That Giant Sucking Sound

By: Mike Shedlock | Thu, Oct 2, 2008
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The following image was used by my friend Charles Goyette whose talk show I was on every Wednesday for several months. Charles left for personal reasons and I miss him. Rumor has it he is working on a new deal and I certainly wish him the best of luck.

The above image is from STOP THE $700 BILLION SWINDLE! The article is about our efforts to kill the Paulson Plan. It appeared about a week ago. You have to scroll down to see it. I was reminded of it when "Andrew" emailed me just a bit ago asking me to post a link. I will do so gladly and also add a link on the left sidebar pointing to Charles' Blog.

Andrew Writes:

WHERE IS YOUR SECOND WIND!!!

Don't let these fools get the best of you. Drive forward. Push hard. We're swinging all the way through this thing. Let our voices be heard!!!!

NO BAILOUT. PERIOD!!! NONE IN ITS CURRENT FORM!!! NONE!!!! It will have been the biggest waste this country has ever seen.

Rally the troops as only you can!!!!

Put up that final stand.... the people are PISSED, and nobody trusts anyone on the list of influential people you cited.

LET'S DO THIS THING!!!! What would Jefferson and Washington be saying? What would Lincoln want?

If you look at the issue through that looking glass, it's all common sense. They guys ARE NOT voting in the interests of the people!!! Aren't we supposed to be in a democracy?

ONE MORE PUSH!!! THIS IS IT! DIG IN, and FIGHT ON!!!!

LET'S DO IT!!! I'LL BE HITTING THE PHONES/FAXES/EMAILS ALL NIGHT LONG!!!!

Many other people expressed similar thoughts. I think I responded to a hundred emails tonight after falling asleep at the computer twice. OK, one more for the Gipper.

First let's consider If There Must Be a Bailout, Here's How to Do It.

If the government wants to save dying banks before they take others down with them, it should choose the clean and direct path: Inject capital into them. Take ownership stakes in return. And, where that's not feasible, seize them and sell their assets in an orderly way, just as the Resolution Trust Corp. did after the 1980s savings-and-loan crisis.

Only after a company's shareholders and debtholders have been flattened should taxpayers take a hit. And for a $700 billion investment, U.S. taxpayers should get a lot more in return than a gargantuan pile of toxic waste.

For that much money, at yesterday's prices, the government could buy 23 of the 24 banks in the KBW Bank Index, including Bank of America Corp. and Wells Fargo & Co. And it still would have money left to buy a stake in JPMorgan Chase & Co., the largest company in the index.

Infusing capital directly, though, was too simple for Paulson. It lacked subterfuge. He decided the way to save the financial system from the evils of structured finance was through more structured finance.

Instead of asking Congress to let Treasury recapitalize needy banks, he proposed buying some of their troubled assets at above-market prices. This would have let other banks create phony capital by writing up the values of similar assets on their own balance sheets, using Treasury's prices as their guide.

Small Wonder

In short, Paulson's plan was one part robbery (with the banks doing the robbing) and one part accounting sleight of hand. No wonder House members rejected it.

Suggested Fax Text

Fax Title: That Giant Sucking Sound

I applaud the decision of the House on Monday and pray for an even bigger margin in the next vote.

That Giant Sucking Sound we all hear was sponsored by the "party for smaller government" and embraced whole hog by the "party for bigger government".

Stop The Largest Tax Increase In History

I call on Democrats and Republicans alike to stop the taxpayer swindle. This $700 billion bailout of Wall Street will be the largest tax increase in history.

Paulson Proposal Will Bail Out Foreign Investors

Today I listened to Representative Brad Sherman on how the Paulson proposal will purposely bail out foreign investors.

Here is the shocking text as translated from CNBC in an exchange with Larry Kudlow.

Rep. Brad Sherman, D California:

Larry I am glad you have a few seconds to talk to someone who voted against this bill. I am not changing my mind. I want to thank my colleagues who stood up to the purveyors of panic and voted against a very bad bill and voted with 400 eminent economists including three Nobel laureates who wrote to us and said don't panic, don't act hastily, hold hearings, work carefully. The fact is Larry if you read this bill, even you would have voted against it.

It provides hundreds of billions of dollars of bailouts to foreign investors. It provides no real control of Paulson's power. There is a critique board but not really a board that can step in and change what he does. It's a $700 billion program run by a part-time temporary employee and there is no limit on million dollar a month salaries.

Larry Kudlow:

Let me just ask you one question. I think you are referring to foreign banks headquartered in the United States. I do not see how foreign investors get bailed out.

Rep. Brad Sherman:

Larry you have to read the bill. It's very clear. The Bank of Shanghai can transfer all of its toxic assets to the Bank of Shanghai of Los Angeles which can then sell them the next day to the Treasury. I had a provision to say if it wasn't owned by an American entity even a subsidiary, but at least an entity in the US, the Treasury can't buy it. It was rejected.

The bill is very clear. Assets now held in China and London can be sold to US entities on Monday and then sold to the Treasury on Tuesday.

Paulson has made it clear he will recommend a veto of any bill that contained a clear provision that said if Americans did not own the asset on September 20th that it can't be sold to the Treasury.

Hundreds of billions of dollars are going to bail out foreign investors. They know it, they demanded it and the bill has been carefully written to make sure that can happen.

Please scrap the Paulson proposal in entirety and try something that might work, that is constitutional, and does not put taxpayer money at risk. The actions of Treasury Secretary Paulson go far beyond disgusting, to outright betrayal of US citizens.

US citizens should not spending $700 Billion to bail out foreign investors.

What Would $700 Billion Buy?

It is time to start over with fresh approaches. Have you thought about what $700 billion could buy? How many jobs would $700 billion create if spent on infrastructure? How many banks would it buy?

$700 billion would buy 23 of 24 banks in the KBW Bank Index

Bloomberg commentator Jonathan Weil noted:

"At yesterday's prices, the government could buy 23 of the 24 banks in the KBW Bank Index, including Bank of America Corp. and Wells Fargo & Co. And it still would have money left to buy a stake in JPMorgan Chase & Co., the largest company in the index.

Infusing capital directly, though, was too simple for Paulson. It lacked subterfuge. He decided the way to save the financial system from the evils of structured finance was through more structured finance.

In short, Paulson's plan was one part robbery (with the banks doing the robbing) and one part accounting sleight of hand. No wonder House members rejected it.

Such simplicity might feel unnatural to someone like Paulson, who used to run Goldman Sachs Group Inc., or a congressman such as Barney Frank who depends on campaign checks from bankers like an infant needs mother's milk."

Barney Frank and Nancy Pelosi Beholden To Special Interests

It's time for new leadership and it's time for Congress to truly watch out for the taxpayer instead of paying lip service to it. It's time to kill the Paulson proposal and consider a dozen ideas, any of which would be better than Paulson's.

"What Congress must remember is that Americans don't exist at the pleasure of the country's banks. It's supposed to be the other way around. There's still time for the politicians to come up with a rescue plan that will work. The important part is making sure you and I get something of value in return for our money."

Senate Hypocrites

Scores of hypocrites spoke out against the bailout on Wednesday, then after stuffing the bill with more pork, voted in favor of it anyway.

I ask that you not do the same.

Paulson Bill Is A Disgrace

This bill is so full of holes and toothless provisions it is a disgrace.

Paulson Bill Creates No Jobs

The bill will not create a single job, it will not solve the underlying economic problems, and it will not protect taxpayer interests. Over 190 major economists agree.

Amazing Authority To The Treasury

The Paulson bill gives an amazing amount of authority to the Treasury Secretary when we don't know who he or she will be on 1/20/2009 or even which party that person will be from. Does this make any sense?

If you vote for this Bailout Bill I will vote against you.

I will do more than that, I will work actively for your opponent, no matter who that person is, doing everything in my power to contribute to your defeat.

If you vote for this bill I will contribute my time, energy and money to your opponent, whoever that may be.

Your Name
Your Phone Number
Your Email Address

If you live in their district, please add your address.

One More For The Road

Click Here For A MetroFax Compatible Fax List For All Congress

Note: The metrofax HOUSE list in the above link was updated this evening to include information about whether someone is a Democrat or Republican and whether they voted Yes or No the first time. The format looks fine. Thanks to Marygwen for the changes!

The senate list contains duplicates and missing senators. We are concentrating on the house now anyway.

Click Here For Contacting Congress State by State.

Those who want to target leaning members of the house should click on Congressional Most Endangered List. Some in Congress have blocked faxes so expect a few errors.

I am faxing everyone in Congress right now. If you are willing to fax everyone, contact Metrofax and ask them to copy House01 through House11 from my file to yours. I hope they will oblige. Bear in mind that will be a ton of pages.

One final note: I am not in favor of nationalizing banks. However, I am in favor of doing anything to promote discussion that will stop the worst of all possible alternatives, that being the Paulson plan.

 


 

Mike Shedlock

Author: Mike Shedlock

Mike Shedlock / Mish
Mish Talk

Mike Shedlock

Michael "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Visit http://www.sitkapacific.com/ to learn more about wealth management for investors seeking strong performance with low volatility.

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