News and Politics | September 20, 2008 | 37 comments

Understanding the $1,000,000,000,000,000,000.00 bail-out

source: http://www.huffingtonpost.com/zack-exley/understanding-the-trillio_b_127853.html

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In the past 24 hours, Henry Paulson effectively committed up to a trillion dollars of tax payer money to bail out bankers and investors, and locked in fiscal policies of his choosing for the next several years. To try to understand the full implications of this, I asked Max Fraad Wolff for an email interview. Max's work regularly appears in the Asia Times, The Prudent Bear and many other international outlets. His work can also been seen regularly on his site GlobalMacroScope.com. Based in NYC, he does contract research on international financial risks and opportunities while teaching in the New School University's Graduate Program in International Affairs. Max is an unorthodox economist--just the kind we need right now.

ZE: Wow. What just happened?

MFW: We just went from Free Fall to Free Lunch. It turns out free markets are the greatest system on earth, but only when they go up. Market discipline is for low income people and homeowners. Short selling must stop only when it laps up on Goldman's shores. Today, the government deploys hundreds of billions, maybe more than a thousand billion dollars to bail out banks and owners, insurers and traders of mortgage backed securities. Wave after wave of cash infusions didn't work, Thursday morning's $183 billion did not work. So here come new rules and whole lots more money. The government will insure money markets, the government will buy between $800 billion to $1.2 trillion in distressed securities to sure up balance sheets. If this had been done last week, then Lehman, AIG and Merrill would still be out there with ALL their employees. If it had been done in March, Bear Stearns would be with us. This financial run just got more expensive than Iraq. Where will the money come from? Who gains and who loses? Is this the largest economic intervention in at least several decades?

ZE: So let me make sure I understand this. Big investors made trillions in bad loans over the past couple decades. Everyone just realized it and now markets are flipping into turmoil. Treasury Secretary Paulson and other financial big wigs decided that without intervention, we'd get into a 1929 free fall. And so they stepped in and said, "Everyone can stop panicking, because we'll insure all your bad loans." Is that right?

MFW: Basically, yeah. The crash is 13 months old. The pain is real and it is really slamming into employees, home owners and the global economy. Many of us have been warning of this for years. Federal regulators have lied and done day-late, dollar-short failed interventions for 14 months. After another round of false promises, they last night gave in and finally decided to admit that the financial sector was leading us into a global recession. So we just pledged years of tax revenues upfront to buy bad mortgage-backed securities. We still don't know the all important details. At what price is the U.S. tax payer picking up the tab? We have been told "market prices" but, what does that mean? Not the market prices before this announcement. Those prices were killing firms and spreading massive losses throughout the world economy. We still don't have congressional approval either. I have no doubt those dead fish will float with the tide. Congress will back the action. Action is needed. We were sliding off the edge. It is just a question of which actions and who benefits.






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37 comments // Understanding the $1,000,000,000,000,000,000.00 bail-out

  • CreeOss
    • 0
      CreeOss  

    • Peaceful Tax Revolution.
      Who's with me.
      We all stop paying taxes, and then we don't have to support these bastards anymore.

    • 3 years ago
  • davidwayneosedach
    • 0
      davidwayneosedach  

    • Why do all of the people who 'speculated' in housing, won, and then used their equity like an atm card buying boats, and luxuries be bailed out?

      the money they blew is gone. And the boats are sitting in the driveway. They should pay for their largesse.

    • 3 years ago
  • PressCore
    • 0
      PressCore  

    • I won't pretend to know it all but aren't there 2 sets
      of tripple 0 place holders in the captioned dollar amount
      too many? I mean if you are talking $1 Trillion then that's
      (1) thousand,thousand,thousand,thousand dollars.Or
      $1,000,000,000,000.00, no?

    • 3 years ago
  • AveryMoore
    • 0
      AveryMoore  

    • Paratus,

      or is it Parrot-us?

      Bad news sport, yes, this bail out is wrong.

      So why did it happen and who put all the gears in motion to make it worse? The same Bush Administration that now wants another 700 million (minimum) of your money to write blank cheques for the same clowns.

      Talk about surrender monkeys! What happened to Survival of the Fittest, Paratus? But you'll vote for the same guys with the same ideas again, won't you?

      Wake up. With or without any "increase" this country IS broke and IN receivership. That is exactly what you are being told.

      Why don't you understand this?

      All this crap about Bush and McCain heroically trying to warn Congress? You actually think that Bush was powerless? You are that naive? Bush can start wars at whim, invade allies, bankrupt hostile regimes, execute baddies, but he was powerless to VETO the very legislation you say caused the debacle? You think that everybody - including John McVain - FORCED Bush to deregulate? Have you lost your wits?

      Bush\McCain. These are the ideological twins whose policies made it possible for massive default. They let it happen and are now covering up by trying to refloat a ship they have run against the rocks. It's kind of complicated now because there's another financial tsunami long overdue.

      You don't know about it. They do. That's why there is such a Panic. You are not meant to know about it. But if you read the financial press the mud drains away and you see what's happening.

      You keep reciting FOX Noise talking points like Obama is "lying" when he recites what every conservative financial analyst (with a brain) has said for years - deregulate financial industries and you're playing with a grenade. Ignore the grenade at your own peril.

    • 3 years ago
  • Paratus
    • 0
      Paratus  

    • This bail out is wrong. With the deficit we have + the increase we will see in future years, especially if Obama wins, this country will be broke and in receivership in short order.
      Both George Bush and John McCAin tried to warn Congress and the Senate in addition to attempting to pass reform of FAnnie and Freddie. The Democrats would have none of it. Now that the chickens have come home to roost and we have to pick up the tab. The greatest lie being told now is the lie from Obama that this is Bushs bault and McCain will continue it. Obama took FAnnie/Freddie lobby money second in amount only to Chris Dodd. He, along with others on the HIll ignored the problem which is now getting blamed on Bush and McCain.
      Obama is a liar and complicit in this happening.

    • 3 years ago
  • Robroy1
  • starr111
  • Robroy1
    • 0
      Robroy1  

    • Backed by bad home mortgages that have been forclosed upon because no one has the money to pay for them. Looks like we keep printing like we have been with no real backing. If our forefathers could only see us now.

    • 3 years ago
  • Robroy1
    • 0
      Robroy1  

    • Where is Phil Gramm anyhow? Just keep printing boys, its only money and its only America and its people they are selling down the tubes.

    • 3 years ago
  • mako2424
  • shadowtrekker
  • wiredbirds
  • Bwittany
  • LAHolly
  • Micaleth
    • 0
      Micaleth  
    • LAHolly:

      I'm in...

      They won't get a penny of my cash any longer.
      I decided that last year.
      I refuse to file and I have already adjusted my paperwork to reflect the max dependents.

      I owe ZERO DEBT, home is paid off, cars paid off, no credit cards, no bank.

      I am now almost totally detached.

      NOW if only others would do the same.

      Worst case, I defect to Canada and forget the USA...

    • 3 years ago
  • joshua2310
    • 0
      joshua2310  

    • What if everyone stopped paying their credit cards and mortgages at the same time? What could they do? Time to take some offensive action.

      The dollar isn't worth a shit anymore. I say we start trading in vegetables.

    • 3 years ago
  • mako2424
  • smice
  • kennymotown
  • argyle_kitten
  • WhiteNoise
  • WhiteNoise
  • curiously_strong
  • curiously_strong
    • 0
      curiously_strong  

    • we are going downhill very quickly, the people who caused it are being set free with millions of our tax dollars, and most of the population believe that they can save us?

      I am laughing at those people who voted for the Bush administration in the office twice, you reap what you sow.

    • 3 years ago
  • melikjay
    • 0
      melikjay  

    • Well, looks like once is all said and done, we are all screwed for a long time....I guess this is what is going to get rid of the last of the middle class, who are barely hanging on, we will have blown wide open, the gap between the rich and the poor, for once an for all. And of course now both idiots running for president are going to use this to get more votes. I genuinely feel ill.

    • 3 years ago
  • WhiteNoise
  • Conniepae
    • 0
      Conniepae  

    • How did they come up with a plan so fast? Knee jerk reaction, or strategery? Americans are being led to believe they are trying to save us? They are saving themselves. The haves and have mores.

      Its not so much a bail-out, its a jail-out, keeping the criminals from going to jail. We will pay, they will walk away with our money. Its an "Assault on Reason"!

    • 3 years ago
  • WhiteNoise
  • WhiteNoise
  • rebot
  • wiredbirds
  • WhiteNoise
    • 0
      WhiteNoise  

    • MAY I SUGGEST THAT THIS GUY NAILED IT...

      "The real owners are the big wealthy business interests that control things and make all the important decisions. Forget the politicians. The politicians are put there to give you the idea that you have freedom of choice. You don't. You have no choice. You have owners. They own you. They own and control the corporations. They've long since bought and paid for the Senate, the Congress, the state houses, the city halls, the judges. And they own all the big media companies so they control just about all the news and information you get to hear. They spend billions every year lobbying to get what they want. Well we know what they want. They want more for themselves and less for everyone else. They don't want a population of citizens capable of critical thinking. They don't want well informed, well educated people. That's against their interests. They want obedient workers." - George Carlin

    • 3 years ago
  • Mark701
    • 0
      Mark701  
    • WhiteNoise:

      When I think of the mega corporations relationship to the general public I can't help but think of that scene in "The Matrix" where Kenau Reeves wakes up in the real world and finds himself feeding the machine world through an umbilical cord that is siphoning off his bioelectric energy.

      Similarly we are living in a dream world created by huge financial companies and the US government where they are telling us everything is ok because they're watching out for Main Streets interest as they are siphoning our money to feed their excess. That's what each of us are to them, little sources of dollar bills. As in "The Matrix", as soon as we are unable to provide them with a source of money (think homeowners losing their homes) we are flushed.

      Well Ameirca, it's time to take that red pill and WAKE THE HELL UP!!!

    • 3 years ago
  • AveryMoore
    • 0
      AveryMoore  

    • How quickly the brave words collapse into bullshit.

      - Survival of the Fittest is the Law of the Jungle!
      - Only the STRONG must survive!
      - Every man [and his devoted blond spouse] for himself!
      - The weak are meat to feed the conquerers!
      - Down with the downtrodden and losers!

      Now finally informed that it is time to panic President Invisible turns to Wall Street and the plunderers to ask "What can we do to help Americans" and they tell him - "Bail Us Out! We haven't finished plundering!"

      Finding himself in precisely the same fix as FDR he acts - but it isn't the fittest or the poorest who get help - but the fattest and the most corrupted. Because these jokers are the Sampsons who can bring down the empire.

      As others have noted, if you're in command you don't ask the perps what they'd like for treats, and it's only if you're the jailed party do others dictate what you must do to please them

    • 3 years ago
  • Conniepae
    • 0
      Conniepae  

    • This was no accident! It happened on Republican watch. No accountability, no shame! Corporate Criminals get bailed out? We get to post their bail?

      America has the highest prison population. Many are non-violent drug users who have harmed no one. These guys have hurt us, our children and grandchildren and they get to go free? Why?

    • 3 years ago
  • WhiteNoise
    • 0
      WhiteNoise  

    • THIS A WELL PLANED ECONOMIC CRIME, JUST AS S&L, ENRON & COMPANY... THESE GUYS ARE NOT INCOMPETENT THEY ARE CROOKS !

      THEY ALL BELONG IN JAIL !

    • 3 years ago
  • pissedoffinarkansas
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