Ali Paulson and his 40 thieves

Before I launch into why the bailout was bad and will fail to do what it is supposed to, I want to remark that there was a solution in place of saying no to the bailout. While often doing nothing does not hurt that much, in this case they would because all sane people should know now, markets head toward ultimate meltdown when they are free. They need to be regulated by positive regulation, and the lack of it had caused this meltdown. Of course, it would not have been instant. There are foreign banks with capital (mostly in China and Abu Dabi) who have a vested interest in slowing American economic collapse. In the long term it is a boon for them but in the short term it will wreck their national economies. What would Abu Dabi be but a mud hole in the desert without greedy Americans buying its oil by the refined bushel? So no, we would not have instantly been reduced to a "post-Katrina" like situation all over the country. It would on the contrary hasten our dependence on foreigners for our daily sustenance, and in the long term we would see the end which the chicken little's in the executive branch are predicting.

Now Free Market economists, seeing the complete defeat of all their theories, proposed an alternative plan which in itself violated them that would present government insurance for the mortgages in question. It was certainly a better plan than Paulson's but tainted by the same flaw, it doesn't understand the problem. Their plan aims at creating the same house of sand which existed before, not alleviate its problem, that there is not enough production within the country to justify the services, and not enough to do with the money which lenders have. Regardless, since it was rejected by the Bush dictatorship and rejected by congress, now they have to distort reality by claiming it is government's fault for forcing lending institutions to give mortgages to "minorities" and low income applicants.

Now it is true that under Clinton and W the government put pressure on banks to abandon prudent behavior and offer sub-prime mortgages low-income borrowers. However, taken by themselves these do not threaten the financial system and every institution within it, just as my lending a bad loan to a neighbor who can't pay will not hurt the institution across town, even if I service many other loans. These would hurt the institution in and of itself. The meltdown of Fannie Mae, Bear Stearns or AIG due to bad sub-prime loans taken by themselves could never in a million years caused a meltdown of the whole system. What caused the meltdown was Free Market principles in and of themselves, because wherever they are tried they inevitably fail, even if they are tried in limited areas.

The meltdown we are witnessing, and the free fall of stocks and banks even after the bailout has been passed, is due to bad securities, short selling, and derivatives. The actual losses from sub-prime loans may in fact be less than 600 billion, which themselves would ruin certain institutions but not the whole system. While I despise the whole lending system and await the day of its demise, not every banker is also a satanist, and there are banks which by themselves would be solvent and sensible both in their lending and what they try and give back to the community. It is the mixing of sub-prime loans, and assorted bad debts into securities packages with solvent ones (even loans made to large and continually paying businesses) and sold. That wasn't enough so bets had to be hedged on the packages which brought more speculation, and tied more prudent investments up with imprudent ones, and like a bunch of lights on a series circuit, if one goes out they all go out. The system of derivatives is completely unregulated, and done so in accordance with free market principles, and it is directly responsible for the meltdown of our economic system. That the meltdown has been so severe is because, much like the Treasury, the banks do not have any money themselves. Bear Stearns was operating at something like a 33 to 1 ratio, for ever $1 they had in their vault they had $33 of debt. Banks themselves do not have to maintain the necessary capital to cover losses on investments. So when default piles upon default, the banks become completely insolvent, whereas had they any money they could cover the bad debt. Hence they need our future.

The reason banks carry not a cent to cover their investments is due to "free market" thinking. Even Communism is not so stupid as to think that debt is a good thing, as is the trend in modern economic liberalism. The current treasury secretary, Ali [sic] Paulson, who was the head of Goldman and Sachs (remember that), met with the Securities and Exchange commission in 1993 and asked for the end to government regulation requiring banks to carry the money to cover their investments. That was the first inroad of many to free banks from government regulation which kept banking from becoming "too big to fail". This was an achievement under a Democratic administration yes, but of Free Market principles in particular, and the baton was passed to W.

What the bailout does in point of fact, is transfer the bad debt from Paulson's 40 thieves, the bad debt of the firm he used to run to public books, and saves his friends and colleagues from bankruptcy. There is no 700 billion dollars because the 700 billion does not exist. The Treasury does not have even $1. All of the budget shortfalls year to year are met by loans from foreigners (China, India, Japan, The Emirates). And as spending increases on worthless education, on two immoral wars, and generally useless and misdirected social services, the interest only goes higher. There is no money to give Paulson and his 40 thieves, unless the Treasury is to embark on Weimar 3.0. Rather, they simply transfer the debt from them to us, and allow the banks to end the year in the black and toast themselves at their time shares in tropical islands, while the rest of the hoi polloi burn. It is a greater theft than any novelist has ever made up, or any wannabe criminals have ever lied about.

Thus both the National Socialist solution passed by congress in defiance of their constituents, and the free market solution proposed by the Emperor's new clothes crowd, both miss the point. There is not sufficient production within our country to base a healthy and stable economy. Production, as John Medaiile of the Distributist Review puts it, must come from farms, fisheries, forests, factories and mines in order to be real wealth, not something produced by services and credit cards. An economy can not be driven only by consumption because by necessity you must have something to consume. We likewise consume production, but it is someone else's consumption in a factory in east Beijing, and so there is no real wealth created within our own country, except for small businesses here and there which manage to subsist, or "Agri-business". More people have to produce, because in times of weakness when we can't afford ships of apples and led filled milk from China, there will be a severe famine due to the lack of American production.

The bailout was not meant for us, and it will not help us. It will help Ali Paulson and his forty thieves at Goldman and Sachs, AIG, Fannie and Freddie, who are already having big spa parties, but it will not help small business nor the individual taxpayer nor the homeowner. For that we must restructure our economy to reflect real wealth, not to be built, as the Pope put it, on sand.

Lastly, Bernanke, Paulson and Bush all told us until two weeks ago that everything was fine, the economy was in great condition and we would bounce back with ease. Not long after that they come out and say the sky is falling. We are expected to believe them that the money that has been voted to them will save the economy? Good grief.