It's the Federal Reserve, stupid.

By Chuck Baldwin
February 10, 2009
NewsWithViews.com

According to Bloomberg News (Monday, February 9, 2009), "The stimulus package the U.S. Congress is completing would raise the government's commitment to solving the financial crisis to $9.7 trillion, enough to pay off more than 90 percent of the nation's home mortgages.

"The Federal Reserve, Treasury Department and Federal Deposit Insurance Corporation have lent or spent almost $3 trillion over the past two years and pledged up to $5.7 trillion more. The Senate is to vote this week on an economic-stimulus measure of at least $780 billion. It would need to be reconciled with an $819 billion plan the House approved last month.

"Only the stimulus bill to be approved this week, the $700 billion Troubled Asset Relief Program passed four months ago and $168 billion in tax cuts and rebates enacted in 2008 have been voted on by lawmakers. The remaining $8 trillion is in lending programs and guarantees, almost all under the Fed and FDIC. RECIPIENTS' NAMES HAVE NOT BEEN DISCLOSED. [Emphasis added]

"'We've seen money go out the back door of this government unlike any time in the history of our country,' Senator Byron Dorgan, a North Dakota Democrat, said on the Senate floor Feb. 3. 'Nobody knows what went out of the Federal Reserve Board, to whom and for what purpose. How much from the FDIC? How much from TARP? When? Why?'"

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U.S. Treasury delays bank bailout announcement

My take? They are out of "traditional" options. All options left are not without dire consequences down the line. 350 billion is a drop in the bucket compared to the capital needed to keep the banks solvent. And you know every cent will go to the banking sector...this talk of foreclosure mitigation is pure political theater, as it has been since day one.

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WASHINGTON (Reuters) - The Obama administration on Sunday pushed back until Tuesday the announcement of a keenly awaited bank rescue plan as it pressed lawmakers to settle their differences over a huge economic stimulus package.

"We're focussed on working with Congress to pass an economic recovery bill so we can create the jobs and make the investments necessary to get our economy moving again," Treasury Department spokesman Isaac Baker said.

Treasury Secretary Timothy Geithner will outline the bailout plan in a speech at 11 a.m. EST (4 p.m. British time) on Tuesday, the Treasury Department said.

The announcement of the bank rescue plan -- which will seek to shore up some of the biggest commercial banks in the United States -- had been due on Monday.

But the Senate is now expected to be focussed on that day on a massive economic stimulus ahead of a vote on Tuesday.

For that reason, Geithner had postponed release of the bank plan, Baker said in a statement.

The stimulus and the bank rescue plan are key parts of President Barack Obama's strategy for tackling the deepest financial crisis in the United States since the Great Depression.

Shares in major U.S. banks such as Bank of America and Citigroup have been volatile in recent weeks on speculation about the contents of the financial rescue plan.

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My response to CNBC's "call to action"

In response to this article:

http://www.cnbc.com/id/28756488

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Bob,

I appreciate your efforts to get folks to contact their banks about the bailout. However, I have a couple comments on your opinion on the TARP.

The bailout money was never meant to be loaned out. Paulson used bait and switch tactics and fear mongering to get it passed through Congress, even going as far as to threaten martial law if the bill was not passed. Once he got the largess, it was off to the races for him. Do you think he was stupid enough to "overlook" the part about banks being required to account for it? Of course not. Do you think it was coincidence that he scrapped the part about helping homeowners in the last moment, unbeknownst to Congress? Of course not. Paulson knew exactly what he was doing. There were even reports that Paulson encouraged banks to buy smaller banks with the TARP money. In the end, this is just a perpetual power grab for the banks (who control the government), a grand opportunity for consolidation of bank power, thus increasing exponentially their power over all of us. Lets not forget that Paulson was a former CEO of Goldman Sachs. Just about every power player in the Treasury or Federal Reserve is a former Wall Street tycoon. Lets not be naive about this.

Lets say that the money was given to the banks and it was loaned out to consumers. What good would that do? This country is swimming in debt, the average person is scared to death right now because they are losing their job, their home, and they have a mountain of debt riding on their shoulders. How can the solution to this problem be MORE debt? How can any logical person come to that conclusion? Sure, 72% of the economy is based on consumer spending, but that is the PROBLEM that needs to be corrected! We cannot continuously spend our way to phony growth, it just isn't sustainable. We need to get back to manufacturing things, exporting things, which creates REAL wealth, not some phony wealth created from the stroke of a keyboard.

Another scenario: what if consumers don't want any more debt via mortgages, loans, and credit card debt? Do our powers that be ever think of that? People are waking up to the fact that the banks are no good; credit card companies are mere loan sharks in the purest form. Companies that charge 30% interest rates and still cannot survive need to fail and fail miserably. The citizens of this country are doing what they need to do: paying off their debts and saving their money. They cutting back on their purchases and taking care of their basic needs to repair THEIR balance sheets (without the help of a government bailout, mind you). This is what needs to happen in order for this country to heal, and it won't be easy. However, if the government thinks they can ride in on their white horse and pour endless amounts of money into a rabbit hole to prop up prices and failing institutions, we are in for a gauntlet of misery for decades to come.

A little logic goes a long way.

Geithner to be confirmed, proving once again that the Treasury Secretary is untouchable

Would you be hired as a police officer if you were caught with a meth lab? Would you be hired as a firefighter if you had past convictions as an arsonist? Would you be hired as a pilot if you had a history of crashing planes?

Of course not. These obvious statements of logic do not apply to the Federal government, however.

Don't you just love the political appointee system. Or is there a system at all? Apparently not, since it's been proven on several occasions that the backgrounds of appointees have no bearing at all on their confirmation, no matter how egregious. The peons are forced to resign, simply because their posts are too insignificant relative to the negative press on the administration (re: Bill Richardson). However, posts like Treasury Secretary will not be given up. Tim Geithner is likely to be confirmed as Treasury Secretary, despite failing to pay taxes in several years. I remind the casual visitor that this guy will be heading up the...wait for it...IRS. More than that, this guy is supposed to be a brainchild, a wizard, a financial genius, yet it is beyond the scope of his skillset to properly fill out his tax form, or pay up when the error was brought to his attention.

Dare us question the intentions of King Secretary, who has been instrumental in the looting of the American taxpayer with bank giveaways. According to our great media, "Geithner is likely to be confirmed because he was so instrumental in the process alongside Paulson." Fantastic, wouldn't that be a reason NOT to confirm him? Does Congress forget that the first 350 billion (along with trillions more that is not reported in our media) was a complete failure under Paulson and his brain trust Geithner? I guess so, because the guy will be confirmed no matter what, and the looting will continue.

The perpetual debt death spiral, at the expense of the innocent, will continue as planned.

Shocker! These bailouts won't work either

The new bank bailouts are not likely to work because they are run by the same people who prolonged the economic agony by throwing money at weak companies rather than allowing them to fail and encouraging the strong ones, Marc Faber, the publisher of the Gloom, Doom and Boom Report, told CNBC Monday.

Britain threw its troubled banks another multi-billion pound lifeline Monday by allowing them to insure against steep losses and guaranteeing their debt, while an adviser for U.S. President Elect Barack Obama said the rest of the TART money will be used to clean out bad assets from the financial system.

"The financial crisis has occurred because of government interventions," Faber told "Squawk Box Europe."

"Specifically central banks, or specifically the US Fed, by keeping interest rates artificially low for too long, they created a huge leverage in the system. So the people who created the problem now are in charge to bail out the system and that's why I am very skeptical that it would work," he added.

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GMAC becomes bank, bailed out with TARP funds

To be PC, the word "bailout" has been replaced by the happier terms "rescue" and "lifeline."

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NEW YORK (CNNMoney.com) -- In yet another move to prop up the crumbling U.S. auto industry, the government announced Monday that it will pump $6 billion into GMAC Financial Services, a financing company critical to the survival of General Motors.

The rescue package has two parts. The Treasury Department is injecting $5 billion directly into GMAC in exchange for preferred equity shares that pay an 8% dividend. GMAC also is issuing warrants to Treasury in the form of preferred stock. If exercised, the warrants will pay a 9% dividend.

Also, the government will lend $1 billion to GM that the automaker will invest in its financing arm. GMAC needs the funding to convert to a bank holding company, a necessary step to receiving the bailout money.

The Federal Reserve said last week that it would approve GMAC's conversion to a bank holding company, subject to certain conditions.

The move deepens the federal government's bailout of the troubled auto industry. Less than two weeks ago, President Bush announced a $17.4 billion rescue package to prevent the collapses of General Motors and Chrysler LLC.

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The Bailout Surge

By Ron Paul
November 24, 2008

This week the bailout of the Big Three automakers was under heavy consideration in Congress’s lame duck session. I have always opposed government bailouts of private organizations. Back in 1979 Congress had hearings about bailing out Chrysler and I was on record pointing out that these types of policies are foolish and very damaging to the long term economic health of our country. They still are.

There was also renewed pressure this week to bailout homeowners and send another round of stimulus checks to “Main Street” to balance out all the handouts to big business. It seems that eventually the entire economy is going to be blanketed over with Federal Reserve notes. Most in Washington are completely oblivious as to why this model of money creation and spending is so dangerous.

We must remember that governments do not produce anything. Their only resources come from producers in the economy through such means as inflation and taxation. The government has an obligation to be good stewards of these resources. In bailing out failing companies, they are confiscating money from productive members of the economy and giving it to failing ones. By sustaining companies with obsolete or unsustainable business models, the government prevents their resources from being liquidated and made available to other companies that can put them to better, more productive use. An essential element of a healthy free market, is that both success and failure must be permitted to happen when they are earned. But instead with a bailout, the rewards are reversed – the proceeds from successful entities are given to failing ones. How this is supposed to be good for our economy is beyond me.

With each bailout we hear rhetoric that this is the mother of all bailouts. This will fix the problem once and for all, and that this is absolutely necessary to avert disaster. This sense of panic squeezes astonishing amounts of dollars out of reluctant but hopeful legislators, who hate the position they are being put in, but are relieved that it will be the last time. It is never the last time, and again and again we are faced with the same scenarios and the same fears. We are already in the bailout business for such a staggering amount that admitting it was wrong in the first place would be too embarrassing. So the commitment to this course of action is only irrationally escalated, in the hopes that somehow, someway eventually it will work and those in power won’t have to admit they were wrong.

It won’t work. It can’t work. We need to cut our losses and get back on course. There is too much at stake for too many people to continue down this road. The bailouts thus far to AIG, Bear Stearns, Fannie and Freddie, and TARP funds amount to around $1.5 trillion. Considering our GDP is $14 trillion, and our Federal budget is already $3 trillion, this additional amount will significantly eat into our future lifestyles. That amounts to an extra $5,000 that every person in the country needs to somehow produce just to keep up. It is obvious to most Americans that we need to reject corporate cronyism, and allow the natural regulations and incentives of the free market to pick the winners and losers in our economy, not the whims of bureaucrats and politicians.