US Congress is set to sell out the country
Partially relevant rant Enslaving Main Street to gild Wall Street
It might do that by voting to grant US Treasury Secretary Henry Paulson the authority to bail out and line the pockets of the wealthiest and most favoured of that reckless class of greed-blinded crooks and swindlers who have financially ruined much of the US populace.
In the process they've driven many large US banks, hedge funds and insurance companies straight off the cliff of financial insolvency and into undeclared bankruptcy.
The so-called representatives of the people might do that because they've been bought and paid-for long ago with incremental bribes of political campaign contributions doled out by that same elite and long entrenched class of financial players. Many US congress people have been paid about $1 million each over the years, give or take a few hundred thousand dollars.
What the House of Representatives is about to vote on and possibly approve is a daft bill already passed by the Senate that would give Secretary Paulson virtually unlimited carte blanche to loot the US Treasury of, and indebt the country for generations by borrowing from the Federal Reserve, and through it the rest of the world, literally trillions of dollars.
The initial authorisation is nominally for $350 billion, but that's automatically extendable to $700 billion under the bill, and that spending authorisation may be renewed, $700 billion at a whack, indefinitely and limitlessly.
Under the bill, Secretary Paulson's authority to pay out taxpayer money to whomever he pleases, for whatever assets or purposes he wishes, at whatever prices, is not constrained in any meaningful way. It is not subject to any binding guidance or close oversight and is not reviewable or reversible by any legislative body or any court of law.
The bill is simply a breathtakingly brazen prescription for total financial dictatorship over the US Treasury and future US tax liabilities, as far as the eye can see.
This incredible financial coup d'etat is being justified as somehow imperatively necessary by the supposedly impending collapse of world's financial system.
The promoters of this scheme -- US Treasury Secretary Henry Paulson, principally, plus US Federal Reserve Chairman Benjamin Bernanke and US President George Bush -- claim that this unprecendented abrogation of US Congressional power over the national purse is needed because some large banks and insurance companies are in a severe financial bind.
The spot they're in has resulted from their wild abandon in devising, making, packaging, insuring, selling and trading home mortgage loans and equity loans, made in all too many cases to people who couldn't afford them.
Many people, who were induced to sign up for variable interest rate Subprime and Alt-A mortgage loans on overvalued houses -- often with no money down, verification of income, assets to back them up, or even paying jobs in many instances -- have been falling behind in their payments and losing their homes to foreclosures in droves for over a year now.
As borrowers, they're trapped by ongoing collapse of the US housing market bubble. The houses that they bought at inflated prices aren't worth nearly as much as they still owe on their mortgages, so they can't sell their homes. And their adjustable rate mortgages are starting to ratchet upwards, making them struggle to make their mortgage payments and forcing many of them into bankruptcy and foreclosure.
The US housing bubble at the root of the current US financial ills was caused by former Federal Reserve Chairman Alan Greenspan's inflationary policy of low interest rates that he pursued for several years, which fueled rampant real estate speculation resulting in an unsustainable rise in US housing prices. In mid-2007, the music stopped and house prices started falling. They still have quite a ways to fall to get back down to the levels ordinary American wage-earners can historically afford, and the US housing market won't begin to recover until they do.
Those institutions are holding stacks of home mortgages and secondary mortgage market bonds and derivatives that are of dubious value. Recent imposition of a rule that they must mark these securities to market prices has made a number of those institutions technically insolvent, because those securities are of unknown value so therefore no banks are willing to buy them at any price, thus they are technically worthless.
Secretary Paulson is proposing to buy up swathes of mortgage bonds, derivatives based upon them, credit default swaps, and whatever else he feels like buying, from whatever financial institutions drag their tattered castoffs into his high-class pawnshop, and he will apparently be willing to pay whatever they ask for them.
Mortgages valued at a trillion dollars or so have already gone bad, that is, either they are non-performing because borrowers have stopped making payments or they've been placed into foreclosure. A Swiss bank estimates that as much as $5 trillion in US mortgages will eventually become worth little or nothing. That's the potential liability facing Mr Paulson.
That amount, $5 trillion, is approximately the value of all US mortgages that are held by Fannie Mae and Freddie Mac, the two US secondary market mortgage holders taken into "conservatorship," that is, nationalised, by the US government just a couple of weeks ago, to put the number in perspective.
The bailout or "rescue" bill proposed, however, won't really place most of the beneficiary financial institutions on firm footing. It will only buy up their worst investments, providing their insiders and major stockholders with large windfalls of cash with which to make fast getaways to sunnier climes. It will merely reward the principal crooks for their larcenies.
That's because the US financial system is awash with arcane derivatives that are called credit default swaps, which Warren Buffet has astutely called " weapons of financial mass destruction." There are presently about $55 trillion in credit default swaps outstanding in the US financial system. There's not enough money in the entire world to buy all those up.
Therefore, some banks, hedge funds and insurance companies are going to fail, dragged down by their former greed in pursuit of ever higher quarterly profits without regard to downside risks. Some large financial institutions will be among those that eventually fail.
The bill won't stave off an economic depression either. In fact, it'll likely both hasten and worsen the depression that's coming, as well as delay the onset of US economic recovery.
That bright light in the American economy's tunnel isn't the sun but rather an onrushing train. Ignoring it will only make the inevitable crash more violent and the damage worse.
But handing the crew that got the US economy into this mess, along with their henchmen and cronies, a free hand to loot the national treasury, enslave taxpayers for generations, and shower the crooked, corrupt and swindling financial elite with cash is simply insane.
It should be interesting to see whether the US Congress actually pulls the trigger on America today. ยต
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