US: Conservative congressmen urge Bush to cut off aid to Wall Street

[Richard]

Elana Schor in Washington
guardian.co.uk, Thursday September 18 2008 20:51 BST

Frustrated by the US government's rescue of AIG, Fannie Mae and Freddie Mac, a group of 100 conservative congressmen today urged the Bush administration to stop keeping Wall Street afloat.

In a letter to the treasury secretary and Federal Reserve chairman, members of the conservative Republican Study Committee (RSC) lamented the abandonment of free-market principles.

Rescuing failing financial firms has "set a dangerous and unmistakable precedent for the federal government both to be looked to and relied upon to save private sector companies from the consequences of their poor economic decisions," the RSC members wrote.

Though the RSC has carried significant influence with Republican leaders in recent years, this week's economic implosion has stoked longstanding tension between conservatives and the Bush administration into a full-blown ideological rift.

The government takeover of private businesses under a Republican president's watch has left conservatives reeling. Bill O'Reilly, the Fox News Channel pundit and favourite of the right, condemned Bush's "poor leadership" on his radio show yesterday, calling the market collapse "the end of President Bush's legacy".

The RSC members, all serving in the House of Representatives, noted with alarm that the government action this week "has the appearance of a socialist and not a free market approach to managing our economy".

Adding to the appearance of an internal feud, Republican House leader John Boehner told reporters today he was cancelling a party meeting on the credit crisis. His reason: the Bush administration "refused" to send anyone to brief the congressmen, Boehner said.

The tension could spill over and undermine conservatives' ties to John McCain, who came out in support of the government's AIG bailout one day after criticising the notion. McCain recently agreed to support $25bn in loan guarantees for the three major US auto companies, a proposal that the RSC blasted in its letter.

The Club for Growth, a conservative political committee that has helped marshal free-market forces on Capitol Hill, took aim at McCain today for his support of the automaker loans.

"The auto industry bailout continues a growing and dangerous trend of socializing the risks inherent in a free economy, setting a precedent for future industries down the road," the Club said in a release to reporters.

http://www.guardian.co.uk/business/2008/...t.congress

[Richard]

Public losses for private gain

The effective nationalisation of huge sectors of the economy means US taxpayers are picking up the tab for failing banks.
 
Nouriel Roubini
guardian.co.uk, Thursday September 18 2008 13:04 BST

With the nationalisation of Fannie and Freddie, comrades Bush, Paulson and Bernanke started transforming the US into the USSRA (United Socialist State Republic of America).

This transformation of the US into a country where there is socialism for the rich, the well-connected and Wall Street (ie, where profits are privatised and losses are socialised) continues today with the nationalisation of AIG.

This latest action on AIG follows a variety of many other policy actions that imply a massive – and often flawed – government intervention in the financial markets and the economy: the bail-out of the Bear Stearns creditors; the bail-out of Fannie and Freddie; the use of the Fed balance sheet (hundreds of billions of safe US Treasuries swapped for junk, toxic, illiquid private securities); the use of the other GSEs (the Federal Home Loan Bank system) to provide hundreds of billions of dollars of "liquidity" to distressed, illiquid and insolvent mortgage lenders; the use of the SEC to manipulate the stock market (through restrictions on short sales).

Then there's the use of the US Treasury to manipulate the mortgage market, the creation of a whole host of new bail-out facilities to prop and rescue banks and, for the first time since the Great Depression, to bail out non-bank financial institutions.

This is the biggest and most socialist government intervention in economic affairs since the formation of the Soviet Union and Communist China. So foreign investors are now welcome to the USSRA (the United Socialist State Republic of America) where they can earn fat spreads relative to Treasuries on agency debt and never face any credit risks (not even the subordinated debt-holders who made a fortune yesterday as those claims were also made whole).

Like scores of evangelists and hypocrites and moralists who spew and praise family values and pretend to be holier than thou and are then regularly caught cheating or found to be perverts, these Bush hypocrites who spewed for years the glory of unfettered Wild West laissez-faire jungle capitalism allowed the biggest debt bubble ever to fester without any control, and have caused the biggest financial crisis since the Great Depression.

They are are now forced to perform the biggest government intervention and nationalisations in the recent history of humanity, all for the benefit of the rich and the well connected. So Comrades Bush and Paulson and Bernanke will rightly pass to the history books as a troika of Bolsheviks who turned the USA into the USSRA.

Zealots of any religion are always pests that cause havoc with their inflexible fanaticism – but they usually don't run the biggest economy in the world. These laissez faire voodoo-economics zealots in charge of the USA have now caused the biggest financial crisis since the Great Depression and the nastiest economic crisis in decades.

This article first appeared on Nouriel Roubini's blog and is edited and cross-posted here with the permission of the author. Nicknamed "Dr Doom", Professor Roubini is now widely acknowledged as having accurately predicted the present crises in financial markets.

This blog was amended at 17.00 on Thursday 18 September, to include more of Nouriel Roubini's original post.

http://www.guardian.co.uk/commentisfree/...editcrunch

[Richard]

Federal Lawsuit Filed To Stop AIG Bailout

U.S. Lacks Constitutional Authority for Emergency Loan

Lord Stirling
9-18-8
 
On the day following the 221st anniversary of the signing of the U.S. Constitution, WTP Chairman and constitutional activist Robert Schulz today filed a federal lawsuit in United States District Court in Albany seeking to halt the execution of the emergency bailout of American International Group, Inc. (AIG) by the United States Government and the Federal Reserve.
 
The lawsuit asserts that the commitment of public funds and credit for the direct benefit of privately owned AIG is an ultra vires action by the United States Government and Federal Reserve, i.e., beyond the limited legal authority granted by the Constitution. The lawsuit asks for a "show cause" hearing demanding that the Government produce evidence of its legal authority to commit public funds for such a purpose, as well as emergency and permanent injunctions halting the bailout transaction.
 
Beyond the Constitutional deficiencies, the bailout establishes a dangerous precedent enabling the Fed and/or Government to nationalize virtually any business or property within the United States without legal authority or congressional approval.
 
The defendants include the Federal Reserve System, Fed Chairman Ben Bernanke, the U.S. Treasury, Treasury Secretary Hank Paulson Jr. and the United States Government. 
Click here to read:
Complaint, (http://www.wethepeoplefoundation.org/PROJECTS/AIG/AIG
-Complaint-9-18-08.pdf )  
Memorandum of Law supporting the TRO,
(http://www.wethepeoplefoundation.org/PROJECTS/AIG/AIG-
MemoLawSupptTRO-9-18-08.pdf )
Schulz's Declaration (http://www.wethepeoplefoundation.org/PRO...-18-08.pdf )
which includes several recent articles from the New York Times.
We The People Foundation For
Constitutional Education, Inc.
2458 Ridge Road, Queensbury, NY 12804
Tel: (518) 656-3578 Fax: (518) 656-9724
 
[email protected]
www.givemeliberty.org
FOR IMMEDIATE RELEASE: Contact: Bob Schulz
September 18, 2008, 3:00 PM (518) 656-3578
Federal Lawsuit Filed to Stop AIG Bailout
U.S. Lacks Constitutional Authority for Emergency Loan  
 
QUEENSBURY, NY -- On the day following the 221st anniversary of the signing of the U.S. Constitution, WTP Chairman and constitutional activist Robert Schulz today filed a federal lawsuit in United States District Court in Albany seeking to halt the execution of the emergency bailout of American International Group, Inc. (AIG) by the United States Government and the Federal Reserve.
 
The lawsuit asserts that the commitment of public funds and credit for the direct benefit of privately owned AIG is an ultra vires action by the United States Government and Federal Reserve, i.e., beyond the limited legal authority granted by the Constitution. The lawsuit asks for a "show cause" hearing demanding that the Government produce evidence of its legal authority to commit public funds for such a purpose, as well as emergency and permanent injunctions halting the bailout transaction.
 
According to available information regarding the transaction, the Federal Reserve will loan AIG $85 billion dollars to stabilize its financial crisis, in effect, using taxpayer money to fund the loan. In consideration of taxpayer financing of the private bailout, the U.S. will receive stock warrants for 79.9% of AIG stock.
 
Schulz believes that, "Beyond the moral hazard and dangerous precedent established by this action, it is of vital importance that the American people recognize that the present financial crisis is a direct and predictable result of decades of constitutional violations by the Federal Government. Through a long- standing policy of disinformation and collusion with the Federal Reserve and Wall Street financial elite, the United States Federal Government has denied public access to information about the secretive operations of the privately owned and operated Federal Reserve and its monopoly control of America's money system. This monopoly control of our currency by a private banking cartel has resulted in increasing distortion, volatility and cyclical (boom and bust) economic conditions in the U.S. and abroad. America's fiat currency (produced from thin air) is manipulated by the Federal Reserve for the benefit of its owners, major Wall Street financial institutions and the Federal Government and is not unaccountable to the taxpayers. These abuses of the Constitution have taken our financial system to edge of the abyss. The chickens have come home to roost."
 
Since 2002, the We The People Foundation and its supporters have tried, thus far unsuccessfully, to get the Government to respond to a number of First Amendment Petitions for Redress of violations of the Constitution, including the Federal Reserve System's violation of the money clauses of the Constitution. Had the Government honored the Constitution and its obligation to respond to the citizens' Petitions for Redress, many of the nation's financial and monetary problems could have been avoided.
 
http://www.rense.com/general83/fed.htm

[Polly]

Holy Crow!  I was reading an article in USA Today about the Reserve Primary Fund, the oldest money market fund, which cut the value of its shares by 3 cents to 97 cents!  Losses from Lehman-related investments was given as the reason.  This is a first, and a sin known as "breaking the buck, because money money market funds always keep the value of one share at $1.00.  They have always been considered safe investments even though they are not backed by the government.

Investors have been selling off money market fund shares in droves:

Sept. 10 - $4 billion

Sept. 11 - $10.6 billion

Sept. 12 - $60.1 billion

Sept. 15 - $4.4 billion

Sept. 16 - $89.2 Billion

Sept. 17 - $89 billion

Money market assets fell from $3.5 trillion to $3.3 trillion during the above time frame.

 

[Polly]

Why do people always say the tax payers are picking up the tab for everything when all they do is print more money?

[Richard]

Because tax payers have to pay back the FED.

[Polly]

It makes no sense to me that tax revenue can meet the expenditures so it cannot really be true that tax payers are footing the bill for all of it; some of it, yes.

[Richard]

That’s why there is a deficit, the government is borrowing more money than they are getting from the taxpayers. Eventually the loans have to be paid. It works the same as any other bank loan. It means they have to raise taxes to pay for all these bailouts.

[Polly]

Richard, what bothers me is the psychological burden implied (intentionally, I think) in all of the statements made by people who say the tax payers are paying for everything when it is not factually true.  Debts are thrown out of the window all of the time because of the way the financial structure is played with and manipulated and used to benefit the few.  It's all sleight of hand, so to speak.  My statements are meant to address the psychological distress which people feel when they read that they are paying for everything the government does, like it or not.  Those kinds of all-encompassing statements are designed to cause stress and worry and the feeling of being cheated and put upon.

It's one of those things I find irksome.  Repeated phrases are used as triggers to elicit a desired emotional response from the public.

 

[Richard]

As far as I know, never in the history of the Fed has the Fed has ever wrote off any of the US government’s loans. That means the taxpayers do have to payback the loans. The trillion dollar loan will roughly cost $3,300 per taxpayer.