It's Fear Itself....

From Bear Stearns to Citi Group our deer-caught-in-the-headlights Treasury Secretary Henry Paulson has been the Bush administration's frantic bailout fireman.... hosing down failing financial institutions before they burst into flames.... they hope.

Fireman Paulson answered the four-alarm only after Wall Street and financial institutions had partied during the Bush administration's unregulated anything-goes trickle-down orgy like Shriners at a Vegas convention.... and the whole country is suffering the hangover.

OK... that's the problem. So far, throwing money at the problem hasn't helped in any noticeable way. People are still losing their homes and jobs, the markets are still on life support and credit lines are still constipated.

What to do? Robert Samuelson opines today in "A 'Wealth Effect' In Reverse." (WaPo) "The 'wealth effect' refers to the tendency of people to adjust their spending as their wealth... concentrated heavily in housing and stocks... changes."

Samuelson points out, "... now the wealth effect is reversing. As stock and home values drop, Americans are scrambling to increase savings and curb spending. The plausible math is daunting. Since September 2007, Americans' personal wealth has dropped about $9 trillion, says economist Nigel Gault of IHS Global Insight."

The reversal in fortunes has fostered more than long-overdue consumer prudence, it has fueled fear.... and fear is the sand in the cogs of the battered economy as it grinds to a near halt.

Overcoming fear is vital if we are to reverse this self-perpetuating plummet.... fear keeps consumers and investors immobilized in the meltdown headlights, unable.... or unwilling.... to take the steps necessary to avoid the collision.

As Samuelson says, "Americans are less upset by hardships they've experienced than by those they imagine."

It'll take more than bailout money to re-energize the economy.... in the coming months it will take nerves of steel and leaders who can instill confidence faster than a speeding bullet.

McCain's Economic-Deathbed Conversion

A decade ago, John McCain embraced the bill proposed by his campaign finance guru, then-Sen. Phil Gramm (R-TX), to successfully push through the GOP-majority Senate the landmark legislation removing the walls between banking, investment and insurance companies.

That bill helped pave the way for companies such as Bear Stearns, Lehman and AIG to become behemoths laden with bad loans and investments. As if that wasn't enough of a boondoggle for his corporate buddies, McCain also continually pushed for less federal government regulation, telling the Wall Street Journal this March.... "I'm always for less regulation... I'd like to see a lot of the unnecessary government regulation eliminated."

But now, after the Lehman collapse and the stock market meltdown this week, he's singing a different tune... "McCain Embraces Regulation After Many Years of Opposition." (WaPo)

Yesterday, Barack Obama mocked "what he called McCain's 'newfound support for regulation' and accused his rival of backing 'a broken system in Washington that is breaking the American economy.'

"In a speech in Golden, Colo., Obama blamed the economic crisis on an 'economic philosophy' that he said McCain and President Bush supported blindly."

" 'John McCain has spent decades in Washington supporting financial institutions instead of their customers,' he told a crowd of about 2,100 at the Colorado School of Mines. 'So let's be clear: What we've seen the last few days is nothing less than the final verdict on an economic philosophy that has completely failed.' "

The "trickle down" philosophy Bush "41" disdainfully labeled "voodoo economics," was fully embraced by his rebellious son Bush "43".... corporate taxes were decreased and enticements given for shipping jobs overseas, regulatory oversights were relaxed or abolished and Ponzi-frenzied oligarchs were given free reign to pillage the populace. Sub-prime was the new platinum parachute to financial riches.... for the few.

While obscene profits trickled up, the financial strength of the country trickled away.

Now, the Bush administration frantically bails with taxpayer money and borrowed hundreds of billions to keep the economy afloat, while the GOP presidential candidate of the party that foisted these ruinous policies on the country.... the-fundamentals-of-our-economy-are-strong McSame.... has found campaign-season economic religion.

Or so he says.

But, as we have seen these past months, McCain's Straight Talk Express has maxed it's credit and is now running on the fumes of distortion and double-talk.

November!

Lehman Trickles Down and Out

Lehman Brothers has filed for bankruptcy becoming the largest financial firm to fail in the credit crisis.... a crisis fueled by shoddy sub-prime lending practices.... producing "Massive Shifts on Wall Street" (WaPo) .... and a domino effect globally as "World Stock Markets Sink.." on the news. (WaPo)

We now know the reality of the Bush/McSame "trickle down" economy where corporations rule.

It's our savings and stock portfolios that have been trickling down and away as the Bush administration's unregulated house-of-cards economy implodes, while greedy fat cats in investment banks and brokerage houses reap obscene benefits from their risky business practices and then exit unscathed leaving stockholders and taxpayers holding the trickled-away bag.

Paul Krugman in his op-ed in The New York Times calls this trickle-down scam "Financial Russian Roulette."

In our new Russian Roulette economy, the old world of banking in which "institutions housed in big marble buildings accepted deposits and lent the money out to long-term clients, has largely vanished, replaced by what is widely called the 'shadow banking system.'"

The marbled-hall banks now play only a minor role in channeling funds, "most of the business of finance is carried out through complex deals arranged by 'nondepository' institutions, institutions like the late lamented Bear Stearns - and Lehman," Krugman explains.

While there were many warning signs.... like housing bankruptcies on a massive scale, and the bailout of investment bank Bear Stearns six months ago.... still the Bush administration didn't respond by putting in place a mechanism for orderly liquidation of troubled banks, or at the very least regulation of the shadow banking system. "If institutions need to be rescued like banks, they should be regulated like banks," Krugman reasons.

Instead, The Denier and McSame just keep double-talking, "the fundamentals of our economy are strong." After all, McSame wants the White House and The Denier wants his legacy... so don't expect any economic straight talk about the real effects of their corporate-loving trickle-down debacle.

November.

McCain's Free Ride

It's clear.... John McCain is getting a free ride from the media, maybe lulled by their chummy hops on his Straight Talk Express.

McCain has dodged his lobbyist ties to his bimbo eruption.... he's disarmed his misleading "safe" stroll around a Baghdad market while being guarded by the might of the U.S. military... he's silenced the fallout from his "bomb, bomb, bomb Iran" warbling.... he's stepped away from his 100 years in Iraq commitment.... he's tamped down his Mad Max persona....

He's downplayed his pandering to far-right hate purveyor Jerry Falwell and seeking the endorsement of Catholic-and-gay-bashing televangelist John Hagee.... he's expounded unchallenged on his recommendation for less "regulatory, accounting and tax impediments to raising capital" in the face of the Bear Stearns billions bailout even though he admittedly doesn't understand the economy....

And, he's excused for his who-is-who stumbles in Jordan, that a hovering Joe Lieberman whisperingly corrected, on Iran training their enemy al Qaeda.

Just imagine.... imagine if Barack Obama had made these fumbles. He would be history. Imagine if Hillary Clinton didn't know that Iran and al Qaeda are enemies..... she'd be out of the race. But McCain.... the news organizations like the cut of his jib. Never mind that he's not up to the job, he's a nice guy.

Haven't we heard this before? Remember during his presidential campaign when The Decider couldn't name world leaders. Ha, ha, ha, the press said. Isn't that cute. Just like they are treating a not-ready-for-prime-time McSame.

As Harold Meyerson points out today in "McCain on the Red Phone" if McCain becomes president we had better hope that Lieberman bunks with him so if that call comes in the middle of the night he can whisper in McCain's ear.

Meyerson makes the case that McCain made the Iran-al Qaeda mistake more than once, it "wasn't just a passing thought. It was a thought that had taken up residence in McCain's brain.... Whether it was a simple mistake, a neoconservative delusion or a habit of mind that lumps together all of America's enemies we cannot say. What we can say is that the idea of any or all of these options is profoundly disquieting.

"The very thought of a president who deliberately conflates or erroneously confuses our adversaries with each other is appalling, though not without precedent. We're mired in a war that has its roots in George W. Bush's both imagining and fabricating an alliance between Saddam Hussein and Osama bin Laden. Do we really want to perpetuate these habits of mind in the next administration?"

Meyerson points out that "McCain's meshugas didn't really get the attention it deserved.... he was fortunate that his descent into fantasy occurred in the same week as Barack Obama's reverend crisis and Wall Street's near-meltdown.

He got a pass from the media, Meyerson says, because his statement "ran so completely counter to his image as an expert on national security."

But just what is that expertise? Has anyone seriously assessed his beliefs? His neoconservative, war-first stance.... The Decider on steroids.

Meyerson bemoans.... "Hard to say what's more dangerous - McCain's approach to the economy or McCain's approach to the world. The thought of him answering the red phone at 3 a.m. fills me with foreboding. Hell, I don't want him answering the phone at 3 p.m."

"Ant" Morgan Bails "Grasshopper" Bear

Here's what the rescue of fifth-largest investment bank Bear Stearns amounts to.... a whistling-past-the-graveyard way of getting around banking regulations in order to receive emergency funding backed by the federal government without admitting that Bush's mindless, optimistic mantra about "the fundamentals of our economy".... are actually at Great Depression levels.

After all, The Decider asserted just today.... "The economy is going to be fine," as the dollar plunges, oil prices gush to all-time highs and financial markets teeter on the edge of the precipice.

Whistling.... singing, dancing..... Softshoe Georgie doesn't want the appearance of 1930s-type of last-hope moves to mar his trickle-down-fair-tale legacy. The next guy can clean up the mess.

Here's the deal, Bear was "sold" to commercial banking firm J.P. Morgan Chase at a jaw-dropping bargain of $270 million, which includes Bear's soaring Madison Avenue headquarters, which amounts to $2 per share.... Bear was at $170 a share just a year ago.

The Federal Reserve is providing the financing including "loans" of up to $30 billion or so to Morgan for Bear's "less-liquid assets".... thus allowing Bear access to the cash for an initial period of 28 days as Morgan borrows money from the Fed and relends to Bear.

You see, the Feds lend directly through its "discount window," usually only to commercial banks.... not investment firms. The Feds can work with commercial banks because they are subject to extensive federal supervision unlike investment firms.

However, a law passed in 1932 allows the Federal Reserve to lend outside of commercial banking during Great Depression-type emergencies. Such a move would signal we're on the verge of financial panic and that's the appearance the White House wants to avoid....

So.... the Feds are using commercial bank Morgan as a conduit to bailout Bear because Morgan has access to the Fed's discount window.... and technically the Feds still haven't lent directly to an investment bank and avoids the appearance of a financial earthquake.

A discount window loan to Bear.... which they don't have access to.... would have had to be secured by the highest-quality collateral and Bear's subprime mortgage problems along with the collapse last July of two of their mortgage-related hedge funds left them on the brink of immediate bankruptcy.

Morgan's CEO, Jamie Dimon, has over the last few years been focused intensely on cutting costs, improving technology and preparing the company for an economic downturn.... they emerged relatively unscathed from the subprime crisis.

Bear, on the other hand, liked to live on the edge....

"A throwback to a bygone era, Bear Stearns still operated as a cigar-chomping, suspender-wearing culture where taking risks was rewarded.... "Ace" Greenberg, Bear Stearn's chairman for more than 20 years and a championship bridge player, still regaled its partners over lengthy lunches about gambling with the firm's money in its wood-paneled dining room." (NYTimes)

So where does this leave investors?

The DOW opened down today, and "investors are taking a grim view of the prospects for other investment banks like Lehman Brothers and Merrill Lynch.... Managers of hedge funds and mutual funds say the problems at Bear confirmed their worst fears about the brokerages, that they have relied too much on leverage and have done a poor job managing the risks they took on during the boom." (NYTimes)

Yesterday, Morgan's senior management actually told the finance community that Bear Stearns will continue to live up to its business obligations, as its trading obligations will carry "the full faith and credit of J. P. Morgan." (NYTimes)

Feels like the twilight zone. Didn't that used to be the motto for the U. S. Treasury? Oh, that's right.... it is the U.S. Treasury (taxpayer money) guaranteeing the whole shebang.

Anyway you cut it.... regardless of our forked-tongue Treasure secretary Henry Paulson still saying the administration won't use taxpayer money to help resolve the crisis.... we're in taxpayer bailout country.... Bush-voodoo economics land.

But, the Bear resolution won't be the model for the Big Bailout to come. There aren't enough J.P. Morgans to go around.

Bush: A Laugh a Minute

This week was a beaut....

Tuesday, Admiral William J. Fallon, commander of American forces in the Middle East whose outspoken public statements on the wisdom of diplomacy in dealing with Iran put him at odds with the Bush administration, announced his early retirement.... the White House mood being "Here's your hat and coat, what's the hurry?"

Senator Harry Reid (D-NV), house majority leader, called Fallon's departure "yet another example that independence and the frank, open airing of experts' views are not welcome in this administration." (NYTimes)

The Decider is in no mood to listen to those who would counsel diplomacy, after all, war is beautiful. On Thursday Bush told U. S. military and civilian personnel in Afghanistan by videoconference... "I must say, I'm a little envious.... I think it would be a fantastic experience to be on the front lines of helping this young democracy succeed. It must be exciting for you... in some ways romantic, you know, confronting danger." (Slate)

Spoken by someone who never put himself in danger, except to play "hot planes" with his guard unit... when he showed up.

While uttering this jaw-dropping inanity, Bush was flanked by Defense Secretary Robert Gates who also didn't experience combat.... serving in the Air Force at an ICBM base.... and Vice President Dick Cheney whose numerous deferments enabled him to avoid the "romance" of serving in any capacity. These are the boys playing soldier with the lives of others.

The Decider has just been full of himself lately, singing and dancing on the morass he'll leave behind. At the Gridiron Club dinner, attended by Washington's journalistic and political disgraces, Bush serenaded them, to the tune of "Green Green Grass of Home"....

"That old White House is behind me.... I spend my days clearing brush, clear my head of all the fuss, like that big fuss you made over Harriet and Brownie. Down the lane I look and here comes Scooter, finally free of the prosecutor. It's good to touch the brown, brown grass of home.... Down the lane I look, Dick Cheney is strolling with documents he'd been withholding, it's good to touch the brown brown grass of home." (WaPo)

And, everyone laughed and had such a good time.... while Hurricane Katrina victims still struggle, Scooter Libby got away with outing an undercover CIA agent and obscuring the White House lies that led us to war in Iraq, and Cheney was allowed to engineer the gutting of checks and balances that are the bedrock of good governance, to say nothing of the rending of citizens rights under the Constitution. Funny stuff.

Had enough?.... oh, but there's more. After repeatedly telling us "the fundamentals of our economy are strong" as home prices were dropping, mortgage loan defaults spiraling and financial markets imploding, The Decider finally fessed up yesterday admitting that the economy "is going through a tough time." (NYTimes)

As he spoke, investment bank Bear Stearns was being rescued by the Federal Reserve Bank of New York and JP Morgan Chase because of crippling losses on mortgage-linked investments.

How bad is this "tough time".... as Balestra Capital hedge fund president James Melcher said: "If the Fed hadn't acted this morning and Bear did default on its obligations, then that could have triggered a very widespread panic and potentially a collapse of the financial system."

In reaction to the financial tsunami coming down on us all, stocks continued their steep tumble. A panicked Federal Reserve chairman, Ben Bernanke, warned of worse to come and unexpectedly cut interest rates by three-quarters of a percent.

But not to worry.... surveying what the financial havoc and ruin of The Decider's "cut taxes and spend" voodoo economic policies, his monstrously costly war, and the administration's "look the other way" abdication of oversight and regulatory restraints have wrought.... Bush boasted that the "fix" was already on the way, referring to the tax rebates scheduled to be mailed over the next few months.

That "fix" is really too silly and facile to even talk about. It's not even a finger in the crumbling financial dike.

When the country elected Frat House Bush they reasoned he would be more fun to have a beer with.... still having fun?