For the Good of the State

Anuzis: Madoff’s $100,000 to Democratic Senatorial Committee is ‘dirty money’ that must be returned to bilked investors

Sen. Schumer, Democrats must show principled leadership and give back donations Madoff stole in Ponzi scheme

LANSING, Mich.  – In addition to bilking investors out of nearly $1 billion, Wall Street grafter Bernard Madoff used his ill-gotten gain to buy influence in the Halls of Congress, including giving at lest $100,000 to the Democratic Senatorial Campaign Committee and make its chairman, N.Y Senator Charles Schumer, the largest recipient of individual campaign contributions.

Now, Michigan Republican Party Chairman Saul Anuzis says it is time for Senator Schumer and the Democrats to step up and return the contributions to the investors from whom Madoff stole the money.

“These contributions are dirty money that Bernard Madoff stole from investors,” said Anuzis, who is a candidate for Republican National Committee chairman. “It’s not enough for politicians like Senator Schumer to wash their hands by donating the stolen money to charity. It is not their money to give away; it is part of a criminal investigation and should be returned to investors.”

According to campaign finance reports from the Federal Elections Commission and news accounts, Madoff and his associates made campaign contributions totaling more than $267,000 since 2001, nearly all of it to Democrats. Madoff personally donated at least $100,000 to the DSCC since Schumer took over as its chairman. Schumer, a member of the Senate Banking Committee and a key Wall Street overseer, received some $32,000 from Madoff and his associates.

“Anyone who took a dime from Madoff, his associates or employees of his securities firm, must give it back to people from which it was stolen,” Anuzis said. “People are tired of politicians having cozy relationships with shady businessmen and crooks. It is time from principles and values to return to politics.”

Michigan Republican Victory Update 12-3-08

While Michigan Republicans retreated in numbers this election cycle, we also gained hope for the future of our party. As our state and nation have grown increasingly diverse, there are strong indications that our party is growing more diverse along with them. Our party must continue to attract voters and candidates of all backgrounds and cultures if we are to get back on track. It is clear that we must continue to encourage and recruit the best candidates regardless of their ethnicity and without regard to the diversity, or lack thereof, of the districts in which these candidates run. Specific examples to note are three recently elected Republicans who will begin serving in the State House of Representatives this coming January. Justin Amash won a very tough primary in a heavily Republican, suburban, Grand Rapids district, besting two very strong opponents - including the wife of the term-limited incumbent. Amash happens to be of Arab-American decent. Larry DeShazor and Paul Scott both won very competitive open-seat races that saw the Democrats spend hundreds of thousands of dollars to try to defeat them. Both men had also won very tough primary races this past August. Both also happen to be African-American and are the first African-American Republicans to serve in the State House in over a century. Amash, DeShazor, and Scott all won in districts that are not ethnically diverse in their make-up. And they won simply because they were better candidates and ran extraordinarily effective campaigns, not because the voters of their district were primarily minority voters. Already serving in the state Senate are Republicans Bill Hardiman (African-American) and Valde Garcia (Hispanic) and along with Amash, DeShazor, and Scott represent the highest level of Republican minority representation ever seen in Michigan. Fresh Faces in the GOP State House Caucus John Walsh (R-Livonia) District 19 Occupation: Attorney, College Administrator Replacing: State Representative John Pastor Pete Lund (R-Shelby Township) District 36 Occupation: Macomb County Commissioner and Owner of Direct Mailers Replacing: State Representative Brian Palmer Hugh D. Crawford (R-Novi) District 38 Occupation: Oakland County Commissioner Replacing: State Representative Craig M. DeRoche Gail Haines (R-Lake Angelus) District 43 Occupation: Legislative Liaison for State Representative Fran Amos Replacing: State Representative Fran Amos Eileen Kowall (R-White Lake) District 44 Occupation: Oakland County Commissioner Replacing: State Representative John P. Stakoe Tom McMillin (R-Rochester Hills) District 45 Occupation: CPA, former Mayor and Oakland County Commissioner Replacing: State Representative John Garfield Cindy Denby (R-Fowlerville) District 47 Occupation: Handy Township Supervisor, former Legislative Aide Replacing: State Representative Joe Hune Paul Scott (R-Grand Blanc) District 51 Occupation: Law School Student and Pollster Replacing: State Representative David B. Robertson Ken Kurtz (R-Coldwater) District 58 Occupation: Mortician, former Funeral Home Owner Replacing: State Representative Bruce Caswell Matt Lori (R-Constantine) District 59 Occupation: St. Joseph County Sheriff Replacing: State Representative Rick Schaffer Larry DeShazor (R-Portage) District 61 Occupation: Portage City Councilman, Insurance Company Executive Replacing: State Representative Jacob Hoogendyk, Jr. Jase Bolger (R-Marshall) District 63 Occupation: Calhoun County Commissioner, Small Business Owner Replacing: State Representative Lorence Wenke Bill Rogers (R-Brighton) District 66 Occupation: Livingston County Commissioner, Residential Building Business Owner Replacing: State Representative Chris Ward Justin Amash (R-Kentwood) District 72 Occupation: Attorney, Industrial Tool Business Executive Replacing: State Representative Glen D. Steil, Jr. Sharon Tyler (R-Niles) District 78 Occupation: Township Trustee, Economic Development Executive Replacing: State Representative Neal Nitz Kevin Daley (R-Attica) District 82 Occupation: Farmer, Township Supervisor Replacing: State Representative John Stahl Bob Genetski (R-Saugatuck) District 88 Occupation: High School Teacher Replacing: State Representative Fulton J. Sheen Joseph Haveman (R-Holland) District 90 Occupation: Former County Commissioner and City Councilman, Construction Company Executive Replacing: State Representative Bull Huizenga Jim Stamas (R-Midland) District 98 Occupation: Midland County Commissioner, Pizzeria Manager Replacing: State Representative John Moolenar Wayne Schmidt (R-Traverse City) District 104 Occupation: Grand Traverse County Commissioner, Clothing Store Manager Replacing: State Representative Howard C. Walker Legacy Brick Fund You can honor Michigan Republicans by purchasing a legacy brick. In 2006, the Michigan Republican Party moved into a new headquarters and installed a legacy site to honor those who have served the party and the citizens of Michigan. However, anyone can purchase a brick, so become of honoring past, present and future Michigan Republicans. Buy a legacy brick today. Michigan GOP Web Browser Toolbar The Michigan GOP Web Browser Toolbar allows you to stay connected to the MI GOP and raise valuable contributions without spending a dime! As you use the toolbar, you will raise funds that go directly to the MI GOP. You will be able to track your donations in real time, and watch as your donations grow! From the Michigan GOP Toolbar you will receive updated messages directly from the MI GOP, keeping you up to date with breaking MI GOP news. Download the MI GOP Toolbar by logging on to www.migop.org. YOUR CONTINUED SUPPORT IS CRITICAL Your Michigan Republicans have been busy this week making sure government works for you. Unfortunately, the Democrats who control Lansing have been equally busy making sure you work for government through the largest tax increase in Michigan history, higher fees and more regulations. Take a few minutes to see what your Michigan Republicans have been up to. But before you do that, take one minute and make a donation to the Michigan Republican Party. By making your contribution today, you will help make sure our Michigan Republicans have the resources to fight the Democrats. Onward to Victory! Saulius "Saul" Anuzis Chairman

Card Check Commercial...Union Boss Gets Pushy

Mike Rogers...two new, great ads

Cliff Taylor for Supreme Court Justice

SNL...Financial Crisis the Democrats Fault?!?

CNN Finds ACORN Fraudulent Voter Registration!

One of the BEST Explanations of Today's Crisis

Investor's Business Daily

http://www.investors.com/editorial/editorialcontent.asp?secid=1501&status=article&id=308530236252361

EDITORIALS & OPINION

America's Second Wake-Up Call!

INVESTOR'S BUSINESS DAILY

Posted 10/10/2008

History is important to study... if you can trust the national media to not withhold key information they don't want you to see or twist daily news to fit their agenda.

In the last 40 years, there have been nine major surveys of editors and reporters who work for national media. The most they ever voted Republican in a national election was 14%; the more common range has been 4% to 7%.

This is one reason why no matter who wins a political debate, the media almost en masse repeatedly tell you their man won. And most voters who don't pay close attention will believe them. It's called coordinated propaganda.

What were the most consistently repeated and strongly asserted slogans you've heard over the last few years? "We're losing in Iraq . . . we must get out . . . it's costing us $10 billion a month we could use here at home . . . we're not any safer . . . the surge won't work."

A year ago, vice presidential candidate Joe Biden opined that we should get out of Iraq immediately and then divide it into three separate countries. This is the sound, seasoned judgment that's supposed to compensate for running mate Barack Obama's youth and complete lack of experience with the military or America's security in a dangerous world!

Well, the surge in Iraq has worked, we are winning decisively and, as a result, now have a new democracy and strong ally in the Mideast. Meanwhile, seven years have passed since 9/11, and we still haven't had another major terrorist attack on our soil.

Yet the media give no credit at all to President Bush, the only president to do something about the terrorist attacks that we had suffered repeatedly beginning in 1992.

With the economy slowing and a weak financial market created solely by our subprime mortgage mess, what do we keep hearing now from the media in hopes the majority will believe it and vote accordingly? "The mess is caused by eight years of failed Bush economic policies, including the tax cuts for the rich that should be rescinded."

This is not the talk of a uniter of people, but rather a separator stirring up class warfare, envy and resentment. It's a stirring-up of hate in an attempt to endlessly criticize, condemn, demean and destroy every opponent.

Do you know the real cause of the out-of-control subprime loan mess that's creating so much fear and hurting every American? It's not something the media or a certain political party wants you to find out. A picture is worth a thousand words, however, and we've made notes of key events on the chart above that you can follow as we give you some key facts.

In 1995, President Clinton mandated new regulations that coerced banks to make significantly more subprime loans to inner-city residents previously viewed as unqualified buyers in high-risk areas. Banks were rated on how well they complied and faced big fines if they didn't do what government regulators wanted.

The government's worst decision was allowing and encouraging banks, for the first time, to bundle these subprime loans in giant packages with prime loans. These packages were then sold to other investors as safe because they were government-sponsored by Fannie Mae and Freddie Mac.

The first of these government-encouraged packages came to market in 1997. For the banks, they were profitable because they could be sold quickly and thereby absolve the banks of any risk in the loans they made. Many subprimes were variable-rate loans made without down payments or documentation of borrowers' incomes.

The banks could then use the money to make even more of these lower-quality, government-required loans, and Fannie Mae and Freddie Mac bought them with virtual abandon.

It evolved into a Big Government pyramid scheme with Democrats in charge of Fannie and Freddie making large political donations to Barney Frank, Chris Dodd, Barack Obama and other politicians who continually defended the anything-goes lending of the two agencies.

In short, this was yet another well-intended, Democrat-supported, government-designed and run program that failed miserably and had the usual unintended consequences.

A few more facts:

• April 2001: The Bush administration's fiscal budget stated that the size of Fannie and Freddie was "potential problem because financial trouble of a large Government-Sponsored Enterprise could cause repercussions in financial markets, affecting federally insured entities and economic activity."

• May 2002: The Office of Management and Budget wanted disclosure and governance principles in Bush's 10-point plan for corporate responsibility to apply to Fannie and Freddie.

• February 2003: A federal housing oversight report warned that unexpected problems at Fannie Mae could immediately spread into financial sectors.

• September 2003: Treasury Secretary John Snow, in testimony to the House Financial Services Committee, recommended that Congress enact legislation to create new agency to regulate and supervise financial activities of housing-related government entities to set prudent and appropriate minimum capital requirements.

Rep. Frank, the committee's ranking member, strongly disagreed, saying: "Fannie Mae and Freddie Mac are not facing any kind of financial crisis . . . . The more people exaggerate these problems, the more pressure there is on these companies, the less we'll see in terms of affordable housing."

• February 2004: The president's new budget again highlighted risks of the explosive growth of these government enterprises and the then-low levels of required capital. It also called for the creation of a world class regulator. The administration determined that housing regulators of government agencies lacked the power and stature to meet their responsibilities and should be replaced with a strong new third regulator.

• February 2004: Greg Mankiw, chairman of Bush's Council of Economic Advisers, cautioned Congress against taking the strength of financial markets for granted. He too called for reducing the risk by ensuring that housing GSEs are overseen by an effective regulator.

• April 2004: Rep. Frank ignored warnings, accusing the administration of creating an "artificial issue." "People pay their mortgages," he told a group of mortgage bankers. "I don't think we are in any remote danger here. This focus on receivership, I think, is intended to create fears that aren't there."

From 2004 to 2008 the Bush administration made 12 more attempts to get Congress to pass legislation to have safer, sounder regulatory oversight of Fannie and Freddie and capital rules. You can see them for yourself on the White House Web site. But here are a couple of examples that show how Democrats resisted:

• July 2005: Senate Majority Leader Harry Reid rejected legislation on reforming Fannie and Freddie. "While I favor improving oversight by our federal housing regulators to ensure safety and soundness, we cannot pass legislation that would limit Americans from owning homes and harm our economy in the process," he said.

• August 2007: Sen. Dodd, another Democrat, ignored President Bush's emphatic calls for Congress to pass Fannie and Freddie reform legislation and called for him to immediately reconsider his ill-advised position.

Democrats have become a far-left propaganda party with the lowest-ranked Congress in history. For six years, they have consistently refused to rein in the monumentally risky subprime loans that Clinton Democrats gave birth to.

Yet, voters are blaming Republicans for this crisis and seem to think that a newcomer they know little about, despite his questionable past associates and mentors, can bring us more huge programs. These include one that would socialize the health care system at a time when government-run systems in Canada and Britain are lower in quality and nearly bankrupt.

We will not have another 1929. The chart above shows we are in a 1937-type correction with a 1938-39 perhaps ahead. That's when England's Neville Chamberlain thought he could appease Hitler just by talking to him and getting a signature on a piece of paper that guaranteed "peace in our time."

Today, a new Hitler in Iran says he wants to have similar relations with the U.S. Are terrorists hoping that we will sign a nice agreement that gives Iran another couple of years to develop a nuclear weapon?

Finally, history shows that since World War II, our best results-oriented presidents were Truman, Eisenhower and Reagan. They were much older — in their 60s and 70s — more experienced and made sounder, more productive decisions. The three youngest presidents — Kennedy, Carter and Clinton — all had more problems, particularly with national defense and dealing with dangerous dictators that were threats to America's security.

Obama, Clinton & ACORN..."forced" Financial Crisis

Watch as Andrew Cuomo, Clinton's Secretary of Housing and Urban Development, admits the Clinton administration forced banks to make bad loans families would not have qualified for without the wrongheaded loan "affirmative action."

Continue to watch and see how ACORN "community organizers" and the Democrats' community organizer in chief, Barack Obama helped bring us this financial crisis.

The Truth Behind the Negative SMEAR Campaign Against Chief Justice Cliff Taylor – Part 1

For more than a year, Michigan citizens have been deluged by false, negative attacks against Chief Justice Cliff Taylor.  Unfortunately, these attacks have been so common-place that some have come to believe that they are true.

Who is behind them?  If you look at press releases and blogs, it is simple:  the Michigan Democratic Party Chair Mark Brewer (who some in the press have characterized as having an obsession with Cliff Taylor), the trial lawyers (whose contingency fees have begun to dry up as a result of the reduction of frivolous lawsuits filed in Michigan), and a few trade union bosses.

In an effort to set the record straight, we have attempted to address their scurrilous attacks one-by-one!  Though they are in no particular order, we’ve numbered these attacks as they’ve hit cyberspace as quickly as their creative authors can make them up!

Smear # 1:  University of Chicago study finds that “under Cliff Taylor,” Michigan Supreme Court ranks last!

The Facts: Those who dislike our Supreme Court will say anything to discredit it.  Now they’re citing an unpublished “study” (it’s a “working white paper” which can be found on a web site asking for comment) using outdated information to level more bogus attacks against Chief Justice Taylor.  Yes, the study was critical of the Michigan Supreme Court – but not under Chief Justice Taylor!  Rather, it examined three years: 1998-2000.  Who was in charge then?  In 1998, Democrat-nominated Conrad Mallet was Chief Justice, and in 1999-2000, Elizabeth Weaver, a frequent and outspoken critic of the current conservative majority, was Chief Justice!  In fact, all four members of the current majority weren’t even on the court for nearly 60% of the time covered by the study! 

Smear # 2:  Chief Justice Taylor never rules against insurance companies.

The Facts:  Another deliberate lie and distortion of the facts.  Either the people putting this nonsense forward don’t do their homework, or they are intentionally spreading false information to try to fool Michigan voters. So far this calendar year (as of 9/29/08), the Michigan Supreme Court has issued five written opinions in which insurance companies have been a named party.  The insurance company has lost in 3 of the 5 cases!  The fact is that the current majority of the Michigan Supreme Court decides cases on the basis of the rule of law – no matter who wins!

Smear # 3:  Chief Justice Taylor looks out for his perks instead of the middle class.

The Facts: Again, just plain wrong!  Recognizing the financial difficulties facing our state, Chief Justice Cliff Taylor went to work for the taxpayers.  It was Cliff Taylor who led the way in returning state funded judicial cars, saving taxpayers nearly a half million dollars a year.  Under his leadership, the number of court employees is down.  He has also recommended the elimination of 24 judges (by attrition) due to decreased work load in some parts of the state.  This would save taxpayers millions of dollars every year!  Unfortunately, neither the Governor nor the Legislature has given the proposal any meaningful consideration.

Smear # 4:  Chief Justice Taylor has refused to allow juries to set damages for injured parties! He just doesn’t care about jurors, and what they think.

The Facts:  Again, a twisting of the facts like a pretzel to suit those who are against him.  The Michigan Supreme Court has ruled that whether or not a party is entitled to damages is within the purview of the jury.  However, the amount of damages a party should get for a particular injury is a question of law, as the Legislature has enacted statutes which put caps on certain injuries.

Further, Chief Justice Taylor has demonstrated his respect and appreciation for jurors time after time.  It was his leadership that led to jury-reform pilot projects around the state.  These reforms, lauded by newspaper editorial boards, had met with stiff opposition from many lawyers and judges.  Nonetheless, the Michigan Supreme Court, under Chief Justice Taylor’s leadership, has now put in place pilot projects in 10 circuit courts across the state!  These reforms allow jurors to do such things as review evidence, discuss the case with each other during deliberation, and take notes during trial. See http://www.clifftaylor.com/jury%20reforms and http://www.clifftaylor.com/jury%20appreciation for additional information.

Smear # 5:  The Michigan Supreme Court, under Chief Justice Cliff Taylor, has no rules for recusal or disqualification from cases from which they may have a conflict.

The Facts:  Another swing and a miss at the truth. The Michigan Supreme Court uses virtually the same system for disqualification as used by the United States Supreme Court.  It is a system that has been used by all Michigan Justices since statehood.  Michigan Court Rules define the situations or relationships that require disqualification.  For situations falling outside the Rules, a very rare circumstance, the individual Justice looks to his conscience to decide. Appeals of such decisions go to the U.S. Supreme Court, which has never found this process wanting.  This has never been an issue until the left has tried to make political hay of it.

Smear # 6:  Cliff Taylor rules in favor of his contributors.  He rules against the little guy and the middle class.

The Facts:  More inaccurate class warfare junk. Cliff Taylor rules according to the law and its application to the facts in each case.  This is not a pro-labor court, nor a pro-business court.  It is not a pro-insurance court, nor a pro-injured party court.  It is a court that abides by the rule of law.  A thorough review of all opinions of the Court demonstrate that all types of litigants win and lose - injured parties, small businesses, victims of crimes, and even those wrongly convicted of a crime.   The other side likes to cherry pick cases, generally those with very tragic results and heart wrenching facts - situations where a law seems unfair or bad policy.  They conveniently and intentionally leave out relevant facts in an effort to put a decision in the worst light.  However, absent a constitutional violation, a judge must interpret and apply the law as written, even though he or she may personally find it difficult.  Under our system of government, the appropriate place to address such policy issues is in the legislature, not the court.  The court does not have the ability to bend the laws in emotional cases, just as it has no discretion to change the laws in criminal cases.

Smear # 7:  Cliff Taylor is soft on crime.

The Facts: These charges are absolutely false and should be a crime. Chief Justice Taylor’s opponents know it.  Take it from the Michigan Fraternal Order of Police Past President, “As chief justice, [Cliff Taylor] has also championed decisions that ensure all Michigan citizens are safer from violent criminals.” That’s why he has been endorsed by the law enforcement people across the state: Police Officers Association of Michigan; Michigan’s Fraternal Order of Police; the Michigan Court Officers Association, along with countless prosecutors and sheriffs across the state.  Just last week, the Michigan Supreme Court rejected an appeal from a convicted killer and a convicted embezzler from Jackson County.  This is just one of hundreds of examples that we can point to!

Smear # 8:  “In a [Michigan Lawyer’s Weekly] survey of attorneys who argue cases in front of the Supreme Court, All of them rated Cliff Taylor lowest in preparedness, lowest in efficiency, lowest in thoroughness, and lowest in overall knowledge of the law.” (Hathaway  website).

The Facts:  Wrong again!  When asked about this characterization of the Michigan Lawyers’ Weekly survey, the pollster who conducted it said: “Chief Justice Clifford Taylor and four of his colleagues were tied for best justice when you factor out the results of those attorneys who disagreed with a particular justice’s decisions more than half the time.”  Only 77 lawyers of over 800 attorneys even responded to the survey, and they were self-selected!  This is not a poll – it is simply the opinion of about 40 trial lawyers who have an axe to grind with the leader of a rule-of-law court!

New Smears?  If you hear of Smear against Chief Justice Taylor, let us know.  Don’t let the other side get away with telling these lies!  Send your comments to ColleenPero@aol.com!  And for more information, go to www.CliffTaylor.com.  Please share this information with your families, friends and neighbors.

Finally, we need help to make sure that these smears don't go unanswered.  You can help by contributing to the campaign - just go to www.CliffTaylor.com/contribute.  Thanks so much for your continued support!!

New Ad...Who's to blame for Freddie & Fannie?

Senate Bailout Bill Vote

How the Senate voted Wednesday on the financial bailout bill (S. Amdt. 5685 to H.R. 1424):

Akaka (D-HI), Yea
Alexander (R-TN), Yea
Allard (R-CO), Nay
Barrasso (R-WY), Nay
Baucus (D-MT), Yea
Bayh (D-IN), Yea
Bennett (R-UT), Yea
Biden (D-DE), Yea
Bingaman (D-NM), Yea
Bond (R-MO), Yea
Boxer (D-CA), Yea
Brown (D-OH), Yea
Brownback (R-KS), Nay
Bunning (R-KY), Nay
Burr (R-NC), Yea
Byrd (D-WV), Yea
Cantwell (D-WA), Nay
Cardin (D-MD), Yea
Carper (D-DE), Yea
Casey (D-PA), Yea
Chambliss (R-GA), Yea
Clinton (D-NY), Yea
Coburn (R-OK), Yea
Cochran (R-MS), Nay
Coleman (R-MN), Yea
Collins (R-ME), Yea
Conrad (D-ND), Yea
Corker (R-TN), Yea
Cornyn (R-TX), Yea
Craig (R-ID), Yea
Crapo (R-ID), Nay
DeMint (R-SC), Nay
Dodd (D-CT), Yea
Dole (R-NC), Nay
Domenici (R-NM), Yea
Dorgan (D-ND), Nay
Durbin (D-IL), Yea
Ensign (R-NV), Yea
Enzi (R-WY), Nay
Feingold (D-WI), Nay
Feinstein (D-CA), Yea
Graham (R-SC), Yea
Grassley (R-IA), Yea
Gregg (R-NH), Yea
Hagel (R-NE), Yea
Harkin (D-IA), Yea
Hatch (R-UT), Yea
Hutchison (R-TX), Yea
Inhofe (R-OK), Nay
Inouye (D-HI), Yea
Isakson (R-GA), Yea
Johnson (D-SD), Nay
Kennedy (D-MA), Not Voting
Kerry (D-MA), Yea
Klobuchar (D-MN), Yea
Kohl (D-WI), Yea
Kyl (R-AZ), Yea
Landrieu (D-LA), Nay
Lautenberg (D-NJ), Yea
Leahy (D-VT), Yea
Levin (D-MI), Yea
Lieberman (ID-CT), Yea
Lincoln (D-AR), Yea
Lugar (R-IN), Yea
Martinez (R-FL), Yea
McCain (R-AZ), Yea
McCaskill (D-MO), Yea
McConnell (R-KY), Yea
Menendez (D-NJ), Yea
Mikulski (D-MD), Yea
Murkowski (R-AK), Yea
Murray (D-WA), Yea
Nelson (D-FL), Nay
Nelson (D-NE), Yea
Obama (D-IL), Yea
Pryor (D-AR), Yea
Reed (D-RI), Yea
Reid (D-NV), Yea
Roberts (R-KS), Nay
Rockefeller (D-WV), Yea
Salazar (D-CO), Yea
Sanders (I-VT), Nay
Schumer (D-NY), Yea
Sessions (R-AL), Nay
Shelby (R-AL), Nay
Smith (R-OR), Yea
Snowe (R-ME), Yea
Specter (R-PA), Yea
Stabenow (D-MI), Nay
Stevens (R-AK), Yea
Sununu (R-NH), Yea
Tester (D-MT), Nay
Thune (R-SD), Yea
Vitter (R-LA), Nay
Voinovich (R-OH), Yea
Warner (R-VA), Yea
Webb (D-VA), Yea
Whitehouse (D-RI), Yea
Wicker (R-MS), Nay
Wyden (D-OR), Nay

Interesting proposal by Soros

http://www.ft.com/cms/s/0/d68e10cc-8f45-11dd-946c-0000779fd18c.html?nclick_check=1

Recapitalise the banking system
By George Soros
Published: October 1 2008 02:05 | Last updated: October 1 2008 02:05

The emergency legislation currently before Congress was ill-conceived – or more accurately, not conceived at all. As Congress tried to improve what Treasury originally requested, an amalgam plan has emerged that consists of Treasury’s original Troubled Asset Relief Programme (Tarp) and a quite different capital infusion programme in which the government invests and stabilises weakened banks and profits from the economy’s eventual improvement. The capital infusion approach will cost tax payers less in future years, and may even make money for them.

Two weeks ago the Treasury did not have a plan ready – that is why it had to ask for total discretion in spending the money. But the general idea was to bring relief to the banking system by relieving banks of their toxic securities and parking them in a government-owned fund so that they would not be dumped on the market at distressed prices. With the value of their investments stabilised, banks would then be able to raise equity capital.

The idea was fraught with difficulties. The toxic securities in question are not homogenous and in any auction process the sellers are liable to dump the dregs on to the government fund. Moreover, the scheme addresses only one half of the underlying problem – the lack of credit availability. It does very little to enable house owners to meet their mortgage obligations and it does not address the foreclosure problem. With house prices not yet at the bottom, if the government bids up the price of mortgage backed securities, the taxpayers are liable to loose; but if the government does not pay up, the banking system does not experience much relief and cannot attract equity capital from the private sector.

A scheme so heavily favouring Wall Street over Main Street was politically unacceptable. It was tweaked by the Democrats, who hold the upper hand, so that it penalises the financial institutions that seek to take advantage of it. The Republicans did not want to be left behind and imposed a requirement that the tendered securities should be insured against loss at the expense of the tendering institution. The rescue package as it is now constituted is an amalgam of multiple approaches. There is now a real danger that the asset purchase programme will not be fully utilised because of the onerous conditions attached to it.

Different focus
‘Tarp’s adverse consequences could be mitigated by using taxpayers’ funds more effectively. If Tarp invested in preference shares with warrants attached, private investors, including me, would jump at the opportunity’

Nevertheless, a rescue package was desperately needed and, in spite of its shortcomings, it would change the course of events. As late as last Monday, September 22, Treasury secretary Hank Paulson hoped to avoid using taxpayers’ money; that is why he allowed Lehman Brothers to fail. Tarp establishes the principle that public funds are needed and if the present programme does not work, other programmes will be instituted. We will have crossed the Rubicon.

Since Tarp was ill-conceived, it is liable to arouse a negative response from America’s creditors. They would see it as an attempt to inflate away the debt. The dollar is liable to come under renewed pressure and the government will have to pay more for its debt, especially at the long end. These adverse consequences could be mitigated by using taxpayers’ funds more effectively.

Instead of just purchasing troubled assets the bulk of the funds ought to be used to recapitalise the banking system. Funds injected at the equity level are more high-powered than funds used at the balance sheet level by a minimal factor of twelve - effectively giving the government $8,400bn to re-ignite the flow of credit. In practice, the effect would be even greater because the injection of government funds would also attract private capital. The result would be more economic recovery and the chance for taxpayers to profit from the recovery.

This is how it would work. The Treasury secretary would rely on bank examiners rather than delegate implementation of Tarp to Wall Street firms. The bank examiners would establish how much additional equity capital each bank needs in order to be properly capitalised according to existing capital requirements. If managements could not raise equity from the private sector they could turn to Tarp.

Tarp would invest in preference shares with warrants attached. The preference shares would carry a low coupon (say 5 per cent) so that banks would find it profitable to continue lending, but shareholders would pay a heavy price because they would be diluted by the warrants; they would be given the right, however, to subscribe on Tarp’s terms. The rights would be tradeable and the secretary of the Treasury would be instructed to set the terms so that the rights would have a positive value.

Private investors, including me, are likely to jump at the opportunity. The recapitalised banks would be allowed to increase their leverage, so they would resume lending. Limits on bank leverage could be imposed later, after the economy has recovered. If the funds were used in this way, the recapitalisation of the banking system could be achieved with less than $500bn of public funds.

A revised emergency legislation could also provide more help to homeowners. It could require the Treasury to provide cheap financing for mortgage securities whose terms have been renegotiated, based on the Treasury’s cost of borrowing. Mortgage service companies could be prohibited from charging fees on foreclosures, but they could expect the owners of the securities to provide incentives for renegotiation as Fannie Mae and Freddie Mac are already doing.

Banks deemed to be insolvent would not be eligible for recapitalization by the capital infusion programme, but would be taken over by the Federal Deposit Insurance Corporation. The FDIC would be recapitalised by $200bn as a temporary measure. FDIC, in turn could remove the $100,000 limit on insured deposits. A revision of the emergency legislation along these lines would be more equitable, have a better chance of success, and cost taxpayers less in the long run.

The writer is chairman of Soros Fund Management

In Times of Crisis...Trust Capitalism

http://www.realclearmarkets.com/articles/2008/09/in_times_of_crisis_trust_capit.html

September 29, 2008
In Times of Crisis, Trust Capitalism
By Joseph Calhoun

The US government is executing a coup d’etat of capitalism and I fear that we will pay the price for many years to come. Hank Paulson, Ben Bernanke and a host of others tell us the credit market is not working and the only way to get it working again is for the government to intervene. They claim this intervention is urgently needed and if we don’t act, the consequences are dire. Dire, as in New Depression dire. Have these supposed experts on capitalism forgotten how it really works?

Last week Goldman Sachs raised $10 billion in new capital in one day. They sold $5 billion in preferred stock and warrants to Berkshire Hathaway and also completed a secondary offering of common stock that raised another $5 billion. Friday, JP Morgan raised $10 billion in a secondary offering to help pay for the Washington Mutual takeunder. Both of these offerings were oversubscribed, meaning that the companies could have raised more capital if they wanted. There is not a shortage of capital for well run financial companies.

There is, however, a shortage of capital for companies that have acted irresponsibly with investor capital in the recent past. For some reason, our political leaders believe this is a failure of the market, but isn’t this what should be expected from rational investors? Given a choice, why would a rational investor allocate limited capital to the losers rather than the winners? If capital is really as scarce as it seems, isn’t it better for our economy if we make sure that it is allocated wisely?

The biggest bank failure in the history of the United States happened last Thursday night and by Friday morning, it was business as usual. The only difference was the name on the door and the losses suffered by those unfortunate enough to invest in Washington Mutual bonds or stock. The taxpayers didn’t lose anything and depositors didn’t lose anything, only investors. That is how capitalism works in case everyone has forgotten.

The “crisis” we face today is not a creation of the market. Government intervention over many years (but especially the last year) is what brought us to the point where we’ve placed our hopes for economic recovery on the good intentions of a Congress facing re-election in a few weeks. There has been much commentary recently about the role of Fannie Mae and Freddie Mac in the creation and expansion of the sub-prime mortgage market which many believe to be the cause of this mess. That criticism is certainly warranted, but little attention has been paid to the real culprit – the Federal Reserve. Furthermore, what attention there has been is concentrated on the role of Alan Greenspan rather than Ben Bernanke. While Alan Greenspan deserves his share of the blame, Bernanke’s contribution to this mess should not be minimized or excused.

Bernanke obviously does not trust the market to sort the winners from the losers. When this erupted last year, the Fed lowered interest rates, including the discount rate, which is the rate charged by the Fed to lend directly to banks. There has always been a stigma attached to borrowing directly from the Fed and for good reason. If a bank can’t get other banks to lend it money, that tells the market something about the condition of the bank in question. Last August, Bernanke convinced three large banks to borrow at the discount window in an effort to remove that stigma. When that didn’t work, he concocted a scheme to allow banks to borrow from the Fed in anonymity via a mechanism he called the Term Auction Facility. When Bear Stearns blew up, he added the Term Securities Lending Facility for investment banks. By removing the stigma of borrowing from the Fed and hiding the identity of the borrowers, Bernanke removed important information from the market.

Now we face a situation where banks are not willing to lend to each other and have therefore become dependent on the Fed for daily liquidity. This is a direct result of the Fed’s actions. Banks will not lend to each other because they don’t know which ones are really in trouble. The rise in inter-bank lending rates is a rational market response to a lack of information. Furthermore, why pay those inter-bank rates when the Fed or ECB is offering easier terms?

These opaque lending facilities are just part of the problem created by the Fed and Treasury. The Bear Stearns intervention started the process by raising expectations that the government would step in and broker deals that would normally be left to the private sector. By providing favorable terms to JP Morgan in the deal, private actors came to see an advantage in waiting to see if the Fed would provide similar terms again. The worry at the time was that a Bear Stearns failure would cause a collapse of the system, but after watching Lehman Brothers file bankruptcy one has to wonder if that worry was based on fear or facts. Lehman filed bankruptcy on a Sunday night and the market opened the next day and functioned as it should. Would a Bear bankruptcy have been different? We will never know, but I have my doubts.

Now markets are waiting on pins and needles as the politicians haggle over the details of the latest bailout attempt by the Fed and Treasury. This has introduced another roadblock to the re-capitalization and reorganization of the financial industry. Companies that are in need of capital are waiting to see if the plan will bail them out of their difficulties. If Hank Paulson is willing to pay an above market price for their bad loans, why should they dilute their equity now? Why not wait until they can offload the bad paper on the taxpayer and raise capital at a better price? Why take Tony Soprano terms when Uncle Sam is willing to let the taxpayer take the hit for you?

If this bailout goes ahead in its current form and the Treasury pays a high enough price to recapitalize the troubled banks, what has been accomplished? The plan may be enough to induce the banking sector to start lending again, although frankly, I don’t know why we would want institutions who have shown such poor judgment in the past to stay in that business. This plan short circuits the capitalist model which would allow the stronger, well-run institutions to gain market share and/or expand profit margins. The long-term effect will be to lower the overall return on capital in the financial services industry. The government apparently believes that the key to economic recovery is to allocate limited resources in an inefficient manner. Does that make sense?

Paulson and Bernanke have testified to Congress that the market for the mortgage paper rotting on the balance sheets of bad banks is not working. They have not offered an explanation of why that market is not functioning except to blame the complicated nature of some of the securities. That explanation begs the question of how exactly the Treasury believes it will be any better at deciphering the mortgage market. A more logical explanation is not a lack of willing buyers, but a lack of willing sellers. The Fed has allowed institutions to use collateral of ever falling quality to secure loans from the Fed. If a bank can finance its activities through the Fed and keep the bad loans on the balance sheet, what incentive does it have to sell? Selling will reveal the true condition of the company and will also force other institutions to do the same under mark- to-market accounting. The Fed is the one keeping the market from functioning. The Treasury does not need to enter the market for it to start functioning; the Fed needs to leave the market.

Paulson has said that the cause of the current problems is the housing deflation, but that ignores the elephant in the living room. The housing bubble, which was concentrated in a relatively small number of states, was caused by the reckless actions of the Greenspan Fed. The consequences of that bubble have been exacerbated by the Bernanke Fed. The market is functioning as it should. It is the Fed that is not functioning correctly. There is no reason we had to go through either the bubble or the aftermath. We got into this mess because we tried to avoid the consequences of the Internet bubble. We will only make things worse by trying to avoid the consequences of the housing bubble.

We are not on the verge of a new depression. The housing bubble collapse in California, Florida and a few other states is not enough to bring down the entire banking system. Investors who made mistakes in these markets should be held responsible and those who navigated the Fed-distorted market should be rewarded for their wisdom and prudence. Enacting the Paulson plan will not allow that to happen and our economy will suffer for it in the long run. The Japanese tried to prop up failed banks in the aftermath of the bursting of their twin bubbles and the result was 15 years of stagnation. Why are we emulating a strategy that is a demonstrable failure? A better alternative would be to allow capitalism to work as it should and stop the interventions of the Fed in the money market. Trust capitalism. It works.
Joseph Calhoun is chief investment officer for Alhambra Investment Management in Coral Gables, Florida. He can be reached at jyc3@alhambrapartners.com

Karl Rove...why the bailout vote failed....politics

NEWT...Suspend Mark-To-Market Accounting

http://www.forbes.com/opinions/2008/09/29/mark-to-market-oped-cx_ng_0929gingrich.html

Commentary
Suspend Mark-To-Market Now!
Newt Gingrich 09.29.08, 6:05 PM ET

Today, Congress voted against passing the bailout package for Wall Street. The stock market reacted immediately, falling almost 800 points. It is clear that something needs to be done, and in the coming days, a new package must be constructed that has the support of the American people that both deals with the liquidity crisis and sets the stage for long-term economic growth.

However, there is an immediate step that could be taken right now that would calm the markets and dramatically reduce taxpayer risk in any future government intervention.

Today the Treasury secretary released the following statement: "I and my colleagues at the Fed and the SEC continue to address the market challenges we are facing on a daily basis. I am committed to continuing to work with my fellow regulators to use all the tools available to protect our financial system and our economy."

While Congress and the White House consider next steps, the Treasury and its fellow regulators should follow their own counsel and take without delay the one regulatory action within their discretion that can help immediately to calm markets and dramatically reduce the taxpayer risk in any necessary government intervention: suspend mark-to-market.

Chief economist Brian S. Wesbury and his colleague Bob Stein at First Trust Portfolios of Chicago estimate the impact of the "mark-to-market" accounting rule on the current crisis as follows:

"It is true that the root of this crisis is bad mortgage loans, but probably 70% of the real crisis that we face today is caused by mark-to-market accounting in an illiquid market. What's most fascinating is that the Treasury is selling its plan as a way to put a bottom in mortgage pool prices, tipping its hat to the problem of mark-to-market accounting without acknowledging it. It is a real shame that there is so little discussion of this reality." (Emphasis added.)

If regulators on their own--or Congress, if regulators fail to use their discretion--can fix 70% of the financial crisis by changing the mark-to-market accounting rule, we should change the rule first before attempting to pass another reevaluated bailout package.

"Mark-to-Market" Accounting and the Origins of the Financial Crisis: Mark-to-market accounting (also known as "fair value" accounting) means that companies must value the assets on their balance sheets based on the latest market indicators of the price that those assets could be sold for immediately. Under such a rule, declining housing prices don't just reduce the value of defaulting mortgages. They reduce the value of all mortgages and all mortgage-related securities because the housing collateral protecting them is worth less.

Moreover, when a company in financial distress begins fire sales of its assets to raise capital to meet regulatory requirements, the market-bottom prices it sells out for become the new standard for the valuation of all similar securities held by other companies under mark-to-market. This has begun a downward death spiral for financial companies large and small.

More foreclosures and home auctions continue to depress housing prices, further reducing the value of all mortgage-related securities. As capital values decline, firms must scramble to maintain the capital required by regulation. When they try to sell assets to raise that capital, the market values of those assets are driven down further. Under mark-to-market, the company must then mark down the value of all of its assets even more.

The credit agencies see declining capital margins, so they downgrade the company's credit ratings. That makes borrowing to meet capital requirements more difficult. Declining capital and credit ratings cause the company's stock prices to decline.

Panic sets in, and no one wants to buy mortgage-related securities, which drives their value under mark-to-market regulations down toward zero. Balance sheets under mark-to-market suddenly start to show insolvency. This downward spiral shuts down lending to these companies, so they lose all liquidity (cash on hand) needed to keep company operations going. Stockholders--realizing that they will be wiped out if the companies go into bankruptcy or get taken over by the government--start panic selling, even when they know the underlying business of the company is fine.

The end result for the company is stock prices driven toward zero and bankruptcy or government takeover. The criminal liabilities imposed under Sarbanes-Oxley have driven accountants to stricter and stricter accounting evaluations and interpretations and have prevented leading executives from resisting them.

The Problems with Mark-to-Market Accounting: William Isaac, chairman of the FDIC in the 1980s under President Reagan, recently wrote in The Wall Street Journal, "During the 1980s, our underlying economic problems were far more serious than the economic problems we're facing this time around. ... It could have been much worse. The country's 10 largest banks were loaded up with Third World debt that was valued in the markets at cents on the dollar. If we had marked those loans to market prices, virtually every one of them would have been insolvent."

Isaac continues, "But what do we do when the already thin market for those assets freezes up, and only a handful of transactions occur at extremely depressed prices? ... The accounting profession, scarred by decades of costly litigation, just keeps marking down the assets as fast as it can."

He concludes, "This is contrary to everything we know about bank regulation. When there are temporary impairments of asset values, due to economic and marketplace events, regulators must give institutions an opportunity to survive the temporary impairment. Assets should not be marked to unrealistic fire sale prices. Regulators must evaluate the assets on the basis of their true economic value (a discounted cash flow analysis). If we had followed today's approach during the 1980s, we would have nationalized all of the major banks in the country, and thousands of additional banks and thrifts would have failed. I have little doubt that the country would have gone from a serious recession into a depression."

Similarly, University of Chicago Law Professor Richard Epstein, among the best in the country at law and economics analysis, recently wrote about mark-to-market accounting for today's mortgage-related securities, "Unfortunately, there is no working market to mark this paper down to. To meet their bond covenants and their capital requirements, these firms have to sell their paper at distress prices that don't reflect the upbeat fact that the anticipated income streams from this paper might well keep the firm afloat."

Alex Pollock, former head of the Federal Home Loan Bank of Chicago, explains that when the economy is in the midst of a severe downturn, the use of mark-to-market accounting "reinforces the downward cycle of panic-falling prices-losses-illiquidity-credit contraction-more panic-further falling prices-greater reported losses-no active markets. Fair value accounting adds momentum to a destructive downside overshoot."

Reform or Bust: Because existing rules requiring mark-to-market accounting are causing such turmoil on Wall Street, mark-to-market accounting should be suspended immediately so as to relieve the stress on banks and corporations. In the interim, we can use the economic value approach based on a discounted cash flow analysis of anticipated-income streams, as we did for decades before the new mark-to-market began to take hold. We can take the time to evaluate mark-to-market all over again. Perhaps a three-year rolling average to determine mark-to-market prices would be a workable permanent system.

It is not widely understood that the adoption of mark-to-market accounting rules is a major factor in the liquidity crisis which is leading companies to go bankrupt. But it is destructive to have artificial accounting rules ruin companies that would have otherwise survived under previous rules.

For companies like Bear Stearns, Lehman Brothers and American International Group, suspending mark-to-market rules will come too late. But for the remaining vulnerable banks and corporations, doing away with the current mark-to-market accounting rules will safeguard against destructive pricing volatility, needless bankruptcies, job loss and huge taxpayer bailouts.

Suspending Mark-to-Market Only the First Step to Economic Recovery: In the wake of today's vote, suspending mark-to-market is an extremely important first step to take, but it is only a first step.

Congress should also consider a bold and dramatic program to restart economic growth and rebuild market efforts.

In particular, the Congress should look at the impact of the Irish 12% corporate income tax on attracting investment and jobs to Ireland and consider a dramatic cut in the U.S. corporate income tax (the highest in the world when combined with state taxes) as a step toward attracting high-value productive and desirable jobs back to the United States.

The Congress should look at the Chinese and Singapore growth patterns and match them by zeroing out the capital gains tax to induce massive flows of private capital to rebuild the market and minimize the need for a taxpayer-funded bailout.

The Congress should repeal Sarbanes-Oxley, which failed to warn of every single bankruptcy but provides a $3-million-a-year accounting and regulatory expense for every small company wishing to go public.

This is the kind of pro-growth, pro-entrepreneur program that would accelerate the American recovery and lead to the next economic period of real growth.

Former House Speaker Newt Gingrich is a senior fellow at the American Enterprise Institute (AEI). Emily Renwick is a research assistant at AEI and also contributed to this op-ed.

FOX News Bailout Special...A Must See

Market Alternatives for various bailouts

Is Purchasing $700 billion of Toxic Assets the Best Way to Recapitalize the Financial System? No! It is Rather a Disgrace and Rip-Off Benefitting only the Shareholders and Unsecured Creditors of Banks

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Nouriel Roubini | Sep 28, 2008
Whenever there is a systemic banking crisis there is a need to recapitalize the banking/financial system to avoid an excessive and destructive credit contraction. But purchasing toxic/illiquid assets of the financial system is not the most effective and efficient way to recapitalize the banking system. Such recapitalization – via the use of public resources – can occur in a number of alternative ways: purchase of bad assets/loans; government injection of preferred shares; government injection of common shares; government purchase of subordinated debt; government issuance of government bonds to be placed on the banks’ balance sheet; government injection of cash; government credit lines extended to the banks; government assumption of government liabilities.

A recent IMF study of 42 systemic banking crises across the world provides evidence on how different crises were resolved. First of all only in 32 of the 42 cases there was government financial intervention of any sort; in 10 cases systemic banking crises were resolved without any government financial intervention. Of the 32 cases where the government recapitalized the banking system only seven included a program of purchase of bad assets/loans (like the one proposed by the US Treasury). In 25 other cases there was no government purchase of such toxic assets. In 6 cases the government purchased preferred shares; in 4 cases the government purchased common shares; in 11 cases the government purchased subordinated debt; in 12 cases the government injected cash in the banks; in 2 cases credit was extended to the banks; and in 3 cases the government assumed bank liabilities. Even in cases where bad assets were purchased – as in Chile – dividends were suspended and all profits and recoveries had to be used to repurchase the bad assets. Of course in most cases multiple forms of government recapitalization of banks were used.

But government purchase of bad assets was the exception rather than the rule. It was used only in Mexico, Japan, Bolivia, Czech Republic, Jamaica, Malaysia, and Paraguay. Even in six of these seven cases where the recapitalization of banks occurred via the government purchase of bad assets such recapitalization was a combination of purchase of bad assets together with other forms of recapitalization (such as government purchase of preferred shares or subordinated debt).

In the Scandinavian banking crises (Sweden, Norway, Finland) that are a model of how a banking crisis should be resolved there was not government purchase of bad assets; most of the recapitalization occurred through various injections of public capital in the banking system. Purchase of toxic assets instead – in most cases in which it was used – made the fiscal cost of the crisis much higher and expensive (as in Japan and Mexico).

Thus the claim by the Fed and Treasury that spending $700 billion of public money is the best way to recapitalize banks has absolutely no factual basis or justification. This way of recapitalizing financial institutions is a total rip-off that will mostly benefit – at a huge expense for the US taxpayer - the common and preferred shareholders and even unsecured creditors of the banks. Even the late addition of some warrants that the government will get in exchange of this massive injection of public money is only a cosmetic fig leaf of dubious value as the form and size of such warrants is totally vague and fuzzy.

So this rescue plan is a huge and massive bailout of the shareholders and the unsecured creditors of the financial firms (not just banks but also other non bank financial institutions); with $700 billion of taxpayer money the pockets of reckless bankers and investors have been made fatter under the fake argument that bailing out Wall Street was necessary to rescue Main Street from a severe recession. Instead, the restoration of the financial health of distressed financial firms could have been achieved with a cheaper and better use of public money.

Indeed, the plan also does not address the need to recapitalize those financial institutions that are badly undercapitalized: this could have been achieved by using some of the $700 billion to inject public funds in ways other and more effective than a purchase of toxic assets: via public injections of preferred shares into these firms; via required matching injections of Tier 1 capital by current shareholders to make sure that such shareholders take first tier loss in the presence of public recapitalization; via suspension of dividends payments; via a conversion of some of the unsecured debt into equity (a debt for equity swap). All these actions would have implied a much lower fiscal costs for the government as they would have forced the shareholders and creditors of the banks to contribute to the recapitalization of the banks. So less than $700 billion of public money could have been spent if the private shareholders and creditors had been forced to contribute to the recapitalization; and whatever the size of the public contribution were to be its distribution between purchases of bad assets and more efficient and fair forms of recapitalization (preferred shares, common shares, sub debt) should have been different. For example if the private sector had done its fair matching share only $350 billion of public money could have been used; and of this $350 billion half could have taken the form of purchase of bad assets and the other half should have taken the form of injection of public capital in these financial institutions. So instead of purchasing – most likely at an excessive price - $700 billion of toxic assets the government could have achieved the same result – or a better result of recapitalizing the banks – by spending only $175 billion in the direct purchase of toxic assets. And even after the government will waste $700 billion buying toxic assets many banks that have not yet provisioned for such losses/writedowns will be even more undercapitalized than before. So this plan does not even achieve the basic objective of recapitalizing undercapitalized banks.

The Treasury plan also does not explicitly include an HOLC-style program to reduce across the board the debt burden of the distressed household sector; without such a component the debt overhang of the household sector will continue to depress consumption spending and will exacerbate the current economic recession.

Thus, the Treasury plan is a disgrace: a bailout of reckless bankers, lenders and investors that provides little direct debt relief to borrowers and financially stressed households and that will come at a very high cost to the US taxpayer. And the plan does nothing to resolve the severe stress in money markets and interbank markets that are now close to a systemic meltdown. It is pathetic that Congress did not consult any of the many professional economists that have presented - many on the RGE Monitor Finance blog forum - alternative plans that were more fair and efficient and less costly ways to resolve this crisis. This is again a case of privatizing the gains and socializing the losses; a bailout and socialism for the rich, the well-connected and Wall Street. And it is a scandal that even Congressional Democrats have fallen for this Treasury scam that does little to resolve the debt burden of millions of distressed home owners.

McCotter on the Bailout

What Caused this Crisis...please watch