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Tell them what YOU think about the bailout proposal on the table.

Ron Paul Votes NO BAILOUT (Speech on the House Floor on 9-29-08)



Why the bailout bombed
Republicans might blame Pelosi's rhetoric, but the message that mattered was the one that came from voters back home.
Barely containing his temper, Virginia's Eric Cantor, deputy whip for the House Republicans, stepped to the microphone this afternoon to blame the bailout defeat on House Speaker Nancy Pelosi's "failure to listen" and her charged partisan rhetoric in condemning President George Bush's "budgetary recklessness" and "anything-goes mentality." If only it were that simple. If only the failure of the White House to muster enough votes from its own party to avert what it calls looming financial disaster could be blamed on a few ill-chosen words uttered on the House floor by San Francisco's hyper-partisan speaker. In fact, Monday's surprise defeat of the $700 billion rescue package - meant to blunt a burgeoning financial crisis - can be traced to a failure on the part of the president and his treasury secretary, Henry Paulson, to fully appreciate the ferocity of the popular revolt they touched off nine days ago.

Central banks pump in $620bn as shares plummet
Central banks around the world unveiled a plan to pump massive amounts of cash into the global banking system in a concerted effort to boost market confidence and inject liquidity into the global markets. The move followed a fall in the Dow Jones of nearly 300 points in morning trade to 10,869 as the market took fright at several bank nationalisations in Europe and the US despite the approval of the "son of Tarp" - the Troubled Asset Relief Programme - bailout. The FTSE 100 index of leading shares was down almost 5 per cent, taking it to a new low for the year and below the psychologically significant threshold of 5,000. As nine central banks used currency swaps to oil the wheels of dollar liquidity in the money markets, sterling plunged and was on course for its steepest one-day drop against the dollar for at least a decade and a half.

The US and global financial crisis is becoming much
more severe in spite of the Treasury rescue plan.
The risk of a total systemic meltdown is now as high as ever
Nouriel Roubini | Sep 29, 2008
It is obvious that the current financial crisis is becoming more severe in spite of the Treasury rescue plan (or maybe because of it as this plan it totally flawed). The severe strains in financial markets (money markets, credit markets, stock markets, CDS and derivative markets) are becoming more severe rather than less severe in spite of the nuclear option (after the Fannie and Freddie $200 billion bazooka bailout failed to restore confidence) of a $700 billion package: interbank spreads are widening (TED spread, swap spreads, Libo-OIS spread) and are at level never seen before; credit spreads (such as junk bond yield spreads relative to Treasuries are widening to new peaks; short-term Treasury yields are going back to near zero levels as there is flight to safety; CDS spread for financial institutions are rising to extreme levels (Morgan Stanley ones at 1200 last week) as the ban on shorting of financial stock has moved the pressures on financial firms to the CDS market; and stock markets around the world have reacted very negatively to this rescue package (US market are down about 3% this morning at their opening). Let me explain now in more detail why we are now back to the risk of a total systemic financial meltdown…

U.S. House rejects plan for bailout
Defying President George W. Bush and the leaders of both parties, rank-and-file lawmakers in the House on Monday rejected a $700 billion economic rescue plan in a revolt that rocked the Capitol, sent markets The stunning defeat of the proposal on a 228-205 vote after marathon talks by senior congressional and Bush administration officials lowered a fog of uncertainty over economies around the globe. Its authors had described the measure as essential to preventing widespread economic calamity. The markets began to plummet even before the 15-minute voting period expired on the House floor. For 25 minutes, uncertainty gripped the nation as television showed party leaders trying, and failing, to muster more support. Finally, Representative Ellen Tauscher, Democrat of California, pounded the gavel and it was done.

US banking bailout in chaos after shock House of Representatives vote
The financial system lurched closer to a catastrophic breakdown last night after the US Congress dramatically rejected a bailout plan designed to restore confidence to paralysed banks. Wall Street suffered one of its worst days in history. In 24 hours five banks across the West, including Britain’s Bradford & Bingley, had to be rescued to avoid insolvency. With plans for the biggest rescue of Wall Street since the Great Depression in tatters, the Dow Jones industrial average of shares dived almost 800 points, losing 7 per cent of its value. It was the worst one-day points fall and the worst percentage fall since Black Monday in 1987. The surprise rejection of the bailout triggered fears of a new wave of banking collapses. Other economies had looked to America to lead the way out of the crisis.

The Depression of 2008? Don't Count on It $$
Wall Street is dead. Whether it was murder or suicide is beside the point: Wall Street as it has operated for the past 75 years has been obliterated in a matter of weeks. And witnessing this violent death in broad daylight has traumatized investors everywhere. The Wall Street domino has toppled just about everything in sight: U.S. stocks large and small, within the financial industry and outside of it; foreign stocks; oil and other commodities; real-estate investment trusts; formerly booming emerging markets like India and China. Even gold, although it has inched up lately, has lost 10% from its highs earlier this year. Not even cash seems entirely safe, as money-market funds barely averted a "run on the bank." Of all the dominos that have tipped over, the most psychologically damaging collapse was the last: the very notion of diversification itself.

Paulson Plan Is Still a Pig, Even With Lipstick
If Treasury Secretary Hank Paulson thought he could cram a $700 billion plan to buy financial institutions' toxic mortgage-backed waste through Congress with no questions asked, he got a rude awakening last week. Paulson and Federal Reserve Chairman Ben Bernanke were grilled by Senate and House committees on the plan. Those same lawmakers were inundated with calls and e-mails from constituents expressing outrage at what they saw as a bailout of Wall Street for a problem of Wall Street's own making. It took them all weekend to hammer out something they could sign off on. Why was it so hard for Paulson to close the deal after laying the blame at Congress' feet should a failure to act result in a collapse of the financial system? Maybe his report card holds the key. Communication Skills: C-

U.S. bailout rejection spurs flight to safety
Recession fears mounted and investors raced for safe havens after U.S. lawmakers unexpectedly rejected a $700 billion (388 billion pound) bailout plan for the financial industry, but Asian stocks trimmed deep early losses after Wall Street's biggest fall since the crash of 1987. A week that started badly with the rescue of three banks in Europe and the distressed sale of big U.S. lender Wachovia to Citigroup grew worse after the U.S. Congress was unable to agree on a rescue package. "It's hard to imagine what's going to happen. It's kind of scary," said Masayoshi Okamoto, head of dealing at Jujiya Securities in Tokyo. "In particular, European banks were putting up a front that nothing was wrong, but now they're falling one after another."
Shares in Asia recovered from early lows but were still down about 3 percent.

U.S. Lawmakers Spurn Pleas From Leadership in Rejecting Bailout
Lawmakers from Texas, Arizona, and California helped defeat a $700 billion credit-market rescue in the U.S. House, voting more in line with their followers, or constituents, than their leaders. The bill was a priority for President George W. Bush, yet 15 of 19 Republicans from his home state, Texas, voted against it. Republican presidential candidate John McCain left the campaign trail to help the measure, which didn't get a single vote from his state of Arizona. Almost half the usually loyal California Democratic delegation rebuffed House Speaker Nancy Pelosi. For too many lawmakers, five weeks before Election Day, the threat of market calamity and arm-twisting from party leaders couldn't overcome impassioned opposition back home, where the rescue plan is drawing fire as a bailout for rich Wall Street bankers.

Senate May Try to Revive Bank-Rescue Bill as Early as Tomorrow
The U.S. Senate will try to salvage a $700 billion financial-rescue package after the measure was defeated in the House of Representatives. The lawmakers won't have a lot of room to negotiate. While they need to tweak the legislation enough to win over reluctant Republicans, they'll risk losing votes from Democrats if they veer too far from the delicate compromise that congressional leaders hammered out with the U.S. Treasury. "They're not going to totally revamp the bill," said Pete Davis, president of Davis Capital Investment Ideas in Washington, who spoke to House and Senate leaders yesterday. "They'll make some minor changes and pass it. This is all about political cover."

Bailout vote stuns Washington, markets
Dow suffers record loss;
world stocks plunge; Bush, House to try again
World financial markets reeled as stunned lawmakers groped for their next move Monday after House Republicans abandoned President Bush in droves to help kill his $700 billion proposal to rescue the financial services industry. Even before the vote was announced, stocks began tanking on Wall Street. The Dow Jones Industrial Average nose-dived by more than 777 points, its worst fall ever, in a sell-off that swept markets around the globe. As fears rose that the credit crisis was spreading, Asian and European markets closed sharply down, and governments in at least eight European countries took steps to begin rescuing large banking institutions.

Fed takes fresh steps to battle credit crisis
Action intended to ‘expand significantly’ the availability of cash
The Federal Reserve and foreign central banks moved Monday to pump billions of dollars to cash-strapped banks at home and abroad in a dramatic bid to break through a credit clog and spur lending. The Fed said the action is intended to “expand significantly” the cash available to financial institutions, its latest effort to relieve the worst credit crisis since the Great Depression. The goal is to boost the amount of quick cash available to banks and other financial institutions so that they’ll feel more confident and inclined to lend not only to each other but also to people and businesses.

Money market freeze stirs rate cut speculation
Central banks and regulators scrambled on Tuesday to relieve the strain on financial markets frazzled by another hefty blow to confidence, this time from the rejection by U.S. lawmakers of a $700 billion (388 billion pound) rescue plan. Global central banks more than doubled the amount of dollar funding to $620 billion, but the move showed no signs on Tuesday of thawing the freeze in money markets where banks are hoarding cash and bracing for more trouble ahead in the deepening year-long credit crisis. Analysts said central banks may now be forced to cut interest rates in a coordinated move because their massive fund injections have done little to ease strains that are threatening to become a bigger systemic breakdown that could endanger the global economy.

Even Hank Paulson's bail-out plan cannot detox global banking
Can the rescue package really halt our slide
into a new Depression, asks Ambrose Evans-Pritchard.
Even if Congress backs the Paulson bail-out, the $700 billion blast cannot save the US, Britain or the world from the deepest economic slump since the Thirties. If Congress balks, God help us. The credit system is suffering a heart attack. Inter-bank lending is paralysed. Funds are accepting zero interest on US Treasury notes for the first time since Pearl Harbour, because no bank account is safe. Wherever you look – dollar, euro, sterling Libor (the rate at which banks lend to each other), or spreads on credit derivatives – the stress has reached breaking point. If borrowers cannot roll over the three-month loans that are the lifeblood of business, they will default en masse. "Money markets are imploding. If no action is taken very soon, there is a significant risk that the global economy will collapse," says BNP Paribas. Almost every trader says much the same thing. So does US treasury secretary Hank Paulson, who as Toby Harnden reports, literally dropped on bended knee to beg help from Democrats on Capitol Hill.

Panic grips world's markets
Shock as American rescue plan
rejected on a day of nationalisations and bail-outs
The US government's $700bn bail-out of the banking industry collapsed yesterday as Congress defied the White House by voting down the plan, sending Wall Street stocks plummeting and spreading shockwaves through the global economy. In a snub to George Bush's authority, Republicans in the House of Representatives led a rebellion which defeated the rescue by 228 votes to 205. As alarm mounted on Wall Street about the stability of the financial system, the Dow Jones Industrial Average plunged by 777 points to 10,365 - its biggest percentage fall for seven years and its worst drop ever in terms of points. The package was intended to allow the government to buy toxic mortgage-related liabilities from banks, after warning that without action banks would curtail home loans, car loans and student loans, as well as credit to keep small firms trading.

Is Purchasing $700 billion of Toxic Assets the
Best Way to Recapitalize the Financial System?
No! It is Rather a Disgrace and Rip-Off Benefitting
only the Shareholders and Unsecured Creditors of Banks
Whenever there is a systemic banking crisis there is a need to recapitalize the banking/financial system to avoid an excessive and destructive credit contraction. But purchasing toxic/illiquid assets of the financial system is not the most effective and efficient way to recapitalize the banking system. Such recapitalization – via the use of public resources – can occur in a number of alternative ways: purchase of bad assets/loans; government injection of preferred shares; government injection of common shares; government purchase of subordinated debt; government issuance of government bonds to be placed on the banks’ balance sheet; government injection of cash; government credit lines extended to the banks; government assumption of government liabilities.

'They're throwing billions around but things seem to be getting worse'
World central banks desperately tried to stave off collapse of the global banking system yesterday with large cash injections into money markets buckling amid news of another rash of bank failures. The pound also suffered its biggest one-day fall since mid-1993 against the dollar as dealers focused on the fact that the US government looked as if it was going to approve its $700bn (£389bn) bail-out for US banks while the UK banking system suddenly seemed shakier than before. Sterling fell 2.3% to below $1.80 at one point. The dollar fell in late trading after the US House of Representatives voted against the bail-out plan. Mark Deans, dealing manager at Moneycorp, said: "Confidence in UK banking has fallen to a new low with the nationalisation of Bradford & Bingley. This has prompted a major sterling sell-off and, coupled with growing confidence that the US government's Wall Street bail-out may be agreed, it has resulted in the pound's heavy fall against the dollar."

Wall Street's slow demise
With breathtaking speed, the world of large Wall Street investment banks has vanished. Fabled firms, some more than a century old, have been merged out of existence (Bear Stearns, Merrill Lynch), gone bankrupt (Lehman Brothers), or sought asylum as commercial bank holding companies (Goldman Sachs, Morgan Stanley). Why on earth did this happen? The death of Wall Street has been a long-running, slow-motion crisis, barely discernible to participants who had still booked huge profits in recent years. Beneath the razzle-dazzle of trading desks and the wizardry of esoteric finance lay the inescapable fact that these firms had shed their original reason for being: providing capital to U.S. business.

Anger as House rejects rescue plan
Anger and confusion overwhelmed the House of Representatives on Monday as Republican legislators ripped into a $700bn financial rescue package backed by almost the entire US political establishment. Congressional leaders scrambled for an alternative course of action once it was voted down. Powerful last-minute pleas by John Boehner, the House minority leader, and Nancy Pelosi, speaker of the House, were unable to prevent the defeat of the bill by 228 votes to 205, with Republicans voting by two to one against and divided Democrats unable to make up the difference. “Nobody wants to vote for this; nobody wants to be anywhere around it,” Mr Boehner said at the end of a debate in which critics assailed the proposal and supporters provided only half-hearted backing.

Adrift and afraid in uncharted territory
It was a bad plan - but it was a plan. The refusal of Congress to back Hank Paulson's bail-out takes us into new territory. George Bush told Americans to expect "a serious financial crisis" and "a long and painful recession" if the legislation was blocked. Paulson went down on his knees to beg for support. But opposition from ordinary Americans killed the bill. It was a historic day: even the decimal point on the Dow Jones average made it memorable. The final reading was: down 777.7 points. Some horsetrading in Washington may yet produce a revised deal that would be acceptable to the politicians, but the banks know there will be no easy handouts: Main Street, for better or worse, wants to see Wall Street suffer. In an election year, voters get what they want.

Many Lenders Lower Credit-Card Limits $$
It's not just your portfolio that may be shrinking lately. The spending limit on your credit card may be heading south as well. Credit-card issuers have been decreasing credit limits. "Most banks are cutting their credit limits," says Carol Kaplan, spokeswoman for the American Bankers Association. "They're doing it to everyone." Smaller credit lines spell trouble for consumers on several fronts. Lower credit limits shrink consumers' ability to spend. And should an emergency arise, consumers will have less credit to cover those costs. Consumers also could trigger penalties for going over a newly lower limit.

US wealth in shrink mode
The US Congress went into labor this weekend, and gave birth to a gnat. With some cosmetic adjustments, Treasury Secretary Henry Paulson's US$700 billion bank bailout plan will be adopted this week. Markets barely budged on the news, which was punctuated by government bailouts of two giant banks - America's Washington Mutual and Belgium's giant Fortis group. A third rescue, of Britain's Bradford and Bingley, sees it taken over by the government. Paulson's plan likely will provide temporary relief to the stockholders of some American banks, whose balance sheets do not look all that different from Washington Mutual's. But this has nothing to do with the larger problem, namely the de-leveraging of the American household. Leverage is the secret of American wealth.

Treasury opens money market guarantee program
The U.S. Treasury Department said on Monday its temporary guarantee program for up to $3.4 trillion in money market mutual fund assets held as of Sept. 19 was now in effect for a three-month period. The Treasury said each fund regulated by the U.S. Securities and Exchange Commission that maintains a stable stock price of $1 can now decide whether to pay a fee to participate in the program. Money market mutual fund shares acquired after Sept. 19, when the Treasury announced the plan, will not be guaranteed under the program. To receive the government guarantee, participating money market mutual funds that had a net asset value of at least $0.9975 per share on Sept. 19 must pay a fee of 1 basis point per share to the Treasury. Those with a net asset value below $0.995 on Sept. 19 are not eligible for the program, and those between $0.995 and $0.9975 on that date must pay a 1.5 basis-point fee. The Treasury created the program to try to stem a massive run on about $3.4 trillion in money market mutual fund assets after the Reserve Primary Fund -- one of the oldest U.S. money market funds -- fell below $1 per share -- a phenomenon known as "breaking the buck."

Big banks, bumbling idiots
The really chilling news is that investment banks are being changed into commercial banks, which gives them the right to create - out of thin air, and then loan - money using fractional-reserve banking! Yikes! They are now banks! These greedy, thieving, lying, staggeringly stupid weenies who are at the epicenter of the biggest financial catastrophe in American history are now being given the right to increase the money supply at their whim to satisfy the willingness of customers, and themselves, to borrow the money! Astounding!

House rejects $700B bailout in stunning defeat
House rejects $700B bailout in stunning defeat,
driving stocks down; Treasury vows more work
In a vote that shook the government, Wall Street and markets around the world, the House on Monday defeated a $700 billion emergency rescue for the nation's financial system, leaving both parties' lawmakers and the Bush administration scrambling to pick up the pieces. Dismayed investors sent the Dow Jones industrials plunging 777 points, the most ever for a single day. "We need to put something back together that works," a grim-faced Treasury Secretary Henry Paulson said after he and Federal Reserve Chairman Ben Bernanke joined in an emergency strategy session at the White House. On Capitol Hill, Democratic leaders said the House would reconvene Thursday, leaving open the possibility that it could salvage a reworked version. Senate leaders showed no inclination to try to bring the measure to a vote before they could determine its fate in the House. President Bush, meanwhile, was scheduled to make a statement on the rescue plan Tuesday morning, the White House said.

The Bailout Plan's Modifications Spell Disaster For The U.S. Economy
In looking at the statement from House Speaker Pelosi which outlines the bailout plan as it will be passed, the first impression of it is that the politicians have eviscerated the Treasury's original proposal to the point which makes the plan destined to fail. Failure of the plan to work means that the U.S. will enter a much deeper and longer lasting recession than it otherwise would have.

Who Really Benefits from the Bailout -- Wall Street or Main Street?
According to some legislators and President Bush, the $700 billion bailout package headed for a House vote this afternoon is less a life raft for Wall Street than a means of keeping Main Street afloat. It's a nice sentiment, but as Henry and I discuss in the accompanying video, good intentions don't always translate into workable plans. It's a given that Wall Street and Main Street are inextricably linked, and that plenty of consumers binged on debt right alongside the banks currently on tap for a federal handout. But if helping homeowners and other stressed consumers in order to bolster the economy is the ultimate goal, Henry argues, why not bail them out directly and let the bad banks fail? Either way, one effect may be that Americans rededicate themselves to saving rather than spending beyond their means.

Fed makes billions available to battle crisis
Fed makes billions available to battle credit crisis; pledges to act as needed
The Federal Reserve and foreign central banks agreed to pump billions of dollars into the global financial system Monday to unlock tight lending that threatens to unhinge the U.S. economy. The Fed said the action is intended to "expand significantly" the cash available to financial institutions in an effort to relieve to the worst credit crisis since the Great Depression. In taking the action, the Fed cited "continued strains" in the demand for short-term funding. Central banks will continue to work closely and are prepared to take "appropriate steps as needed" to ease the crisis and get banks lending again, the Fed said. Under one new step, the Fed will boost the amount of 84-day cash loans available to U.S. banks. The Fed is increasing the amount to $75 billion, up from the current $25 billion starting on Oct. 6. Banks bid on a slice of the loans at an auction.

After Bailout, Economy Will Still Be Lousy
Prepare to be disappointed: The Bailout of the Century will probably do little to make life better anytime soon for the taxpayers footing The Emergency Economic Stabilization Act of 2008 may help avert the unspecified economic disaster that Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke keep hinting at. But for most of us, it's hard to fathom this freakish financial monster lurking in the darkness, unseen by anybody except Paulson and Bernanke. Instead, we cling to quaint notions, like the idea that for $700 billion in taxpayer commitments, we ought to get something tangible in return. That's false optimism. The legislation establishes new government procedures to "protect home values, college funds, retirement accounts, and life savings." Good priorities. But that word "protect" doesn't mean you'll end up better off. No checks are going to arrive in your mailbox. Your retirement portfolio won't suddenly rebound. You won't get an iPod as thanks for your contribution to the Bailout Olympics. You'll simply be spared some sort of wipeout.

Deaf frogs and the Pied Piper
A truly horrible joke from the days when vivisection was still permitted has it that a scientist took to the lab a trained frog that could jump whenever it heard the command "jump". In that respect, the amphibian was quite similar to communist party members around the world, but anyway let's carry on with the story.
In the lab, the scientist placed the frog on a table and swiftly sundered one limb. He then said "jump" and the frog complied with some difficulty. He then proceeded to do the same to the limb on the opposite side and said the same thing - and the frog miraculously managed to jump again. Then the third limb and the frog defied all odds by still jumping with just one limb. Finally, the last limb was split and of course this time the frog could not jump. The scientist wrote his conclusion in the journal, "When it lost all four limbs, the frog became DEAF."
With all apologies to animal lovers, the story resonated with me last week not so much because I happened to pass a French restaurant or two, but rather the triumphant signaling of the end of market capitalism that is being heralded by leftist newspapers and other media outlets globally. Across Asia, the decline of American banks and government-sponsored intervention in financial markets is being seen as the reason for everyone to return to Japanese-style interventionist policies.

Your scorecard for understanding mortgage scandal
Find out who's who in the 'Rogues Gallery' of economic crisis
As Congress works on a $700 billion bailout plan for the U.S. financial system, the FBI has extended fraud investigations to 26 companies involved in mortgage lending. Authorities are attempting to determine whether any of the firms have participated in accounting fraud, insider trading or inflating values of mortgage-related assets. The FBI has not disclosed a list of companies under investigation, but the following are just a few firms in distress and executives under scrutiny.

Broad Authority, Lots of Money And Uncertainty
Congress is on the verge of granting Treasury Secretary Henry M. Paulson Jr. sweeping powers to stabilize the nation's financial system. He would stand largely unfettered by traditional rules, largely unrestricted in his ability to spend $700 billion of federal money. The Treasury Department would decide what kind of assets to buy, and which financial firms could sell them. It would decide how much to pay. And it would hire firms to manage its acquisitions, without having to obey the normal rules for hiring contractors. These decisions would take several weeks, Paulson said. The results will determine whether $700 billion is enough to end the financial crisis. "This is really an unusual situation, a highly unusual situation. And we need flexibility, we need a variety of tools, we need to figure out how to get out there in weeks," Paulson said in an interview last night.

Paulson to get the power he wants
AFTER a week of political brinksmanship and 100 pages of concessions to political reality, US Treasury Secretary Henry Paulson seems to have finally won the power and money he asked for to mount an unprecedented rescue of the financial system. If approved by a reluctant Congress and signed into law by the President, the Economic Stabilisation Act of 2008 will authorise Paulson to continue in a bigger and systematic way what the Treasury and Federal Reserve have been doing since March when they committed $US29 billion to facilitate the sale of Bear Stearns to its stronger rival, JPMorgan Chase. And although the initial focus will be on home mortgages and mortgage-backed securities, there remains enough flexibility in the legislation for Paulson to tackle similar problems with car loans, credit card debt and loans for commercial real estate.

Americans get the wool pulled over their eyes
The money men have been well prepared for the crisis sweeping the world. IN THE mid-1980s, at the height of the savings and loan scandal - a smaller crisis than what is now gripping the US, but almost an identical harbinger of promises to come - the popular Phil Donahue TV show devoted a program to the situation. An angry man from the audience demanded to know: "Why can't the government pay for these debts instead of the people?" Now we see the financial titans demanding: "Why can't the public pay for these debts instead of us?" Or even more grandly: "Why can't foreign taxpayers do so?" Back in the 1980s, the audience at Donahue's show erupted in applause at the suggestion the government, not the taxpayer, foot the bill. I expect millions of American's in their lounge rooms roundly agreed. Americans had forgotten they were the government. Years of populist politics of blaming Washington, or "big government", for their woes - the Reagan revolution - had convinced Americans their government was some sort of occupying entity determined to fleece them. So the bail-out, or bail-up, of the 1980s passed partly because Americans were sufficiently ignorant to believe that they, the people, were not their own government.

No bailout for bankruptcy
Lending lobby thwarts homeowner relief plan
As congressional negotiators labored over the $700 billion financial bailout plan last week, business leaders saw little to applaud in more than a few of the ideas under discussion, including demands for limits on executive compensation. But one proposal aroused particular ire: changing the nation's bankruptcy laws to make it easier for homeowners to downsize troubled home mortgages. And on Sunday, when the head-banging ended and the dust cleared, a coalition of banking and mortgage industry lobbyists had reason to celebrate: The final bill included no changes in federal bankruptcy laws. The business lobbyists' victory infuriated such pillars of the Democratic establishment as major labor unions and consumer groups. Behind the scenes, however, proponents of the change proved no match for a coalition that included the American Bankers Association, the Mortgage Bankers Association and the home builders lobby. Starting with a core of Republicans who adamantly opposed any such change, the coalition persuaded key Democratic leaders in Congress that pushing the idea could doom the rescue effort and endanger the whole economy.

Banks warned on hiding credit exposure
The prudential regulator has warned the big banks to scrutinise their overall loan exposure to financial companies and their satellite funds as turmoil continues on global markets. The Australian Prudential Regulation Authority (APRA) is concerned the banks may be treating loans to companies such as Macquarie Group, Babcock & Brown and Challenger Financial and their listed funds as separate exposures, as this could allow the banks to avoid reporting them to the regulator, The Australian Financial Review reports. Prudential standards dictate that lenders must advise APRA of exposures that exceed 10 per cent of their lending books. Similarly, banks are not allowed to lend more than 25 per cent of their loan book to a single entity without APRA's permission.

A changed financial landscape
For our country's sake, I hope our Washington politicians worked out a mindful financial sector bailout package over the weekend. Not that I am pro-bailout or for government intervention. It's just that our financial system is teetering at the precipice. The federal takeover and "sale" of Washington Mutual, our nation's largest bank failure to date, was yet another major body blow. Confidence has now been shaken so brutally that our policymakers can do little to repair the damage. Yet at this point, stop-gap measures to restrain collapse seem more appealing to me than no measures at all. The financial structure that fueled myriad credit bubbles, asset bubbles, economic bubbles and overliquefied the entire world is today no longer viable. Wall Street finance is at this point an unmitigated bust, with a few of the "holdout" sectors (ie the credit default market and the hedge fund community) now succumbing. The great financial alchemy of transforming endless risky loans into perceived safe and liquid "money"-like instruments has run its historic course.

RBA pumps billions into the market
THE Reserve Bank is pumping money into financial markets at a record rate while nervous investors seek confirmation of the US Government's plan to rid banks of troublesome assets. The RBA yesterday accepted Authorised Deposit Taking Institution (ADI) securities worth $2.7 billion, on top of a surplus system cash position of $424 million. And the liquidity injection of more than $3.1 billion means the central bank has a record $10.7 billion out in the financial markets. Even so, long-term debt markets are still frozen, and Elstree Investment Management director Campbell Dawson said it was too early to tell whether the US Government's $US700 billion ($A840 billion) bail-out would loosen things up. "The only way you can get money is basically through banks," he said, explaining that some of the bigger requests for funds were allegedly being refused. The US House of Representatives and the Senate are scheduled to vote on the Troubled Assets Relief Program (TARP) legislation early this week but it is not clear that it has enough votes to pass the lower house. The TARP would accept responsibility for the so-called "toxic" assets held by many US financial institutions, disposing of them over several years.

US Congress's Rescue Plan Could Pose Pain For Weakest Banks
A nearly final version of the federal government's rescue plan for the U.S. financial system presents some tough choices for the nations' weakest firms. The House of Representatives is likely to vote on the $700 billion measure on Monday, with the Senate moving after the House. A nearly final working draft includes provisions that will make public the prices at which the U.S. Treasury buys troubled mortgage assets from financial institutions, and will also allow Congress to recoup from participating firms any losses suffered by taxpayers after a period of five years. House Speaker Nancy Pelosi, D-Calif., on Sunday evening said that the provision giving taxpayers the right to recoup all losses from participating institutions "a major, major change" over the bill' previous format. She said the provision met "much resistance" from the administration, but is nonetheless likely to be included in the bill's final version. "In any case where there is a shortfall," for taxpayers after five years, the draft says, "the President shall submit a legislative proposal that recoups from the financial industry an amount equal to the shortfall" so that any enduring cost to taxpayers "does not add to the deficit or national debt."

Plan B for Bailout Looks to New Deal For Inspiration
What if it doesn’t work? Contrary to popular belief, House Financial Services Chairman Barney Frank , D-Mass., and Treasury Secretary Henry M. Paulson have a Plan B for the massive financial bailout bill, Frank said Sunday night. Should the bill (HR 3997) fail, Frank said, congressional leaders and the administration would look back to President Franklin D. Roosevelt’s New Deal for answers. But that would mean greater government intervention, not less, he warned. “Should we decide that to get us out of this hole there needs to be what was referred to under the New Deal as the Homeowners Loan Corporation . . . it may have to be a more substantial participation by the federal government,” Frank said. At the core of the current financial crisis are mortgage foreclosures - a number that reached more than 272,000 in July. Frank said the backup plan would directly address that issue. It would be based on the Home Owners’ Loan Corporation (HOLC), an agency established by Roosevelt in 1933 in the depths of the Great Depression.

It’s not just Wall Street with its back to the wall
I’m in shock. Can this crisis get any worse?
My instinct is it can. My deep concern is it will.
This time last week, the world was breathing a sigh of relief. The “bailout” had just been announced - and share prices shot up in celebration. Financial markets were jubilant US Treasury Secretary Hank Paulson was coming to the rescue. Even inter-bank rates – what banks charge to lend to each other - were falling. So last weekend, as Paulson purred, we all saw a light at the end of the tunnel. Yet, as we now know, that light was an oncoming train. Last weekend I warned, despite the euphoria, the bailout could cause an “almighty, debilitating political dust-up”. Unfortunately, that’s what happened. Having spent the last few days in the US, I can vouch voters are very, very angry about feather-bedding a bunch of overpaid bankers. Even in New York, a city that lives and breaths high finance, the tabloids screamed “Fraud Street” - aimed directly at the Wall Street crowd.

Bailout's Bottom Line: It's a Confidence Game
For all the economic debate and political wrangling, the $700 bailout package comes down to one word: Confidence. "This is about market confidence and the tools to do the job," Treasury Secretary Hank Paulson said last week during Congressional hearings on the $700 bailout plan, which is set for a House vote this afternoon. Paulson's point is financial institutions have lost confidence in each other -- credit spreads show banks are refusing to lend to each other, much less consumers or business - and only massive government intervention can restore it. The acute nature of the market was on stark display Monday as financial institutions across the globe faced disaster:

Sarkozy calls for global crisis summit
Europe’s leading policymakers will convene in Paris next week to prepare the ground for a possible global summit on the financial crisis, Nicolas Sarkozy, France’s president, said on Monday. He said the Paris talks would bring together officials from France, Germany, Italy and the UK – the four European Union powers represented in the G8 group of industrialised nations – as well as Jean-Claude Trichet, the European Central Bank president, José Manuel Barroso, the European Commission president, and Jean-Claude Juncker, head of the eurozone’s finance ministers’ group. "We must not give in to the forces of destabilisation. We must support the banks. But there are structural problems. I confirm my call for a summit in coming weeks to establish the basis for a new international financial system," Mr Sarkozy said. Speaking after a summit of EU and Indian leaders in the French city of Marseille, he added: "Europe has to develop a financial and economic determination as big as the crisis that we face."

Hugo Chavez wants Venezuela to have nuclear programme
Venezuelan President Hugo Chavez has announced he wants the country to develop a nuclear programme with the help of Russia. He insists, as do the Iranians, that it would be for purely peaceful purposes. "We certainly are interested in developing nuclear energy, for peaceful ends of course, for medical purposes and to generate electricity," Mr Chavez said during a political rally of his United Venezuelan Socialist Party in Caracas. "Brazil has various nuclear reactors, as does Argentina. We will have ours and Vladimir [Putin, the Russian prime minister] said Russia is ready to help Venezuela develop nuclear energy." The Venezuelan president recently returned from Moscow, where increasingly close ties were cemented with planned joint military exercises, energy accords and a Russian offer of a billion-dollar credit line to Venezuela for further arms purchases. Mr Chavez has already spent $4.4 bn on Russian aircraft, submarines and weapons. The Venezuelan president said he had forged a "profound friendship" with Mr Putin.

Venezuela to go nuclear with Russia
Venezuela plans to develop its nuclear energy capacity with the help of ally Russia, Venezuelan President Hugo Chavez said in a national address. The leftist Chavez -- an outspoken critic of the United States -- said the South American country would develop a civilian nuclear energy program with Russia's help, El Universal reported Monday.

Russia says Gazprom ready to drill off Venezuela
NOVO-OGARYOVO, RUSSIA: Russian Prime Minister Vladimir Putin told Reuters that Gazprom will be ready to start drilling for hydrocarbons off Venezuela by the end of October. "I am very pleased to note the launch of the first Gazprom drilling rig in the Venezuelan gulf is planned for the end of October," Putin told Venezuelan President Hugo Chavez after a meeting at his official residence on the outskirts of Moscow.

ALMOST ARMAGEDDON
MARKETS WERE 500 TRADES FROM A MELTDOWN
......Without commercial paper, "factories would have to shut down, people would lose their jobs and there would be an effect on the real economy," ......
Cracks started to show in money market accounts late Tuesday when shares in one fund, the Reserve Primary Fund - which touted itself as super safe - fell below the golden $1 a share level. It had purchased what it thought was safe Lehman bonds, never dreaming they could default - which they did 24 hours earlier when the 158-year-old investment bank filed Chapter 11. By Wednesday, banks sensed a run on their accounts. They started stockpiling cash in anticipation of withdrawals. . . . .Paulson knew the $105 billion injection was not a real solution. A broader, more radical answer was needed. Hours after Paulson made his round of calls to calm the industry, word leaked out that an added $1 trillion bailout of banks was being readied. Investors cheered. At about 3 p.m., news of the plans was filtering up and down Wall Street, fueling a 700-point advance in the Dow Jones industrial average through 4 p.m. Friday. By that time, Paulson had announced the plan. It included insurance on money market accounts, a move that started in quiet Thursday morning, when the former Goldman Sachs executive saved the country from a paralyzing meltdown.