McCain: Santa is a Socialist

How did this socialist germ, the idea that wealthier people should pay higher taxes, creep into the American bloodstream? Through John McCain's hero, Theodore Roosevelt. He championed the idea that the rich should not only pay more money but a higher rate, arguing explicitly that it contradicted the spirit of socialism.

In “Wealth of Nations,” Adam Smith wrote: “The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.”

The U.S. financial crisis is a human rights issue Global Research
The U.S. government has been complicit in the emergence of the financial crisis. It deregulated the financial sector, failing to provide adequate protection for Americans against violations of their human rights by financial institutions. It failed to provide sprotection for Americans needing safe assets to achieve an adequate standard of living in their retirement, and good-quality affordable mortgages to purchase housing. The U.S. government allowed the financial sector to become dominated by speculation, creating an unstable house of cards that was bound to collapse. Financial institutions have now lost all confidence and trust in one another, and are failing to provide the credit required for businesses to produce and workers to be paid and houses to be bought and sold. Americans have been left unprotected against the loss of their businesses, homes and jobs; against the falling value of their savings, and homes; against the falling value of revenue from property taxes, leading directly to a decrease in the availability of resources for public education.

'Spreading the wealth' is nothing new to U.S.
But is it really socialism to talk of “spreading the wealth”?

Actually, it has been part of the American economic system since its founding.

In a letter to James Madison in 1785, for instance, Thomas Jefferson suggested that taxes could be used to reduce “the enormous inequality” between rich and poor. He wrote that one way of “silently lessening the inequality of property is to exempt all from taxation below a certain point, and to tax the higher portions of property in geometrical progression as they rise.”

Madison later spoke in favor of using laws to “reduce extreme wealth towards a state of mediocrity (meaning the middle) and raise extreme indigence towards a state of comfort.”

God forbid you ever had to walk a mile in their shoes,
Cause then you really might know what it's like to sing the blues.

The reality is increasing taxes on the upper tier promotes economic growth, because funds are reinvested rather than cashed out.

McCain Multilates Himself for Halloween

McCain trick or treats as the "Blame Obama Masochist Monster".

Biden: McCain needs Halloween costume for change
The Associated Press
Democratic vice presidential candidate Joe Biden said Friday that Republican John McCain would need a Halloween costume to convince voters that he would depart from the policies and divisive politics of President Bush. "I know Halloween is coming, but John McCain as the candidate of change? Whoa, come on," Biden said during an outdoor rally in the capital city's downtown. "John McCain and change? He needs a costume for that. Folks, the American people aren't going to buy this."

Fox VP: Hate crime hoax means McCain’s campaign is ‘over, forever linked to race-baiting.’ Think Progress
This incident could become a watershed event in the 11 days before the election.

If Ms. Todd’s allegations are proven accurate, some voters may revisit their support for Senator Obama, not because they are racists (with due respect to Rep. John Murtha), but because they suddenly feel they do not know enough about the Democratic nominee.

If the incident turns out to be a hoax, Senator McCain’s quest for the presidency is over, forever linked to race-baiting.

For Pittsburgh, a city that has done so much to shape American history over the centuries, another moment of truth is at hand.

Police Declare 'Mutilation' of McCain Campaign Worker a Hoax
Editor & Publisher
It started to appear overblown (Drudge downgraded it to smaller, black type) as the police noted that it seemed to be a robbery ($60) and she did not seek medical attention. But later press reports said she would visit a hospital, Sarah Palin and perhaps John McCain had called her, and Obama camp had condemned, although McCain/Obama angle to a story not yet confirmed.

"This afternoon, a Pittsburgh police commander told KDKA Investigator Marty Griffin that Todd confessed to making up the story. The commander added that Todd will face charges; but police have not commented on what those charges will be."

Happy Halloween :)

India Launches Moon Mission

World hails India's moon mission Sify India
The successful launch of India's maiden unmanned moon mission Chandrayaan-1 has catapulted the country into the league of a select group of nations which already have sojourn with the mystical satellite of Earth - the Moon.

India launches first unmanned moon mission AP
India launched its first mission to the moon Wednesday, rocketing a satellite up into the pale dawn sky in a two-year mission to redraw maps of the lunar surface.

Clapping and cheering scientists tracked the ascent on computer screens after they lost sight of Chandrayaan-1 from the Sriharikota space center in southern India. Chandrayaan means "Moon Craft" in ancient Sanskrit.

Days of the Black Swan

Ludic Fallacy Wiki
• It is impossible to be in possession of all the information.
• Very small unknown variations in the data could have a huge impact.
• Theories/models based on empirical data are flawed, as events that have not taken place before cannot be accounted for.

The Financial Meltdown: This Time Is Different Global Research
"The (economy's) primary functions are agriculture, manufacture, and transportation. Community life is impossible without them. They hold the world together....The great delusion is that one may change the foundation. The foundations of society are the men and means to grow things, to make things, and to carry things."

Real enterprise producing value. Tangible products. Not casino capitalism. Computerized gambling. The illusion of wealth. Disappearing once liquidity dries up. Or even now when it's abundant. With a keyboard click, or when investors fear an approaching economic storm.

"Neither the Treasury nor Congress is helping to resolve this problem." Newly issued debt won't re-inflate markets or stabilize the economy. Just the opposite. "As debt deflation eats into the domestic market for goods and services, corporate sales and earnings will shrink," and so will market valuations. The end result will be "the very bankruptcy that the bailout was supposed to prevent."

That prospect is nightmarish so here we are. America's economy is eroding. Government and Wall Street are orchestrating it. Maybe even willfully, and here's the legacy they're leaving. The nation "passing from democracy to oligarchy (and steering it is) a bipartisan financial kleptocracy" chuckling all the way to their offshore tax havens.

Fed Attempting To Prevent "Great Depression II" The Market Oracle
Here is the deal in even simpler terms. In order to prevent the "Great Depression II", the Fed and the Treasury have embarked on a series of measures similar in nature to those that caused the great depression.

The root cause of the great depression was the unsound lending patterns leading up to it. Those same unsound lending practices, now carried to the very limits of legality via Bernanke's alphabet soup of facilities, cannot possibly be the cure.

Another turning point, a fork stuck in the road
Time grabs you by the wrist, directs you where to go
So make the best of this test, and don't ask why
It's not a question, but a lesson learned in time

It's something unpredictable, but in the end it's right.
I hope you had the time of your life.

General Motors on Death Watch

GM Recovery Swaps Signal 73% Bond Losses on `Highway to Hell' Bloomberg
General Motors Corp.bondholders may lose as much as 73 percent in the event of a default by the world's biggest automaker, based on the price of contracts used to fix a recovery value for the securities.

The recovery swap rate on GM dropped to 26.5 percent, from 39.5 percent at the end of June, meaning investors expect to get only 26.5 cents on the dollar in an insolvency, CMA Datavision pricing models show. Investors are pricing in a lower recovery rate than the average of 40 percent in bankruptcies as capital is eroded by $69.8 billion of losses since 2004.

"GM is on the highway to hell, there is no signal there is a way out for them," said Jochen Felsenheimer, the Munich-based head of credit strategy at UniCredit SpA, Italy's biggest bank. "Recovery on GM might be significantly below 40 percent."

What If the U.S. Auto Makers Don’t Survive? Wall Street Journal
The Big Three could soon become the Big Two. Is even that too many?

The question of whether all three Detroit auto makers will survive is out there, based largely on the inability of the debt-laden companies to get access to funding. General Motors is desperate enough for cash to consider merging with Chrysler. On Oct. 6, Fitch downgraded Ford Motor and Ford Motor Credit to CCC, the lowest junk rating. Deutsche Bank’s Rod Lache wrote Sunday that the auto industry may survive because of federal bailouts and restructuring. But, he wrote, “based on our belief that at least two of the U.S. Big Three automakers could reach minimum cash levels within the next 12 months, we continue to assess the risks to our universe.”

GM-Chrysler: Obama, McCain advisers take no sides Reuters
An economic adviser to Republican candidate John McCain said any merger should be evaluated on the basis of its competitive implications.

Asked whether Sen. Obama would support government financing for GM to back the merger, his economic adviser, Austan Goolsbee, told Reuters that Obama supported the existing plan to guarantee $25 billion of low-interest loans for the auto industry but had not taken a position on a GM-Chrysler merger.

Rise Up to a New Economy

"To rise from error to truth is rare and beautiful" ~ Victor Hugo

Summer 2009: The US government defaults on its debt Leap2020
The sudden shock that will result from the US defaulting in summer 2009 is partly due to this decoupling of decision-making processes of the world’s largest economies with regard to the US. It is predictable and can be dampened if global players start to anticipate it. As a matter of fact, it is one of the topics developed in this 28th edition of the GEAB: LEAP/E2020 hopes that the September shock has “educated” the world’s political, economic and financial policy-makers and made them understand that it is easier to act by anticipation than in a panic. It would be a pity if Euroland, Asia and oil-producing countries, as well as US citizens of course, discover one morning of summer 2009 that, after a long-week-end or bank-holiday in the US, their US T-Bonds and Dollars are only worth 10 percent of their value because a new Dollar has just been imposed.

Retiring hedge fund manager: Idiots made me rich Raw Story
"Since Thomas Jefferson and Adam Smith passed, I would argue that there has been a dearth of worthy philosophers in this country," he wrote, "at least ones focused on improving government. Capitalism worked for two hundred years, but times change, and systems become corrupt...My suggestion is that this great man start and sponsor a forum for great minds to come together to create a new system of government that truly represents the common man’s interest, while at the same time creating rewards great enough to attract the best and brightest minds to serve in government roles without having to rely on corruption to further their interests or lifestyles. This forum could be similar to the one used to create the operating system, Linux, which competes with Microsoft’s near monopoly. I believe there is an answer, but for now the system is clearly broken."

This is the world we live in
And these are the names we're given
Stand up and let's start showing
Just where our lives are going to...

System Failure and the Need for Revolution RINF
The analysis that follows is framed by these core points:

1. There is an essential relationship between the vast enlargement of the financial sector in the U.S., and the general phenomenon of financialization, and the deepening globalization of capitalist production of the last 15 years. And central to this dynamic has been the relationship between U.S. imperialism and China.

2. Through the course of this growth and expansion, severe imbalances have built up between the financial system—and its expectation of future profits—and the accumulation of capital, that is, the structures and actual production and reinvestment of profit based on the exploitation of wage-labor.

3. A “dirty little secret” of this crisis is the enormous weight of militarization of the U.S. economy.

4. This crisis is a concentrated expression of the anarchy of capitalist production—the fact that production is not carried out according to any conscious, rational plan at the society-wide level, much less at the international level.

It's time to head back towards innovation and production,
this money flipping resource dependent service economy is dying.

Paulson Parody: US Treasury Bailout Commercial

NBR's Treasury Commercial: A different take on the bailout.

Banks Admit Bailout Won't Work Clusterstock
So much for that story. A few days ago, when Hank Paulson called the heads of the nine families to Washington and shoved cash down their throats, he announced that the banks would use this new taxpayer cash to lend. They won't, of course. They'll hoard it like a starving family who has just been given a grocery cart full of food.

And after a few days of silence, even the banks are finally admitting that. So it's back to the drawing board for Paulson & Co.

Crisis may make 1929 look a 'walk in the park' Telegraph UK
As the credit paralysis stretches through its fifth month, a chorus of economists has begun to warn that the world's central banks are fighting the wrong war, and perhaps risk a policy error of epochal proportions.

"Liquidity doesn't do anything in this situation," says Anna Schwartz, the doyenne of US monetarism and life-time student (with Milton Friedman) of the Great Depression.

"It cannot deal with the underlying fear that lots of firms are going bankrupt. The banks and the hedge funds have not fully acknowledged who is in trouble. That is the critical issue," she adds.

Lenders are hoarding the cash, shunning peers as if all were sub-prime lepers. Spreads on three-month Euribor and Libor - the interbank rates used to price contracts and Club Med mortgages - are stuck at 80 basis points even after the latest blitz. The monetary screw has tightened by default.

Paulson: Boom then Bust

Welcome to the boomtown...

US Investing $250 Billion in Banks New York Times
The Treasury Department, in its boldest move yet, is expected to announce a plan on Tuesday to invest up to $250 billion in banks, according to officials. The United States is also expected to guarantee new debt issued by banks for three years — a measure meant to encourage the banks to resume lending to one another and to customers, officials said.

Stocks Soar on Wall Street as Markets Bounce Back from Worst Rout in 20 Years VOA
The Dow Jones Industrial Average Monday registered its biggest daily point gain ever, gaining 936 points or 11 percent. The Bush administration is expected to unveil a plan to spend up to $250 billion buying stock in private banks so that they can raise money and resume normal lending. Government and industry sources say President Bush will announce the plan at the White House Tuesday. VOA's Barry Wood reports that Wall Street's powerful rally followed new commitments of public money to unfreeze credit markets.

Nikkei bounces back to end up a record 14.2%
Japanese stocks soared Tuesday, rebounding from last week's multi-year lows, with the benchmark Nikkei 225 Average climbing a record 14.2% on a broad-based rally after U.S. indexes posted a double-digit surge overnight.

Other Asian markets jumped as well, as governments around the world unveiled plans worth hundreds of billions of dollars to rescue banks as part of their efforts to find a solution to a financial crisis that has weighed on global markets for more than a year.

Why the Bailout Scam Is More Likely to Fail than to Succeed Global Research
The first major problem is that the current financial disaster is not really a liquidity problem as it is repeatedly portrayed to be. It is a problem of faith and trust, or lack thereof, which in turn stems from the disproportionately large amount of junk assets or mortgages relative to real assets. It is true that lending and credit expansion has almost come to a halt and, in this sense, there is a serious liquidity crisis. But this illiquidity is not really due to a lack of good money or real assets in the system. It is rather because owners of such valuable assets are unwilling to lend their precious possessions to owners of troubled assets, or worthless papers.

The second major problem with the bailout scheme is that it is simply unfeasible and ineffectual because there is just not enough good money to redeem all the bad money that has ballooned or bubbled to a multiple of the good money and/or real assets.

The third major flaw of the bailout plan is that, as mentioned earlier, it does not address the real problem: the problem of rescuing the financially-distressed homeowners. As Dr. Paul Craig Roberts points out, “the Paulson bailout does not address the core problem. It only addresses the problem for the financial institutions that hold the troubled assets. Under the bailout plan, the troubled assets move from the banks' books to the Treasury's. But the underlying problem--the continuing diminishment of mortgage and home values--remains and continues to worsen.”

And this brings us to the discussion of the fourth major problem of the Paulson/Bernanke bailout scam: lack of any economic stimulus plan, which is badly needed for economic revival. While government substitution for predatory lenders and the resulting institution of realistic or devalued mortgage installments will certainly lighten the financial burdens of the economically-pressed, it will not relieve them from the need to earn an income and make a decent living. Nor would it (by itself) provide the badly needed purchasing power or necessary demand to stimulate the economy.

And this brings us to the fifth major problem of the Paulson/Bernanke bail out scheme: absence of any mention, let alone change, of our warped or lop-sided fiscal policies and priorities.

We'll be watching you Paulson and your little dog Bernanke too.

Mothership Lands Today: Exclusive photos

Today is the day when an alien spacecraft appears and remains visible for the next three days, according to Australia's Blossom Goodchild.

The aliens are coming ... today Daily Telegraph AU
A MASSIVE alien spaceship is to land on Earth TODAY to prove life really is out there, an Aussie psychic insists - and bookies are so worried they stopped taking bets on it happening.

Queensland-based "channeler" Blossom Goodchild says aliens informed her of their plans that a huge intergalactic spaceship will appear over the American desert.

Bookies suspend bets on alien landing Daily Record UK
WORRIED bookmakers have stopped taking bets on aliens showing up on Earth.

It follows a flurry of bets amid internet buzz that a massive intergalactic spaceship will appear tomorrow.

Videos and messages on YouTube, blogs and UFO websites are buzzing with predictions that a vessel from the alien Federation Of Light will be visible in our skies for three days.

It may all sound more oddball than odds-on - but bookies William Hill are taking it seriously enough to temporarily suspend betting on proof of the existence of intelligent alien life being confirmed by PM Gordon Brown.

The Galactic Felines of Light just wired me photo from Toyko.
Apparently they prefer sushi. May the meow be with you...

Or perhaps?

May the farce be with you, nanu nanu.

Rasputin Economics: Crash of 2008

One of the rarities in life is finding a person who can write financial satire, embraces critical thinking and has an astute knowledge in economics. Rasputinlives at Prudentbear forum is that rarity. Recently, Rasputin has been posting what is termed as the "Raspedia ", which covers our current economic malaise and then some. If this doesn't wake you up out of your financial stupor, nothing will...

Rasipedia Update #11, October 10th 2008:

1. October 10th: Japan's $2.7 billion insurance company. Yamato Life, failed outright. Of course, any time I hear of ANY insurance company being in trouble these days, my rat-like Rasputin nose starts twitching, trying to sniff out whether they were deeply ensconsed in the drunken derivatives orgy. Since Yamato was a private company it is more difficult to discern what brought them down, but suffice it to say that I doubt it was mass hari-kari by their life insurance policy holders which was sure to happen as the collapse continues). Rather, it is my sense that they were probably caught up in the fever of selling CDS "insurance" because the so-called "profits" were just too lucrative.

2. The Wall street Journal is reporting this morning that the U.S. is considering removing ALL limits on deposit insurance at ALL banks, literally offering an "Infinite Fiat" backstop to the entire banking system, as found here:

What will they think of next? Guarantee all stocks too?

To that I say: "Yipeee! Ponies for everyone!"

Furthermore on this subject, I'm sure that after today's G7 "Champagne and Caviar" fest in Washington is finished, you will see a joint announcement from ALL of the panicked G7 goons that they will be insituting similar "Infinite Fiat" backstops for their failed financial systems.

And why not? It's only electronic digits right?

The only reason I can think of for this unprecedented (a word that has lost all meaning and impact at this point) move is to try to stop all the terrified little "Rasputin-types" from continuing to pile into U.S. Treasuries and to herd them back into the failed financial system.

All I can say is: "Good luck" because I wouldn't put any fiatscos in any bank anwhere in the world, even if they were paying 20% APR interest.

3. (Ras note: This particular update point should have been posted in yesterday's Rasipedia Update #10, but frankly I completely forgot to include it. Oops, my bad!): October 8th: The Treasury Department announced a "technical correction" that would allow them to backstop additional money market funds under Treasury's "Temporary Money Market Fund Guarantee Program". (Please see section 6:"All government and central bank efforts...", Point 18.)

I don't understand why Treasury considers this move necessary because the Federal Reserve has ALREADY backstopped the entire $4 trillion money market sector with two separate programs (first the "non-recourse loans" against failed ABCP, then the blowing off of any pretense of "collateral" with their latest move to offer loans to any failed gambler in the entire commercial paper market--which backs much of the money market funds), but what do I know? I'm just a lowly little "Collapse Chronicler". So, there must be some logical reason for this but for the life of me, I can't figure it out.

4. The ECB is offering banks "unlimited cash" (which sounds a LOT like "infinite fiat" to me) Please see Section 7:"Other countries efforts...", Point 13).

Hmmm, is the Eurozone experiencing a bank run? LOL. Whoda thunk it? Does this mean that the fiat/fractional reserve/central banking/securitization/derivatives model might be a tad..."unstable"? LOL.

5. Iceland froze trading on their stock exchange for two days. (Please see section 7, Point 14.)

Heh, "Iceland froze", am I funny or what? Anway, once again we see that the Derivatives Beast was nurtured in every nook and cranny of the global financial system, including little insignificant countries buried in snow, and is now consuming all the gamblers in a fiat conflagration. Just goes to show you that the urge to gamble is a universal human condition and even infected formerly staid old bankers.

(Additional Ras Note to the above point: Please understand that at this point, most governmnets and central banks have crossed the line into literal "Infinite Fiat" backstop offerings to their banking and financial systems. This renders any attempt try to keep track of the total number of fiatscos flung at this epic, systemic collapse impossible.)

6. Finally, today is "D-Day", or rather "CDS Day" as all the failed financial gamblers try to obscure and hide how many of the sellers of "insurance" are really bankrupt and can't pay their equally-as-scroomed counterparties. And, given that mainstream media is reporting that approximately 400 billion fiatscos are supposed to change hands today, I will predict that the REAL number is probably trillions.

Needless to say, the gamblers don't have the fiatscos to hand over, which might just explain the systemic, global, synchronized, massive, unprecedented-by-any-measure-or-metric financial system collapse.

Now, onto the Rasipedia:


Table of Contents:

Section 1: Layman's explanation of the systemic, worldwide financial collapse

Section 2: Timeline of "Fannie/Freddie Big Bang" leading to worldwide, systemic financial collapse

Section 3: What will happen even though the "Hanktator Act" was enacted.

Section 4: The four questions that were never asked during the Congressional hearings on the "Hanktator Act"

Section 5: Special section: The Fed's unprecedented move to backstop the entire $4 trillion money market fund sector

Section 6: All government and central bank efforts to date to combat the systemic global financial institution collapse

Section 7: Other Countries' Efforts to Fight the Financial Collapse:

Individual Sections of the Rasipedia:

Section 1: Layman's explanation of the systemic, worldwide financial system collapse

Layman's explanation of our situation:

1. The current "Ponzi Pyramid of Death" monetary system is crumbling.

2. Right now, virtually every single large bank, medium-sized bank, hedge fund, pension fund, mutual fund, money market fund, stock broker and insurance company on the planet has failed or is failing. All the trillions of dollars phony paper they have been trading back and forth is virtually worthless.

3. Somewhere between $10-$20 TRILLION (estimates are hard to make due to the opaque nature of the derivatives markets) in debt and derivatives "value" has been wiped off the books of the above-mentioned players.

4. The players are failing left-and-tight. ALL of the biggest, oldest Wall Street banks, plus the largest insurance company plus the two largest mortgage companies (Fannie and Freddie), plus the entire money market, plus the largest S&L (WaMu) and the fouth-largest bank (Wachovia), all failed in the span of three weeks. The rest of the thousands of institutions worldwide were also mortally wounded and are now toppling over, en masse.

5. Governments and central banks worldwide have already pumped approximately $6 trillion collectively into the failed financial system to date to fight this systemic, sychronized, worldwide, complete, utter collapse. So far, their efforts have failed.

6. At this point, the fight will continue to the death. During these next few weeks, months, and even years the "economic convulsions" between the "Ponzi Pyramid" debt collapse destruction-deflation and government and central bank reflation/monetization/nationalization efforts will rage, with the back-and-forth battles getting wilder and wilder, until:

7. The entire world will plunge into a final financial demise, with the people of all the nations suffering mightily. "Great Depression II" will ensue for the next five to ten years.

8. During this time, if the world doesn't blow itself up in all the wars that will surely follow, tens of millions of people in the U.S. are going to learn to fear debt and living beyond their means. This is a good thing.

9.Eventually, hopefully, the U.S. pulls through in one piece, the people's stock, bond, and housing assets are decimated, many have lost their jobs, but we all learn discipline, humility and sobriety and as a result, our national character grows.

10. We emerge as a chastened and humble nation, and so do the other nations who have contributed to this Ponzi Pyramid of Debt and Derivatives Death". Exactly what we need.

Section 2: Timeline of "Fannie/Freddie Big Bang" leading to worldwide, systemic financial collapse

In order to help put into context the rapidly-moving events surrounding this systemic worldwide financial collapse, below is a timeline of the "Fannie/Freddie Big Bang" that touched off the derivatives implosion, which is why so many instituions failed simultaneously, worldwide.

To wit:

Timeline of "Fannie/Freddie Big Bang" CDS implosion, leading to current total, systemic, global financial collapse:

1. September 7th, 2007: Treasury takes over the failed Fannie and Freddie and FHLBs.

2. September 7th, 2008: All counterparties to the multiple tens-of-trillions of fiatscos of CDS positions are instantly thrown into chaos since many of these OTC private contracts are poorly documented and the gamblers are poorly capitalized and unable to pay up on the bets. (Many players immediately start failing that very week).

3. September 8th, ISDA issues an emergency press release confirming that there are huge (but undisclosed) amounts of CDS trades outstanding on Fannie/Freddie debt. ISDA urges emergency conference call with Federal Reserve New York in attendance be undertaken immediately. The call takes place that very morning.

4. September 8th to present: The failed gamblers scramble to construct a list of the failed trades.

5. September 16th: The Fed, feds, and ISDA step in and try one last ditch attempt to make a market in all the destroyed derivatives positions during the emergency "ISDA Sunday Swap Meet", which is a complete, abject, utter failure

6. Immediately after this failed "Sunday Swap Meet", the following players instantly are ruined (but not all topple over immediately) :

a. Lehman Brothers
b. Merrill Lynch
c. AIG
d. Morgan Stanley
e. Goldman Sachs
f. (Update): WaMu topples less than three weeks later
g. (Update): Wachovia bit the dust exactly three weeks later

And the Grand Total of just the top financial institution failures so far:

1. Fannie Mae failed ($2.5 tril.)

2. Freddie Mac failed ($2.5 tril.)

3. FHLB system failed ($1.3 tril)

5. Merril failed ($800 bil.)

4. Lehman failed ($700 bil)

5. AIG failed ($500 bil. in CDS)

6. Goldman Sachs effectively failed ($2 tril)

7. Morgan Stanley effectively failed ($1.5 tril)

8. WaMu failed ($300 billion)

9 Wachovia failed ($800 billion)

Sub Total: Approximately $13.1 trillion

(And now the simultaneous collapse of virtually ALL of Europe's biggest banks, followed by the unprecedented move to nationalize all the fallen financial freaks by the European governments. Please see:Grand Total ALL Reflation/Nationalization/Monetization Costs to Date,worldwide )

Time-frame for this epic collapse of virtually every major financial institution in the U.S. AND now Europe:

Less than four weeks,

...which clearly is a record.

However, that's not all: also vaporized were virtually every:

1. Hedge fund
2. Pension fund
3. Insurance fund
4. Mutual fund
5. Money Market funds, both in the U.S. and in all other major countries, worldwide.

Sub Total: Who knows? Probably trillions more

ALSO crushed, and even more dangerously so:

1. Some percentage of the $62 trillion credit default swaps market (Ras Note: Immediately after the "Fannie/Freddie Big Bang", ISDA began reporting that the swaps market was $54 trillion instead of the former $62 trillion--$8 trillion in positions evaporated--and offered NO explanation for this stunning drop.)

2. Some percentage of the $650 trillion overall derivatives markets

(Ras Note: As of October 10th, The ISDA is holding auctions to try to determine the extent of the damage to the CDS derivatives space. As mentioned above, $8 trillion in CDS positions have magically disappered--coincidentally at the exact moment that Fannie and Freddie failed. In any event, the gamblers are trying to figure out a way to settle up their failed positions, but since so many of them are bankrupt, clearly this process is not going well. We should know more after today's Lehman Bros. CDS debacle is done.)

Sub Total: Who knows? I don't even want to guess anymore.

Section 3: What will happen even though the "Hanktator Act" was enacted

Now that the Hanktator Act has been officially passed, I am modifying my predictions for what will happen going forward--even though at this point it's anybody's guess as to what the heck will take place next in this insane economic environment.

To wit:

1. Perhaps there won't be any immediate runs on the banking system since FDIC was just given NOT ONLY the authority to cover all accounts up to $250k, BUT ALSO an infinite line of credit with the U.S. Treasury to guarantee all $6-plus trillion fiatscos in deposits.

2. You can bet that the Federal Reserve will be the first one lined up at Treasury's window to start trading in the half-trillion or so fiatscos worth of totally dead assets it took on its balance sheet from failed financial institutions around the world.

Taken on by the Fed, I might add, in order to keep the collapsed financial system from dragging down the rest of the so-called "real economies" in a cascading series of cross defaults.

Whether the Fed removes this toxic waste from their own coffers by a "Two-step" process (handing the trash back to the failed financial firms, who then pass them right along to Treasury), or directly with Treasury isn't important; the bottom line is the Fed is gonna be made whole. Yet the Fed may still wind up being a player in this little charade, as outlined below.

3. Perhaps McMansion prices will just continue on in a gentle downward slope instead of immediately collapsing 70% from present levels as they would have, had the Hanktator Act not been passed. With all the foreclosure forebearance provisions snuck into this bill (with more surely to come in the next bill), homedebtors should be able to enjoy luxuriating in a 5000-square foot stucco-siding-and-granite-countertops box without making ANY payments ever again.

4. And maybe--after the feds nationalize the U.S. auto industry too--they can start offering ten-year, no-interest loans to help keep the lambs purchasing gas-guzzling SUVs. It's in our national interest, you know...

5. Instead of millions of minions being thrown out of work, the federal government will now perhaps employ them cleaning the newly-restored McMansions, polishing all the cars soon to be sold, and shuffling all the paperwork created by the implementation of the Hanktator act.

6. However, after the immediate sell-off of all three stock indices once the Act was passed, I can't give any assurances that the sheeple's 401(k)/IRA mutual funds are gonna be protected from protacted contraction. But it's too early to prognosticate on this particular issue as I am quite confident that the feds will think of something to keep the lambs complacent in their little pens.

7. Now, this one is the "biggie": What happens to the U.S. fiatsco and the bond market? I dunno, but somebody's gotta step up and buy the trillions of fiatscos of debt that is gonna be created by Treasury in order to fund the resurrection of the failed financial system.

Will the Asian debt-enablers keep funding this insanity?

At the same low interest rates?


Or, will the Federal Reserve have to step up and fling some fresh fiatscos to buy the debt?

Again, it is too early to tell what will happen here, but we should know shortly because Hank has to immediately--within the next few weeks--start purchasing the dead "assets" from the failed insitutions in order to keep us from continuing to slide into "Great Depression II".

And he has to sell that debt to somebody.

So, for now, my only prediction is heck I admit it:

I don't have a friggin' clue as to what will happen.

Section 4: The four questions that were never asked during the Congressional hearings on the "Hanktator Act"

The four questions that were never asked during the Congressional hearings on the "Hankzooka Act" were:

1. Of WHAT exactly do all these instruments consist? (Categorically: MBS, CDOs/Squareds/Cubeds, CDS, other derivativtes)

2. Exactly WHO is holding them?:

3. WHAT are the actual, verifiable, CASH FLOWS on the instruments that the destroyed financial sector are trying to foist on the American taxpayer?

3.(a) WHAT is a reasonable estimate of the "worth" of these assets, based upon number 3 above?

4. WHAT "assets" has the Federal Reserve accepted in exchange for the fiat/Treasuries flung under the various "TAF-like" programs? From WHOM has the Fed accepted these "assets?" WHAT is the cashflow from these "assets?" At WHAT price did the Fed value these "assets"? Will the Fed be swapping these "assets" back out to the players with whom they did these deals? (And then will the players be dumping these assets onto the Treasury under the "Hanktator Act"?)

(Ras): Four simple questions. The truthful answers to which would instantly collapse our entire economy and financial system even more so than it already has, because the truth is just too ugly to reveal.

Which is why we haven't heard them asked, nor will we hear them answered.

Section 5: Special section: The Fed's unprecedented move to backstop the entire $4 trillion money market fund sector

The Fed's unprecedented move to backstop all Money Market funds:

First, a link to the Fed's "Interim Final Rule" on their loaning to the failed financial institutions enough fiatscos to try to revive the moribund ABCP scheme:

But we''re not desperate or anything. We just thought we''d do this outta the blue, on a Friday morning, because we weren''t very busy

Now, the KEY phrase from this document is this (with my emphasis added):

"To reduce liquidity and other strains being experienced by money market mutual funds, the Federal Reserve System adopted on September 19, 2008, a special lending facility that enables depository institutions and bank holding companies to borrow from the Federal Reserve Bank of Boston on a NON-RECOURSE basis if they use the proceeds of the loan to purchase certain types of asset-backed commercial paper (ABCP) from money market mutual funds (ABCP Lending Facility)."

Did you catch that part about "non-recourse"?

Do you know what that means?

Well, it means that when--not if--the ABCP the institutions hand the Fed in return for freshly-flung fiatscos goes bad, then THE FED WILL JUST EAT THE LOSS AND NOT, I REPEAT NOT, TRY TO RECOVER THE FIATSCOS FROM THE INSITUTIONS!!!

Section 6: All government and central bank efforts to date to combat the systemic, global financial system collapse

Government and Central Bank efforts from March, 2008 to present to fight the financial Collapse:

The sum, fiatsco-wise and in terms of actual actions, of the efforts of the various TPTB branches to fight the debt destruction convulsions and the related costs incurred to do so (so far) is presented below.

To wit:

Federal Reserve efforts undertaken to fight the credit collapse:

1. Dropped Fed Funds rates 325 basis points, some of these moves being surprise rate cuts.

2. Also pounded down discount rates by similar amounts and means.

3. Created unprecedented, even borderline Constitution-contravening, now-trillion fiatsco TAF, TSLF, PDCF,"Fed,LLC", "Fed, AIG", "Fed Euro-swap" programs Then, extended time-frames, amounts and frequency of many of those programs.

4. Instituted the stunning "Fed-FDIC" program on Friday, September 19th, whereby the Fed backstops ALL money market funds (total fiatsco exposure amount: over $4 trillion by itself), accepting worthless ABCP paper with NO-RECOURSEto try to stop a run on the funds by panicked bagholders.

5. Accepted hundreds and hundreds of billions (and now perhaps trillions) of fiatscos of totally dead "assets" from failed Wall Street firms and will not disclose what those "assets" are, nor from whom they were accepted.

6. Offered JPM "sweatheart $75 billion loan" as part of Lehman liquidation (probably to square up some failed CDS positions)

7. Suspended "Rule 23(a)", allowing commercial banks to fling fiatscos to their failed investment banking arms

8. Began outright purchases of Agency debt on Friday, September 19th

9. Allowed Goldman Sachs and Morgan Stanley to--with no waiting period--change from investment banks into commercial banks. Changed "rules" so that Morgan Stanley can continue to perform investment banking functions. Changed the "rules" regarding minority ownership of these giants

10. Did a special $25 billion "TAF" to Goldman and Morgan

11. Raised "SOMA" account credit limits by 25% from $3 billion to $4 billion

12. In an unprecedented move, on September 29th, the Fed committed to injecting $630 BILLION in "liquidity" into the world's financial system. This injection took the form of increased "TAF-like" injections (also extended in duration) as well as MASSIVE "Fed Euro Swap" injections--probably to help fight the collapse of all the European institutions that are stuffed to the gills with bad paper sold to them by Wall Street.

13. Announced, on October 7th, that the Fed will be acting in concert with foreign central banks to extend the size and duration of the previous "TAF-Like" program.

14. In a move that can only be decribed as "Crossing the Rubicon" the Fed, for the first time ever, announced on October 7th that it will create an "SIV" and directly loan fiatscos to corporations that participate in the commercial paper market. NO "collateral" is even necessary for the players to borrow from the "Fed SIV". Furthermore, NO limit to the amount of fiatscos provided by the Fed was announced. However, not even this ground-breaking, breath-taking step taken by the increasingly-panicked Fed lowered LIBOR rates. In fact, LIBOR rates actually ROSE on the day of the announcement.

15. On October 8th, The Fed pumped an additional $38 billion into AIG, raising the total to an astounding $123 billion so far. This latest, massive, injection coincidentally was made just twenty-four hours before the ISDA's scheduled auction to settle perhaps as much as hundreds of billions of fiatscos of failed CDS positions. AIG is reported to be sitting on $500 billion-plus in CDS "insurance" they sold to counterparties.

(Total liquidity/reflation/monetization effort costs on the part of the Fed):

Now multiple trillions of fiatscos, and no sign of let up, since they have proven they are willing to fling fiatscos in all directions to prop the money market funds and other failures. So don't for a minute believe that the Fed (or other central banks) are anywhere near throwing in the towel.

(Ras): That is one impressive list of accomplishments by the Fed in their battle against the debt destruction convulsions. Breaking all previous rules, precedents and protocols, the Fed is well on its way to playing out Bernanke''s promised "Roadmap to Weimar" as laid out in his famous 2002 speech:

"Deflation: Making Sure it Doesn't Happen Here".

However, these massive stunning, creative, and even nefarious moves on the part of the Federal Reserve don''t represent the total effort by TPTB to stave off economic collapse.

Far from it.

Next we will focus on the Treasury/Administration/SEC/FDIC gang's efforts and see just what rabbits they have pulled out of their collective hats. Trust me, they have produced an entire litter of "reflation bunnies" in their attempts to keep this collapsing system intact.

And here they are:

Treasury/Administration/Congress/SEC/FDIC efforts:

1. Congress proffered "Economic Stimulus Checks for Sheeple" program of $150 billion

2. Treasury floated various failed "Super SIV" programs before turning to the "big gun" efforts described below

3. Treasury (Hank Paulson) demanded, and received, from Congress an $800 billion (so far) "Bazooka" to nationalize Fannie, Freddie, FHLBs

4. Within six-weeks, Hank used that bazooka to take over the GSEs, injecting an initial $200 billion into these fallen frauds and also instituted a Federal Reserve-like function of monetizing GSE MBS. Also, offering "liquidity" for MBS

5. Treasury pulled off two emergency funding Treasury auctions totalling $200 billion to give Federal Reserve more ammo to fire at collapsing financial institutions worldwide

6. Treasury demanded "Hanktator" emergency legislation from Congress, giving Treasury literally dictatorial powers over the entire financial system. Further demanded authority to keep shuffling dead assets from Wall Street banks into government (and taxpayer's) lap

7. Treasury/FDIC/SEC arranged "shotgun weddings" between failed Wall Street banks, commercial banks and major mortgage originators

8. On Friday,September 19th., Treasury announced they were turning the GSEs loose to once again start snapping up dead MBS from the failed financial system

9.The FDIC quietly allowed banks and S&Ls to practice "foreclosure forebearance" which gives these failed institutions the authority to pretend that all their deadbeat real estate loans are "performing". Also, have quietly shut down or married off failed banks (And are just beginning this last effort, with perhaps thousands more to go.)

10.The SEC ruled that "Short-Selling Seditionists" are a financial threat and released a 799-member "untouchable" list of failed financial institutions which cannot be shorted. This action came after a smaller version of same was instituted in July. Have continually added to this list, including many non-financial stocks

11. The FDIC arranged an unusual THURSDAY NIGHT takeover of WaMu, dealing off its deposits to JPM. Additionally, and no surprise at all, WaMu's derivatives positions were also transferred to JPM

12. FDIC decided that the collapse of WaMu did NOT constitute a "Credit Default" therefore no CDS payments need be triggered. This is a HUGE event because the FDIC just basically negated ALL CDS contracts, in my opinion.

13. On September 29, the FDIC authorized that Citi take over the failed Wachovia. And, in what is becoming par for the course, Citi was allowed to "cherry pick" Wachovia's deposits and some of the debt, and the rest of the rotting carcass will be strewn across the backs of the taxpayers to be carried like so much rotting meat, similar to the recently-failed WaMu.

And who knows what further CDS bombs were set off by this latest failure of one of Wachovia, which is the world's largest financial institutions? My sense is that Wachovia's collapse was "not helpful" to the already devastated credit default swaps market in particular and the whole derivatives space in general.

14. ON September 30th, in yet another stunning move by the increasingly-desperate TPTB, the SEC and FASB decided to make it even easier for the failed gamblers holding dead, toxic "assets" to completely abandon any and all pretense of "mark-to-market" and just allow the mortally-wounded institutions to literally make up any "value" for these "assets" they deem necessary to shore up the ol' balance sheet.

The SEC and FASB offered a press release, found here:

But Rules are for little taxpaying sheeple, NOT big, failed, Wall Street gamblers.

...whereby they explain that it is perfectly okay for the destroyed financial institutions to simply make up whatever valuation they desire for the trillions of fiatscos worth of dead, rotting "assets" currently stuffed in the dungeons of their balance sheets.

This latest desperation move is obviously intended to obscure the massive, multi-trillion fiatsco losses which have crushed the gambler's corrupt enterprises until the Hanktator Act can be passed and these rotting corpses can be laundered through the new entity.

15. The SEC has extended the "Anti Short Selling Seditionist" emergency rule has been so successful in fixing all stock, bond, currency, debt-derivatives problems that they are extending it for another few weeks or so. Sheesh, and to think TPTB could have saved themselves all this heartache and stress of having to take the OTHER thirty or so unprecedented, emergency actions if they just would have implemented this one simple rule up front. Whod'a thunk it?

Oh well, better late than never I say.

16. IRS rules were changed to make the deal more palatable tax-wise for Wells. Here is the actual ruling:

"For purposes of Code Sec. 382(h), any deduction properly allowed after an ownership change of a corporation that is a bank with respect to losses on loans or bad debts, including any deduction for a reasonable addition to a reserve for bad debts, shall not be treated as a built-in loss or a deduction attributable to periods before the change date. This guidance does not affect the application of any provision of the IRC except Code Sec. 382. Banks may rely on this guidance until further guidance is issued."

...which, according to calculatedrisk blog, allows Wells to accelerate the tax write-offs associated with absorbing the failed Wachovia's "assets".

17. The Treasury is allowing Fannie and Freddie to buy FHLB MBS. I'm not sure why they are doing this since all the GSEs have been effectively nationalized, but there must be some nefarious method to this madness.

18. October 8th:The Treasury Department announced a "technical correction" that would allow them to backstop additional money market funds under Treasury's "Temporary Money Market Fund Guarantee Program". According to Treasury, MMFs that have a "policy of maintaining a stable net asset value or share price that is greater than $1.00 and had such policy on September 19, 2008" are now eligible to participate, provided the fund meets all of the other original requirements, which basically translates to: they haven't folded up shop yet.

So, once again we are witnessing the complete and utter blowing off of all previous laws, regulations and precedents as TPTB becomes increasingly desperate to fight the systemic financial collapse that is consuming the world.

And please don't make the fatal mistake that these guys are anywhere NEAR finished in this epic battle. They have only begun to fight. And I can hardly bear to contemplate what they will do next, so I won't at this point.

(Total nationalization/stimulus/reflation effort costs on the part of Treasury):

Estimated $2.3-plus trillion so far, with open-ended commitment going forward.

(Ras):Once again I have to confess pure,unbridled shock and awe at the impressive array of weapons that this particular branch of TPTB has amassed--and used--in their battle against the evil forces of deflationary debt collapse convulsions.

Yet, despite outlining the above massive and unprecedented steps taken, we''ve not yet completed our quest to document all TPTB''s powers and programs undertaken to date.

Let us do so now:

Congressional efforts:

1. Passed the proposed $150 billion "economic stimulus" program suggested by Treasury/Administration

2. Passed the "Save the Homedebting Sheeple Act" with an estimated cost of $300 billion (but will surely be much more)

3. Then tacked on the "Bazooka" provision to allow Treasury to nationalize Fannie/Freddie for another $800 billion (so far)

4. passed the afore-mentioned "Hanktator" act, giving Treasury unprecedented dictatorial powers over the failed financial system and perhaps multiple-trillions of fiatscos to do so.

so that we can buy ourselves a few more weeks or months worth of reprieve before "Great Depression II" continues unabated.

5. Just passed $25 billion aid to auto manufacturers

(Total stimulus/reflation effort costs on the part of Congress, avoiding double-counting costs already attributed to Fed/Treasury above):

$300 billion to $1 trillion.

(Grand Total ALL Reflation/Nationalization/Monetization Costs to Date, U.S. only):

Approximately $ 6 trillion. So far.

Section 7: European Efforts to Fight the Financial Collapse:

In addition to the nationalization of Northern Rock in 2007, Europe has been in a mad scramble to try to revive their equally-as-collapsed-as-the-United states'. financial system. Virtually every single big bank throughout Europe in the last week.

And the governments have responded with unprecedented moves to nationalize the broken banks.

To wit:

1. Monday. September 29th Germany's biggest bank bail-out, putting together a €35 billion loan package to save Hypo Real Estate.

2.Belgium, changing their stance from a mere "liquidity injection" decided that nationalized Fortis, a 300-year odl institution that survived everything except the "Great Real Estate Bubble" of 2002-2008, was a better idea.

3. And a day later, a bail-out for Dexia took place.

4. The Irish government issued a blanket guarantee of the deposits and debts of its six largest lenders in the most radical bank bail-out since the Scandinavian rescues in the early 1990s.

5. The government of Greece folllowed Ireland and announced that it was guaranteeing all deposits in all banks.

6. On October 7th,Iceland's entire banking system failed. Russia stepped in and provided a five billion fiatsco injection to try to revive the Iceland banking system. Alas, but this emergency measure was to no avail. The Icelandic government had to step in and shut down all the banks and has announced they will nationalize the entire banking system.

7. Again, on October 7th, the Russians stated that they were pumping in thirty-six billion fiatscos into their failing banking system.

8. Spain revealed their version of the American "TARP", a fifty billion Euratsco fund to soak up dead "assets" from failed financial institutions.

9. Australia's central bank, in a surprise move, dropped their overnight funds rate by 100 basis points. Hong Kong followed shortly with a rate cut of their own.

10.On October 8th, the U.K. pumped the equivalent of 87 billion U.S. fiatscos into their failed banking system in a desperate attempt to revive their failed financial institutions. At least the U.K. was kind enough to their taxpayers to demand preferred stock which MIGHT one day pay some paltry dividend back to their Treasury--unlike the U.S. TARP plan, which will basically offer nothing to U.S. bagholding taxpayers.

11. Various halts to trading on indices around the world have taken place in the first week of October as stock indices crash upwards of ten-percent per day.

12.On October 8th, The People's Bank of China dropped their overnight lending rates twenty-seven basis points--sneaking in under the cover of the excitement generated by the massive, unprecedented, coordinated move by the Fed and other European (and the Canadian) to drop overnight lending rates fifty basis points. Not to be outdone in creating more fire to burn their currencies to the ground along with everyone else, On October 9th, the central banks of Hong Kong, South Korea and Taiwan also dropped their overnight rates twenty-five basis points.

13.On Oct. 9th, The European Central Bank is offering banks "unlimited cash" and pumped an unprecedented (there's that word, "unprecedented" again!) 100 billion fiatscos in overnight funds into the financial system. This latest panic move came the one day after an interest-rate cut failed to soothe tensions in money markets.

The ECB said it will lend banks as many fiatscos for which the failed gamblers can provide "collateral", which one can only imagine what the "collateral" consists of these days: Beanie Babies? Pet Rocks?

14. October 9th: Iceland's government froze (sorry for the bad pun, but I can't resist) trading on its stock exchange for two days and took control of the country's largest bank (the third one in a row). Whoda thunk that tiny little Iceland would be knee-deep in the derivatives hoopla and now has a banking system that is totally in tatters? I guess when one lives in a country that is freezing cold 9 months a year, what else is there to do than gamble?

(Grand Total ALL Reflation/Nationalization/Monetization Costs to Date, worldwide):

Best estimate: Tens of trillions of fiatscos pumped into or committed to being pumped into the system?

And even more as Europe's collective governments continue nationalization of their biggest banks.

Why even bother to hazard a guess anymore?

The Butterfly Effect and Global Economic Collapse

Butterfly Effect: Small variations in the initial condition of the global economy are now producing large variations in the long term behavior of the system in an effort to return to normalcy or equilibrium.

European Crisis Deepens; Officials Vow to Save Banks Bloomberg
The developments yesterday came a day after a summit in Paris where leaders of Europe's four biggest economies stopped short of a plan mirroring the $700 billion rescue in the U.S. to counter the worst financial crisis since World War II. Instead, they agreed to work together to limit the economic fallout, ease accounting rules, and seek tougher financial regulations.

"Until now the solutions have appeared to be uncoordinated, so perhaps it's time for a more coordinated approach globally," said Torsten Slok, an economist at Deutsche Bank AG in New York. `"It's not just the U.S. and Europe, it's banks in every part of the world."

Every country for itself as European unity collapses in an attack of jitters UK Times
Germany shattered any semblance of European unity on the global credit crisis last night by announcing that it was ready to guarantee €568 billion of personal savings in domestic accounts.

The underpinnings of Chancellor Merkel’s decision emerged in an interview with the Interior Minister, Wolfgang Schäuble. History had taught Germany, he said, that a sustained economic crisis created political havoc.

“We learnt from the worldwide economic crisis of the 1920s and 1930s that an economic crisis can result in an incredible threat for all of society,” he said. “The consequence of that depression was Adolf Hitler.” Only one thing trumps German anger at the perceived abuse of taxpayers’ money: the fear that the 1930s will return.

America and the New Financial World Wall Street Journal
As the U.S. government plunges into the markets, we must understand that this is the end of an era, and that attempts to unilaterally force capital to stay here will only lead to its continued flight. We are now one market among many, a huge and affluent one to be sure, but a wise nation recognizes both its strengths and its limitations. A more secure domestic capital base depends on the U.S. being seen as a desirable place for investment, and not as King Lear raging against the storm, alone, deluded and abandoned.

We can work as a whole or fragment into pieces.

No Real Choice in a Two Party System

When societies are in decline, they reach a point where the corruption becomes so rampant that any remedies only reveal and further aggravate the causes of their demise. In the current two party system, they are but two sides of the same coin. The illusion is making you think you have a choice, when in reality it all fades to black.

Declare freedom of thought...

Bailout Passes Senate: Bring Out Your Dead

Overseas markets declined on the news. Time to sell everything in regards to a US assets. This is your exit call.

Senate passes massive $810 billion bailout
WASHINGTON -- In a historic vote, the Senate approved a massive $700 billion rescue plan for the nation's finance system Wednesday night, but only after tacking on another $110 billion in tax breaks to lure votes from both parties.

A strong bipartisan majority rallied behind the controversial Wall Street bailout package, passing it by 74-25.

Stocks drop after Senate votes in favor of bailout
HONG KONG (MarketWatch) -- Asian markets declined Thursday as investors sold off financials such as Mitsubishi UFJ Financial Group and Industrial & Commercial Bank of China after the U.S. Senate passed the financial-sector rescue package.

The Nikkei 225 Average fell 1.1% to 11,242.65 and the Topix index lost 1.7% to 1,082.72, after rising earlier in the day.

The Hang Seng Index lost 2% to 17,649.20 and the Hang Seng China Enterprises Index gave up 2.1% to 8,880.66.

Australia's S&P/ASX 200 index slipped 0.2%, South Korea's Kospi shed 0.9% and New Zealand's NZX 50 index climbed 1.1%.

"I really think what we're seeing is that any positive news is being used to reduce risk. These are long sellers trying to reduce risk," said Benjamin Collett, head of hedge-fund sales trading at Daiwa Securities SMBC in Hong Kong.
Grand Larceny on a Monumental Scale
Economist Dean Baker of the Center for Economic and Policy Research makes the point:

"The near hysterical discussion (count the times ‘Great Depression’ appears in news stories) of the bailout still largely fails to recognize the roots of the economy's current problems in the collapse of the housing bubble. Much of the discussion assumes that the problem is just bad subprime loans and that house prices will bounce back once the credit markets are working properly."

The point is critical, because what the Senate and House leaders are telling us, as are President George W. Bush, presidential candidates Barack Obama and John McCain, and Federal Reserve Chairman Ben Bernanke, is that the bailout is to get the American economy moving again. Credit, they say, is the lifeblood of the economy, and without credit no one can make a move.

But credit is the lifeblood of the economy only because people are broke. Purchasing power in the U.S. has collapsed, and it is getting worse as the recession which has now begun worsens.

People can’t get loans, not because the credit markets are stalled, but because they have no savings for down payments and can’t afford to repay what they wish to borrow. If they could repay their loans, plenty of credit would be available. But there is no money—and no savings—within the economy for it to get moving again. The only possible source is more federal borrowing to prime the pump Keynesian-style. That is what the politicians claim the bailout will do. But it won’t.

Then what is happening?

What is happening is that the Bush administration is engineering a massive raid on the Federal treasury to pay off the people within the financial industry who have been operating the housing scam because the politicians told them to do it. This is hush money.