[Rhodes22-list] Finance - Economics - Fear - Politics

[Brad Haslett]

The short version of a long story is, I've been stuck in a hotel on
reserve in my own city all day and paying close attention to the
negotiations in DC. Everyone knows I'm a partisan, but what been going
on the last few days with Pelosi, Reid, and company is disgusting and
despicable.  We need a bill and we need it before the Asian markets
open tomorrow night (our time).  They've been trying to load this bill
up with pork and special favors, the most disturbing pork being marked
for ACORN.  There's a lot of media spin being put out and a lot of
high stakes power politics being played. These people have no idea how
serious this game of "chicken" is and what the probable outcome will
likely be.  Here's some observation and some links with a brief
description of some of shenanigans at the end.

Brad

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http://www.bloomberg.com/apps/news?pid=20601087&sid=aCpGk.NPYZ3g&refer=home

http://www.bloomberg.com/apps/news?pid=20601087&sid=aCpGk.NPYZ3g&refer=home

http://www.weeklystandard.com/Content/Public/Articles/000/000/015/636zbhel.asp

http://www.politico.com/news/stories/0908/14018.html

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/3094318/Bailout-failure-will-cause-US-crash.html


-from Gateway Pundit-

On Friday, the US government stepped in and sold Washington Mutual
after customers withdrew $16.7 billion from accounts since Sept. 16th
leaving the Seattle-based bank "unsound."

It was later announced that Washington Mutual Inc. bondholders were
likely to lose most of their money. This was a HUGE mistake by the
government and must be corrected quickly or it could have major
consequences.

This report was sent to me from a an international auditor in the
insurance industry and close friend who understands the seriousness of
the situation.He describes the situation in layman's terms.It ain't
pretty:

    The financial crisis is real. Most people don't realize it yet,
but banks, investment managers and corporate treasurers around the
world all know what is going on. It started with the Freddie – Fannie
collapse. They wrote loans to individuals who they shouldn't have.
Government policies encouraged loans to minorities and the
underwriting function of banks was no longer approving loans upon an
individual's creditworthiness but their race was now a factor in the
loan decision. When individuals are given loans based on race and not
their ability to pay, it is inevitable that bad loans would be written
and foreclosures would come. That's what happened and in a big way.

    This caused ripple effects throughout the financial services
industry. Firms who consolidated loan packages or guaranteed their
creditworthiness were caught in the middle. Bear Sterns, Lehman
Brothers and others went under. The largest insurance company in the
US by some measurements was one of the casualties (AIG). With
insurance companies around the globe, AIG is hoping to have some
business left when all is over. The government stepped in to rescue
this giant by providing capital for the firm while it liquidates
portions of its business to pay off the investment derivatives which
caused it trouble and then pay off the government loan. The
investments became bad when the mortgages went south.

    The ripple affect continues. Putnam funds, the largest money
market fund in the US and rated AAA, had to close its doors since
money managers began to realize that Putnam's assets were not
guaranteed by the Federal Government (unlike cash in banks and savings
and loans) and began to ask for their money. Putnam had to sell
securities in order to meet the demand. Although they have begun to
pay their account holders, their reputation and money market accounts
in general have been severely damaged.

    Corporations and institutions are scared of losing their money or
having it locked up so there is a rush for money. This is global as
long lines were reported outside AIG offices in various Asian offices.
The Taiwan government came in to help AIG in Taiwan. There are other
cases like this worldwide. Rumors are that some banks in Europe may be
at risk.

    The largest bank to ever be taken over by the government was next.
And this is the scary part. Washington Mutual was taken over by the
government on Thursday. They were not able to handle the surge for
cash requests and became insolvent. The government however has made a
big – HUGE – mistake.

    In taking over Wash Mu, the government told Wash Mu bondholders
that they would not be paid. This precedent when recognized by the
investors around the world will cause massive pandemonium if the
government doesn't do something quick. You see the bondholders are
people and institutions who buy bonds for stable and guaranteed
returns with a payoff based on the bond type. Banks and many
corporations raise capital or get money by issuing bonds. If
bondholders realize that their bonds with banks will not be paid off
if the bank goes under, then the bond will become very risky
especially during these times, if not worthless. This will cause banks
the inability to raise capital to pay off the depositors they have on
the books. Depositors will become scared and more 'runs on the bank'
will occur in all financial service industries.

    The President has made a proposal for the government to step in.
They must do so quickly. There is no time to waste. Fear is a great
motive and causes people to do crazy things. Already treasurers of
companies are divesting their assets from risky investments and moving
it to more safe places. This is causing illiquidity in the market and
will continue if not addressed. Congress cannot continue to filibuster
and lollygag. The world economy is at stake. The root problems of a
government policy encouraging bad loans, corporate and government
greed (some Fannie Mae executives made off with millions), and a
Congress that wishes to put pork on this bill to save our economy must
be addressed and now.

More... There are already reports that the stock market could suffer a
devastating crash with shares losing a third of their value this week
if a concensus is not reached in Congress this weekend.

With tensions high and Speaker Pelosi calling GOP members unpatriotic
for missing meetings they were not invited to, it may be impossible
for this to happen.
Let's pray for a miracle.

-----------------------

Despicable Nancy Pelosi calls GOP Unpatriotic for missing a meeting--
A meeting they were not invited to.

Here's some behind the scenes politicking by Democrats at the
Congressional bailout talks today, via the House GOP:

    I Just wanted to shoot this story regarding the ongoing
negotiations your way before you hear the media spin the Dems are
feeding them. Republicans were told today's negotiations were for
"principles." Meaning each party's lead negotiators – Senators Chris
Dodd and Judd Gregg and Reps. Blunt and Frank. When we showed up to
the meeting the list of Dems walking in the door kept growing to
include all the above along with Democrats:

    Rahm Emanuel (arguable the most political member of the House)
    Charles Rangel (currently under an ethics investigation)
    Senator Max Baucus
    Senator Chuck Schumer (again, one of the most polarizing Members
of Congress)
    Senator Kent Conrad
    Senator Jack Reed

    That's hardly the deal we were promised, like Mr. Blunt quipped to
reporters, "I think the ratio's about fair. It's two to eight or
something."

    And, the Dem spin machine is still in full swing. They said we
boycotted earlier meetings, well, as Chris Dodd said last night on
NBC, they just forgot to call us. So, maybe an 8-2 fight is the best
we've had all week because we are at least at the table.