Zakaria further claims that with Treasury Secretary Henry Paulson, "America is extremely fortunate to have a man of tremendous intelligence, drive and pragmatism." No one would have disagreed with Paulson when he denounced "irresponsible practices" under which mortgages were sold to unqualified buyers and "sliced and diced" all over the world. According to him, "What has gone on here is terrible, inexcusable." Where was he when this behavior was rampant on Wall Street? Until May 2006 he was running a leading investment bank that was doing quite a bit of slicing and dicing, as John Gapper of the Financial Times has suggested. Now, as Treasury secretary, Paulson declares he's shocked about these "irresponsible practices." His ethical position appears questionable. If Paulson were bold and conscientious enough to donate the $18.7 million bonus he received from Goldman Sachs for half of 2006 to the Treasury's fund and lower the taxpayers' bill, his $700 billion bailout plan would seem more palatable to taxpayers and avoid the impression that it privatizes gains and socializes losses.
Yeomin Yoon
Professor of Finance and International Business
Seton Hall University
South Orange, N.J.

Robert McGee
Director, Center for Accounting, Auditing, and
Tax Studies, Florida International University
Miami, Fla.

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Posted By: Nowforthetruth @ 10/22/2008 6:51:15 PM

See: http://www.newsweek.com/id/164972
Stating that Gramm-Leach-Bliley Act wasn't what caused the meltdown, and noting that "economists on both sides of the political spectrum have suggested that the act has probably made the crisis less severe than it might otherwise have been." And also:
http://www.factcheck.org/elections-2008/who_caused_the_economic_crisis.html
Look and listen for yourself. Hear Obama in his own words discusses his links to both ACORN and the mortgage meltdown, and praises bundling and securitizing mortgages by banks as a means to float loans to the poor and spread the risk world wide. Never mind the link commentators point of view, just listen to what Obama says in his own words. A picture is worth a thousand words. Maybe more in the case of Obama comments in the last half of the first youtube link.

http://www.youtube.com/watch?v=Lr1M1T2Y314&feature=related

http://www.youtube.com/watch?v=8vJcVgJhNaU

See also:
http://boards.msn.com/MSNBCboards/thread.aspx?threadid=808692&boardsparam=Page%3d2

Below is a link to C-SPAN video clips of the Congressional hearings at roughly the time McCains attempt at S.190. to fix Fannie and Freddie. See for yourself who said what.

http://www.youtube.com/watch?v=_MGT_cSi7Rs
See also
http://www.newsweek.com/id/164732 from this web site. (oops!) stating that Freddie Mac was spending tax payer money to target Republicans in 2005 who were trying to regulate Fannie and Freddies fraud. Democrats were not targeted, as the were all in the tank with Fannie and Freddie to kill the regulations. Hear that, the article admits that Republicans were trying to regulate, and Democrats were trying to stop it from happening as a means to facilitate the Community Reinvestment Act.

The link below contains a purported list of the top 25 in Congress who got contributions from the folks at Fannie and Freddie. Obama is listed third, after Dodd and Kerry, even though Obama is just a junior Senator. Obama is followed next by Clinton. Barney Frank and Nancy Pelosi are on the list as well.

http://www.investors.com/editorial/IBDArticles.asp?artsec=16&artnum=1&issue=20080918

And the link below describes how some Democrats in Congress tried to use the original version of the bailout bill to divert money eventually recovered to groups like ACORN, a group Obama has a long association with. See: Wall Street Journal

http://online.wsj.com/article/SB122247015469280723.html?mod=googlenews_wsj
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Posted By: Nowforthetruth @ 10/22/2008 6:51:06 PM

Who "Joe the plumber" may be is not the issue, though it's easy to see why the Dems want it to be. That's because the real issue is what Obama's comments to him revealed about Obama. In the exchange with "Joe the plumber" we find out that Obama really is as radical as his early political acquaintances, Davis, Ayers, Wright, etc., and that he is into the failed economic policy of wealth redistribution. Obama's tax and spending plans alone would be bad enough, but add Reid and Pelosi to the mix, with the three of them controlling both houses of Congress and the executive branch without any effective restraint, and you have something that should causes concern even among moderate Democrats.
See Wall Street Journal: A Liberal Supermajority:

http://online.wsj.com/article/SB122420205889842989.html

And whether McCain won or lost the third debate is also not relevant. He succeeded in the first half hour to plant the seeds of a Reagan style wipeout. Reputable historians and economists overwhelmingly agree that the taxation imposed by Hoover and FDR, and the "stimulus" spending and public works programs of FDR, actually deepened and prolonged the Great Depression. It was the production demands of WWII that got the economy going again. And when the war was over, the economy promptly went into recession.

See e.g. http://www.cbsnews.com/stories/2008/10/03/opinion/main4499465.shtml
And
http://newsroom.ucla.edu/portal/ucla/FDR-s-Policies-Prolonged-Depression-5409.aspx

Point is, Obama's programs require him to tax, and his health care plan is a hidden tax on all business, large an small. In reality, it does not really matter who he taxes, those taxes are going to be passed through the economy. He has to tax, because it is they only way he can pay for his massive social engineering experiments. Any first year economics student knows that taxation is a tool used to contract an economy experiencing inflation, because it reduces demand by reducing the amount of money individuals and businesses have to spend. It is contractionary, which is exactly what you do not want to do when the problem is that the economy is contracting already into recession. Like Hoover and FDR, Obama's plans will only make it worse for longer.
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Posted By: speechpath1979 @ 10/11/2008 1:11:00 PM

have been a Newsweek subscriber for literally decades and I am through...Your magazine is no longer "news", it is full of Republican bashing articles, entirely full of opinionated biases. You have joined the ranks of trash/hollywood magazines like The Enquirer and People with your sensationalized and nasty covers of highly respected Republican candidates. I only hope more individuals like myself stand up against this type of media led negative press and also cancel their subscriptions to liberal biased magazines like yours.