Eating Fair Traded, Shade Grown, Free-range, Crow

One unfortunate feature of being an economic gadfly is the the field of economics is fraught with prediction, most of it coming from the third bend in an economist's colon.  At the Institute For Economic Reality, the convocation of macro-economic realists strives not to source its predictions in the same manner.  Even so, reality often intrudes in the most obsene fashion for those of us trying to politely cajole the mildly curious out of the dark arts of economic superstition and down the marble colonnade to economic reality.  Even the IER's predictions did not take into account the serialized criminal actions by the financial elites in this country to prevent the collapse of the debt-fueled consumption binge of the last 20 years.

That's a fancy way of saying that we didn't think the FED and US Treasury would resort to freebasing several trillion dollars worth of economic crystal methamphetamine to keep the party going. 

The IER's predictions of an 80% (minimum) peak to trough decline in sexy, bicoastal residential real estate by the end of 2010 is a bust.

Yes, the IER was wrong.  You heard it here, first.  The homes of the vainglorious twits (the ones that drone on endlessly about how valuable their homes are and how they are special and immune from the macro economic forces that subjugate the rest of us) only collapsed 30-40%, which is 80% lower than where said twits thought they would be.

As one of my favorite hockey players, Grant Marshall, would say when the Dallas Stars would lose a hockey game, "They didn't beat us; we just ran out of time."  He was implying that the Stars were better, but didn't get enough time to demonstrate it.

The same is at work here.  2010 has come and gone, but the game isn't over.  The only part of "20 cents on the dollar by 2010" that isn't true is the time element.  Make no mistake - we are going to 20 cents as soon as the FED runs out of ammo, and they are running out of ammo.

There is no better time to gun the financial markets higher than in the low volume trading days surrounding Christmas.  Even with this, the debt markets are getting crushed, and equities aren't exactly rebounding like they should.  With the FED now holding in excess of a cool trillion in US debt, they are very, very sensitive to the value of that debt.  Some students of this phenomenon have predicted that the FEDERAL RESERVE is going to be frozen solid if the 10 year US Treasury hits 4.5%.  Absent some flood of money hitting the debt auctions over the next few months, we should be there by Spring 2011.

How would you like to sell a home in a market that doesn't have loans available at any price?  If the FED freezes up, we get to find out.

Just as any tweaker knows, once you start meth, you have to keep on it to get the same high, while at the same time, your brain's ability to manufacture its own "happy drug" is essentially detroyed.  That's the situation with the Treasury and the FED.  13% of GDP is borrowed money, and that gets us a 2% growth rate.  Think about that and what happens when the government can no longer borrow 40% of what it spends.

The economy is just reacting to government spending, rather than to a genuinely expanding manufacturing base.  The deficit spending is killing off the private economy because the risk/reward is distorted.

So, for the record, and so everyone on "Rain City Guide" and the detractors on "Seattle Bubble" can rub my face in it, "20 cents on the dollar by 2010" is dead. 

Recipies for crow are being accepted.  In the interest of the sensitivities of those living on the southern 7 miles of SR-305, the crows must be fair traded, shade grown, and free range.

Bankers, Beanie Babies, Leverage and Liars

Q: How do you know when a banker is lying?

A: He publishes his quarterly financial statements.

The Institute For Economic Reality, a think tank based in Poulsbo, Washington, has been watching the "credit crisis" unfold for a few years, and has concluded that bankers are dumber and more dishonest than airline executives - a feat that was previously thought to be unassailable.

Many have asked me if there is any way for the banks to be able to "hold" their assets and survive by getting relief from being forced to mark their assets to market. In other words, can the banks just agree to all lie on a grand scale, and pretend all is well?

No. In fact, it will make the matters worse. If they stay this course, we will have a systemic failure of the entire world-wide banking system.

Why? Because the entire credit economy is based upon this little thing called "trust."

Trust is the basis of credit, which is the basis of our monetary system. The dollars, francs, yen, rubles, euros, kroner, pesos, and rupees you hold are all based upon the belief that people will execute contracts faithfully and will transmit truthful statements when negotiating those contracts. Should people lose faith in their counter party to perform on their contracts, money will cease to flow. The less faith, the more the markets will freeze.

If you go to a farmer's market, and a farmer had several bags of produce for sale, but you couldn't examine the produce, you would need to trust that farmer in order to buy what he was selling. If the farmer tells you that there are two kilos of fresh apples in the bag, and you buy them, you expect to get two kilos of fresh apples. Should you open the bag and find two kilos of rotten, worm infested apples, are you going to buy more apples from this farmer?

Only if you are Fannie Mae or Freddie Mac.

If most of the farmers conduct their business in this manner, how much money will flow at the farmer's market? Money will flow proportionately to the amount of trust, which in this situation is zero.

What happens to the farmers that actually have fresh produce, but still sell them in the opaque bags that all the dishonest farmers use? They fail too.

You can see the problem; our politicians can not. It is costing you trillions of dollars, and it is about to cost you even more.

So, what does this have to do with mortgages, and why do the banks want to continue to lie? Because their alternative is to die, and their executives will probably get the Ken Lay treatment.

The reason the banks can't tell the truth is because of the leverage they have used to get them into this Gordian Knot. Banks like to keep things complex, because they believe we can't figure out what they are doing if they use complicated terminology and talk about really large, spooky figures. However, as we have already stated, bankers are the sleaziest animals in the business community, so they like to masquerade as High Priests of a goofy, New Age religion in hopes that we just leave our tithes and hope the God of High Finance smiles upon us.

Banking is actually pretty simple. Bankers go out into the community to borrow money from people with more money than debt at a low interest rate, repackage it, mark it up, and sell it to people with more debt than money. They pocket the difference (aka "spread"), pay their bills, and call the remainder profit. That's it. That is what they do.

So, if it is so easy, why are they in such trouble? Greed + lack of vision = bankruptcy.

Let's look at another example that we can understand without having to break out our Banking Rosetta Stone.

Back in the early days of "Operation Enduring Bubble," we had lots of speculative playthings. Yes, housing was moving right along, but the real action was in esoteric tech and Internet stocks, Pokemon cards, and Beanie Babies. Americans were simply enamoured with colored socks that were half filled with plastic beads and given a cute name. With the advent of eBay, we had people that made a living buying Beanie Babies at a high price, marking them up, and selling them to a love-starved population at an even higher price.

One such such enterprise that consulted with The Institute For Economic Reality was named "DRECK's: Purveyors of fine American schlock." Dreck's came to the IER with quite a story, and they have agreed to share their story so others don't make the same mistake, or at least if they do, they will feel really bad about it.

Dreck's started out on a limited budget and had a sales volume of $1000/yr in Beanie Babies. They would buy about $800 worth of BBs and sell them for $1000, netting themselves a sweet 25% profit. Then, as the Beanie Baby craze hit its stride, the owner of Dreck's got a bright idea. He could borrow money, expand his business, and really rake in the dough. The interest rate was fixed, Beanies were cute and would "always go up" in price, so this was a "no lose" situation. In fact, the only way to lose was not to be fully leveraged to the never ending Beanie Baby craze.

Dreck's went to a friend and borrowed $9000, combined it with his own $1000 and now had $10,000 worth of half-filled colored socks in his mother's basement. Dreck's friend, the lender of the $9000, made the loan without collateral, as he trusted Dreck's to make good on the loan.

The risk paid off, and paid off big. Beanies were up 30% in that period, which brought the entire gross sales amount to $13,000. Dreck's paid back the $9000, plus $50 in interest, got his original $1000 back, and still had $2950 left over. His return on investment (ROI) was 295%!

Shazzam!

Now, Dreck's was a real business. The owner went out and took his sweetie to a monster truck rally, and got a lift kit for his Toyota 4x4. He also bought shares in Amazon.com in late 1999.

Dreck's did it again. He took $1000, and borrowed $19,000, because he calculated that he would get a 50% return on the sales, and he could then move out of his mother's basement and get real office space. He placed an order for $20,000 worth of adorable bean bags. The lender was happy with the previous investment, so he thought it would be prudent to extend the credit line.

Bubbles have a funny way of popping when the maximum damage will occur, and this would be no exception. Rather than appreciating 50%, the Beanies were now deflating 15%. Dreck's couldn't move his Beanies at the prices he used to justify the loan, and was afraid to put them on eBay at a lower price, for fear the lender would see and call his loan.

That $20,000 order now had a market value of $17,000 and the trend was for it to continue to decline even more.

Dreck's original $1000 was gone, and $2000 of the lender's money was also gone. This is where it gets bad. Dreck's decided to pay the interest and "roll" his loan. He cooked up some false financial statements stating that his Beanie Baby inventory was worth $25,000, rather than the $30,000 he had anticipated, but he was still solvent at $25,000. The lender didn't think otherwise. After all, the lender trusted Dreck's.

The petty cash at Dreck's was drained to pay the $100 interest payment and then the next thing was to find new investors to keep the money coming. Occasionally, some Beanies would be sold to fund the interest payment, but they would be done discreetly, as not to alert the lenders to the crashing market.

No other investors could be found, so the owner of Dreck's hit up his mom for a loan, and she blithely obliged the request.

Eventually, the lender called up Dreck's and asked about the market for Beanie Babies. Dreck's was in debt to his mother, was behind in his UPS bills, and still had a mountain of half-stuffed socks that he couldn't move. He needed to wait until the market recovered, or he was ruined. If the existing inventory was marked-to-market, he would be instantly out of business, and so would his lender, as he couldn't take a 10% hit.

They all agreed that they would lie and say that the Beanies were priced high enough to keep them from being shut down, and hopefully, they would attract other lenders to extract their money from this brier patch.

The other lenders asked to see their books, and when Dreck's said their Beanies were at the theoretical value, the lenders looked at the market and decided that Dreck's could not be trusted, so they refused to invest.

Every Beanie Baby that was sold went to pay off the loan, and Dreck's owner realized that he could never sell enough to get out from under the debt. His stake was completely gone. What money he had to operate came from his mother that was taking Beanies as collateral against the money she loaned.

Now, the mother's rainy day money is gone, and all she has is worthless Beanie Babies. The hair salon doesn't take Beanies as payment, nor does the piano teacher or soccer coach.

No matter what happens, Dreck's can't recover his money. His investors are also in trouble, as their loan was unsecured. Nobody else wants to invest, because they don't trust the numbers that Dreck's uses. Holding the assets won't help, unless another frenzy develops that takes prices higher than what they were before, but with all the Beanies on the market, coupled with the reluctance for people to speculate in bean bags, the price outlook is grim.

Meanwhile, interest payments and overhead need to be paid.

This is why the banks can't just "wait it out." Their leverage killed them, and by lying about their assets, they have guaranteed they will not get the funding to continue. If Dreck's had marked their inventory to market, they would have been bankrupted, but their Beanies would have been sold to "Second Hand Sam's" at auction, and Sam would have marked his new assets at market, gone out for a loan, and sold them for a profit. The lenders would have been paid back with interest, and the cycle would repeat. The lenders are not afraid of Sam, as they know his assets are marked at a true value. Sam cycles loan after loan, and moves Hula Hoops, Tickle Me Elmo, Pet Rocks, Rubik's Cubes, Pokemon, Beanie Babies, and parachute pants at market prices.

The denial is killing us. Lying is for poker, not for banking. This is a multi-trillion dollar bluff that will be called.

Inslee Wins Immunity!

On Friday, October 3, 2008, America was sold out to foreign bankers by the United States House of Representatives in a 263-171 vote.

There were few bright spots in this disaster, but among the brightest for people in North Kitsap, Bainbridge, Shoreline, Kirkland and Edmonds was that our Congressional Representative, Jay Inslee, kept the faith with his district and voted "NO" on both occasions. As I had pointed out in an earlier posting, Inslee displayed incredible courage as he went against the tide of the House, his party, and the Banking Lobby. For this, we should be very proud.

Also included in the Clearcut Bainbridge "Roll of Honor" are Congressmen Dave Reichert (Bellevue), Doc Hastings (Yakima/Tri Cities), and Cathy McMorris Rodgers (Spokane). Senator Maria Cantwell also voted against this act of treason in the Senate vote on Wednesday. Seattle Representative, Jim McDermott, voted against the bill on Friday largely on the tax provisions, but voted for it on Monday.

It is not the purpose of Clearcut Bainbridge to engage in partisan politics, but when someone displays unusual courage to do the honorable thing and not sell out his fellow citizens to foreign bankers (or even domestic bankers), I believe recognition is in order.

I make no apologies for being a conservative that has voted Republican my entire adult life*. This vote does not change that.

As for the other four unmentionables that voted to put our tail between our legs and lick the boots of foreign bankers, I would encourage everyone in those districts (2nd, 3rd, 6th, and 9th) to vote for the challengers (Rick Bart - 2nd (Bellingham/Skagit), Michael Delavar - 3rd (Kelso/Vancouver), and Doug Cloud - 6th (Gig Harbor/Bremerton/Olympic Peninsula). The challenger for the 9th District (Federal Way/Tacoma/Puyallup), James Postma could not be reached for comment on the Bailout Bill. His website is not clear on the matter. He is likely a better alternative to the incumbent.

In the 6th District, Doug Cloud, is challenging "Congressman For Life" Norm Dicks. I have had two separate conversations with Cloud on the issue, and he is passionately against the Bailout and advocates the banking reforms that will create a healthy, stable, and functional banking system for American commerce. I highly encourage all in the 6th District (Western Tacoma/Bremerton/Olympic Peninsula) to help get the vote out for Cloud and send Dicks to a well deserved retirement.



* I did not vote for Bush in 2004. I wrote in a candidate that actually envisions greatness for America.

Paying For Chinese Subprime

This is getting to be worse than a bad drive-in horror movie. The villain not only refuses to die, but comes back in an even more hideous form. As if $700B for American financial toxic waste (yes, that's what it is called) wasn't enough, we now are going to pay for as much Chinese, Japanese, English, and Arabian toxic waste as they can shovel at us.

Don't believe me? Here is a copy of the bill that will be attached in the Senate on Wednesday. [Edit: The Senate Bill is here.]

Go to page 33 and read Section 112

SEC. 112. COORDINATION WITH FOREIGN AUTHORITIES AND CENTRAL BANKS.
The Secretary shall coordinate, as appropriate, with foreign financial authorities and central banks to work toward the establishment of similar programs by such authorities and central banks. To the extent that such foreign financial authorities or banks hold troubled assets as a result of extending financing to financial institutions that have failed or defaulted on such financing, such troubled assets qualify for purchase under section 101.

Is this a great country, or what? We are going to buy all the US toxic debt and as much toxic debt the world's bankers can throw at a US subsidiary of their bank. We are going to fund the Communists and terrorists with AAA rated, US taxpayer backed governement bonds.

I would like to thank Congressman Brad Sherman (D-San Bernardino) for getting this into the public dialogue. You can see the YOUTUBE of his time on CNBC where he discussed the matter.



Normally, foreign leaders don't take much interest in US spending legislation. I don't recall any foreign leader panting at the prospect of each of us getting a stimulus check, but they certainly have come out and supported this.

Now we know why. They want a huge slice of free government cheese.

If the Chinese sent their revenue collection agents to the US to shake you down for tens of thousands of dollars, we would shoot them where they stand. Thousands of Chinese tax agents would be lying in a pool of their own blood on American doorsteps. However, under this plan, US IRS agents would be shaking you down on behalf of the Chinese bankers that wrote bad loans on Chinese real estate.

You read that correctly.

THIS IS MADNESS! THIS HAS TO STOP AND STOP NOW!

The bought and paid for lapdogs in the US Senate will likely pass this because only 1/3 will have to face the voters this fall. Expect most of that 1/3 to vote against this and the bulk of the 2/3 that is not up for reelection to vote in favor.

Our battle is in the House - OUR HOUSE!

When the word gets out that Main Street America has to bailout Chinese high-finance, the US will be shaken to its core. The stock market is going to lose value, and it will happen with vigor once the rush has worn off of dim-bulb US equity investors. I fear for any politician that votes for this.

Bush and Paulson have sold us out. No matter how you slice this, it comes up rancid. The Administration was either asleep at the switch, intentionally lied to us, or holds us in such contempt as to enslave our children to Chinese bankers.

When asked by Congress if the Administration would accept a bill without the foreign toxic waste purchases, Paulson told the leaders of Congress that the bill would be vetoed if such a provision were not present.

WOW!

So, we now know what happened in the past few weeks. Paulson got a margin call from China and Dubai. They waited until the elections were drawing near and held out their money from the US markets. The credit market froze and China said that we have to take their bad bets, or they quit funding our deficit ($2B/day - $200/mo for every man, woman, child). China's stock market has lost 2/3 of its value in the past year, and they need money. They sold us cheap plastic crap, and we sold them toxic mortgage paper. They want a refund.

They did this during the Fannie/Freddie bailout. Paulson said that foreign interests needed this bailout, as the NON GUARANTEED Fannie/Freddie bonds started dropping in value. That's why THE US TAXPAYER had to make good on NON GUARANTEED bonds purchased by China. Now you know why these bailouts never include you.

Economic terrorism - and we are not only negotiating with these terrorists, but giving in to their every demand.

Why? So Wal-Mart wil continue to "roll back prices?"

This has the potential to get extremely ugly. Call your Congressman and call him now. Explain section 112 and how you will not stand for US taxpayers paying for Chinese and Arabian high-finance gambits gone bad. You stood firm against bailing out American bankers. Now is the time to tell them that you will not stand for this treasonous bill that is before the Congress.

This will not help you get a mortgage, auto loan, college loan, or even help your paycheck clear. This will make all of those things harder to obtain. You are being asked to float the bill for the entire world's spending orgy.

Oppose this. Pray for your country. Call for impeachment. Pull the plug on China while we still can.

The following is a more detailed explanation by a friend of mine. Please take the time to learn more.

A Way Out Of This Mess

The following is a letter that I have given to Inslee, Cantwell, and Murray. I have also put this to every member of the House Financial Services Committee and the Senate Banking Committee.

If you agree with this, please visit:

www.fedupusa.org

Please take this letter, put it under your name and send it to your representitives. I have been working with Inslee's staff in DC to get this into the hands of someone that can get this moving. If you would like to help, please do so. Call Inslee's office at 202-225-6311 and tell them you like the FedUpUSA.org proposal and want to see it implemented. It gives Congress a "way out" of the current mess that Paulson and Bernanke have trapped them.

If you are in Norm Dicks' district, I encourage you to press his office. He is one of the most powerful members of Congress and he can get things done.

Please leave a comment if you have any questions. Due to the serious nature of this matter, I will have to pass on my normal snarky tone. I hope you understand.



=========================================================

A Solution That Works

The Honorable Jay Inslee:

By now, you have been thoroughly deluged by angry phone calls and letters from your constituents. They do not wish to pay Wall Street bankers trillions of dollars of their hard earned money for putting our financial system at this level of peril. You should respect their wishes.

However, you can’t leave without doing “something,” and that “something” always seems to come with a hefty price tag and an uncomfortable level of trust given to those, who for the last 18 months, have told us not to panic and that all is well. There is a solution that costs the government nothing, eliminates “moral hazard,” and ensures we never have to do this again. Any variation of the current proposal lacks all these features.

The solution is to fix the problem, not paper it over.

For the past 13 months, every “crisis” in the banking sphere has descended from three basic flaws in the current regulatory structure:

- Over leverage. The failures of the Bear Stearns, Lehman Bros., Merrill Lynch and various hedge funds descend directly from their level of financial leverage. At the present levels of leverage, one mistake and you are dead. Back when these financial institutions were regulated to carry no more than 12:1 leverage, we didn’t have banks blowing up every 13 weeks.

- Unregulated derivatives. This is what caused the trillion dollar insurance company, AIG, to be taken under by the Treasury Department. Financial service providers made billions writing insurance policies that were unregulated and carried no regulatory oversight that ensured they would be paid in the event they were triggered. No other category of insurance policies is unregulated in this manner. Warren Buffet refers to these instruments as “financial weapons of mass destruction.” The notional value of these numbers in the tens of trillions.

- Fictional Accounting. This is the precise reason that “short sellers” have pounced on the various financial institutions. The current accounting allows banks to intentionally produce fraudulent financial statements, regarding the value of various assets they claim as part of their net worth. The short sellers understand that the value of these stocks are grossly under their current price and act accordingly. Banning short selling does not change the fact that these companies are priced well above their value. You NEVER see short sellers attempt this with healthy, truthful companies.

The solution is to pass a comprehensive regulatory reform bill that:

- Reduces leverage to safe levels. This needs to happen over the next two quarters. Company reports shall be required to show that financial leverage is within statutory limitations, or enforcement action will follow.

- Put Credit Default Swaps on a regulated exchange. This ensures the insured party can be paid and prevents the nightmare scenario of a chain-reaction of defaults across the system. The equity options markets are a good example of how this needs to be structured. No company may be allowed to write these derivatives without the capital backing necessary for performance.

- End fictitious accounting practices. Every company must mark all of their assets to current market value on their quarterly and annual statements. Each asset must have its own accounting as to its value. This way, full transparency is brought to the marketplace and investors know exactly what they are buying. This will end the practice of hiding unhealthy companies within the larger herd of structurally sound companies, as is the current practice in the US banking system. Capital will immediately flow to the healthy companies and the assets of the unhealthy companies will be taken into the market and deployed to their most efficient use. The current practice only serves to cast a pall of doubt over the entire sector until it fails en masse.

Note that these proposals end the current “crisis” within two quarters. These proposals do not cost the taxpayer one dime. They fix the problem, and most importantly, they eliminate the enormous moral hazard that is present in any derivation of the current Paulson/Bernanke proposal. They establish the framework for building a healthy, stable, and useful financial system in the United States. “Bailouts” and dark-of-night enforcement changes are obviated.

The Congress retains all of its financial oversight and regulatory powers. The Administration is consigned to its enforcement role, as the Founders had set forth.

For more information, please go to:

www.FedUpUSA.org

We are a non-partisan organization dedicated to banking transparency and regulatory reform. Our proposal is simple, effective, permanent, and cost neutral. We are not coming to you at the last minute with some hideous scenario that we denied for 18 months.

We are giving you a way out of the present mess in a manner that the taxpayers you have been hearing on your telephones will cheer.

Please do the right thing. Do not give our money to Wall Street. Force them to take their marks like the rest of America.

Very truly yours,

Enabling Act of 2008: The Rise of The Fourth Reich

The following is a letter that I have sent to Senators Murray and Cantwell, as well as Congressman Inslee. Please feel free to copy this and send it to anyone you believe will benefit from the content.

Enabling Act of 2008

Dear Member of Congress:

You are being asked to assign unprecedented powers to an unelected, and unaccountable former Wall Street banker, under the guise of bringing stability to the markets and solvency to our banking system. With one hastily thrown together vote, you are going to create the most powerful human being in world history – Henry Paulson.

This is being done for the purposes of fixing a “crisis” that has suddenly, in the last hour, been presented to Congressional leaders. This act would remove the constitutionally mandated powers of regulation of the money supply, and the value thereof, from Congress and give it to an unelected member of the President’s cabinet. According to the act, this person would be above judicial review, and be allowed a $700,000,000,000 revolving line of credit to print money on behalf of the United States government. That is more power than anyone has ever had – anyone. Caesar did not have this power.

This should sound eerily familiar.

In March of 1933, after the “crisis” of the Reichstag Fire, newly named Chancellor of Germany, Adolf Hitler, petitioned the German Reichstag to give him plenary powers over the affairs of German government. The Reichstag transferred its power, on an emergency basis, to the Cabinet of Germany for a period of four years, and this was called “The Enabling Act”. This was to deal with the perceived “crisis” of Communists within the German government, when the “crisis” was never fully substantiated. It is believed by most historians that the Reichstag Fire was a deliberate act to coax the Reichstag into giving up its power.

That history did not end well.

You are being goaded into giving Henry Paulson plenary powers over the economy and government spending, money supply, and value of that money. Those powers belong to you, held in trust for the citizens of the United States. Our Founders gave you those powers TO PREVENT THE VERY SCENARIO THAT SECRETARY PAULSON HAS PRESENTED TO YOU.

You are being manipulated.

For the past 13 months, Paulson, and Federal Reserve Chairman, Bernanke have repeatedly given public statements through the various media, and have testified to Congress on the soundess of our banking system. As that time has worn on, they have repeatedly come to Congress for various bailouts (Bear Stearns, AIG, Fannie/Freddie), as well as acted to install confidence through the manipulation of the Federal Reserve Monetary Policy, and announcing various liquidity programs to keep money in the banking system (TAF, TSLF). While they have been taking extraordinary measures to shore-up the banking system, they have always maintained that the system is sound and just needs a little time to get through a “soft spot,” or a “contained” problem (Subprime).

You now know that they were lying the entire time. There is no way to sugar coat this. They have been lying to you since March of 2007. They are lying now. This was plainly known to many in the professional and amateur investment community, recently smeared as “short sellers.” It turns out that the cynics were right all along.

Ask yourself, why didn’t they come to you for this unprecedented bailout last October, when Paulson attempted the same thing with various Wall Street banks? Surely, the problem was known last fall when Paulson attempted to create his “super SIV.”

Had he come to you at that time, there would have been at least 11 months to debate the issue, open it for public review, and deal with it while the stock market was trading at an all-time high. Why did he wait until the weekend before the Congressional recess for the bi-annual election cycle, and present the plan over a weekend where the public could not comment? Why did he have to wait until the stock market teetered on collapse, and the credit markets were frozen solid?

He needs a “crisis” so you will not oppose him.

Ask yourself, why did the Senate Majority Leader and Speaker of the House, as late as September 16, attempt to leave the issue in Washington and head back to their districts, leaving the Administration to clean up the mess, then suddenly have a change of heart less than 36 hours later? What was said? Why are the details of the briefing given to Congressional leaders not available for public review? Why are you being asked to vote for something so hastily and without proper briefing or public review? Does Democracy flourish in the dark, or does tyranny and fraud?

We know the following:

-Paulson and Bernanke have lied for the duration of the credit crisis.
-Every bailout has been bigger, more frequent, and has resulted in a much bigger “crisis.”

Now, Paulson and Bernanke are telling you that they really are telling you the truth and this bailout will work.

You are being played.

They are framing the issue in terms of Congress voting to rescue the banks and the markets. Let me be clear on this point: YOU ARE NOT VOTING ON THE HEALTH OF THE BANKS OR THE MARKETS. YOU ARE DECIDING WHO GETS WHAT MONEY IS LEFT OVER AFTER THEY FAIL. The markets (equity and credit) are going to experience a large dislocation, or in the common lexicon, “a crash.” That is an absolute certainty. You are merely deciding if the US citizens are going to keep their money, or give it to Wall Street bankers. You are deciding if the US government is going to survive or collapse. Giving Paulson unlimited spending powers will ensure that the government collapses. That is a certainty.

Paulson and Bernanke need to be removed from office for malfeasance. For 18 months, the health of the banking system has been very suspect. They have known all along what is happening and have failed to act. Their actions have been limited to lying to Congress and the American people and manipulating the accounting to cover the insolvency of the US banking system.

You are being asked to abdicate. The American people want their Constitution and their government to survive. We will rebuild what Wall Street has destroyed, but we need to keep our money in order to do it.

Vote against this unprecedented power grab. History shows the folly of such endeavors.

Very truly yours,
//signed//