Bailout Bill Passes: Obama & Pelosi Whip Votes

"Open Mouth Buddha, shedding Black Tears" Click for LARGE.
2007, Gallery #19, # 6915 - Kazuya Akimoto Art Museum.

It's Over -- We lost.

Obama and Pelosi made damn sure the bill passed.

Thanks Gidget. We sure appreciate that.

Congresswoman Donna Edwards says Obama personally promised her, in exchange for her "Yes" vote, that they would revisit the bankruptcy provisions later. We shall see. I think the Congresswoman, whom I respect, is placing WAY too much faith in Obama, and not enough faigh in his demonstrated history with FISA.

That there is no bankruptcy provision now, means there won't be one later. Obama will apologize, and that will be that. I'm holding 2:1 odds for friends (so don't write, trying to get some of my action.)

I give you the wisdom of Ian Welsh.

Firedoglake

Fundamentally it's the Treasury Secretary to spend pretty much as he chooses, with meaningless oversight, up to 700 billion or the debt limit. In theory it's "whichever is less" in practice it's going to be "whichever is more". Add to mark to the end of mark to market, and the move to mark to "whatever the bank says its worth" and banks are going to be allowed to stay alive no matter whether they're solvent or not as long as their cash flow doesn't go so far negative it can't be papered over the world's favorite wallpaper, the US buck. Zombie banks plus all the money flooding into trying to stop deleveraging from wiping out said financial institutions means this is a Japanification plan.

Japan had its own bubble back in the 80's. When it popped the Japanese decide that they would not force banks to write down their losses. Instead they left them on the books. Those of you who are old enough will remember when Japan was the economy of the future, who built the best stuff and were destroying everyone else. After the bubble popped that all ended. The world's most vibrant economy went into a long economic slump from which it never recovered. This wasn't a classic depression—there wasn't a huge immediate contraction. Things just generally got lousy - unemployment rose somewhat, jobs stagnated, no one had a lot of money. The good times never, ever, came back ever again. It was like being caught in a low grade recession, all the time.

That's what this bill will do in the most likely scenario. The US will go into recession, every once in a while it will seem to pop out, then it will drop again. Because the US has population growth, and Japan doesn't, the actual numbers will look better than Japan's, but the feeling of "there are no jobs anywhere" and "this economy sucks" will be pervasive. This will translate into a grinding down of Americans standards of living.

The reason this happens is that all the money that could be used to increase output and productivity or to decrease input problems (by, say, reducing the amount of oil and other commodities used) will be all be being used to prop up the current financial structure. 750 billion dollars, and this is key, is not going to be enough. Folks on Wall Street are already saying so. More money is going to keep flying into the structure to keep it from deleveraging in an uncontrolled fashion, and thus wiping out lots of rich people. I figure they'll be back for more money in 6 months, 9 max. 3 months wouldn't surprise me, since Paulson has a lot of incentive to use up his full allowance while he's still Secretary. After he does so the problem will still exist and the next Treasury Secretary will be back looking for more.

Now, if that money hits the real economy in a significant way, it will lead to inflation, and in my earlier writing that's what I figured would happen. But on consideration, I think the downturn in the economy combined with the sheer sucking power of the leveraged financial structure which has to be kept from collapsing means that very little of that money is, in fact, going to get to the real economy and what does won't be sufficient to overcome demand contraction. Simply put, the financial masters of the universe owe more money than exists in the entire universe. So their need is going to be pretty close to endless. 10 years minimum, probably 20. Maybe 30. Who knows... but certainly not a one time injection. If 700 billion was their total losses, they wouldn't actually need a bail out.

Note that Japanification was always the plan of the "neconomy", or Busheconomy if you prefer. It was always the endgame? Why? Because Japanification makes the winners of the final game permanent. All extra money in the system will be pumped to the people who made the bad decisions that crashed the prior economy, they will stay in power and because there isn't a dynamic economy left, no one is likely to rise to replace them.

There's more...

I hate that the plan lacks bankruptcy revisions.

If you are bankrupt, you will likely lose your home.

Get screwed over because you lose your job, a big chance in the economy we're about to have, lost your home.

Uncontrolled medical expenses and have to go bankrupt? Lose your home.

Or go underwater on your home mortgage because of the sub-prime crisis... LOSE YOUR HOME.

This plan bails out the same assholes who created the problem, but does NOTHING to protect you. YOU get to pay the bill. So do your children and grandchildren.

OPEN THREAD on the bailout.

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AIG On the Brink

I have a gut feeling that this week in financial news is going to be one of those things that people look back on in history. With Lehman officially gone all eyes are now on AIG, the huge global insurance company.

from Financial Times

"AIG, the troubled insurer that sits at the heart of the financial system, has one more day to come up with the capital to stay afloat, according to David Paterson, New York governor.
Speaking to CNBC, Mr Paterson also explained that without a capital-raising deal, AIG would not be able to benefit from the $20bn lifeline thrown by state regulators on Monday."

This is going to be a best a very very bumpy ride.

There's more...

Lehman Down for the Count, BoA buys out Merrill Lynch

Ok, the fun and games continue. Huge banking and investment firms topple. If people aren't getting that "depression" vibe yet not sure what will wake them up to the fact that these firms played cowboy economics while the preznit was playing cowboy politics. It is going to be a bumpy week/month/holiday season...

Couple o'eyecatching lines today;

Dow Plunges 500 points.

...the 158-year old investment house is racing toward liquidation.

Lehman joins more than 10 banks over the past 12 months to be battered by the credit crunch, including Bear Stearns, AIG, Countrywide, Wachovia, WaMu, and others.

Lehman declined comment Monday on the bankruptcy and its impact on employees, but evidence of the fallout came in various ways as cameras covered employees with their belongings streaming out of Lehman locations in New York and elsewhere around the world.- By Ellen Messmer, Network World, 09/15/2008

It looks like talks of bailing them out are over. And most analysts are saying that is a good thing, commenting that government has been overly involved in rescue efforts after companies have made bad and risk heavy decisions in recent years. This one is gonna hurt.

A reality that we should be mentioning frequently this week, the GOP is fielding a candidate at the top of the ticket who admits to limited economic understanding and experience. great.

There's more...

Bennigan's Liquidates in Huge Restaurant Chapter 7 Filing

Chicago Tribune photo by Tom Van Dyke / July 29, 2008

Bennigan's, Steak and Ale To Liquidate as Glutted Restaurant Industry Shakes Out

After filing for Chapter 7 bankruptcy, the parent company of national chains Bennigan's and Steak and Ale on Tuesday shut hundreds of restaurants, putting thousands of employees out of work.

The filing marked one of the largest Chapter 7 bankruptcies of a restaurant chain in recent history, according to restaurant consultancy Technomic, and is the most extreme sign yet of how midprice, sit-down restaurants are undergoing one of their worst periods in decades. Challenger, Gray & Christmas says the resulting layoffs constitute the sixth-largest mass job cut of the year.--JEFFREY MCCRACKEN and JANET ADAMY

This is bad in so many ways. While I am no fan of big chains the 9,000++ folks that just lost their jobs are going to be hit hard. Students, struggling families, these are the folks busting their asses for minimum wage. And according to the story staff were given no notice at all of the shut down.

Bennigan's, owned by privately held Metromedia Restaurant Group, collapsed in a particularly dramatic fashion Tuesday. Managers of restaurants across the country were awakened by midnight phone calls telling them to shutter their stores immediately, according to interviews with several restaurant managers.--By Michael Hughlett

That part pisses me off even more. No chance to go try to find other work. No warning at the end of the month with rent due and bills to pay. I know in my restaurant this year has been tough. But my staff and I are working together to get the company and ourselves through difficult times. I wonder if Bennigan's had more respect for their employees and communities-- they might have been able to avoid this liquidation?

Anyway, this is just the beginning. As I mentioned in an earlier post, the F&B business is the canary in the coal mine during a bad economy. People struggling to pay bills, or in danger of losing their homes are going to stop eating out as a first line of defense. And so the dominoes begin to fall.

There's more...