MSM admits, entire financial collapse was a con to get the banksters bailout!!!!

[Dig]

Now we know the truth. The financial meltdown wasn't a mistake – it was a con

Hiding behind the complexities of our financial system, banks and other institutions are being accused of fraud and deception, with Goldman Sachs just the latest in the spotlight. This has become the most pressing election issue of all
  
http://www.guardian.co.uk/business/2010/apr/18/goldman-sachs-regulators-civil-charges
Will Hutton
The Observer, Sunday 18 April 2010

The global financial crisis, it is now clear, was caused not just by the bankers' colossal mismanagement. No, it was due also to the new financial complexity offering up the opportunity for widespread, systemic fraud. Friday's announcement that the world's most famous investment bank, Goldman Sachs, is to face civil charges for fraud brought by the American regulator is but the latest of a series of investigations that have been launched, arrests made and charges made against financial institutions around the world. Big Finance in the 21st century turns out to have been Big Fraud. Yet Britain, centre of the world financial system, has not yet levelled charges against any bank; all that we've seen is the allegation of a high-level insider dealing ring which, embarrassingly, involves a banker advising the government. We have to live with the fiction that our banks and bankers are whiter than white, and any attempt to investigate them and their institutions will lead to a mass exodus to the mountains of Switzerland. The politicians of the Labour and Tory party alike are Bambis amid the wolves.

Just consider the roll call beyond Goldman Sachs. In Ireland Sean FitzPatrick, the ex-chair of the Anglo Irish bank – a bank which looks after the Post Office's financial services – was arrested last month and questioned over alleged fraud. In Iceland last week a dossier assembled by its parliament on the Icelandic banks – huge lenders in Britain – was handed to its public prosecution service. A court-appointed examiner found that collapsed investment bank Lehman knowingly manipulated its balance sheet to make it look stronger than it was – accounts originally audited by the British firm Ernst and Young and given the legal green light by the British firm Linklaters. In Switzerland UBS has been defending itself from the US's Inland Revenue Service for allegedly running 17,000 offshore accounts to evade tax. Be sure there are more revelations to come – except in saintly Britain.

Beneath the complexity, the charges are all rooted in the same phenomenon – deception. Somebody, somewhere, was knowingly fooled by banks and bankers – sometimes governments over tax, sometimes regulators and investors over the probity of balance sheets and profits and sometimes, as the Securities and Exchange Commission (SEC) says in Goldman's case, by creating a scheme to enrich one favoured investor at the expense of others – including, via RBS, the British taxpayer. Along the way there is a long list of so-called "entrepreneurs" and "innovators" who were offered loans that should never have been made. Lloyd Blankfein, Goldman's CEO, remarked only semi-ironically that his bank was doing God's work. He must wake up every day bitterly regretting the words ever emerged from his mouth.

For the Goldmans case is in some ways the most damaging. The Icelandic banks, Anglo Irish bank and Lehman were all involved in opaque deals and rank bad lending decisions – but Goldman allegedly went one step further, according to the SEC actively creating a financial instrument that transferred wealth to one favoured client from others less favoured. If the Securities and Exchange Commission's case is proved – and it is aggressively rebutted by Goldman – the charge is that Goldman's vice-president Fabrice Tourre created a dud financial instrument packed with valueless sub- prime mortgages at the instruction of hedge fund client Paulson, sold it to investors knowing it was valueless, and then allowed Paulson to profit from the dud financial instrument. Goldman says the buyers were "among the most sophisticated mortgage investors" in the world. But this is a used car salesman flogging a broken car he's got from some wide-boy pal to some driver who can't get access to the log-book. Except it was lionised as financial innovation.

The investors who bought the collateralised debt obligation (CDO) were not complete innocents. They had asked for the bond to be validated by an independent expert into residential mortgage-backed securities – a company called ACA management. ACA gave the bond the thumbs-up on the understanding from Fabrice Tourre that the hedge fund Paulson were investing in it. But the SEC says Tourre misled them, a pivotal claim that Goldman denies. The reality was that Paulson was frantically buying credit default swaps in the CDO that would go up in price the more valueless it became – a trade that would make more than $1 billion. Worse, Paulson had identified some of the dud sub-prime mortgages that he wanted Tourre to put into the CDO. If the SEC case is true, this was a scam – nothing more, nothing less.

Tourre could see what was coming. In one email in January 2007 he wrote: "More and more leverage in the system. The whole building is about to collapse anytime now… only potential survivor, the fabulous Fab[rice Tourre] .. standing in the middle of all these complex highly leveraged exotic trades he created without necessarily understanding all of the implications of those monstrosities". Fabulous Fab, like his boss, will not be feeling very fab today.

The cases not only have a lot in common – using financial complexity allegedly to deceive and then using so-called independent experts to validate the deception (lawyers, accountants, credit rating agencies, "portfolio selection agents," etc etc ) – but they also show how interconnected the financial system is. In Iceland Citigroup and Deutsche Bank covered the margin calls of distressed Icelandic business borrowers, deepening the crisis. Lehman uses the lightly regulated London markets and two independent British experts to validate that their "Repo 105s" were "genuine" trades and not their own in-house liability. The American authorities pursued a Swiss bank over aiding and abetting US nationals to evade tax.

Bankers will complain these cases all involve one or two misguided individuals, but that most banking is above board and was just the victim of irrational exuberance, misguided belief in free market economics and faulty risk management techniques. Obviously that is true – but, sadly, there is much more to the crisis. Andrew Haldane, executive director of the Bank of England, highlights the remarkable reduction in the risk weighting of bank assets between 1997 and 2007. Put simply, Europe's and the US's large banks exploited the weak international agreement on bank capital requirements in the so-called Basel agreement in 2004 to reclassify the risk of their loans and trading instruments. They did not just reduce the risk by 5 or 10%. Breathtakingly, they claimed their new risk management techniques were so wonderful that the riskiness of their assets was up to half of what it had been – despite property and share prices cresting to new all-time highs.

Brutally, the banks knowingly gamed the system to grow their balance sheets ever faster and with even less capital underpinning them in the full knowledge that everything rested on the bogus claim that their lending was now much less risky. That was not all they were doing. As Michael Lewis describes in The Big Short, credit default swaps had been deliberately created as an asset class by the big investment banks to allow hedge funds to speculate against collateralised debt obligations. The banks were gaming the regulators and investors alike – and they knew full well what they were doing. Simon Johnson's 13 Bankers shows how the major American banks deployed vast political lobbying power and money to create the relaxed regulatory environment in which all this could take place. In Britain no money changed hands. Gordon Brown offered light-touch regulation for free – egged on by the Tories, who wanted to go further.

This was the context in which Goldman's Fabulous Fab created the disputed CDOs, Sean FitzPatrick allegedly moved loans between banks and Lehman created its Repo 105s along with the entire "debt mule" structure revealed this weekend of inter-related companies to shuffle debt around its empire. London and New York had become the centre of an international financial system in which the purpose of banking became making money from money – and where the complexity of the "innovations" allowed extensive fraud and deception.

Now it has all collapsed, to be bailed out by western taxpayers. The banks are resisting reform – and want to cling on to the business practices and business model that has so appallingly failed. It is obvious why: it makes them very rich. The politicians tread carefully, only proposing what the bankers say is congruent with their definition of what banking should be. Labour and Tories alike are united in opposing improved EU regulation of hedge funds, buying the propaganda those operations had nothing to do with the crisis. Perhaps Paulson's trades at Goldman, and the hedge funds' appetite for speculating in credit default swaps, may disabuse them.

It is time to reframe the question. Banks and financial institutions should do what economy and society want them to do – support enterprise, direct credit to where it is needed and be part of the system that generates investment and innovation. Andrew Haldane – and the governor of the Bank of England – are right. We need to break up our banks, limit their capacity to speculate and bring them back to earth. Britain should also launch an official investigation into what went wrong – and hand the findings to the Serious Fraud Office. This needs to become this election campaign's number one issue – not one which either a compromised Labour party or a temporising Conservative party will relish. The Lib Dems, the fiercest critics of the banks, have begun to get very lucky.
Crisis timetable

September 2007 Funding problems at Northern Rock triggers the first run on a British bank. It is nationalised in February 2008.

April 2008 Bear Stern faces bankruptcy after a run on the company wipes out cash reserves in less than two days. Backed by the Federal Reserve, JPMorgan buys up shares at far below market value.

September 2008 Lehman Brothers files for bankruptcy protection, becoming the first major bank to collapse since the start of the credit crisis.

December 2008 Bernard Madoff arrested for operating the largest Ponzi scheme in history.

January 2009 The Bank of England launches £200bn quantitative easing.

March 2010 Former chairman of Anglo Irish bank Sean Fitzpatrick is arrested in Dublin after failing to disclose details of loans worth millions from the bank.

April 2010 Northern Rock former directors, David Baker and Richard Barclay, are fined £504,000 and £140,000 for deliberately misleading analysts prior to nationalisation.

April 2010 The US Securities and Exchange Commission accuses Goldman Sachs of "defrauding investors by misstating and omitting key facts".

[Dig]

GET THIS EVERYWHERE!

WTF? They admit that the entire thing was manufactured from the highest levels!

Only one reality check in this amazing article: "Be sure there are more revelations to come – except in saintly Britain."

Yup, looks like te super elite may be throwing the sub-elite to the wolves, well we are just gonna keep on investigating levels of the pyramid that were profiteering off the citizens till the illuminati capstone is exposed.

I mean wtf? Black has gone on record over and over and over again.

Thank you Guardian. At least this one time looks like you are taking the 49 year old advice of a dead president...

http://forum.prisonplanet.com/index.php?topic=166564.0

[Dig]

OBAMA October 1, 2008:
Senate Must Pass Bailout,
"Do What's Right for the Country"
http://www.youtube.com/watch?v=rSCMd9OIUE4

And so did McCain, Clinton, Lieberman, Reid, and all the other Goldman owned congressmen!

[Viper]

If we could help the people to have the right reaction to all this maybe one day a solution shall be found, i advise being open at all times (whenever appropriate) and never give in to fear.

Fear

From Marianne Williamson's book "Return to Love" (this quote is sometimes attributed to Mandela, but it was never used by him, ever.)

"Our deepest fear is not that we are inadequate. Our deepest fear is that we are powerful beyond measure. It is our light, not our darkness, that most frightens us. We ask ourselves, who am I to be brilliant, gorgeous, talented, and fabulous? Actually, who are you not to be? You are a child of God. Your playing small doesn't serve the world. There's nothing enlightened about shrinking so that other people won't feel insecure around you. We are all meant to shine, as children do. We are born to make manifest the glory of God that is within us. It's not just in some of us, it's in everyone. And as we let our own light shine, we unconsciously give other people permission to do the same. As we are liberated from our own fear, our presence automatically liberates others."

[Dig]

The savior and award winning illuminati apologist Paul Krugman is on record: "I think the bailout is too little."

Charlie Rose:

A conversation with Paul Krugman 2008 Nobel Prize Winner, Economics, Paul Krugman
http://www.charlierose.com/view/interview/9320
on Thursday, October 23, 2008

[Dig]

Financial Crisis: UK bail-out plan is too little, too late
As I write, the banking rescue package announced yesterday seems to be probably too little and very definitely too late.
 
http://www.telegraph.co.uk/finance/comment/3160463/Financial-Crisis-UK-bail-out-plan-is-too-little-too-late.html
By Jon Moulton
Published: 10:24PM BST 08 Oct 2008

[Dig]

Krugman is still saying that his Illuminati Banker friends are untouchable and we just have to learn to enjoy the continual, persistent, and progressive raping of our future wage earnings going on. (everybody is on record, this entire RICO fraud lawsuit has more evidence than Mark Foley's Instant Message account).



-
Are Bailouts for the Super-Rich Inevitable? Ask Paul Krugman
http://blogs.alternet.org/speakeasy/2010/04/02/are-bail-outs-for-the-super-rich-inevitable-ask-paul-krugman/
Posted by LesLeopold at 12:59 pm
April 2, 2010

“There’s every reason to believe that this will be the rule from now on: when push comes to shove, no matter who is in power, the financial sector will be bailed out.” Paul Krugman, 3/29/10

“The recovery of big banks not only benefited bankers. It also created huge paydays for hedge fund managers, with the top 25 taking home an average of $1 billion in 2009.” New York Times, 4/1/10

Paul Krugman, the Nobel Prize-winning economist and influential New York Times columnist, says Wall Street institutions have become so big and powerful that they will never be allowed to fail. The only hope he sees is to regulate them thoroughly. He greatly prefers the stricter rules now being offered by Barney Frank in the House to the softer ones coming from Chris Dodd in the Senate. (Neither bill truly tackles the derivatives casino.)

Krugman criticizes Senate Republican leaders who portray proposed bank regulations as just another Wall Street bailout. In fact these hypocritical leaders are doing all they can to thwart the Obama administration’s modest reforms and befriend Wall Street, hoping to net some cold, hard political cash from the bankers.

Unfortunately, when Krugman says bailouts are inevitable, he’s handing the government haters another round of ammunition. “See, the liberal/pinkos are going to just keep on bailing out Wall Street,” they piously intone.

But, why isn’t Krugman calling for an end to all financial bailouts for the wealthy, instead of announcing that they will go on forever?

One reason is that he doesn’t think breaking up the big banks will work: “I don’t have any love for financial giants,” he writes, but I just don’t believe that breaking them up solves the key problem.” He argues that a run on thousands of little banks, as in the 1930s, would also require bailouts to avoid another Great Depression.

Krugman’s sad fatalism is particularly worrisome to those of us who usually welcome his insightful commentaries. We expect thinkers like Krugman to imagine a better financial system — even if it’s not politically attainable right now. And that vision shouldn’t involve bailing out the richest, most reckless financiers, no matter what. Why should we ever accept or justify plutocracy?

Just think about the implications of Krugman’s stance. Wall Street remains in firm control of our nation’s economy since they know they’ll always get bailed out of trouble. The inevitability of bailouts encourages bankers to find yet more ways to gamble with investor and taxpayer money. How long do you think it will take our ingenious financial engineers and tax lawyers to “innovate” around Congress’s new rules (especially the Senate’s extra-weak ones)?

With everyone going so easy on the bankers who just sank our economy, Wall Street is using our bailout funds to reward its executives with bonuses that have no relationship to any real value they create for our economy. Just look at what is going on in the world of shadow banking. In 2009, the worst economic year for working people since the Great Depression (29 million Americans unemployed or forced into part-time jobs — with the BLS March 2010 jobless rate at 17.5 percent), the top 25 hedge fund managers “earned” on average $1 billion each! And that money is taxed only at 15 percent since it’s counted as capital gains. I defy anyone to show how those “earnings” can be justified in terms of job creation, contribution to our economy or social utility.

And where did all that money come from? From us! If we hadn’t bailed out the big banks, these hedge fund managers would have earned nothing at all. Because the financial pay scales are so outlandish and unconnected to the production of real value, it makes effective regulation even more difficult. Can we really expect government regulators with civil service salaries not to cast their eyes on the sweet sinecures they might snag in the financial sector after they’ve finished their grubby tour of duty in the government? How hard are they really going to press their future employers? (Any bets on where Chris Dodd will end up?)

Krugman has focused some much needed attention on the deregulation of finance since the 1980s and the rise of the shadow banking system, which evolved into a crazy unregulated casino of finance. But that’s only half the story. Why isn’t he — and why aren’t we all — talking about the gutting of progressive taxation, which also started in the 1980s? We didn’t just deregulate Wall Street back in the disco era. We threw out the whole idea of significantly taxing the super-rich. The marginal tax rate on those who earned more than $3 million (in today’s dollars) dropped from 91 percent during the Eisenhower years to 28 percent by 1990. Now the richest 400 people in the US are effectively taxed at only 16 percent, according to the latest IRS report. And that doesn’t even include the money these stupendously wealthy people didn’t declare and the resulting taxes they didn’t pay. In fact, we are losing $100 billion in taxes from the super-rich each year because they are hiding their money in overseas accounts. They’ve stashed it there for one purpose only — to avoid taxes that they are legally required to pay. (We lose another $30 billion a year in corporate profits taxes hidden in the same ways.).

If we forced those tax cheats to pay what they owe, we could fund free tuition for every student in America who was admitted to a public college or university. And if we had even more nerve and reinstituted progressive taxation, we could put America back to work, rebuild our infrastructure and build a new green economy — without going further into debt.

Let’s also talk about how deregulated finance and tax cuts for the super-rich destabilized our economy. We created the perfect conditions for big-time financial gambling. The super-rich had amassed so much money that they literally ran out of decent investments in the real economy of goods and services. And so shadow banking was born. Investors started chasing after fantasy finance securities like synthetic CDOs. Those were the casino chips that financed the savings and loan fiasco, the dot.com bubble and the housing explosion. Too much money in the hands of the few is the root cause of financial speculation and crashes — same as it ever was.

Along the way much of our economy was financialized. By the 1990s, a lot of people thought the future was in hybrid financial securities, not hybrid cars. Shortly before the crash nearly 40 percent of all corporate profits came from financial corporations producing little of real value. Wall Street wasn’t serving Main Street. Rather, Main Street — and all of us — were serving the Wall Street bankers. The result: a financial crash and an obscene distribution of wealth.

Allow me to share again with you the one factoid that says it all: It 1970 the ratio of compensation between the top 100 CEOs and the average worker in the US was 45 to 1. By 2008 it was 1,071 to one. No one can justify that gap on the basis of talent, knowledge or effort.

So here we are in our new billionaire bailout society. Its features include a collapsing infrastructure, chronic high unemployment, a gutted public sector, a hollowed out middle class and a depleted environment. It’s a place where the super-rich keep on getting richer, not because they are creating new jobs for Americans, but because they are gambling yet again, knowing we will bail them out.

Yes, regulation is critically important. But it’s not enough. If financial institutions truly are too big and too interconnected too fail, then we have only two choices: Bust them up so that they are small enough to fail, or turn all the major banks and their large shadows into public utilities.

It’s just not right or sane to let private bankers and investors walk off again and again with billions of taxpayer dollars for what amounts to wrecking our way of life. But alas, this is the nightmare we’re going to keep having until our best thinkers put forth a compelling vision to end the insanity.

Come on, Mr. Krugman — let ‘er rip! We know you’re not ready to make peace with our pampered and grossly overpaid financial elites. Americans are looking for a way out of our billionaire bailout society. Lead the way!

[Dig]

Rationale for the bailout
http://en.wikipedia.org/wiki/Emergency_Economic_Stabilization_Act_of_2008

Government officials

In his testimony before the U.S. Senate, Treasury Secretary Henry Paulson summarized the rationale for the bailout:[56]

Stabilize the economy: "We must... avoid a continuing series of financial institution failures and frozen credit markets that threaten American families' financial well-being, the viability of businesses both small and large, and the very health of our economy."

Improve liquidity: "These bad loans have created a chain reaction and last week our credit markets froze – even some Main Street non-financial companies had trouble financing their normal business operations. If that situation were to persist, it would threaten all parts of our economy."

Comprehensive strategy: "We must now take further, decisive action to fundamentally and comprehensively address the root cause of this turmoil. And that root cause is the housing correction which has resulted in illiquid mortgage-related assets that are choking off the flow of credit which is so vitally important to our economy. We must address this underlying problem, and restore confidence in our financial markets and financial institutions so they can perform their mission of supporting future prosperity and growth."

Immediate and significant: "This troubled asset relief program has to be properly designed for immediate implementation and be sufficiently large to have maximum impact and restore market confidence. It must also protect the taxpayer to the maximum extent possible, and include provisions that ensure transparency and oversight while also ensuring the program can be implemented quickly and run effectively."

Broad impact: "This troubled asset purchase program on its own is the single most effective thing we can do to help homeowners, the American people and stimulate our economy."

In his testimony before the U.S. Senate on September 23, 2008, Fed Chairman Ben Bernanke also summarized the rationale for the bailout:[57]

Investor confidence: "Among the firms under the greatest pressure were Fannie Mae and Freddie Mac, Lehman Brothers, and, more recently, American International Group (AIG). As investors lost confidence in them, these companies saw their access to liquidity and capital markets increasingly impaired and their stock prices drop sharply." He also stated: "Purchasing impaired assets will create liquidity and promote price discovery in the markets for these assets, while reducing investor uncertainty about the current value and prospects of financial institutions. More generally, removing these assets from institutions’ balance sheets will help to restore confidence in our financial markets and enable banks and other institutions to raise capital and to expand credit to support economic growth."

Impact on Economy and GDP: "Extraordinarily turbulent conditions in global financial markets... these conditions caused equity prices to fall sharply, the cost of short-term credit—where available—to spike upward, and liquidity to dry up in many markets. Losses at a large money market mutual fund sparked extensive withdrawals from a number of such funds. A marked increase in the demand for safe assets—a flight to quality—sent the yield on Treasury bills down to a few hundredths of a percent. By further reducing asset values and potentially restricting the flow of credit to households and businesses, these developments pose a direct threat to economic growth."

Regarding the $700 billion number, Forbes.com quoted a Treasury spokeswoman: "It's not based on any particular data point. We just wanted to choose a really large number."[58]


Journalists

According to CNBC commentator Jim Cramer, large corporations and institutions are pulling their money out of bank money market funds, in favor of government-backed Treasury bills. This move is slowly taking away the capital reserves the banks have grown to depend on. Cramer called it "an invisible run on the banks," one that has no lines in the lobby but pushes banks to the breaking point nonetheless. Bank runs are taking place under the radar, he said. Chief financial officers, lawyers, the wealthy – they’re all pulling their money from savings accounts and asking for T-bills. As a bank’s deposits evaporate, so too does its ability to lend and correspondingly make money. This will continue until Congress agrees on a bailout deal. “The lack of confidence inspired by Lehman’s demise, the general poor health of many banks, this is going to turn this into an intractable moment,” Cramer said, “if someone in the government doesn’t start pushing for more deposit insurance.”[59]


Reaction to the initial proposal

Skepticism regarding the plan occurred early on in the House. Many members of Congress, including the House of Representatives, did not support the plan initially, mainly conservative free-market Republicans and liberal anti-corporate Democrats.[60] Alabama Republican Spencer Bachus has called the proposal "a gun to our head"[61] fear-inflicting policy of the administration to stifle proper debate and affect decision.[32] However, many sources have reported that for this crisis there are many alternatives and options,[62] and other less risky and more profitable solutions to use the taxpayers' funds that aren't being debated, but ought to be debated, in the rush to the sudden deal.


Immediate [controlled-faux] market reactions [controlled by the same illuminati bankers]

On September 19, 2008, when news of the bailout proposal emerged, the U.S. stock markets surged by approximately 3%. Foreign stock markets also surged, and foreign currencies corrected slightly, after having dropped earlier in the month. The value of the U.S. dollar dropped compared to other world currencies after the plan was announced.[63][64] The front end oil futures contract spiked more than $25 a barrel during the day Monday September 22, ending the day up over $16. This was a record for the biggest one-day gain.[65] However, there are other factors that caused the massive spike in oil prices. Traders who got "caught" at the end of the October contract session were forced to purchase oil in large batches to cover themselves, adding to the surge in prices.[66] Further out, oil futures contracts rose by about $5 per barrel. Mortgage rates increased following the news of the bailout plan. The 30-year fixed-rate mortgage averaged 5.78% in the week before the plan was announced; for the week ending September 25, the average rate was 6.09%,[67] still far below the average rate during the early 1990s recession, when it topped 9.0%.[68]


Potential conflict of interest

There was concern that the current plan created a conflict of interest for Paulson. Paulson was a former CEO of Goldman Sachs, which stood to benefit from the bailout. Paulson has hired Goldman executives as advisors and Paulson’s former advisors have joined banks that were also to benefit from the bailout. Furthermore, the original proposal exempted Paulson from judicial oversight. Thus there was concern that former illegal activity by a financial institution or its executives might be hidden.[69][70][71]

The treasury staff member responsible for administering the bailout funds is Neel Kashkari, a former vice-president at Goldman Sachs.

In the Senate, Senator Judd Gregg (R-NH) was the leading Republican author of the TARP program while he had a multi-million dollar investment in the Bank of America.[72][73]


Views from the public, politicians, financiers, economists, and journalists



The public

Protests opposing the bailout occurred in over 100 cities across the United States on Thursday September 25.[74] Grassroots group TrueMajority said its members organized over 251 events in more than 41 states.[75] The largest gathering has been in New York City, where more than 1,000 protesters gathered near the New York Stock Exchange along with labor union members organized by New York Central Labor Council.[76][77] Other grassroots groups have planned rallies to protest against the bailout,[78] while outraged citizens continue to express their opposition online through blogs and dedicated web sites.[79]

In a survey conducted September 19–22 by the Pew Research Center, by a margin of 57 percent to 30 percent, Americans supported the bailout when asked "As you may know, the government is potentially investing billions to try and keep financial institutions and markets secure. Do you think this is the right thing or the wrong thing for the government to be doing?"[80]

In a survey conducted September 19–22 by Bloomberg/Los Angeles Times, by a margin of 55 percent to 31 percent, Americans opposed the bailout when asked whether "the government should use taxpayers' dollars to rescue ailing private financial firms whose collapse could have adverse effects on the economy and market, or is it not the government's responsibility to bail out private companies with taxpayers' dollars?".[81][82]

In a survey conducted September 24 by USA Today/Gallup, when asked "As you may know, the Bush administration has proposed a plan that would allow the Treasury Department to buy and re-sell up to $700 billion of distressed assets from financial companies. What would you like to see Congress do?", 56 percent of respondents wanted Congress to pass a plan different from the original Paulson proposal, 22 percent supported the Paulson proposal in its initial form, and 11 percent wanted Congress to take no action.[83]

Senator Sherrod Brown said he had been getting 2,000 e-mail messages and telephone calls a day, roughly 95 percent opposed.[84]

As of Thursday September 25, Senator Dianne Feinstein's (D-Calif.) offices had received a total of 39,180 e-mails, calls and letters on the bailout, with the overwhelming majority of constituents against it.[77]

Politicians

Then-senator Barack Obama addresses the Senate on the financial crisis and argues in favor of the bailout bill. View clip on commons. "Barack Obama support of Bailout". Retrieved 2008-10-16.

British Prime Minister Gordon Brown supported the plan, saying that it was essential to restore stability to the markets.[85]


The then presidential candidates from both major parties, Senators Barack Obama (D) and John McCain (R) voted in favor of the Senate version of the bill on October 1, 2008. Senator Barack Obama pledged to telephone wavering House of Representatives members to urge them to support the legislation.

"This plan is stunning in its scope and lack of detail," said Connecticut Senator Christopher Dodd, chairman of the Senate Banking Committee. "It does nothing in my view to help a single family save a home."[86]

"I am concerned that Treasury's proposal is neither workable nor comprehensive, despite its enormous price tag," said Alabama Senator Richard Shelby, the ranking Republican on the committee.[87]

"The Paulson plan will not bring a stop to the slide in home prices. But the Paulson plan will spend 700 billion taxpayer dollars to prop up and clean up the balance sheets of Wall Street. This massive bailout is not a solution. It is financial socialism and it's un-American," said Sen. Jim Bunning, R-Ky.[88][89]

Then Democratic presidential candidate Barack Obama said any bailout must include plans to recover the money, and protect working families and big financial institutions and be crafted to prevent such a crisis from happening again.[90]

Texas Republican U.S. Representative and former two-time presidential candidate Ron Paul publicly opposed any bailout and called for other type of reforms to remedy the crisis.[91]

Ohio Democratic U.S. Representative Dennis Kucinich, a former two-time presidential candidate, delivered a speech on the House floor denouncing the bailout as "too much money, in too short of a time, going to too few people, while too many questions remain unanswered," and asking, "Is this the U.S. Congress or the board of directors at Goldman Sachs?"[92]

Democratic opponents of the bailout include Oregon U.S. Representative Peter DeFazio, who called for a modified Tobin tax on stock transactions to pay for any bailout,[93] and California Congressman Brad Sherman, who compared the bailout to a ransom demand for "$700 billion in unmarked bills".[94]

Republican opponents of the bailout include Texas U.S. Representative Ted Poe, who gave a speech on the House floor comparing the dire economic warnings of the bailout's proponents to the Y2K scare,[95] and Michael C. Burgess, who accused the House leadership of declaring "martial law" to pass the legislation without debate.[96]

After negotiations, bipartisan groups of Congressional leaders were willing to support the highly revised plan. Despite the leaders' support, the rest of the House of Representatives did not follow their lead.

In a Wall Street Journal opinion piece, Senator Hillary Clinton has advocated addressing the rate of mortgage defaults and foreclosures that ignited this crisis, not just bailing out Wall Street firms: "If we do not take action to address the crisis facing borrowers, we'll never solve the crisis facing lenders." She has proposed a new Home Owners' Loan Corporation (HOLC), similar to that used after the Depression, which was launched in 1933. The new HOLC would administer a national program to help homeowners refinance their mortgages. She is also calling for a moratorium on foreclosures and freezing of rate hikes in adjustable rate mortgages.[97]

Libertarian presidential candidate Bob Barr has been one of the most outspoken opponents of the bailout. He spoke out against it while it was making its way through Congress. He took his message to the airwaves and explained the government should not toss around taxpayer dollars so easily and that government should decrease regulation and privatize Fannie Mae and Freddie Mac.[98]


Financiers

Investor Warren Buffett says he could put in $10B plus $90B nonrecourse debt; that is, without having to repay beyond $10B if mortgages did not repay. (This is 10 to 1 leverage, 10 times upside with 1 times downside.) He also said that the government should pay market price, which may be below the carry value.[99] Buffett says "I would think they might insist on the directors of the institutions that participate in this program waiving all director's fees for a couple of years. They should, maybe, eliminate bonuses." Buffett says "...if someone wants to sell a hundred billion of these instruments to the Treasury, let them sell two or three billion in the market and then have the Treasury match that, ... . You don't want the Treasury to be a patsy."[100] Mr. Buffett's company owns financial companies which will benefit directly or indirectly, including his investment in Goldman Sachs.[101]

Alan Greenspan, former Chairman of the Federal Reserve, endorsed Paulson’s plan on September 19.[102]

Investor George Soros is opposed to the original Paulson plan – "Mr Paulson’s proposal to purchase distressed mortgage-related securities poses a classic problem of asymmetric information. The securities are hard to value but the sellers know more about them than the buyer: in any auction process the Treasury would end up with the dregs. The proposal is also rife with latent conflict of interest issues. Unless the Treasury overpays for the securities, the scheme would not bring relief." – but calls Barack Obama's list of conditions for the plan "the right principles".[103]

Investor Carl Icahn described the bailout as "crazy and inflationary hell".[102]

Investor Jim Rogers called the plan "astonishing, devastating, and very harmful for America".[104]

Tim McCormack (Chief Investment Officer, Alpha Titans, Santa Barbara, CA) has diagnosed the underlying problem as a failure of regulatory oversight, which allowed firms to overly leverage mortgage-backed assets. He criticizes the Paulson Plan as a giveaway.[105] He has also written that fears of the domino effect, rather than illiquidity, are the cause of the credit freeze.[106]

William Seidman was critical of rescuing the banks' managements and their shareholders, comparing the bailout with action he and his team at the Resolution Trust Corporation took during the S&L crisis of the 1980s: "What we did, we took over the bank, nationalized it, fired the management, took out the bad assets and put a good bank back in the system."[107]


Economists

In an open letter sent to Congress on September 24, over 100 university economists expressed "great concern for the plan proposed by Treasury Secretary Paulson". The letter, endorsed by 231 economists at American universities within a few days, has been described as "the emerging consensus from academic economists".[108] Its authors described three "fatal pitfalls" they perceived in the plan as it was initially proposed:

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. [...] The government can ensure a well-functioning financial industry [...] 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.[109]

Nobel Prize-winning economist Joseph Stiglitz strongly criticizes the bill in an article written for The Nation.[110]

Economist, New York Times columnist and Nobel laureate Paul Krugman recommended that, instead of purchasing the assets, equity capital could be provided to the banks directly in exchange for preferred stock. This would strengthen the financial position of the banks, encouraging them to lend. Dividends would be paid to the government on the preferred shares. This would be similar to what happened during the S&L crisis and with the GSE bailout. This avoids the valuation questions involved in the direct purchase of MBS.[111] This is an approach based on the 1990s Swedish banking rescue.[112] But then he still endorsed the plan and said that congress needed to pass it because they had to do something.

The first half of the bailout money was primarily used to buy preferred stock in banks instead of troubled mortgage assets. This has led some economists to argue that buying preferred stock will be far less effective in getting banks to lend efficiently than buying common stock.[113][114]

A recent study shows that market's reaction to the announcement of a rescue plan is positive independently to the type of the intervention. It indicates that a timely bad plan could be better than an untimely good one.[115]


Journalists

The Economist magazine said that although "Mr Paulson’s plan is not perfect ... it is good enough" and that "Congress should pass it—and soon."[116]

"The deal proposed by Paulson is nothing short of outrageous. It includes no oversight of his own closed-door operations. It merely gives congressional blessing and funding to what he has already been doing, ad hoc." - Robert Kuttner[117]

Journalist Rosalind Resnick favors a hypothetical scenario in which "consumers and businesses would be able to borrow at the fed funds rate at 2 percent, just like the big banks do. This means that every cash-strapped homeowner would be able to refinance his mortgage and cut his payments in half, saving thousands of homes from foreclosure. Consumers could also refinance their credit card balances, auto loans and other debt at interest rates they can afford" and that this plan "would cost U.S. taxpayers absolutely nothing."[118]

Journalist Michael Hudson says "It is bad enough for the government to buy $700 billion of bad bank investments at prices that no private-sector investor has been willing to approach. This itself is an undeserved giveaway to the financial institutions that caused the problem..."[119]


And now we know it was not $700 Billion, but over $28.3 Trillion.

[kennedymaure]

To me, this is kind of a no brainer. Logically, the rich guys knew they needed to pull all of their real cash out of the system before the new administration came in because they knew the unemployment would be high and blah blah... they drained the system and stuffed the real cash away so they could stay rich. This to me is just the worst case scenario of insider trading ever... and the scale of victims is on a level we have never seen before. Bush and Obama and John McCain let them do it...they had to pay off the bankers to same level he paid off his oil buddies. It's really just more of the same - 1% of the wealthiest people controlling 99% of the wealth. If some of them get caught, that would be good but they'll only make the ones that won't play they want them to play. I wonder who at Goldman pissed the Feds off? That's what I want to know.