Time is Running Out... Pick up the Phone

I sent (bcc'd) the following email missive to over fifty friends and family members in my contact list. Below the end of this email copy way below, I am pasting in the replies that I received, abbreviating their names, etc.
Encouraging everyone to pick up the dialog here rather than the ole email chain...

---------- Forwarded message ----------
From: Todd McGreevy
Date: Wed, Sep 24, 2008 at 3:27 PM
Subject: Time is running out... Pick up the phone.
To:

Or as a friend of mine put it, "Step up or bend over."
Sorry to spam you.
But, the apathy of some apalls me and I include you on this cause I think you have what it takes to step up, cause somebody has to.
I just spent the last 30 minutes on the phone with aides at Senator Grassley, Senator Harkin and Congressmen Braley's offices... voicing my strong support AGAINST a bail out package of any kind for any more private debt. The travesty of this is over the top.

If you already haven't, can you pick up your phone too? (202) 224-3121 Capitol Switchboard.

Grassley's office told me that they've had hundreds of calls and not one person is for the bailout. Braley's office told me that maybe one in 50 were for a bailout. Harkin's office said that was confidential information...they need to be told to QUIT nationalizing private debt... private risk. I asked them why we should bailout someone else's bad paper? They took a risk of their own free will, like we all do every day.
I asked them to post on their websites the worst case scenario if we DON'T do this bailout... how can you make an informed decision if you don't know the down side risk?
(If you have any insight into the downside risk and I am just barking up the wrong tree, then please illuminate me, i will share with all.. i am willing to be convinced I am wrong.)

Anyway, here is Kathleen's editorial in the Reader this week, called, Pick up the Phone. (short and sweet)

A number you can use right now to call the U.S. Capitol switchboard and ask to be connected to your congressmen's office is (202) 224-3121.
For the Net savvy, try this site to get a start on researching your congressmen: CongressMerge.com/onlinedb/index.htm.
And because I know how fond you all are of Dr. Paul, below is his missive today from his congressional campaign office...
I especially like the part where he explains the proposal on the table reads:
"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."

Hmmm... i just saw Paulson testify that he "wants transparency, we need transparency and oversight to make this process work."
Right.

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Wednesday, September 24, 2008

Dear Friends,

Whenever a Great Bipartisan Consensus is announced, and a compliant media assures everyone that the wondrous actions of our wise leaders are being taken for our own good, you can know with absolute certainty that disaster is about to strike.

The events of the past week are no exception.

The bailout package that is about to be rammed down Congress' throat is not just economically foolish. It is downright sinister. It makes a mockery of our Constitution, which our leaders should never again bother pretending is still in effect. It promises the American people a never-ending nightmare of ever-greater debt liabilities they will have to shoulder. Two weeks ago, financial analyst Jim Rogers said the bailout of Fannie Mae and Freddie Mac made America more communist than China! "This is welfare for the rich," he said. "This is socialism for the rich. It's bailing out the financiers, the banks, the Wall Streeters."

That describes the current bailout package to a T. And we're being told it's unavoidable.

(Full text of Dr. Paul's letter here: http://www.campaignforliberty.com/blog/?p=597 )

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Todd,

Let me tell you what would happen if we didn't bail out these institutions. For a few months, maybe even a year, the mortgage market would be relatively slow. But after that the prices would adjust appropriately and our economy would start to see some real true growth for a change. The true cost of a bailout is not the 700 billion, but is in bolstering a credit addicted market and that would be the greatest travesty. It would further create a disparity of what the free market is trying to correct in our economy. It would be synonymous to you taking twice as much alcohol when u start to feel the hangover coming on. It will make the inevitable hangover even worse, and in the mean time you'll be an absolutely unproductive fool, except in your own perception. That's what our economy has been for a long time.

-- JJ

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Local education is now the only way. Only by training the people on the evil of the current system can we replace the tyrants. I am tired of writing and calling 2-3 times a week, I am tired of begging for what is rightfully mine. I am also willing to start speaking at a few public gatherings. However, my schedule is already so compressed, I am not sure how many I will be able to work out. It is time to make Davenport into Boston. Others need a rallying cry, and if we can raise public awareness, we might as well be it. As time progresses, we may want to start spending a little time in basic self defense. Gandi's method only works when standing down moral people with a sense of justice. The current "Tyranny of Love" in the form of a Nanny State will have no qualms of either executing dissenters or drugging them into oblivion.

-- TR

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Nice message..

But what if you have your way and the stock market crashes and the global economy rolls into a depression and unemployment goes to maybe 30%? Would that be a better scenario? I am not taking a position, just asking a question. If all these private instutions default, what would happen? Enquiring minds want to know...

-- DB

Todd's Reply to DB:

David,
thanks for the feedback.
my quick response is:
you assume "my way", which is for the federal government to cease nationalizing private debt, cease backstopping risk that wall streeters have taken, acknowledge that the government does NOT have $700B lying around, the government should NOT own ANYthing anyway... you assume that such a restrained approach WILL crash the stock market... what proof is there of that?
And frankly why should I care? I don't have investments in the stock market. Those that do should pay more attention to the leadership and balance sheets of the companies they invest in. That's not the government's job nor my responsibility. We need an adjustment, call it a recession fine.... not more propping up of thin air.

I watched some of the hearings yesterday... the Treasury and the Fed canNOT even tell us how much the "toxic asseets" are even worth... it is a shell game of the highest order.
The folks who are holding these paper derivatives, who are they? Why should we backstop their risks that failed... the reason they failed is due to the Fed making "money" (which is really fiat, but that's too much info for the dithering masses) too easy and the banking institutions taking on too risky loans... no money down for house purchases.... the banks that did that got their rip on the fees up front, on deals they should have never made.... let them fail. What kind of example are we setting here?! It boggles the mind.

Someone told me last night that if this $700B is not put into the system (which is hard to fathom cause it doesn't exist anywhere other than agreeing to endenture Americans even more) the creditors who are financing the war (Saudis, Chinese, others) will no longer continue to loan capital to finance our wars... boy, ask me if i give a shit. Maybe now we will reign in our imperialistic armies and take care of our own at home....

If it walks like a duck David...
This is a heist of the highest order.

I am having breakfast with a bank prez next week I know, and will get a more informed perspective hopefully.

Aren't you glad you asked?!
Todd

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Todd,

I think this one we will disagree on. The markets are frozen. No action is almost a certain disaster for all Americans. The key here will be to pay the right price for these assets and be a patient seller, so that they are sold at rice that is hopefully better than the price paid. This is NOT a bailout in the traditional sense. We are investing rather than simply giving away money as is the usual fix in the governments mind. I truly believe, one, this is necessary, two, IF managed properly, the taxpayer will get substancially ALL of his/her $$ back. Thirdly, the cost of doing nothing would certainly exceed any costs that may ultimately come from this

Here’s the point I want to make, and where I think we can find common ground. Regardless of what amount is ultimately recouped by the government, and there will certainly be billions, ITY NEEDS TO GO TO PAY OFF THE LOAN WE ARE TAKING OUT TO FUND THIS PROGRAM!!! If I borrow $100 to invest and get back $110 is was an ok investment, as long as I pay back the original $100 loan. If I instead spend it friviously, it is simply another $100 in debt. I see nowhere that the government is required to use proceeds(no matter how small or llarge they turn out to be) to pay off the money we borrow to fund this thing!!

Once government gets its hands on money it spends it!!! THIS IS MY BIGGEST CONCERN!!! Something to think about.

-- MM

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First, I'm by no stretch of the imagination very knowledgable on the
fiancial markets, but I agree with Uncle Mark. There's a lot of
politicians up on the Hill now making the "bailing out Wall Street on
the backs on Main Street" argument and I think its pretty
short-sighted. The end goal of this thing is not to preserve a way of
life for Wall St. execs, but to prevent the panic from spreading and
affecting the whole economy, cutting off credit to small businesses
and raising unemployment.

On the more fundamental issue of government stewardship, I agree with
concerns about the way the government spends money. I work on the
Hill and deal with entitlements and at times it feels like our whole
purpose is to keep doling out the dollars to justify our existence.
As much as I'm generally repulsed by the worldviews of people like
Sen. Coburn, I admire his determination not to treat his office as
just a vehicle for doling out more federal money to constituents so he
can keep his job. (Coburn is infamous for routinely using Senate rules
to block legislation he sees as containing unnecessary or reckless
spending. He'd have slightly more credibility if he ever objected to
a single dime pegged for defense or Iraq). There's gotta be a plan
for using any ROI from this deal to address the national debt.

-- PM

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I am one of those
typically pulling for less intervention by the government but feel we need
some now. Main street American is
ignoring the fact that Main Street (home owners/businesses) are the one
who owe the money on these loans -
Wall Street owns them. One party OWES and the other OWNS - big difference
in position. Listening to the media and the
public, one would think that these are liabilities of Wall Street but they
are liabilities of the our over spending
American population in which Wall Street put far too confidence and
packaged in an attractive box with a nice bow and
an A+ rating. Evidently the American public does not deserve the A+ rating
and there in lies the problem. The fact that
real estate values have declined is not an excuse to not repay your loan.

The other point is that if these loans are worth far less than face
value, then the American public who owes the mon
has received these dollars and the benefit of such. Either they paid their
neighbor too much for his house and the neighbor
has the money or they did not sell but refinanced the mortgage on their
house at some over inflated price and they have the
cash from the refinancing. Either way the American public got the money
and is not repaying it. Again, this is money owed to
Wall Street not a ability of Wall Street.

-- JM

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Thanks JM, for your input, I agree with your version, with one small
change (but I think will turn out to be large),
We OK the $700B + bail out / loan, but we put language into the measure
that limits the type of securities that are eligible to only Home/Real
Estate Mortgages, no other type of asset or security would qualify for
this Resolution Trust.
Then watch the financial institutions, Bernanke and Paulson squirm.
Because, I think the real issues are the other types of "non performing
asets and securities'.
That's my take.

-- BM

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The bailout will result in 8% inflation over our current inflation rate, possibly pushing us to double digit inflation. Since inflation is really the supply of money, 700 Billion/roughly 13 trillion GDP = aproximately 8%. Add to the 700 Billion the other bailouts so far, and that gets up to around 1.2 Trillion, or nearly 10% inflation over and above what is already going on.

If we don't act, the worst that could happen is that the banks have to write down their bad assets. The effect will be a collapse of their balance sheets and a reduction in owners equity (i.e. real stock value). Done gradually, the Banks could probably prevent chaos. But done wrong, the sudden loss in owners equity would result in stockholders immediately demanding replacement of the board of directors, CEO, and corporate officers, along with an Enron type prosecution seizing assets and sending them to prison. This really doesn't have to be much worse than Enron, it would just affect a lot of investment and retirement accounts.

The government could step in with loans to cover the inevitable bank runs, but these would have to be loans that "take precedence over payment of any dividend, employee bonus, pay raise or payment of loans to other banks including the federal reserve". I am against the government loan scenario, and Warren Buffet's bailout of PacifiCorp energy using assets with Mid-American provides a better template for bailing out the failing banks. http://www.iht.com/articles/2005/05/25/business/power.php The "Grand Old Families" of Astor, Rockefeller, Carnegie, Morgan, Chase, etc could put their personal wealth on the line to back up their own banks or face the enivitable loss of the family's good name and reputation when upstarts like Buffett squeeze them out.

As it stands now when a foreclosed home goes on the market or is auctioned, the bank is there to guarantee that it is bought for at least as much as they have in it. In an overvalued market, that means the bank holds onto empty houses and keeps the price up. The houses begin to decay due to deferred maintenance, and they turn their community into a "blighted community". Banks often don't pay the taxes, resulting in tax liens that make the sale difficult. The leins result in the opportunity for the city or county to step in after a few years for a tax sale. However, cities and counties don't like to do this because in a down market it always goes for less in a tax sale, driving appraised home values down for the entire comunity and reducing tax revenue.

The solution of not intervening would hurt and it would hurt bad, but it would probably bounce back fairly quickly, and it would force the banks to negotiate with most home owners for lower home values/payments.

The other solution was discussed in the two other e-mails you sent. http://www.economics-charts.com/cpi/cpi-1800-2005.html If you notice the trend from abolishing the First and Second National Banks, the freezing of the money supply resulted in a gradual lowering of prices. Now, we have been gaming the system much longer, the first two national banks only lasted 20 years, and they had an ownerships society back then. We would see a sudden drop, followed by a gradual shake out, but the average consumer would probably be better off in 5-10 years (just my guess) Be sure to notice the red line of the chart, since it shows that inflation and deflation on a fixed money offset each other in a short 2-3 year cycle preventing major effects in the economy. Reducing wild fluctuation in employment and consumer prices.

Although it is a flawed methodology, the CPI shows the way the dollar changes. The 20's and 30's were both interventions that kept the dollar from correcting see the start of the decline in 1920. The CPI chart also shows the myth of "War builds the economy" as even the Fed couldn't keep the CPI down through the war. When the value you are comparing to, i.e. the dollar, keeps changing, you can't get a good picture of economic growth.

--- TR

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Todd,

I took your point and did call, it was so jammed up, I got voice mail, which was also full. I woke up this morning and checked the headline, and it looks like it didn't do any good. Bohica!

My point isn't one of apathy, it is a realistic look at what is going on. We write, we call, and they do whatever they want anyway. To get a full development of the reason for not believing in the efficacy of writing see the article below. If you don't have time for the whole thing, at least read starting at "Changing the Culture" a little over half way down. (He does make an exception for letters to the editor or published "open letters to elected officials" that the whole public sees as a means of public education.)

http://www.jpfo.org/filegen-a-m/bohica.htm

-- TR

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