Ready to read the most cold-blooded rendition of what went on at the White House this past weekend when Pres. Bush held his "summit" to send the Paulson plan to Congress, and loot the US Treasury for about $1-trillion - the real cost of the bailout?
To grasp how much money that represents, the entire M1 money supply - that is, US dollars in circulation everywhere in the world; every cash drawer, every wallet, every penny jar of change - every single penny of US dollars - is about $1-trillion. So what we are talking about here is somehow manufacturing double the number of dollars that exist everywhere on Earth.
And we are talking about manufacturing them - literally - overnight.
How reliable is this number to do the job? Read this quote, and then decide if you should laugh - or cry:
"They had good reason for skepticism. On Tuesday, a Treasury Department press spokeswoman admitted the $700 billion figure was not based on any particular data point, adding with astonishing candor: 'We just wanted to choose a really large number.'"
OK folks, this is the type of planning going into this crisis from the people who got us into this crisis. Why do I not feel reassured knowing they are in charge?
And frankly, where in the world is my congressman, Jeff Miller? Have you heard from yours either?
Well, read it for yourself in this unedited article. Once again, the London Telegraph does the job; it's a "take no prisoners" fact-telling story that will put the quality of what you've read in the US news to shame.
This is must-reading for anyone who wants to be on the inside of this crisis. But keep the Valium handy when you do.
Kenneth
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US economy in crisis: How did it come to this?
America’s effort to see off a new depression unravelled last week. Washington correspondent Tim Shipman watched the bail-out talks descend into gridlock .
Unattributed to any one staffer
London Telegraph
Last Updated: 9:48PM BST 27 Sep 2008
When the two men who want to run the world’s most powerful nation took to the stage for the first presidential debate on Friday night, more than 60 million Americans tuned in. But not everyone in Washington was watching Barack Obama and John McCain.
In the White House, the men who currently hold the reins of power in America were on the phone to Capitol Hill, where grey-faced congressional aides were holding late-night meetings trying to thrash out the deal they hope can prevent meltdown in the world economy.
Asked whether he would be watching the debate, in which Mr Bush’s name was used as an insult, or the deadlocked negotiations, in which his standing is little better, one White House official said: “A bit of both – but I’d rather not watch either.”
It was a week that began with a financial crisis, perhaps the gravest in eight decades, and ended with a political crisis over the already infamous bail-out plan to invest $700 billion of public cash buying up the bad debts of failing banks.
Into this maelstrom stepped a president with little economic literacy and still less authority; a presidential candidate whose political judgment seemed as constant as the fluctuating stock market; and, at the heart of it all, a treasury secretary who ended the week literally on his knees, begging for deliverance from the vicissitudes of Washington politics.
At issue was nothing less than the fate of the world economy, the future of free market capitalism and the credibility of the most powerful nation on earth – perhaps even its status as lone global superpower.
This time last week, treasury secretary Henry “Hank” Paulson, a former chief executive of Goldman Sachs, was pretty pleased with himself. His plan, all three pages of it, had been welcomed across the political spectrum.
Roy Smith, a former colleague of Mr Paulson at Goldman Sachs and Professor of Finance and International Business at New York University, told The Sunday Telegraph: “He clearly emerged as the central leader in the administration. Normally, treasury secretaries don’t get that sort of latitude. He’s the principal government decision-maker on economic policy. Period.”
But Mr Paulson’s world quickly fell apart when the American public and Republican congressmen showed themselves unwilling to take dictation from a former Wall Street plutocrat.
Calls and emails to congressional offices on Monday and Tuesday ran 200-to-one against the plan. Polls showed that six out of ten voters could not understand why taxpayers should pay to save reckless Wall Street firms.
They had good reason for scepticism. On Tuesday, a Treasury Department press spokeswoman admitted the $700 billion figure was not based on any particular data point, adding with astonishing candour: “We just wanted to choose a really large number.”
Mr Paulson, unused to the ways of Washington, had failed to explain that his plan was necessary to prevent a credit freeze which would stall the flow of money through the arteries of the world economy, with consequences similar to those of stopping the flow of blood around the human body.
Prof Smith said: “They lost control of the media description of it. That magnified misunderstandings which have been fodder for a political system of demagoguery and posturing.”
He said Mr Paulson has had to undergo a lot of on-the-job learning: “He’s also had to learn that, in the political context in Washington, CEOs are often emasculated quite quickly.”
It was not just the public that did not understand the rescue plan, nor why it was necessary. When Mr Paulson met with congressmen and senators on Tuesday and Wednesday, he found that many lawmakers were similarly clueless.
An aide to a senior Democratic senator said: “It might as well be in Arapahoe for most of them. Paulson had to spell it out like he was talking to a bunch of first-graders.”
In these impromptu lessons, Mr Paulson found Left-wingers scandalised by help for rapacious capitalists sitting side-by-side with Right-wingers who saw in his plan a socialist scheme to tamper with their precious markets.
In closed-door meetings with senior Democrats, Mr Paulson accepted compromises (limits on executive pay at the banks needing help, and more support for struggling mortgage holders) that allowed the House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid to line up their troops in support of the plan. The White House soon won over Senate Republicans, too. But when the 199 House Republicans gathered, just four raised their hands to back Paulson’s proposals.
And more was needed to sell the deal to the nation. Step forward George Bush, whose political capital has long been deep in the red. His televised address on Wednesday night laid out a vision of plummeting house prices and pension funds. “Our entire economy is in danger,” he said.
Steve Clemons, a senior fellow at the New America Foundation think tank, accused Mr Bush of pushing the “fear” button: “He said the clock was ticking. This seems like a bad episode of 24.”
In the panelled splendour of the Capital Grille, a favoured haunt of the political smart set, a former White House speechwriter reflected the view that the presidents doom-mongering could actually make things worse: “If we didn’t need a bail-out before that, we do now.”
But in private talks on Capitol Hill, the Bush administration was pushing an even bleaker picture. A Republican familiar with the warnings issued by the Treasury Department away from the cameras, said the New York stock market should brace for a collapse of up to a third of its value if the deal failed to materialise. “The economy is dropping into the john,” he said. “We could see falls of 3,000 or 4,000 points on the Dow in just a couple of days.
“What’s being put around behind the scenes is that we’re looking at Thirties stuff. We’re looking at catastrophe; huge, amazing catastrophe. It’s one of those things that no one can quite grasp or understand. Everybody is extraordinarily scared.”
This harum-scarum offensive seemed to bear fruit and the tentative basis of a deal was hammered out by Thursday lunchtime. But by then, John McCain had made another of the political gambles for which he is becoming known. The Republican presidential candidate, whose unsure performance on the economy (declaring the fundamentals sound just as the stock market plunged, opposing the bail-out of insurance giant AIG the day before supporting it) had seen his poll numbers decline, declared that he was suspending his campaign to return to Washington and help finalise the deal. From a man known as Senator Hothead for his profanity-laced negotiating style, this was like a bull announcing to the inhabitants of the china shop his intention to do a little browsing.
Mr McCain succeeded in persuading Mr Bush to invite the principal players, and his Democratic rival, Barack Obama, to a Thursday-afternoon summit in the White House. His move also emboldened the House Republicans.
What happened next will go down as the biggest White House drama since The West Wing left our screens two years ago. President Bush lost control as tempers flared in the cabinet room. John Boehner, the Republican House minority leader, torpedoed the Paulson plan, offering up an alternative proposal that would force banks to buy insurance for their failing securities instead of giving them public money.
Mr Paulson explained that the idea was unworkable and declared: “We can’t start over.” But the rebels were not done. Republican Senator Richard Selby then produced a five-page list of 192 economists and business school professors who oppose the plan. That was a red rag to Mr Bush, who snapped back: “I don’t care what somebody on some college campus says,” saying he would trust Mr Paulson instead.
The President then summarised the dangers of inaction to the world economy in characteristically blunt terms: “If money isn’t loosened, this sucker could go down.”
With the deal on life-support, Mr Paulson then chased after furious Democrats, dropping to his knees, only half-jokingly, to beg Nancy Pelosi not to blow up the legislation. Through it all, Mr McCain, who knew Mr Boehner’s plans in advance, far from helping to engineer a compromise, sat mute.
Moderate Republicans were furious at Boehner’s band of brothers. Jim Nuzzo, a White House staffer under the first President Bush, branded the House Republicans “immature brats who have put ideology before country”.
“We’re at a point in our nation’s history when they need to grow up. If McCain can’t get the House Republican leadership to give him 100 votes to do something that the President wants, the treasury secretary wants, the Fed chairman wants, then he doesn’t have a set of nuts that’s worth a damn.”
If he can deliver them over the next 24 hours, it may yet boost Mr McCain’s credibility. Those 100 votes are critical political cover for the Democrats who fear they might lose 20 to 30 congressional seats in November if they alone pushed through an unpopular bill.
The Democratic Senate aide, steeped in seven years of military metaphors from the war on terror, said: “We were prepared to strap on the suicide bomb vests and pull the pins together. But we’re not committing suicide if the Republicans won’t do the same. It’s mutually assured destruction, or nothing.”
In the long run, the true significance of the opposition of the House Republicans may not be the narrow politicking but their stance on the broader historic issue of whether America, a country built on capitalism, will have to accept more government intervention in the market.
The Republican strategist Alex Castellanos, most recently an adviser to Mitt Romney, warned that this would mean accepting aggressively socialistic measures that would leave conservatives unable to explain why the same paternal state we called upon to rescue Wall Street can’t bend down a little lower to provide government-paid health care, energy subsidies and every imaginable social service.
Senior Democratic congressman Barney Frank admitted that things are changing. “This is a very serious policy step that the American government is taking. It’s a fundamental shift in the relationship between the public sector and the private sector.”
The week-long quest for a deal deemed vital and urgent left many cursing Washington’s collective failure of leadership. It was not just smug Europeans, like the German finance minister Peer Steinbrück, who saw last week as the moment America compromised its status as an economic superpower.
Pat Buchanan, the former Republican presidential candidate, claimed that the crash of 2008 will usher in a more sober and much diminished America, branding the credit crisis “a Katrina-like failure of government, of our political class, and of democracy itself. The party’s over. What we are witnessing today is how empires end.”
The days of gridlock raise questions about whether the prize that Mr Obama and Mr McCain are fighting over will be worth the candle come January. In the debate, both candidates acknowledged that the financial belt-tightening will force them to modify their economic plans.
Tom Daschle, a likely chief of staff in an Obama White House, predicted the next president would have, at best, a 50-50 chance of winning a second term because of the looming economic downturn.
The rows on Capitol Hill exposed a continuing cultural divide between New York capitalists and Washington bureaucrats. Slate magazine’s Timothy Noah pointed out that the expansion of government after the Great Depression meant that Washington became Wall Street’s principal rival when it came to running the world. Which wielded more power: the financial markets or the government? If last week is anything to go by, neither of them looks capable of running a corner shop, let alone a world.
As the Senate aide put it after China used a week of American political and economic decline to demonstrate its emergence as a rival power: “They’ve just put men in space. We can’t get 400 congressmen to agree that preventing another depression is a good idea.”
Copyright 2008 the London Telegraph - Used with permission.
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