The pigs are at the trough. Yves points out the changes Paulson is making in his "bailout" fund's charter to include hedge funds and foreign banks in the massive give away. Of all the ways to ease the crisis, this is likely the worst.
This is the language from Paulson's request for bailout money (nominally, $700 billion, but the debt ceiling hike requested indicates more than double that):
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.
It's carte blanche. Why does he need it? He wants to pay a premium price for toxic assets and let the taxpayers absorb the loss.
Unfortunately, this is all part of a classic scam.
For decades the market for our financial system's virtual products relied on the greater fool theory. Simply, that there was always some foreign firm/investor stupid enough to buy them (and then absorb the loss when they turned out to be worthless). Foreign investors aren't playing this game anymore. That leaves one fool left: the US government.
Why did the markets bounce? The Treasury is looking for blank check authority to give away trillions of dollars of public money to the financial sector. We, meaning citizens of the US, will get nothing in return for the effort. We aren't even getting equity!
Unfortunately, this is a huge scam that will only result in misery and anger. It doesn't address the core problems. All it does is let the bad actors in the financial sector get another round of bonuses before the next shoe drops.
Bruce identified a way point on the pathway that will convert most of us into "informal" citizens doing informal work and living in informal spaces:
In the western Balkans, the collapse of the socialist economic system in Yugoslavia and Albania has given rise to extensive informal building activity that represents a new form of urbanisation. The question is: how far do such urban transformations indicate patterns of future development for European cities in general?
This is hilarious re: the wealthy (jumping from lily pad to lily pad of security/services):
Bruces: "I think maybe we should scrap all the old, regulated buildings and just have rich, highly-mediated jet-set gypsies scampering around with laptops brimming with electronic cash."
Very real possibility now. Edging towards the likely category.
Forget the worries about nationalizing the assets of failed firms. Forget the national debt. This is crunch time. Do or die for the financial system. Of course, I'm not holding out much hope given how weak the US has become.
Time for a rethink. This election may actually be all about who is going to manage the aftermath of the financial and economic carnage that has just started.
The global credit markets have just about shut down. The entire system is seizing, despite the best efforts of the Fed/Treasury. The system is just too big and moves to fast for these relatively small organizations to do anything other than conduct a holding action.
"We have lost control. We cannot stabilize the dollar. We cannot control commodity prices."
Yves points out what is disturbing about this:
I cannot stress how shocking this statement it is. The Federal Reserve, with a mere $900 billion dollar balance sheet, thought it could control, or even seriously manipulate, the currency and commodities markets? JP Morgan's footings are nearly twice as large. The Fed simply is not a big enough actor to have that sort of impact. The fact that the Fed chair knows so little about market that he ever harbored the delusion that he could control them means he is even less knowledgeable than I feared.