SHARK INFESTED ECONOMIC WATERS

Just when you thought it was safe to read the economic news you discovered that these troubled waters are still under threat by ravaging sharks. As President Bush signs what many economists say is a waste of money, an anathema to economic theory; the news from the Street is not encouraging. In case you were busy this weekend, here are some of the headlines and quotes you may have missed:

“…investors believe the package will only be a baby step in the long road to economic recovery.”
"At best, we can hope that it stems some of the more intense risk from the credit crisis.”
“Brace yourself. The credit squeeze that almost every financial expert has warned about is here.”
Economy sheds most jobs since 2003, more cuts seen
Payrolls drop by most in 5 years; more pain ahead
THE LATEST: Employers slashed 159,000 jobs in September, the most in more than five years and the ninth month in a row of nationwide job losses.
Factory orders drop by 4 percent in August
…the credit strains began to hit manufacturing with full force.
Jobless claims pushed to 7-year high
Durable goods orders drop 4.5 percent in August
Stocks end lower amid worries after House OKs plan
Sting in the tail on US bailout day
NEW YORK (AFP) - US stock markets fell sharply Friday after the Congress passed a huge financial rescue plan
SEC short-selling ban to expire Wednesday night
Congress passes bailout, focus shifts to fallout
Stocks drop on economic concerns despite bailout
…the $700 billion financial rescue package may not unblock credit markets and stave off a U.S. recession.
Even with Congress' unprecedented $700 billion financial bailout, the faltering economy and the jobs market probably will get worse

The signing of the Bailout Bill is the equivalent of Economic Appeasement that will ultimately be compared to that of Chamberlain and the Nazis at Munich. Driven by fear, innuendo and out right lies, the majority of American politicians appeased the Wall Street threats of economic collapse. Like Hitler who kept saying, “One more, that is all and then I will stop,” Congress and the President have allowed Wall Street more “Lebensraum,” living space. Making a fear based and not a reasoned based decision, politicians have allowed the money forces to launch their final assault on the consumer in their efforts to control the entire monetary system.

What is being said now? The above quotes and headlines tell it like it is. The economists say that the bailout will have little effect on the credit crunch. There will still be foreclosures. Jobs will still be lost. Hiring will come to a standstill. Things will get worse. Reports also now indicate that until housing prices start rising, the bailout will not end the credit crunch. Banks do not want to make loans for cheaper houses. Pardon my ignorance but if homes are cheaper, are they not more affordable for more people? The ‘greenbacks’ are still dripping with ink and the refrain is that the bailout is not enough. How could so many politicians ignore the proper decision making process? Why did they not have hearings? Why did they not consult a broader base of experts? We are not talking thousands of dollars, but hundreds of billions of dollars. Is that not cause enough to pause, take stock and properly evaluate the alternatives?

Finally, for the moment, we have this wonderful news story: “An American member of al-Qaida pointed to economic troubles in the United States as proof that "the enemies of Islam" face defeat…” Not too long ago I wrote an article asking if the American economy was under terrorist attack. My assumption was that foreign elements were manipulating markets to cause havoc for the West. What I should have guessed is that the terrorists are not abroad, they are within our very borders and their name is Wall Street.

"Six Pack" Palin and THE DEBATE

Palin had a pretty good performance in her debate with Biden. But the operative word is "performance." When pressed, she answered very few questions with any sense of depth. It was obvious that she memorized answers to preconceived questions and that was going to be the answer, even it was not really the question. So if the term "Iraq" came up, this is what you should say, even if the response did not address the actual question. If the question is about the economy, this is what you say, regardless of the actual content of the question. She did this well, but it was obvious she lacked any depth of knowledge.

Palin's comment about having a "Joe Six Pack" in the White House bothers me. Aside from being a good role model for our youth, I do not really like the implication. Does she plan on solving problems over a beer? While many issues may have been solved this way regarding personal issues, I do not think it will work with foreign diplomats. It was also clear that she memorized a few names of foreign leaders because she said them so many times. I really hoped that questions would have been asked about Chavez, Brown, Rudd, Hue Jintao,or Velez and I am sure she would have said, "Huh?" While Palin was folksy she did not exude a sense of confidence. Her answer about how she would govern should McCain die was not at all encouraging. He put down about Biden's age, 65 was kind of interesting as Mccain is seven years older than Biden.

Biden obviously has depth of knowledge. Yes, he has been around a while and he should know what is going on and who the players are in the international scene. There were times when he sounded like a president. If something were to happen to Obama, I think Biden was convincing that he would know what to do. Palin would be a loose cannon if McCain's health failed.

Bottom line, while Palin would be fun to have over to your house for dinner, I do not believe that dinner should be served at the White House.

U.S. SENATE, MCCAIN, OBAMA SELL OUT!

Shame on the U.S.Senate and our presidential candidates for voting for the Wall Street bail out bill. Shame on them for adding $150 Billion to the $700 Billion for "pork barrel" projects. Those being foreclosed will be giving money to the very banks that caused the foreclosures. The bill that was passed is the same one rejected by the House; the difference being "sweeteners" aimed at buying off congressman.

While a registered Republican who voted for Bush, I will still vote for Obama since McCain and his "Joe six pack" (more on that later) running mate are not a viable option, I am deeply bothered that Obama did not have the 'profile in courage' to stand up to the monied interests of Wall Street. There is basically nothing in this bill that will end the current credit crunch that is choking both small and large companies. Even AT&T cannot get more than an overnight loan. The nation 's leading economists, while somewhat divided, oppose the Bail Bill. The former head of the FDIC opposes the bill. The minority head of the Senate Banking Committee opposes this bill. None of these people were asked to help formulate its provisions.

How can the Senate approve such an expensive piece of legislation without even a hearing and without consultation of experts that are not on the President's payroll? Does the fall of Rome come to mind? At one tine the Roman Senate was the keeper of the Republic. It decayed into corruption, in-fighting and special interests and as a result Rome under the thumb of ruthless and incompetent emperor's. Rome fell from within. The barbarians were only icing on the already rotten cake.

And now, the U.S. Senate, once one of the most admired institutions in the world, has fallen to the will of special interests and a president gone rabid. Did I mention Rome? While tax breaks for wooden arrows, mental health insurance, tax breaks for alternative energy and other issues may have merit, do they belong in a bill that the Bush said if it did not pass our economy would become toxic? The 'candy factory,' the American taxpayer, is running out of sweetener. We are running out of money. Many experts have offered many alternatives to this corporate giveaway. To say there is no time to talk and explore alternatives is just a ruse. Politicians know that if there is any serious discussion, the sham being fostered on Americans would be exposed for what it is; a plan that will truly lead us to economic ruin. Did I mention Rome? Surely, there are stop gap measures that could be taken to shore up the economy while a serious discussion occurs. Even now, the FDIC, working with the President and Treasury, have the power to insure "all" of the assets and deposits held by banks. Certainly short term and lower cost alternatives exist that would allow intelligent discussion. The 'toxic' debt is not going anywhere, they will still be around in a few months while proper debate is taking place. Certainly, there are less costly actions that can be taken to give American citizens confidence that their money is safe.

The burden now falls to the House. Will they have the courage and fortitude to put the skids on this bill that leads to nowhere? Will intelligence and reason win out ou will the Age of Reason officially come to an end? Did I mention Rome?

ECONOMISTS SAY BAIL OUT WASTE OF $$$

PLEASE READ THE FOLLOWING-THE LIST OF WHO SIGNED CAN BE FOUND AT THE URL END OF THE MESSAGE. ALSO, LOOK AT THE ASSETS OF THE TOP 50 BANKS AND TELL ME THE BANKING INDUSTRY NEEDS MORE $$$$.

(This letter was sent to Congress on Wed Sept 24 2008 regarding the Treasury plan as outlined on that date. It does not reflect all signatories views on subesquent plans or modifications of the bill)

To the Speaker of the House of Representatives and the President pro tempore of the Senate:

As economists, we want to express to Congress our great concern for the plan proposed by Treasury Secretary Paulson to deal with the financial crisis. We are well aware of the difficulty of the current financial situation and we agree with the need for bold action to ensure that the financial system continues to function. We see three fatal pitfalls in the currently proposed plan:

1) Its fairness. The plan is a subsidy to investors at taxpayers’ expense. Investors who took risks to earn profits must also bear the losses. Not every business failure carries systemic risk. The government can ensure a well-functioning financial industry, able to make new loans to creditworthy borrowers, without bailing out particular investors and institutions whose choices proved unwise.

2) Its ambiguity. Neither the mission of the new agency nor its oversight are clear. If taxpayers are to buy illiquid and opaque assets from troubled sellers, the terms, occasions, and methods of such purchases must be crystal clear ahead of time and carefully monitored afterwards.

3) Its long-term effects. If the plan is enacted, its effects will be with us for a generation. For all their recent troubles, America's dynamic and innovative private capital markets have brought the nation unparalleled prosperity. Fundamentally weakening those markets in order to calm short-run disruptions is desperately short-sighted.

For these reasons we ask Congress not to rush, to hold appropriate hearings, and to carefully consider the right course of action, and to wisely determine the future of the financial industry and the U.S. economy for years to come.


Signed (updated at 9/27/2008 6:00PM CT)

http://faculty.chicagogsb.edu/john.cochrane/research/Papers/mortgage_protest.htm

Here is a list of the 50 largest banks and savings institutions in the United States ranked by total deposits in thousands of dollars.

Institution Name
State
Headquartered No.
of
Offices Total
Deposits
June 30, 2007
Bank of America North Carolina 5,728 596,584,899
JPMorgan Chase Bank Ohio 3,108 439,996,000
Wachovia Bank North Carolina 3,103 314,850,000
Wells Fargo Bank South Dakota 3,255 263,664,999
Citibank Nevada 1,036 210,289,000
Washington Mutual Bank Washington 2,180 202,706,306
SunTrust Bank Georgia 1,747 114,579,848
U.S. Bank Ohio 2,590 113,097,080
Regions Bank Alabama 2,087 88,388,815
Branch Banking and Trust Company North Carolina 1,484 83,720,251
National City Bank Ohio 1,451 82,374,824
HSBC Bank USA Delaware 455 75,342,071
World Savings Bank, FSB California 287 73,247,967
Countrywide Bank Virginia 2 60,616,621
PNC Bank Pennsylvania 836 59,188,198
Keybank Ohio 965 57,286,597
ING Bank, fsb Delaware 1 54,161,553
Merrill Lynch Bank USA Utah 3 51,601,084
Sovereign Bank Pennsylvania 745 49,134,698
Comerica Bank Michigan 395 41,797,801
Union Bank of California California 331 40,650,535
Commerce Bank Pennsylvania 398 40,126,588
North Fork Bank New York 356 38,059,484
Fifth Third Bank Michigan 775 37,990,237
LaSalle Bank National Association Illinois 138 34,653,022
E*TRADE Bank Virginia 2 33,197,825
Bank of the West California

671


33,151,413
Citibank (South Dakota) N.A. South Dakota 4 32,892,908
Manufacturers and Traders Trust Company New York 673 32,811,138
Harris National Association Illinois 226 30,725,670
The Bank of New York New York 9 29,601,000
Chase Bank USA, Delaware 3 29,565,966
Marshall and Ilsley Bank Wisconsin 321 28,899,307
TD BankNorth Maine 626 28,092,910
Fifth Third Bank Ohio 415 27,054,097
USAA Federal Savings Bank Texas 1 25,267,329
Citizens Bank of Pennsylvania Pennsylvania 415 24,485,743
The Huntington National Bank Ohio 424 24,121,042
Citizens Bank of Massachusetts Massachusetts 262 23,713,359
LaSalle Bank Midwest Michigan 268 23,435,977
Compass Bank Alabama 420 23,405,240
First Tennessee Bank Tennessee 259 21,763,800
Charter One Bank Ohio 490 21,270,835
Capital One Louisiana 354 20,567,194
Discover Bank Delaware 2 20,343,620
UBSBank Utah 1 20,222,245
Morgan Stanley Bank Utah 1 19,535,000
Colonial Bank, National Association Alabama 321 16,663,063
Banco Popular de Puerto Rico Puerto Rico 202 15,269,000
TD Bank USA, National Association New York 1 15,246,862


See Top 50 Bank Holding Companies -- Source: FDIC

IF THE TABLE DOES NOT COME OUT RIGHT GO TO: http://nyjobsource.com/banks.html

INTEREST RATE HOLIDAY

I propose that Congress enact an interest rate holiday for mortgages and credit cards. With interest rates at ZERO, all payments would go to paying down debt rather than the majority of payments going to interest. This would still give banks money back but they would not make a profit for a specified time-say, one year. After that, assess the impact and go from there. Maybe raise the rates slowly until some sense of normality occurs. This put money in the hands of the consumer, allows for debt reduction and can bolster the economy. Obviously, this would be for existing as of a set time, any charges after that time would be subject to interest rates. HOWEVER, there should be a cap on interest rates. How can you pay down a credit card when you are paying 18-24% interest? Time to put a cap on usury and give the break to the consumer and not the bank.

Thomas Jefferson's letter to Treasury Secretary Albert Gallatin in 1802:

“I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”

THE WALL STREET THAT STOLE CHRISTMAS

History has proven that “power corrupts and absolute power corrupts absolutely.” While many understand this concept with respect to political systems, it is also true in other areas of human activity. Absolute power over anything is a corrupting influence that casts its pall over religion, economics, news, education, economics and most other aspects of society.

While all desire a totally free society, we have found that human frailty and perceived imperfection has not permitted such a system. Even in the early dawn of civilization, it was evident that those with the biggest clubs and the strong would prey upon the weak. Big men stole from the small, big nations raped and pillaged the meek, and a concentration of power and wealth with accompanying abuse is the subject of World History I. From the Mongols and the Romans, the absolute monarchies of the 17th/18th centuries to Hitler and Stalin and Burma, it has been clear that absolute political power leads to abuse and atrocities.

The same soon appeared with regard to religious power. Those who did not follow the dogma and dictates of state religions were burned, fed to the lions and cast out. Even the modern religious institutions are rife with historical terrorism. Under the banner of “onward Christian soldiers” religions of cultures like the American Indians and those of Africa were systematically destroyed. The term Inquisition is well documented in the annals of theological abuses.

During the era of the great monarchies, economic systems were also subject to abuse and corruption. The supply of goods and services served one purpose; to increase the wealth of the king or queen. Under the system of mercantilism, lands were conquered for colonies, resources were stolen for the mother country and gold and silver were stashed in the king’s vaults. However, the growth of a middle class and increased agricultural technology gave rise to a new line of economic thought; CAPITALISM.

Out of the ashes of the absolute power of kings grew an economic system that called for no government interference in the affairs of business. Thinkers like Malthus and Smith said that an economy free of government intervention would grow and prosper. The Industrial Revolution had begun! With the movement of population to the city factories blossomed and society and business planted the seeds that have ripened in the 21st century. With absolute control over money, goods and services, industry created the highest standard of living in the world. But in keeping with the problem of absolute power, the system became corrupt as sweat shops, poverty wages, unsafe conditions, company stores, child labor, monopolies and other abuses demanded government intervention. Anti-trust legislation, safety regulations, child labor laws and other government regulations were enacted to save the public from the devouring mouth of unfettered capitalism.

Bring the history to modern times and we have Reaganomics once again de-regulating industry in order to free them to pursue globalization. Up until now, all appeared well,
but the ugly head of absolute power reared its head. It has been all about making more money regardless of how it was made. Profit became the new monarch and abuse has now brought the American and maybe even the world economy to its knees. If you have watched the news you must know that our financial institutions are collapsing. Congress and the White House have been trying to undo in one week what has taken years to create. Sides have been taken and the “free marketers” have lined up against the “regulators.” While it is clear that lack of oversight and regulation created an economic monster gone amok, there are those who still think that less regulation, tax breaks and guarantees. This is money for the rich and the few at the expense of the many. After all, it is the lack of regulation that has created the current crisis. The questions are: how much regulation is needed; how much will it cost to fix the problem and, who will pay the ferryman?


There is one thing that is certain, our economy is in very deep trouble and the blame has washed up on the shores of Wall Street. New house construction is at a recent history low, unemployment is up, job creation down, credit is tight, retail is down, durable goods are way off and the near future has the lights on dim. There is another certainty; the age-old top down fix will not work. Actually, it has never worked. While greed, corruption and misuse of economic power may be causal in the current crisis, the solution is at the bottom of this power pyramid in the hands of the people. I, for one, favor putting the “bail out” money in the hands of the consumer so they can pay their mortgages, pay down credit cards, buy alternative energy products and stimulate jobs. I also favor reducing absurd interest rates on credit purchases, putting a mandatory low interest on mortgages, banning flexible rates and closely regulating financial institutions. Democracy and a controlled economy are not antithetical.

Like the Grinch, Wall Street is in the process of stealing this Christmas and perhaps others. We can also take another Grinch lesson, the true meaning of most holidays’ lies not in things, but in the spirit of why the holiday even exists. The real way to reduce the power of the wealthy and Wall Street is not to want what they have, but rather to redefine the very concept of wealth. If money is the most important thing, then it, and those who control it, have power over your life. But if what they have is not valued, then they have no power to control your life. Be of good cheer, be informed, let your feelings be known and vote your conscious in the upcoming election and let the Wall Street Grinch get what it deserves.

MONEY, MONEY EVERYWHERE BUT NONE FOR YOU AND ME!

Forget all those campaign promises of tax breaks. With the Feds giving trillions of dollars to bail out banks and corporations using your tax dollars any promise to reduce middle class taxes is impossible. Amidst the news that the nation’s “best economic minds” are going to solve the current financial crisis, the clear observation is that it is these very minds that permitted the crisis to occur. I am not in the least bit reassured that our financial future is in good hands. Furthermore, it is greatly dis-heartening that neither Obama, nor McCain can offer any better alternatives.

The American public is now in the middle of the same old refrain, more money for huge corporations at our expense so that they can continue to make more money. Between the funds for Fannie Mae, Freddie Mac, Bear Stearns, AIG and who knows who else, the Feds are committing at least $4.1 TRILLION to salvage these institutions. This is being done, we are told, to salvage the free market system: a system which, since massive deregulation, has run rampart in its effort to consolidate control over the world economy. Under the guise of globalization and free trade, these companies have grown to a proportion that would make even the economist of the early twentieth century shudder.

All that these great minds have managed to do is to give more money to those who created the problem. It is like giving more bullets to Russia because they used them up in Georgia and want to use more somewhere else. The claim is that there is little alternative. This makes no sense. If this same amount of money was given to every American household, they would get close to $15,000 per household. If just given to family households, the amount would be about $57, 000. With this money in the hands o9f the consumers, mortgages could be caught up and other debts paid down. Good for banks and good for the consumer. The government could even have deducted out mortgage payments and then distributed the balance. What would happen if the Feds mandated that all mortgage interest rates be dropped to the prime lending rate? Banks would still make some money and people could afford to make payments rather than suffer foreclosure. How about mandating that credit card interest rates be kept to 8% rather than 15-24%? Consumers could pay the bills and the banks make money. How about, like we have done for poor countries, forgive the mortgages of those under a certain income level? Keep people in the homes and refinance at a real low rate? The point is that there are alternatives worth exploring other than having our money chase bad money. Keep in mind that this $4 Trillion will not spur new economic growth nor create jobs. All it is doing is making sure that big corporations survive. What is even worse is that in this process, companies like Bank of America has gotten even bigger and now controls a greater amount of money. What does that do to help the taxpayers? What happens if they get into trouble?

As taxpayers, we are being hit from all sides. The cost of the war in Iraq and Afghanistan, billions needed for storm damage recovery and now our very bank accounts are put in jeopardy. How can we ever expect to improve education and health care when hundreds of thousands are losing their jobs, food and fuel prices are soaring and many have been relegated to a day-to-day existence? Our economic system is broke and the “laws of economics” need to be re-written. We need a consumer based system that puts customer and taxpayer first, not the mega-rich. There is plenty of money but there seems to be none for us.