This is why GM went bust

Update June 14, 2009
Have You Driven a Han Lately?

Here is a re-post of a March blog: the cars available in Europe this summer. GM should have been making these cars since the 1980's instead of gas guzzling, status appealling SUVs. GM deserved to go bankrupt and the US has truly lost its edge in manufacturing autos now.

Innovative cars - from Germany and India

US carmakers deserve to fold having lost the plot decades ago. The Big 3, Chrysler, GM and Ford could have produced these cars and be on top - if they didn't have their collective heads up their corporate arses. And they have the cheek to ask for bailout money. Guess it's another case of American know-how - yep - know-how to bankrupt the US economy. Good work lads.

VW - 2 passenger car - 258 mpg

Source
This is not a toy, not a concept car. It is a newly developed 2-seater car in highly aerodynamic tear-shape road-proven real car. It is ready to be launched as a single-seater for sale in Shanghai in 2010 for a mere RMB 4,000 = US $600 .00 ! Interested? Wait till you learn that it will cruise at 100-120 Km/Hr with an unbelievable 0.99litre/100Km =(258 miles/gallon) !! Impressed? Totally, after you have read all the details below about the hi-tech and space-age material input into this care !!! Truly the most Economic Car in the world . Must see and read to the end and please comment !!!! The Most Economic Car in the World will be on sale next year....

Tata Nano from India

Source
The Tata Nano is a rear-engined, four-passenger city car built by Tata Motors, aimed primarily at the Indian market. It was first presented at the 9th annual Auto Expo on 10 January 2008, at Pragati Maidan in New Delhi, India.

Tata Motors commercially launched Nano on March 23, 2009, with bookings from April 9 to April 25.The sales of the car will begin in July 2009, with a starting price of Rs 1,15,000 Rupees, cheaper than the Maruti 800, its main competitor and next cheapest Indian car priced at 1,84,641 Rupees. It also has an 8 percent smaller exterior size and a 23 percent larger interior space compared to Maruti 800. Tata had sought to produce the least expensive production car in the world — aiming for a starting price of Rs.1,00,000 (approximately US$2,000 in March 2009).

In early 2008 the news magazine Newsweek identified the Nano as a part of a "new breed of 21st-century cars" that embody "a contrarian philosophy of smaller, lighter, cheaper" and portend a new era in inexpensive personal transportation — and potentially, "global gridlock" The Wall Street Journal confirmed a global trend toward small cars, which includes the Nano.

"Nano" means "small" in Gujarati, the language of the founders of the Tata Group. In English, the prefix "nano-" is often used to mean small. This derives from the Greek root 'nanos', meaning dwarf.

News you WANT to read - Obama & bankers

The image painted of this meeting between Obama and bank CEOs is hilarious. Nice to see them squirm abit though they deserve much worse. Maybe Obama is not so bad afterall.

Inside Obama's bank CEOs meeting

Politico
Source
Bank of America Corp. CEO Kenneth Lewis speaks to media at the White House after meeting with U.S. President Barack Obama Reuters – Bank of America Corp. Chief Executive Kenneth Lewis speaks to the media at the White House after a meeting …
Eamon Javers Eamon Javers – Fri Apr 3, 2:00 pm ET

The bankers struggled to make themselves clear to the president of the United States.

Arrayed around a long mahogany table in the White House state dining room last week, the CEOs of the most powerful financial institutions in the world offered several explanations for paying high salaries to their employees — and, by extension, to themselves.

“These are complicated companies,” one CEO said. Offered another: “We’re competing for talent on an international market.”

But President Barack Obama wasn’t in a mood to hear them out. He stopped the conversation and offered a blunt reminder of the public’s reaction to such explanations. “Be careful how you make those statements, gentlemen. The public isn’t buying that.”

“My administration,” the president added, “is the only thing between you and the pitchforks.”

The fresh details of the meeting — some never before revealed — come from an account provided to POLITICO by one of the participants. A second source inside the meeting confirmed the details, and two other sources familiar with the meeting offered additional information.

The accounts demonstrate that despite the public comments on both sides that the meeting was cordial, the tone in the room was in fact one of mutual wariness. The titans of finance -- men used to being the most powerful man in almost any room -- sized up a new president who made clear in ways big and small that he expected them to change their ways.

There were signs from the outset that this was a business event, not a social gathering. At each place around the table sat a single glass of water. No ice. For those who finished their glass, no refills were offered. There was no group photograph taken of the CEOs with the president, which typically happens at ceremonial White House gatherings but not at serious strategy sessions.

“The only way they could have sent a more Spartan message is if they had served bread along with the water,” says a person who attended the meeting. “The signal from Obama’s body language and demeanor was, ‘I’m the president, and you’re not.’”

According to the accounts of sources inside the room, President Obama told the CEOs exactly what he expects from them, and pushed back forcefully when they attempted to defend Wall Street’s legendarily high-paying ways.

From the White House, there were five principal attendees: chief of staff Rahm Emanuel, who arrived a few minutes late, Treasury Secretary Timothy Geithner, Council of Economic Advisers chairwoman Christina Romer, senior adviser Valerie Jarrett and director of the National Economic Council Larry Summers. Uncharacteristically, Summers said almost nothing, and it appeared to one participant as if he had been told to remain silent.

To break the ice, JPMorgan Chase CEO Jamie Dimon offered Geithner a fake check for $25 billion, the amount of Troubled Asset Relief Program money that the company has accepted. Although many of those in the room laughed, Geithner didn’t keep the check.

The president entered the room a few minutes later and made a lap of the table, shaking hands and saying hello to the CEOs, several of whom he called by name.

Taking his seat at the table, the president said, "So let's get to it." He spoke for several minutes without notes, giving an overview of the economic situation as he saw it. But the first comment that made an impression on several attendees was on Wall Street salaries and bonuses.

The president spoke of public outrage over the high-flying executive lifestyle. "The anger gentlemen, is real," Obama said. He urged pay reform and said rewards must be proportional, balanced, and tied to the health and success of the company.

The president described the financial system as still “fragile” and asked for cooperation from the CEOs. But he also told them he wouldn’t shy away from regulatory reform. Obama wrapped up his remarks and threw the conversation open to the table, saying, “So, who’d like to talk?”

JPMorgan’s Dimon spoke first. He began by complimenting the president on the economic team he’d assembled. And he said his industry needs to explain more directly to the American people that the economic recovery plans are already working. Dimon also insisted that he’d like to give the government’s TARP money back as soon as practical, and asked the president to “streamline” that process.

But Obama didn’t like that idea — arguing that the system still needs government capital.

The president offered an analogy: “This is like a patient who’s on antibiotics,” he said. “Maybe the patient starts feeling better after a couple of days, but you don’t stop taking the medicine until you’ve finished the bottle.” Returning the money too early, the president argued could send a bad signal.

Several CEOs disagreed, arguing instead that returning TARP money was their patriotic duty, that they didn’t need it anymore, and that publicity surrounding the return would send a positive signal of confidence to the markets.

Bank of America CEO Ken Lewis cracked a joke at the expense of his peers who’d lavished praise on the administration: “Mr. President,” he said, “I’m not going to suck up to Geithner and Summers like the other CEOs here have.” Lewis also urged the president not to paint all the banks with the same broad brush.

The president argued that’s not what the White House was doing. Indeed, earlier the same week, Obama said at a nationally televised news conference, “The rest of us can’t afford to demonize every investor or entrepreneur who seeks to make a profit.”

As the meeting wound down after nearly an hour and a half, the CEOs hustled out to live television positions on the White House grounds, where many gave interviews to CNBC.

It had been a landmark day in the history of American capitalism. Unbeknownst to the financial executives, General Motors CEO Rick Wagoner was also on Pennsylvania Avenue that day, meeting with Obama’s auto bailout task force. Although the finance CEOs got a meeting with the president, Wagoner saw only Obama’s senior advisor Steven Rattner at the Treasury Department. During the meeting, Rattner demanded Wagoner’s resignation.

It had been a tough day for CEOs in the nation’s capital.

Michael Moore's: "YOU'RE FIRED!"

"We the People" to "King of the World":
"YOU'RE FIRED!"

Wednesday 01 April 2009
Michael Moore
Source

Friends,

Nothing like it has ever happened. The President of the United States, the elected representative of the people, has just told the head of General Motors -- a company that's spent more years at #1 on the Fortune 500 list than anyone else -- "You're fired!"

I simply can't believe it. This stunning, unprecedented action has left me speechless for the past two days. I keep saying, "Did Obama really fire the chairman of General Motors? The wealthiest and most powerful corporation of the 20th century? Can he do that? Really? Well, damn! What else can he do?!" This bold move has sent the heads of corporate America spinning and spewing pea soup. Obama has issued this edict: The government of, by, and for the people is in charge here, not big business.

John McCain got it. On the floor of the Senate he asked, "What does this signal send to other corporations and financial institutions about whether the federal government will fire them as well?" Senator Bob Corker said it "should send a chill through all Americans who believe in free enterprise." The stock market plunged as the masters of the universe asked themselves, "Am I next?" And they whispered to each other, "What are we going to do about this Obama?"

Not much, fellows. He has the massive will of the American people behind him -- and he has been granted permission by us to do what he sees fit. If you liked this week's all-net 3-pointer, stay tuned. I write this letter to you in memory of the hundreds of thousands of workers over the past 25+ years who have been tossed into the trash heap by General Motors. Many saw their lives ruined for good. They turned to alcohol or drugs, their marriages fell apart, some took their own lives. Most moved on, moved out, moved over, moved away. They ended up working two jobs for half the pay they were getting at GM. And they cursed the CEO of GM for bringing ruin to their lives. Not one of them ever thought that one day they would witness the CEO receive the same treatment.

Of course Chairman Wagoner will not have to sign up for food stamps or be evicted from his home or tell his kids they'll be going to the community college, not the university. Instead, he will get a $23 million golden parachute. But the slip in his hands is still pink, just like the hundreds of thousands that others received -- except his was issued by us, via the Obama-man. Here's the door, buster. See ya. Don't wanna be ya.

I began my day today in Washington, D.C. I went to the U.S. Senate and got into their Finance Committee's hearing on the Wall Street bailout. The overseers wanted to know how the banks spent the money. And many of these banks won't tell them. They've taken trillions and nobody knows where the money went. It certainly didn't go to create jobs, relieve mortgage holders, or free up loans that people need. It was so shocking to listen to this, I had to leave before it was over. But it gave me an idea for the movie I was shooting.

Later, I stopped by the National Archives to stand in line to see the original copy of our Constitution. I thought about how twenty years ago this month I was just down the street finishing my first film, a personal plea to warn the nation about GM and the deadly economy it ruled.

On that March day in 1989 I was broke, having collected the last of my unemployment checks, relying on help from my friends (Bob and Siri would take me out to dinner and always pick up the check, the assistant manager at the movie theater would sneak me in so I could watch an occasional movie, Laurie and Jack bought an old Steenbeck (editing) machine for me, John Richard would slip me an unused plane ticket so I could go home for Christmas, Rod would do anything for me and drive to Flint whenever I needed something for the film). My late mother (she would've turned 88 tomorrow if she were still with us) and my GM autoworker dad told me in the kitchen they wanted to help and handed me a check for an astounding thousand dollars. I didn't know they even had a thousand dollars. I refused it, they insisted I take it -- "No!" -- and then, in that parental voice, told me I was to cash it so I could finish my movie. I did.

And I did. So on that March day in 1989, as I was driving down Pennsylvania Avenue, my 9-year-old car just died. I coasted over to the curb, put my head down on the steering wheel and started to cry. I had no money to take it in to be repaired, and I certainly had nothing to pay the tow truck driver. So I got out, screwed the license plates off so I wouldn't be fined, turned my back and just left it there for good.

I looked over at the building next to me. It said "National Archives." What better place to donate my dead car, I thought, as I walked the rest of the way home. Though it wasn't easy for me, I still never had to suffer what so many of my friends and neighbors went through, thanks to General Motors and an economic system rigged against them. I wonder what they must have all thought when they woke up this Monday morning to read in the Detroit News or the Detroit Free Press the headlines that Obama had fired the CEO of GM. Oh -- wait a minute. They couldn't read that. There was no Free Press or News. Monday was the day that both papers ended home delivery. It was canceled (as it will be for four days every week) because the daily newspapers, like General Motors, like Detroit, are broke.

I await the President's next superhero move. Yours, Michael Moore MMFlint@aol.com MichaelMoore.com (Go State!) P.S. Please know that it has not been lost on any of us from the Rust Belt how our corporate bigwigs were treated (remember, the auto companies wanted a loan, not a handout) compared to how the titans of Wall Street got trillions of free cash, lunch at the White House and a photo op with the Prez. Trust me, we get it.

And, if there is a God in heaven, the thieves of Wall Street will soon pay. Also... the sight of our president having to promise that he would back every GM warranty and give consumers a bonus if they trade in their old Grand Am for a hybrid, was alternately sad, hilarious, and just plain weird.

This is what it's come to: the Commander in Chief of the Free World is now Mr. Goodwrench. Jeesh.

Innovative cars for today - NOT MADE in the USA

Future cars - from Germany and India

US carmakers deserve to fold having lost the plot decades ago. The Big 3, Chrysler, GM and Ford could have produced these cars and be on top - if they didn't have their collective heads up their corporate arses. And they have the cheek to ask for bailout money. Guess it's another case of American know-how - yep - know-how to bankrupt the US economy. Good work lads.

VW - 2 passenger car - 258 mpg

Source
This is not a toy, not a concept car. It is a newly developed 2-seater car in highly aerodynamic tear-shape road-proven real car. It is ready to be launched as a single-seater for sale in Shanghai in 2010 for a mere RMB 4,000 = US $600 .00 ! Interested? Wait till you learn that it will cruise at 100-120 Km/Hr with an unbelievable 0.99litre/100Km =(258 miles/gallon) !! Impressed? Totally, after you have read all the details below about the hi-tech and space-age material input into this care !!! Truly the most Economic Car in the world . Must see and read to the end and please comment !!!! The Most Economic Car in the World will be on sale next year....

Tata Nano from India

Source
The Tata Nano is a rear-engined, four-passenger city car built by Tata Motors, aimed primarily at the Indian market. It was first presented at the 9th annual Auto Expo on 10 January 2008, at Pragati Maidan in New Delhi, India.

Tata Motors commercially launched Nano on March 23, 2009, with bookings from April 9 to April 25.The sales of the car will begin in July 2009, with a starting price of Rs 1,15,000 Rupees, cheaper than the Maruti 800, its main competitor and next cheapest Indian car priced at 1,84,641 Rupees. It also has an 8 percent smaller exterior size and a 23 percent larger interior space compared to Maruti 800. Tata had sought to produce the least expensive production car in the world — aiming for a starting price of Rs.1,00,000 (approximately US$2,000 in March 2009).

In early 2008 the news magazine Newsweek identified the Nano as a part of a "new breed of 21st-century cars" that embody "a contrarian philosophy of smaller, lighter, cheaper" and portend a new era in inexpensive personal transportation — and potentially, "global gridlock" The Wall Street Journal confirmed a global trend toward small cars, which includes the Nano.

"Nano" means "small" in Gujarati, the language of the founders of the Tata Group. In English, the prefix "nano-" is often used to mean small. This derives from the Greek root 'nanos', meaning dwarf.

Economic class-rape - ENOUGH!

I love Keith Olbermann's commentaries. This one is directed at the corporate bailout of the USA banks, but could well apply to any other country, especially Ireland. The suggestions Olbermann makes about removing 'person' status legally for corporations, making corporate executives personnally accountable for fraud and returning control of media ownership diversity to a government regulatory agency (FCC in US) are all exquisitely lucid solutions to the fiasco of bankers raping the working class.

I am glad there is Keith Olbermann. His ideas here apply universally to corporations run amuck with greed. Indeed, the pitch forks and torches of ordinary people who have suffered from the unforgivable corruption and great Big Dogs and Fat Cats may still be in the dealing of the cards.

2 years of recession or 10 years of hell?

The state of the global economy and the future it faces is perplexing and overwhelming. William Engdahl presents a lucid and understandable overview of the dynamics of this disaster. Excellent video interview in 4 segments.

F William Engdahl says getting to a real solution to the crisis will take mass action by millions of people in the streets demanding nationalization of the banks, cuts in military spending,a rise in the standard of living of the middle 60% of the population, and rebuilding the infrastructure of the country.

Bio
F William Engdahl is an economist and author and the writer of the best selling book "A Century of War: Anglo-American Oil Politics and the New World Order." Mr Engdhahl has written on issues of energy, politics and economics for more than 30 years, beginning with the first oil shock in the early 1970s. Mr. Engdahl contributes regularly to a number of publications including Asia Times Online, Asia, Inc, Japan's Nihon Keizai Shimbun, Foresight magazine; Freitag and ZeitFragen newspapers in Germany and Switzerland respectively. He is based in Germany.




For the next 3 segments of this brilliant interview go here

• F. William Engdahl: The danger is the US may turn to military might as their financial power weakens.
• F. William Engdahl: We are heading for a time of great social movements like the 1930's - England, Sweden and bank nationalisation.
  
• F William Engdahl: US economy has been hollowed out over the last 15 years and debt load is staggering- the European picture and global currency.
  

More F. William Engdahl articles.

Wall Street's Bailout is a Trillion-Dollar Crime Scene

Why Aren't the Dems Doing Something About It?

By Naomi Klein
November 14, 2008
"The Nation"
The more details emerge, the clearer it becomes that Washington's handling of the Wall Street bailout is not merely incompetent. It is borderline criminal.

In a moment of high panic in late September, the U.S. Treasury unilaterally pushed through a radical change in how bank mergers are taxed -- a change long sought by the industry. Despite the fact that this move will deprive the government of as much as $140 billion in tax revenue, lawmakers found out only after the fact. According to the Washington Post, more than a dozen tax attorneys agree that "Treasury had no authority to issue the [tax change] notice."

Of equally dubious legality are the equity deals Treasury has negotiated with many of the country's banks. According to Congressman Barney Frank, one of the architects of the legislation that enables the deals, "Any use of these funds for any purpose other than lending -- for bonuses, for severance pay, for dividends, for acquisitions of other institutions, etc. -- is a violation of the act." Yet this is exactly how the funds are being used.

Then there is the nearly $2 trillion the Federal Reserve has handed out in emergency loans. Incredibly, the Fed will not reveal which corporations have received these loans or what it has accepted as collateral. Bloomberg News believes that this secrecy violates the law and has filed a federal suit demanding full disclosure.

Despite all of this potential lawlessness, the Democrats are either openly defending the administration or refusing to intervene. "There is only one president at a time," we hear from Barack Obama. That's true. But every sweetheart deal the lame-duck Bush administration makes threatens to hobble Obama's ability to make good on his promise of change. To cite just one example, that $140 billion in missing tax revenue is almost the same sum as Obama's renewable energy program. Obama owes it to the people who elected him to call this what it is: an attempt to undermine the electoral process by stealth.

Yes, there is only one president at a time, but that president needed the support of powerful Democrats, including Obama, to get the bailout passed. Now that it is clear that the Bush administration is violating the terms to which both parties agreed, the Democrats have not just the right but a grave responsibility to intervene forcefully.

I suspect that the real reason the Democrats are so far failing to act has less to do with presidential protocol than with fear: fear that the stock market, which has the temperament of an overindulged 2-year-old, will throw one of its world-shaking tantrums. Disclosing the truth about who is receiving federal loans, we are told, could cause the cranky market to bet against those banks. Question the legality of equity deals and the same thing will happen. Challenge the $140 billion tax giveaway and mergers could fall through. "None of us wants to be blamed for ruining these mergers and creating a new Great Depression," explained one unnamed Congressional aide.

More than that, the Democrats, including Obama, appear to believe that the need to soothe the market should govern all key economic decisions in the transition period. Which is why, just days after a euphoric victory for "change," the mantra abruptly shifted to "smooth transition" and "continuity."

Take Obama's pick for chief of staff. Despite the Republican braying about his partisanship, Rahm Emanuel, the House Democrat who received the most donations from the financial sector, sends an unmistakably reassuring message to Wall Street. When asked on This Week With George Stephanopoulos whether Obama would be moving quickly to increase taxes on the wealthy, as promised, Emanuel pointedly did not answer the question.

This same market-coddling logic should, we are told, guide Obama's selection of treasury secretary. Fox News's Stuart Varney explained that Larry Summers, who held the post under Clinton, and former Fed chair Paul Volcker would both "give great confidence to the market." We learned from MSNBC's Joe Scarborough that Summers is the man "the Street would like the most."

Let's be clear about why. "The Street" would cheer a Summers appointment for exactly the same reason the rest of us should fear it: because traders will assume that Summers, champion of financial deregulation under Clinton, will offer a transition from Henry Paulson so smooth we will barely know it happened. Someone like FDIC chair Sheila Bair, on the other hand, would spark fear on the Street -- for all the right reasons.

One thing we know for certain is that the market will react violently to any signal that there is a new sheriff in town who will impose serious regulation, invest in people and cut off the free money for corporations. In short, the markets can be relied on to vote in precisely the opposite way that Americans have just voted. (A recent USA Today/Gallup poll found that 60 percent of Americans strongly favor "stricter regulations on financial institutions," while just 21 percent support aid to financial companies.)

There is no way to reconcile the public's vote for change with the market's foot-stomping for more of the same. Any and all moves to change course will be met with short-term market shocks. The good news is that once it is clear that the new rules will be applied across the board and with fairness, the market will stabilize and adjust. Furthermore, the timing for this turbulence has never been better. Over the past three months, we've been shocked so frequently that market stability would come as more of a surprise. That gives Obama a window to disregard the calls for a seamless transition and do the hard stuff first. Few will be able to blame him for a crisis that clearly predates him, or fault him for honoring the clearly expressed wishes of the electorate. The longer he waits, however, the more memories fade.

When transferring power from a functional, trustworthy regime, everyone favors a smooth transition. When exiting an era marked by criminality and bankrupt ideology, a little rockiness at the start would be a very good sign.

Naomi Klein on the Bailout

The Bush gang's parting gift:
a final, frantic looting of public wealth

The US bail-out amounts to a strings-free, public-funded windfall for big business. Welcome to no-risk capitalism

Friday October 31 2008
Naomi Klein
In the final days of the election many Republicans seem to have given up the fight for power. But don't be fooled: that doesn't mean they are relaxing. If you want to see real Republican elbow grease, check out the energy going into chucking great chunks of the $700bn bail-out out the door. At a recent Senate banking committee hearing, the Republican Bob Corker was fixated on this task, and with a clear deadline in mind: inauguration. "How much of it do you think may be actually spent by January 20 or so?" Corker asked Neel Kashkari, the 35-year-old former banker in charge of the bail-out.

When European colonialists realised that they had no choice but to hand over power to the indigenous citizens, they would often turn their attention to stripping the local treasury of its gold and grabbing valuable livestock. If they were really nasty, like the Portuguese in Mozambique in the mid-1970s, they poured concrete down the elevator shafts.

Nothing so barbaric for the Bush gang. Rather than open plunder, it prefers bureaucratic instruments, such as "distressed asset" auctions and the "equity purchase program". But make no mistake: the goal is the same as it was for the defeated Portuguese - a final, frantic looting of the public wealth before they hand over the keys to the safe.

How else to make sense of the bizarre decisions that have governed the allocation of the bail-out money? When the Bush administration announced it would be injecting $250bn into US banks in exchange for equity, the plan was widely referred to as "partial nationalisation" - a radical measure required to get banks lending again. Henry Paulson, the treasury secretary, had seen the light, we were told, and was following the lead of Gordon Brown.

In fact, there has been no nationalisation, partial or otherwise. American taxpayers have gained no meaningful control over the banks, which is why the banks are free to spend the new money as they wish. At Morgan Stanley, it looks as if much of the windfall will cover this year's bonuses. Citigroup has been hinting it will use its $25bn buying other banks, while John Thain, the chief executive of Merrill Lynch, told analysts: "At least for the next quarter, it's just going to be a cushion." The US government, meanwhile, is reduced to pleading with the banks that they at least spend a portion of the taxpayer windfall for loans - officially, the reason for the entire programme.

What, then, is the real purpose of the bail-out? My fear is this rush of dealmaking is something much more ambitious than a one-off gift to big business: that the Bush version of "partial nationalisation" is rigged to turn the US treasury into a bottomless cash machine for the banks for years to come. Remember, the main concern among the big market players, particularly banks, is not the lack of credit but their battered share prices. Investors have lost confidence in the honesty of the big financial players, and with good reason.

This is where the treasury's equity pays off big time. By purchasing stakes in these financial institutions, the treasury is sending a signal to the market that they are a safe bet. Why safe? Not because their level of risk has been accurately assessed at last. Not because they have renounced the kind of exotic instruments and outrageous leverage rates that created the crisis. But because the market will now be banking on the fact that the US government won't let these particular companies fail. If they get themselves into trouble, investors will now assume that the government will keep finding more cash to bail them out, since allowing them to go down would mean losing the initial equity investments, many of them in the billions. (Just look at the insurance giant AIG, which has already gone back to taxpayers for a top-up, and seems likely to ask for a third.)

This tethering of the public interest to private companies is the real purpose of the bail-out plan: Paulson is handing all the companies admitted to the programme - a number potentially in the thousands - an implicit treasury department guarantee. To skittish investors looking for safe places to park their money, these equity deals will be even more comforting than a triple-A from Moody's rating agency.

Insurance like that is priceless. But for the banks, the best part is that the government is paying them to accept its seal of approval. For taxpayers, on the other hand, this entire plan is extremely risky, and may well cost significantly more than Paulson's original idea of buying up $700bn in toxic debts. Now taxpayers aren't just on the hook for the debts but, arguably, for the fate of every corporation that sells them equity.

Interestingly, mortgage fund giants Fannie Mae and Freddie Mac both enjoyed this kind of unspoken guarantee before they were nationalised at the start of this crisis. For decades the market understood that, since these private players were enmeshed with the government, Uncle Sam could be counted on to always save the day. It was, as many have pointed out, the worst of all worlds. Not only were profits privatised while risks were socialised, but the implicit government backing created powerful incentives for reckless business practices.

With the new equity purchase programme Paulson has taken the discredited Fannie and Freddie model and applied it to a huge swath of the private banking industry. Again, there is no reason to shy away from risky bets, especially since the treasury has made no such demands of the banks (apparently it doesn't want to "micromanage".)

To further boost market confidence, the federal government has also unveiled unlimited public guarantees for many bank deposit accounts. Oh, and as if this were not enough, the treasury has been encouraging the banks to merge, ensuring that the only institutions left will be "too big to fail", thereby guaranteed a bail-out. In three ways, the market is being told loud and clear that Washington will not allow the financial institutions to bear the consequences of their behaviour. This may be Bush's most creative innovation: no-risk capitalism.

There is a glimmer of hope. In answer to Senator Corker's question, the treasury is indeed having trouble dispersing the bail-out funds. So far it has requested about $350bn of the $700bn, but most of this hasn't yet made it out the door. Meanwhile, every day it becomes clearer that the bail-out was sold to the public on false pretences. Clearly, it was never really about getting loans flowing. It was always about doing what it is doing: turning the state into a giant insurance agency for Wall Street, a safety net for the people who need it least, subsidised by the people who will most need state protections in the economic storms ahead.

This duplicity is a political opportunity. Whoever wins on November 4 will have enormous moral authority. It should be used to call for a freeze on the dispersal of bail-out funds, not after the inauguration but right away. All deals should be renegotiated, this time with the public getting the guarantees.

It is risky, of course, to interrupt the bail-out process. Nothing could be riskier, however, than allowing the Bush gang their parting gift to big business - the gift that will keep on taking.

A version of this column first appeared in The Nation (www.thenation.com)
Source
www.naomiklein.org

I love the Irish 'Left'

How I love Irish politics. We definitely have our problems here, but all in all, the country is quite humane and compassionate. I think we will be very lucky in the coming financial downturn.

Fat cats are solely to blame for financial crisis

Sunday, October 12, 2008
By Vincent Browne
These are bewildering times. Nobody has any idea whether the world economy will collapse in a few days, weeks or months.

Nobody seems to have a plan to save the world from the looming disaster - and nothing tried so far has worked.

The debate between the US presidential candidates last Tuesday night seemed abstracted from the potential catastrophe.

John McCain and Barack Obama addressed the issue as though it were merely another campaign debating point, rather than the survival of the social and political system to which both are committed.

The scale of the possible disaster is terrifying. The president of the World Bank, Robert Zoellick, said last Thursday that, ‘‘while people in the developed world are focused on the financial crisis, many forget that a human crisis is rapidly unfolding in developing countries. It is pushing poor people to the brink of survival.”

The number of malnourished people globally will grow by 44million - to 967million - this year, according to the World Bank.

The crisis will also have devastating effects on people elsewhere in the world. In America, the richest country in the world, the poverty level, as measured by the US Census Bureau, will rise appreciably from its current level of 35 million.

The proportion of the black population in poverty will rise from the 25 per cent mark to around one-third.

Incidentally, wasn’t it extraordinary that Obama - the first black presidential nominee of either major party, and the candidate more likely to succeed - has not mentioned the impoverishment of the black population in either of the debates so far?

How could a black nominee contribute to the invisibility of the phenomenon? If that is what it takes to become president, is it worth it? Likewise in Europe and elsewhere in the ‘developed’ world.

The financial billionaires have taken a hit from the financial crisis - and, very likely, there are more hits to come.

But do you remember the night that Lehman Brothers was going to the wall? Limousines were lined up outside the bank’s Wall Street headquarters to ferry the directors home - the same directors who had personally made billions of dollars out of the reckless, financial scavenging in which they had engaged for more than a decade.

Did you see Richard Fuld, the chairman and chief executive of Lehman Brothers, acknowledge to a congressional committee how he had taken millions from the company he had wrecked? Last year, this gent earned $45 million. From 1993 to 2007, he received nearly half a billion dollars in total compensation.

Fuld may have to sacrifice an executive jet or two, but he is unlikely to share the fate of tens of millions around the world whose lives have been devastated by his greed and recklessness.

Of course, the financial crisis in Ireland is not the sole creation of the Fianna Fáil-PD governments of the last 11 years. The worldwide financial crisis has played a major part in precipitating the crisis here. But Fianna Fáil and the PDs have contributed to it massively.

They fuelled the property boom, which they must have known would end in tears - not for them, but for hundreds of thousands of others.

They courted - or at least held hands with - the property developers, many of whom became billionaires. They spent, spent and spent, while cutting taxes - particularly taxes that affected the rich: income tax and capital gains tax.

Now, having devastated the tax base, they will ravage the lives of hundreds of thousands by committing them to poverty, misery, poor health and early deaths, for these are the direct results of the inequality that they created and will now deepen.

Mary Harney’s initiative last Thursday, even by the standards of this deplorable government and of the despicable PDs, was breathtaking. Just when the government was risking the economic lifeblood of this society in order to rescue the powerful and wealthy financial institutions, she was proposing to take life savings and homes from the poorest and most helpless old people to finance residential care.

As Eamon Timmons of Age Action asked: ‘‘Does it mean that an older person who is medically assessed as being in need of full-time medical and nursing care, but who refuses to sign up to the new charging arrangement whereby he would pay 80 per cent of his income and up to 15 per cent of the value of his estate, would be refused essential care by the state?

‘‘In effect, it means that people who have been paralysed by stroke or who are suffering from dementia will be charged in a completely different way to people who, for example, have a heart attack or are being treated for cancer.”

In spite of this crisis, we still have a hugely wealthy society. The average income for every man, woman and child is around €36,000. Nobody would be in want or have their life chances compromised if everyone had such wealth. The problem is how it is distributed.

The ‘Masters of the Universe’ in the banks, for instance, think they are individually worth in excess of €2 million.

The government believes that the balance of the economy would be disturbed if this were to be pared back - hence the massive bailout now under way for the institutions, so brilliantly managed by these Masters of the Universe.

Brendan Drumm, whose performance has been questionable since he took over the management of the Health Service Executive (HSE) - aided and abetted by Harney - thinks it is okay for him and a few of his colleagues to share a bonus in excess of €1 million.

Is this justified on the basis that he would be earning far more than €450,000 had he remained a hospital consultant?

Obviously, it did not occur to him that this is very much part of the problem and that his mentality - which, one assumes, is widely shared in the medical profession - is a major part of the problem.

The Irish solution to the financial crisis seems increasingly a piece of madness that could impoverish this country for generations. If any one of the financial institutions now guaranteed goes under - and the likelihood of that happening seems to be increasing by the day - then this society could be saddled with a debt of something like €20 billion to €150 billion.

This would cripple the economy here for decades. Would it not have been preferable to commit to the survival of, say, AIB and the Bank of Ireland by a state takeover, and let the others go to the wall if necessary?

Isn’t it extraordinary that we have allowed our societies to become vulnerable to the vagaries of the mere facilitators of its functioning, the financial institutions?

How did we ever allow them to become so much a central part of our societies? How ever did we justify giving these penny-pushers such vast wealth and power, so much so that their greed and recklessness now threaten the economic future of our societies?

Source

With bailout, socialists say Bush is now ‘a fellow traveler'

By TYLER BRIDGES
McClatchy Newspapers

They don't call him President Bush in Venezuela anymore. Now he's known as "Comrade."
With the Bush administration's Treasury Department resorting to government bailout after government bailout to keep the U.S. economy afloat, leftist governments and their political allies in Latin America are having a field day, gloating one day and taunting Bush the next for adopting the types of interventionist government policies that he's long condemned.

"We were just talking about that this morning on the floor," said Congressman Edwin Castro, who heads the leftist Sandinista congressional bloc in Nicaragua. "We think the Bush administration should follow the same policies that they and the International Monetary Fund have always told us to follow when we have economic problems - a structural adjustment that requires cutting government spending and reducing the role of government.

"One of our economists was telling us that Bush has just implemented communism for the rich," Castro said.

No one in Latin America has been making more hay of Bush's turnabout than Venezuela's President Hugo Chavez, a self-proclaimed socialist who is the U.S.'s biggest headache in the region.

"If the Venezuelan government, for example, approves a law to protect consumers, they say, 'Take notice, Chavez is a tyrant!'" Chavez said in one of his recent weekly television shows.

"Or they say, 'Chavez is regulating prices. He is violating the laws of the marketplace.' How many times have they criticized me for nationalizing the phone company? They say, 'The state shouldn't get involved in that.' But now they don't criticize Bush for having nationalize . . . the biggest banks in the world. Comrade Bush, how are you?"

The audience laughed and Chavez continued.

"Comrade Bush is heading toward socialism."

That certainly isn't the view of the Bush administration, which sees the government plan to buy toxic mortgages and the takeover of a major insurance company as well as two huge mortgage lenders as distasteful but necessary temporary measures to right the listing U.S. economy and prevent a worldwide depression.

Mark Weisbrodt, director of the leftist Washington-based Center for Economic and Policy Research, advises numerous Latin American governments.

He called the recent Bush administration policies ironic.

"The biggest nationalization in the world was of Fannie Mae and Freddie Mac. The biggest nationalization of an insurer was AIG. People are saying that Bush is privatizing risk and socializing losses," Weisbrodt said.

John Ross, who has begun providing advice to the Chavez government, along with his boss, former London Mayor "Red" Ken Livingstone, criticized the U.S. president and his conservative political allies.

"They have abandoned every policy that they've advocated that other governments should follow over the past 20 years," Ross said by telephone from London. "And they've adopted the measures that they've condemned other governments for taking.

"This is not the end of capitalism. But it is the end of Reaganism and Thatcherism," he added.

British Prime Minister Margaret Thatcher, a conservative, was a close ally of President Reagan in the 1980s.

In Peru, Congresswoman Nancy Obregon said she thought Bush's actions were sounding the death knell for capitalism.

"He's driving it into the ground," said Obregon, a socialist. "He's imitating Evo Morales."

Morales is the socialist president of Bolivia who has nationalized a half dozen foreign companies.

But Bolivia's ambassador in Venezuela, Jorge Alvarado, took issue with Obregon's comparison.

"Bush is guilty of a double-standard, but it would be an exaggeration to say he's imitating Evo," said Alvarado. "He'd have to be re-born to imitate Evo!"

Manuel Sutherland, a senior official in the Caracas-based Latin American Association of Marxist Economists, said that Bush has become a fellow traveler.

But Sutherland said he wasn't about to let Bush join his group.

"He carries out nationalizations to save capitalism," Sutherland said. "We want to sink it."

Source

China Welcomes U.S. Rescue Plan, Offers Cooperation

It seems that USA Banks will live to see another day, hi ho bailout. If this doesn't work, there is no plan B. One of the foundations of the bailout is the USA assuring that it has buyers for the 400 billion dollars of Treasury Bills which will be used to purchase dodgy mortgage products.

It looks as though a major buyer is China, who has acted to stabilise the world economy by cooperating with USA. Who would have thought ten years ago that a Communist country would be rescuing a Capitalist country?

China Welcomes U.S. Rescue Plan, Offers Cooperation (Update2)

By Irene Shen

Oct. 4 (Bloomberg) -- China's central bank said it hopes to see enhanced cooperation and coordination with U.S. and among other countries to stabilize global financial markets after the U.S. Congress approved a $700 billion rescue package.

``We're happy to see the bailout passage,'' the People's Bank of China said in a statement on its Web site today. ``All countries should take the responsibility to cooperate, as we share the same interest and goal in facing this crisis.''

The central bank said it had already taken measures to reduce the impact of the U.S. financial crisis on China and would continue to do so, without specifying. It last month reduced its one-year lending rate to 7.20 percent from 7.47 percent, and lowered the reserve-requirement ratio for smaller banks to 16.5 percent from 17.5 percent.

``If China doesn't move actively, the global recession would be deeper,'' said Frank Gong, JPMorgan Chase & Co.'s Hong Kong-based chief China economist.

``To keep China's economy strong and stable is the biggest contribution we can make to the global economy,'' the central bank said in today's statement, citing Premier Wen Jiabao.

The House of Representatives voted in favor of the bailout yesterday after rejecting the original bill on Sept. 29. The bailout comes after global banks racked up almost $590 billion in credit losses and asset writedowns stemming from the worst housing slump since the Great Depression.

To contact the reporter on this story: Irene Shen in Shanghai at ishen4@bloomberg.net
Last Updated: October 4, 2008 01:37 EDT

Source

The Big Bailout - Aspects

The Big Bailout is a difficult matter to sort through, even if one wants to. The following article is presented here as a discussion. Some will find this too boring to read and others will find the clarity it brings to evaluating the Big Bailout, fascinating. I have added emphasis and comment through the article but I do not subscribe to its conclusions necessarily.

The short question about USA economic collapse is..When?
If?....it's possible, but not very probable.


The Political Nature of the Economic Crisis

September 30, 2008 Graphic for Geopolitical Intelligence
Report By George Friedman
September 30, 2008 Graphic for Geopolitical Intelligence Report By George Friedman
Classical economists like Adam Smith and David Ricardo referred to their discipline as “political economy.” Smith’s great work, “The Wealth of Nations,” was written by the man who held the chair in moral philosophy at the University of Glasgow. This did not seem odd at the time and is not odd now. Economics is not a freestanding discipline, regardless of how it is regarded today. It is a discipline that can only be understood when linked to politics, since the wealth of a nation rests on both these foundations, and it can best be understood by someone who approaches it from a moral standpoint, since economics makes significant assumptions about both human nature and proper behavior.

The modern penchant to regard economics as a discrete science parallels the belief that economics is a distinct sphere of existence — at its best when it is divorced from political and even moral considerations. Our view has always been that the economy can only be understood and forecast in the context of politics, and that the desire to separate the two derives from a moral teaching that Smith would not embrace. Smith understood that the word “economy” without the adjective “political” did not describe reality. We need to bear Smith in mind when we try to understand the current crisis.

Societies have two sorts of financial crises. The first sort is so large it overwhelms a society’s ability to overcome it, and the society sinks deeper into dysfunction and poverty. In the second sort, the society has the resources to manage the situation — albeit at a collective price. Societies that can manage the crisis have two broad strategies. The first strategy is to allow the market to solve the problem over time. The second strategy is to have the state organize the resources of society to speed up the resolution. The market solution is more efficient over time, producing better outcomes and disciplining financial decision-making in the long run. But the market solution can create massive collateral damage, such as high unemployment, on the way to the superior resolution. The state-organized resolution creates inequities by not sufficiently punishing poor economic decisions, and creates long-term inefficiencies that are costly. But it has the virtue of being quicker and mitigating collateral damage.

Three Views of the Financial Crisis
There is a first group that argues the current financial crisis already has outstripped available social resources, so that there is no market or state solution. This group asserts that the imbalances created in the financial markets are so vast that the market solution must consist of an extended period of depression. Any attempt by the state to appropriate social resources to solve the financial imbalance not only will be ineffective, it will prolong the crisis even further, although perhaps buying some minor alleviation up front. The thinking goes that the financial crisis has been building for years and the economy can no longer be protected from it, and that therefore an extended period of discipline and austerity — beginning with severe economic dislocations — is inevitable. This is not a majority view, but it is widespread; it opposes governmen t action on the grounds that the government will make a terrible situation worse.

A second group argues that the financial crisis has not outstripped the ability of society — organized by the state — to manage, but that it has outstripped the market’s ability to manage it. The financial markets have been the problem, according to this view, and have created a massive liquidity crisis. The economy — as distinct from the financial markets — is relatively sound, but if the liquidity crisis is left unsolved, it will begin to affect the economy as a whole. Since the financial markets are unable to solve the problem in a time frame that will not dramatically affect the economy, the state must mobilize resources to impose a solution on the financial markets, introducing liquidity as the preface to any further solutions. This group believes, like the first group, that the financial crisis could have profound economic ramifications. But the second group also believes it is possible to contain the consequences. This is the view of th e Bush administration, the congressional leadership, the Federal Reserve Board and most economic leaders.

There is a third group that argues that the state mobilization of resources to save the financial system is in fact an attempt to save financial institutions, including many of those whose imprudence and avarice caused the current crisis. This group divides in two. The first subgroup agrees the current financial crisis could have profound economic consequences, but believes a solution exists that would bring liquidity to the financial markets without rescuing the culpable. The second subgroup argues that the threat to the economic system is overblown, and that the financial crisis will correct itself without major state intervention but with some limited implementation of new regulations.

The first group thus views the situation as beyond salvation, and certainly rejects any political solution as incapable of addressing the issues from the standpoint of magnitude or competence. This group is out of the political game by its own rules, since for it the situation is beyond the ability of politics to make a difference — except perhaps to make the situation worse.

The second group represents the establishment consensus, which is that the markets cannot solve the problem but the federal government can — provided it acts quickly and decisively enough.

The third group spoke Sept. 29, when a coalition of Democrats and Republicans defeated the establishment proposal. For a myriad of reasons, some contradictory, this group opposed the bailout. The reasons ranged from moral outrage at protecting the interests of the perpetrators of this crisis to distrust of a plan implemented by this presidential administration, from distrust of the amount of power ceded the Treasury Department of any administration to a feeling the problem could be managed. It was a diverse group that focused on one premise — namely, that delay would not lead to economic catastrophe.

From Economic to Political Problem
The problem ceased to be an economic problem months ago. More precisely, the economic problem has transformed into a political problem. Ever since the collapse of Bear Stearns, the primary actor in the drama has been the federal government and the Federal Reserve, with its powers increasing as the nature of potential market outcomes became more and more unsettling. At a certain point, the size of the problem outstripped the legislated resources of the Treasury and the Fed, so they went to Congress for more power and money. This time, they were blocked.

It is useful to reflect on the nature of the crisis. It is a tale that can be as complicated as you wish to make it, but it is in essence simple and elegant. As interest rates declined in recent years, investors — particularly conservative ones — sought to increase their return without giving up safety and liquidity. They wanted something for nothing, and the market obliged. They were given instruments ultimately based on mortgages on private homes. They therefore had a very real asset base — a house — and therefore had collateral. The value of homes historically had risen, and therefore the value of the assets appeared secured. Financial instruments of increasing complexity eventually were devised, which were bought by conservative investors. In due course, these instruments were bought by less conservative investors, who used them as collateral for borrowing money. They used this money to buy other instruments in a pyramiding scheme that rested on one premise: the existence of houses whose value remained stable or grew.

Unfortunately, housing prices declined. A period of uncertainty about the value of the paper based on home mortgages followed. People claimed to be confused as to what the real value of the paper was. In fact, they were not so much confused as deceptive. They didn’t want to reveal that the value of the paper had declined dramatically. At a certain point, the facts could no longer be hidden, and vast amounts of value evaporated — taking with them not only the vast pyramids of those who first created the instruments and then borrowed heavily against them, but also the more conservative investors trying to put their money in a secure space while squeezing out a few extra points of interest. The decline in housing prices triggered massive losses of money in the financial markets, as well as reluctance to lend based on uncertainty of values. The resu lt was a liquidity crisis, which simply meant that a lot of people had gone broke and that those who still had money weren’t lending it — certainly not to financial institutions.

The S&L Precedent
Such financial meltdowns based on shifts in real estate prices are not new. In the 1970s, regulations on savings and loans (S&Ls) had changed. Previously, S&Ls had been limited to lending in the consumer market, primarily in mortgages for homes. But the regulations shifted, and they became allowed to invest more broadly. The assets of these small banks, of which there were thousands, were attractive in that they were a pool of cash available for investment. The S&Ls subsequently went into commercial real estate, sometimes with their old management, sometimes with new management who had bought them, as their depositors no longer held them.

The infusion of money from the S&Ls drove up the price of commercial real estate, which the institutions regarded as stable and conservative investments, not unlike private homes. They did not take into account that their presence in the market was driving up the price of commercial real estate irrationally, however, or that commercial real estate prices fluctuate dramatically. As commercial real estate values started to fall, the assets of the S&Ls contracted until most failed. An entire sector of the financial system simply imploded, crushing shareholders and threatening a massive liquidity crisis. By the late 1980s, the entire sector had melted down, and in 1989 the federal government intervened.

The federal government intervened in that crisis as it had in several crises large and small since 1929. Using the resources at its disposal, the federal government took over failed S&Ls and their real estate investments, creating the Resolution Trust Corp. (RTC). The amount of assets acquired was about $394 billion dollars in 1989 — or 6.7 percent of gross domestic product (GDP) — making it larger than the $700 billion dollars — or 5 percent of GDP — being discussed now. Rather than flooding the markets with foreclosed commercial property, creating havoc in the market and further destroying assets, the RTC held the commercial properties off the market, maintaining their price artificially. They then sold off the foreclosed properties in a multiyear sequence that recovered much of what had been spent acquiring the properties. More important, it prevented the decline in commercial real estate from accelerating and creating liquidity crises throug hout the entire economy.

Many of those involved in S&Ls were ruined. Others managed to use the RTC system to recover real estate and to profit. Still others came in from the outside and used the RTC system to build fortunes. The RTC is not something to use as moral lesson for your children. But the RTC managed to prevent the transformation of a financial crisis into an economic meltdown. It disrupted market operations by introducing large amounts of federal money to bring liquidity to the system, then used the ability of the federal government — not shared by individuals — to hold on to properties. The disruption of the market’s normal operations was designed to avoid a market outcome. By holding on to the assets, the federal government was able to create an artificial market in real estate, one in which supply was constrained by the government to manage the value of commercial real estate. It did not work perfectly — far from it. But it managed to avoid the most feared outcome, which was a depression.

There have been many other federal interventions in the markets, such as the bailout of Chrysler in the 1970s or the intervention into failed Third World bonds in the 1980s. Political interventions in the American (or global) marketplace are hardly novel. They are used to control the consequences of bad decisions in the marketplace. Though they introduce inefficiencies and frequently reward foolish decisions, they achieve a single end: limiting the economic consequences of these decisions on the economy as a whole. Good idea or not, these interventions are institutionalized in American economic life and culture. The ability of Americans to be shocked at the thought of bailouts is interesting, since they are not all that rare, as judged historically.

The RTC showed the ability of federal resources — using taxpayer dollars — to control financial processes. In the end, the S&L story was simply one of bad decisions resulting in a shortage of dollars. On top of a vast economy, the U.S. government can mobilize large amounts of dollars as needed. It therefore can redefine the market for money. It did so in 1989 during the S&L crisis, and there was a general acceptance it would do so again Sept. 29.

The RTC Model and the Road Ahead
As discussed above, the first group argues the current crisis is so large that it is beyond the federal government’s ability to redefine. More precisely, it would argue that the attempt at intervention would unleash other consequences — such as weakening dollars and inflation — meaning the cure would be worse than the disease. That may be the case this time, but it is difficult to see why the consequences of this bailout would be profoundly different from the RTC bailout — namely, a normal recession that would probably happen anyway.

The debate between the political leadership and those opposing its plan is more interesting. The fundamental difference between the RTC and the current bailout was institutional. Congress created a semi-independent agency operating under guidelines to administer the S&L bailout. The proposal that was defeated Sept. 29 would have given the secretary of the Treasury extraordinary personal powers to dispense the money. Some also argued that the return on the federal investment was unclear, whereas in the RTC case it was fairly clear. In the end, all of this turned on the question of urgency. The establishment group argued that time was running out and the financial crisis was about to morph into an economic crisis. Those voting against the proposal argued there was enough time to have a more defined solution.

There was obviously a more direct political dimension to all this. Elections are just more than a month a way, and the seat of every U.S. representative is in contest. The public is deeply distrustful of the establishment, and particularly of the idea that the people who caused the crisis might benefit from the bailout. The congressional opponents of the plan needed to demonstrate sensitivity to public opinion. Having done so, if they force a redefinition of the bailout plan, an additional 13 votes can likely be found to pass the measure.

But the key issue is this: Are the resources of the United States sufficient to redefine financial markets in such a way as to manage the outcome of this crisis, or has the crisis become so large that even the resources of a $14 trillion economy mobilized by the state can’t do the job? If the latter is true, then all other discussions are irrelevant. Events will take their course, and nothing can be done. But if that is not true, that means that politics defines the crisis, as it has other crisis. In that case, the federal government can marshal the resources needed to redefine the markets and the key decision-makers are not on Wall Street, but in Washington. Thus, when the chips are down, the state trumps the markets.

All of this may not be desirable, efficient or wise, but as an empirical fact, it is the way American society works and has worked for a long time. We are seeing a case study in it — including the possibility the state will refuse to act, creating an interesting and profound situation. This would allow the market alone to define the outcome of the crisis. This has not been allowed in extreme crises in 75 years, and we suspect this tradition of intervention will not be broken now. The federal government will act in due course, and an institutional resolution taking power from the Treasury and placing it in the equivalent of the RTC will emerge. The question is how much time remains before massive damage is done to the economy.

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The People Have Spoken