Mish Shedlock on Ireland government collapse (Good one !!)

Irish Government Collapses, Six Cabinet Members Resign, Election March 11; How To Negotiate Haircuts

Posted: 20 Jan 2011 09:11 PM PST

In a fitting tribute to a disgraceful performance by Irish Prime Minister Brian Cowen in which Cowen crammed losses of Irish banks down the throats of taxpayers, his government has at long last collapsed. Six cabinet members (40%) resigned representing justice, health, trade and enterprise, defense and transport. Earlier in the week his foreign minister resigned making the total six.

I have a wide selection of articles to choose from. Here is a representative sample.

Irish Central reports Irish leader Brian Cowen calls an election for March 11

Irish Prime Minster Brian Cowen has called an Irish election for March 11th.

Speaking to a packed parliament, Cowen stated that he was reassigning six cabinet portfolios after six of his ministers resigned.

The proceedings in Irish Parliament had been suspended as opposition leaders refused to move forward until Prime Minister Brian Cowen explained the six recent ministerial resignations.

Rumors of an impending collapse of the government and an immediate election were circulating as the Green Party met to decide whether they would withdraw support for the government.

Earlier today parliament was suspended after rowdy scenes. Opposition leader, Fine Gael’s Enda Kenny demanded that proceeding be suspended until Cowen could explain what was going on within the Government.

Kenny said “This is the worst government in history…This would not have happened even in the days of great dictators. It is unprecedented, what you have done.”

He continued “These are the last days of the worst government in the history of the state.”

Minister for Enterprise, Trade and Innovation Batt O’Keefe tendered his resignation this morning. Wednesday saw Mary Harney from Health, Dermot Ahern from Justice, Noel Dempsey from transport and Tony Killeen from defense all resigned. These followed the resignation of Micheal Martin from foreign affairs who resigned after a failed leadership challenge.

Kenny said that the actions of Cowen had been a “cowardly, disgraceful act” and said he was “refusing to come in here today to tell the people of his country what is happening with a Government that has imploded, with a Government that is dysfunctional, that has disintegrated, and that had let our people down”.

The Independent reports Irish government falls and calls 11 March poll

The Irish Government collapsed yesterday, with multiple ministerial resignations propelling Prime Minister Brian Cowen into setting 11 March as the date for a general election. His Fianna Fail party, which dominates the government, is widely expected to be largely wiped out in the contest, since under the Cowen leadership it has slumped to unprecedented depths in opinion polls.

In recent months he was damaged by "Garglegate", when he was judged to have performed badly in a morning radio interview after a late night of drinking with journalists and others. Next came "Golfgate" when we learnt that as finance minister he had played golf and had dinner with the banker Sean Fitzpatrick, regarded as possibly Ireland's most toxic figure, since he above all others is blamed for the economic disaster.

Many Fianna Fail members of the Dail, the Irish parliament, have announced they are not standing again, because they are unlikely to be re-elected or because they realise they will face years in opposition.

The election was precipitated during a day of turmoil after the small Green party, which has kept Fianna Fail in power, called for a contest in March. Four Fianna Fail ministers, plus a long-time supporter, then announced their resignations. In what is viewed in Dublin as an extraordinary move, Mr Cowen then redistributed their portfolios with some of his remaining ministers taking on extra responsibilities. Mary Hanafin, for example, has become Minister for Trade, Enterprise, Innovation, Tourism, Culture and Sport.

Fianna Fail has traditionally been the largest in the Irish Republic but recently hit a record low of 13 per cent in the opinion polls.

This has led to predictions that Fianna Fail could drop from more than 70 seats to fewer than 20, a result which would represent a seismic change in Ireland's political patterns. There are certainly obvious signs of a widespread loss of public confidence in Fianna Fail. A disaffected backbencher said recently: "The people just don't trust us. We got arrogant and got disconnected and wouldn't listen. The people are very angry and you can't blame them."

Yahoo! News reports Irish premier sets early election for March 11

Cowen's Fianna Fail party has fallen to record-low levels of support after leading the country from the Celtic Tiger boom to the edge of national bankruptcy. Adding to the sense of chaos, the prime minister managed to bring his own administration to the brink of collapse Thursday through an ill-calculated bid to inject his Cabinet with fresh blood.

Five ministers — a third of Cowen's Cabinet — resigned from the departments of defense, justice, health, transport and trade between Wednesday night and Thursday morning because they were not planning to seek re-election. Cowen hoped to promote five new lawmakers in their place to boost their pre-election profiles.

But the gambit provoked fury in parliament and a backlash from Cowen's coalition partners in government, the environmentalist Green Party. Cowen spent the morning pleading with the Greens to back the election of the new Cabinet ministers but they refused and demanded that he set an election date.
When Cowen finally appeared in parliament, he appointed five current Cabinet ministers to take on the additional departments for the next few weeks before parliament is dissolved in mid-February. The move avoided the need for a parliamentary vote that Cowen was sure to lose.

Fianna Fail lawmakers expressed dismay that their leader hadn't seen the Green opposition coming.

"I'm really infuriated by what's happened. ... Whatever his great plan was, it has totally backfired," said Fianna Fail lawmaker Tom Kitt. "I've never seen anything like it."

Ireland has nationalized four of the six Irish-owned banks and repaid tens of billions to foreign bondholders. It spent two years trying to fund the bank bailouts itself, but the cost drove Ireland's 2010 deficit to 32 percent of gross domestic product and forced the country to negotiate a euro67.5 billion ($91 billion) bailout loan with the European Union and the International Monetary Fund.

So far Ireland has received euro5 billion ($6.7 billion) of those funds. The two opposition parties expected to win the March 11 election and form the next coalition government, Fine Gael and Labour, have pledged to reopen negotiations with the EU and IMF.

The Mail Online reports Beleaguered Irish PM calls general election for March 11 after failing to push through Cabinet reshuffle

Irish Prime Minister Brian Cowen has set a date of March 11 for an general election that will provide a stern test for his deeply unpopular government.

The Taoiseach [Prime Minister] was forced into a humiliating climbdown in his plans to replace five Cabinet ministers with junior members of his Fianna Fail party.



Resignations: Justice minister Dermot Ahern (left) and health minister Mary Harney, seen here after being pelted with red paint) are among the five cabinet members to quit

How To Negotiate Haircuts

The two opposition parties expected to win the March 11 election and form the next coalition government, Fine Gael and Labour, have pledged to reopen negotiations with the EU and IMF.

I offer the following suggestions on how to negotiate.

The correct procedure is to announce intent to default with a statement something like "The Irish government refuses to bailout UK, German, French, and US banks too stupid to realize that Ireland was in the midst of a gigantic property bubble."

Now doubt EU, ECB, and IMF will offer to cut interest rates to 2% or some such number, perhaps even 0%.

The correct response to that sort of nonsense should be "This is not be a question of interest rates. This is a question regarding principal and principles. In regards to the latter, Irish taxpayers cannot and will not make whole foreign investors whole for their piss poor decisions. In regards to the former, and as a gesture of goodwill, we are prepared to offer 2 cents on the dollar for all debts owed."
That should set an appropriate tone for the "negotiations". It will also send bondholders a very badly needed message.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Ireland's "String and Sealing-Wax Fix"; Irish PM Loses Confidence of Own Party; European Sovereign Default Risk Hits All Time High Posted: 23 Nov 2010 11:12 AM PST [Good links - I don't agree with cutting the minimum wage, though.] News in Europe regarding Ireland, Spain, and Portugal is ominous. Credit Default Swaps (CDS) are soaring in Spain and Portugal. European sovereign risk jumped to an all-time high. Lloyds TSB says "Ireland’s debt woes may spread because investors have lost confidence in policy makers". Members of his own party are calling on Irish Prime Minister Brian Cowen to resign. The quote of the day goes to Bill Blain, a strategist at Matrix Corporate Capital LLP in London who said "“Bailouts are nothing but a short-term string-and-sealing-wax fix”. With that let's take a look at some specific news. Zero Confidence in Irish Solution Lloyds says Ireland’s Woes May Spread on ‘Zero Confidence’ “The markets currently have virtually zero confidence that the bailout in Ireland will solve the European crisis even though fiscal austerity measures in both Portugal and Spain have been severe and prima facie, sufficient to ease market concerns,” Charles Diebel and David Page, fixed-income strategists in London, wrote in an investor note today. “With markets effectively in a position to dictate policy, the risk is that the credibility crisis shifts to more sizeable European Union countries and thereby poses a greater risk to the system as a whole,” they wrote. That may also raise “valid questions about the prescriptive policy measures being sufficient to deal with issues of such magnitude.” Credit Default Swaps Soar in Spain, Portugal In spite of the Irish bailout, Spain, Portugal Bank Debt Risk Soars as Traders Look South The cost of insuring Spanish and Portuguese subordinated bank bonds soared as traders of credit-default swaps turned their focus to southern Europe following Ireland’s bailout. Swaps on Portugal’s Banco Espirito Santo SA rose to a record while contracts on Banco Bilbao Vizcaya Argentaria SA, Spain’s second-biggest lender, climbed to the highest in more than five months. The benchmark gauge of European sovereign risk also jumped to an all-time high, while two indexes tied to bank debt surged the most since June. Ireland’s rescue “achieves completely the opposite of what it allegedly tries to achieve, namely to calm markets,” Tim Brunne, at UniCredit SpA said in a report. “Instead, the credit profile of both the sovereign and the impaired financial institutions has been weakened,” the Munich-based strategist wrote. “The disentanglement of the sovereign and the financial sector solvency issue is the pivotal factor to manage the European periphery’s debt problems.” “Bailouts are nothing but a short-term string-and-sealing- wax fix,” Bill Blain, a strategist at Matrix Corporate Capital LLP in London, wrote in a client note. “We into the next stage of the euro sovereign crisis. It’s now a struggle between the political will of the Brussels elites to maintain the euro as is, versus the markets betting they can’t.” Irish Prime Minister Brian Cowen Loses Confidence of His Own Party Members of his Fianna Fail Party may ask Cowen to Resign. Irish Prime Minister Brian Cowen may be asked to resign by some members of his Fianna Fail party as the parliament prepares to pass the country’s 2011 budget, a lawmaker in the party said. “Tonight I’ll be telling him that I’ve lost confidence in you, the public has lost confidence in you and for the sake of the country and the party, give us an indication when you will resign and let us select somebody to lead us into the next election,” Noel O’Flynn told Bloomberg News in Dublin today. “Several members will stand up and ask him to go after the budget” on Dec. 7. Cowen’s position is weakening as he opens formal negotiations with the European Union and the International Monetary Fund over a rescue package to help stabilize the country’s banking system. Fianna Fail lawmakers will meet tonight, a day after the Green Party, Cowen’s junior coalition partners, called for a January election, saying he “misled’ voters over the past two weeks. Ireland Borrowing Costs 5%, Same as Greece Dutch Finance Minister says Ireland to Borrow From EU at Same Rate as Greece Ireland will pay about the same interest rate on emergency loans from the European Union as Greece, Dutch Finance Minister Jan Kees de Jager said. “We agreed that it will take place at about the same conditions and pricing as with Greece,” De Jager said in an interview at the ministry in The Hague yesterday. Ireland will have to pay interest of “about” five percent on the emergency loans, he said. Dilution Concerns Plague Bank of Ireland Over bailout dilution concerns, shares of Bank of Ireland Plunge 31 Percent Bank of Ireland Plc, Ireland’s largest bank, fell to a 20-month low on concern that shareholders will be diluted in any government bailout. Bank of Ireland slid 31 percent to 27 cents at 12:45 p.m. in Dublin trading after dropping 19 percent yesterday. Allied Irish Banks Plc, the country’s second-largest lender, fell 19 percent to 33 cents and Irish Life & Permanent Plc, which has avoided a bailout so far, fell 4.8 percent to 80 cents. “That the banks will be obliged to raise further capital now looks assured,” Emer Lang, an analyst with Dublin-based securities firm Davy, wrote in a note today. “The timing of any increase will hinge on the balance struck between ‘immediate’ additional capital injections and ‘top-ups’.” Rescue Package Set at $114 Billion, 85 Billion Euros The cost of the bailout keeps going up. The original estimate was for a $50 billion bailout. Now, Ireland Said to Need 85 Billion Euros for Rescue European Union officials estimate that a rescue package for Ireland may amount to about 85 billion euros ($114 billion), according to two officials familiar with the talks. The European Commission cited the figure as a preliminary estimate on a conference call of euro-region finance ministers on Nov. 21, said the people, who spoke on condition of anonymity because the talks were private. Of the total, 35 billion euros would be earmarked for banks and 50 billion euros to help finance the Irish government. Contagion is spreading through the euro region as Ireland hammers out an aid package with the EU and the International Monetary Fund to rescue its banking system. Spanish bonds tumbled, pushing the extra yield that investors demand to hold its 10-year debt over German bunds to a euro-era record of 236 basis points. Irish bonds also dropped today. A tip of the hat to Bloomberg for every one of the above links. Ireland at Crossroads Here are my thoughts expressed in Irish PM Dissolves Government; Spanish Banks Face Debt Challenge; Greece May "Shut-Down"; Meaning of "Guarantee"; Should Ireland Ditch the Euro? Ireland is at a major crossroads. The fact that Irish Prime Minister Brian Cowen is willing to step down helps. I agree that Ireland certainly needs reforms. Lowering the minimum wage will help create jobs. So will reducing benefits. Both need to happen regardless of what labour parties might think. However the biggest job creation effort will come from Ireland telling the ECB and IMF to stuff it. There is no reason Irish citizens should have to pay back the foolish guarantees made by Brian Cowen. Cowen will be gone soon enough, and the next PM can and should have different thoughts about the meaning of "guarantee". German Chancellor Angela Merkel last month called for bondholders to foot more of the bill of European bailouts. I agree. It's time to hold her to her word. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com

6 Million Benefit-Paying Jobs Vanish in One Year! (Mish Shedlock)

Perhaps I should start a seperate economics (hick!) blog ??

Well, no not really, but the hits just keep on a coming and some stuff is just too precious NOT to post. I don't politically always agree with Mish Shedlock 100% but his data is more than always impressive.

In light of the coming prescribed cuts in social security, consider these following FACTS !!

(and thanks Mish. More great ammo. Ain't that economic stimulus propoganda just stunning?)

6 Million Benefit-Paying Jobs Vanish in One Year!

Posted: 17 Nov 2010 02:05 AM PST

Analysis of weekly unemployment data and covered employees shows that 5,977,844 benefit-paying jobs have been lost in the last year.

click on chart for sharper image

The above chart is from reader Tim Wallace. I added the date and numeric annotations. Thanks Tim!

Covered Employment Stats of Merit

• Covered employment is back to 2004 levels.
• Close to 6 million benefits paying jobs have vanished in a year.
• Over 8 million benefits paying jobs have vanished since the 2008 peak.

What is a Covered Employee?

The exact meaning of "covered employee" varies slightly state to state, but not by much. In simple terms it means one is eligible for unemployment insurance benefits.

Most states exclude the self-employed, commission based employment such as real estate agents, those in student training programs, academic and hospital internships, employment by churches or religious organizations, and rehabilitation programs.

Self-employed individuals must pay into unemployment insurance programs, however, the self-employed are not eligible for benefits anywhere.

Nearly 6 Million Jobs Vanish

By the above intrepretation, it is safe to conclude that 5,977,844 jobs totally vanished (not just benefit paying jobs).

The only way that cannot be true is if there was a sudden shocking increase in the number of real estate agents, church hiring, or close to 6 million people all of a sudden decided to go into business for themselves.

All of those possibilities are highly unlikely to say the least.

Tim Wallace writes ....

The ANNUAL ADDITIVE TREND from 2004 to 2008 of 1.9 million is now a net loss of 8 million the past two years

Year....Covered...........Number added from previous year

2004....126,276,670....Data from hard copy sheets

2005....127,622,590....1,345,920

2006....130,605,286....2,982,696

2007....132,623,886....2,018,600

2008....133,902,387....1,278,501 average added per yr = 1,906,429

2009....131,823,421....-2,078,966

2010....125,845,577....-5,977,844

Did the stimulus SAVE or CREATE any jobs, or did we lose over 8 million jobs in two years in spite of record amounts of stimulus?

Download data including the covered column is found on the US Department of Labor website, Weekly Claims Data.

Was there a Massive Surge in Retirees?

click on chart for sharper image

There was no massive surge in retirees so that cannot account for the loss of benefits-paying jobs.

Retiree Data

• In October of 2006 there were 30,908,097 retirees.
  
• In October of 2007 there were 31,467,071 retirees, an increase of 558,974.
  
• In October of 2008 there were 32,222,895 retirees, an increase of 755,824.
  
• In October of 2009 there were 33,366,881 retirees, an increase of 1,143,986.
• In October of 2010 there were 34,463,650 retirees, an increase of 1,096,769.

Information on retirees is from the Social Security Administration. It undercounts retirees not in the system so actual numbers would be somewhat higher.

The number of retirees is certainly increasing which suggests the number of jobs needed to keep the unemployment rate steady is dropping. It also helps explain a falling participation rate (although not at the rate that it is falling).

That aside, the growth in the number of retirees cannot begin to explain the massive loss of benefits-paying jobs.

The increase in retirees from 2008 to 2010 is only 2,240,755 total. Civilian population growth was rose by 1,980,000 just last year.

Population Changes

I recently discussed population changes in my post In Search of 1.1 Million Jobs Claimed by Obama; Where the Hell are They?

Let's take another look at the BLS October Jobs Report.

Scroll down to page 5: HOUSEHOLD DATA Summary table A. Household data, seasonally adjusted.

click on chart for sharper image

The first item of interest is the Civilian Noninstitutional Population(i.e the population aged 16 and up not in school, prison, or other institutions).

In the last year, the table shows Civilian Noninstitutional Population rose by 1,980,000 an average gain of 165,000 potential workers a month.

Expected Increase In Workforce

In the last year the Civilian Noninstitutional Population rose by 1,980,000. There were 1,096,769 retirees. That mean the labor force should have increased by 883,231 workers. Instead the BLS reports the labor force increased by 50,000 workers (second line in table A above).

The rest supposedly dropped out of the workforce.

Hard Facts

Please remember the numbers in Table A are from phone surveys, seasonally adjusted, and arguably quite error prone.

On the other hand, the covered employees chart was produced from actual jobs data from the states.

Hard data says the US lost 5,977,844 benefits-paying jobs in a year, and 8,056,810 benefits-paying jobs in 2 years when we should have gained close to a million jobs a year or so based on population growth, even factoring in the number of retirees.

6 Million Benefits-Paying Jobs Vanish and Unemployment Rate Drops!

In spite of losing nearly 6 million benefits-paying jobs in the last year (and not gaining another 800,00 to a million more based on population growth minus retirees), the unemployment rate in October of 2009 was 10.1% and it is nowsupposedly a half-point lower at 9.6%.

Is this a crock or what?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Fiscal Crisis (CONT'D): Mish's analysis (blunt and good)

UK Wants to "Help" Ireland

Please consider Ireland May Be Next Greece as Europe’s Economic Superstar Fades

“Ireland is our closest neighbor, and it’s in Britain’s national interest that the Irish economy is successful and we have a stable banking system,” says George Osborne, the U.K. chancellor. “So Britain stands ready to support Ireland in the steps that it needs to take to bring about that stability.”

The Irish underestimated the severity of the losses for the past two years. In September, the government said that the bank bailout may cost as much as 50 billion euros. NAMA says it will absorb an estimated 73 billion euros of loans from the banks at a discount of about half of their value.

The figures sound small relative to the U.S. rescue of its banking system, except that Ireland’s population hovers at 4.4 million, according to the World Bank; the bailout so far equals 30 percent of the country’s 158 billion-euro gross domestic product. EU officials say Ireland’s emergency aid package may tally $136 billion, roughly the same amount given to Greece in May.

While the U.S. economy was driven off a cliff by the reckless securitizing of subprime mortgages and Greece collapsed under the burden of misrepresented government spending, the Irish traveled a simpler road to ruin: by taking out enormous, unregulated loans. Ireland’s economy has contracted for three consecutive years, and the Irish Central Bank governor has declared his country’s fiscal deterioration “worse than almost any other country.”

Today, according to former Central Bank of Ireland economist David McWilliams, the average Irish family owes 132,000 euros to banks.

Many Irish people won’t be able to pay off their debts in their lifetime, and almost all commercial developers are broke.

New Buzzword "Namatized"

NAMA stands for National Asset Management Agency, Ireland’s “bad bank.” Bloomberg notes that NAMA was created by the Irish government in 2009 to help stanch a crisis within the Irish banking system that has pushed the country to the edge of insolvency.

NAMA clearly did not work. I am saddened to report Irish citizens have been "Namatized", a fitting tribute to the fools in Irish government that authorized the nonsensical guarantee of Irish bank debts.

How Bankers Ruined Ireland

Please consider Why the Irish Crisis is Going Global for a nice synopsis of how bankers ruined a once thriving Ireland.

On the surface, it's reminiscent of the problem Greece had with its unmanageable federal debt early this year, which shook world markets, ended a global rally in stocks and ultimately led to a $146 billion bailout by the European Union and the International Monetary Fund. Greece spent more money than it took in for years, papered over the gap, and essentially became insolvent when it could no longer borrow the money needed to finance its debt.

Ireland is on the brink of insolvency too, which has helped drive down the S&P 500 stock index by nearly 4 percent over the last few days. But unlike Greece, Ireland is a relatively wealthy country, with per capita GDP of nearly $38,000. That's 21 percent higher than per capita GDP in Greece, and in the top third for European countries. Low corporate tax rates and a skilled workforce have made Ireland a haven for some of the world's biggest companies. And its public debt, about 65 percent of GDP, is far below Greece's crushing load, which is 126 percent of GDP. Ireland's debt levels are even lower than those in France, Germany and the United Kingdom.

But Ireland has one huge problem that may soon make it a supplicant to its European brethren: A failed banking sector that Ireland's government can no longer rescue on its own. Ireland is in the midst of a real estate bust that could trump even the ruinous downturns that turned parts of southern California and Nevada into suburban ghost towns, with home-grown banks stoking it all. Now, those banks are trying to manage catastrophic losses. The Irish government has effectively nationalized the nation's biggest banks by guaranteeing their debt, which would be akin to the U.S. government taking over Citigroup, Bank of America, J.P. Morgan Chase and Wells Fargo.

That means the Irish government is also on the hook for the losses those banks endure--which have risen far beyond initial estimates, and may have a lot farther to go. So far, the Irish government is obligated to cover losses amounting to 175 percent of Irish GDP, which is becoming an unsustainable burden. "If the Irish banks go down, the Irish government also goes down," says economist Jacob Kirkegaard of the Peterson Institute for International Economics.

Rat's Ass Perspective on "Help" from UK, EU, and IMF

Finally, I would like to repeat something I said in European Banks have $650 billion Exposure to Ireland; Germany’s Economy Minister says "EU Cannot Throw Money from Helicopters"

Rat's Ass Perspective

The other countries in the EU do not give a rat's ass about Ireland. All they really cares about is $650 billion in loans on the books of UK, German, French, Italian, and Spanish banks.

The US is of course the third most interested party and will no doubt apply pressure on the IMF to apply pressure on Ireland to accept some sort of bailout.

Ireland is sitting on a pile of cash. That cash will last much longer if Ireland defaults and that I believe is just what Ireland should do.

The IMF may be prepared to "Help" but I repeatedly ask and answer whether or not it can do any such thing in IMF Ready to "Help" Ireland; Can the IMF "Help" Anyone?

The short answer is for Ireland to tell the EU and IMF to "Stuff It".

Every country for itself. There is simply no reason for Irish citizens to bailout UK, German, French, and US banks.

Postponed is Not Solved

Bailout "help" will do nothing but overburden Ireland while making its problems worse down the road. Resentment will build up and hopefully Irish voters will do the same thing Icelandic voters did: throw the bums out and tear up the agreement.

Meanwhile, Spain is waiting in the on-deck circle. The proverbial s* hits the fan when Spain comes up to bat.

Mike "Mish" Shedlock

http://globaleconomicanalysis.blogspot.com

URGENT ACTIVISM !! STOP the bank bailout

Now this comes for Mish Shedlock -

Hardly a "radical" type.

Below that, the REAL TRUTH about the crisis

from Dennis Kucinich -

with the suggestion of WHAT TO DO !!

Bush Administration Seeks "Dictatorial Power"

Bloomberg is reporting Treasury Seeks Authority to Buy Mortgages Unchecked by Courts.

The Bush administration sought unchecked power from Congress to buy $700 billion in bad mortgage investments from financial companies in what would be an unprecedented government intrusion into the markets.

"He's asking for a huge amount of power," said Nouriel Roubini, an economist at New York University. "He's saying, `Trust me, I'm going to do it right if you give me absolute control.' This is not a monarchy."

Paulson is seeking an expansion of federal influence over markets that hasn't been seen since the Great Depression, said Charles Geisst, author of "100 Years of Wall Street" and a finance professor at Manhattan College in New York.

"This is going to be a big package because it's a big problem," Bush said following a meeting with Colombian President Alvaro Uribe at the White House. "We need to get this done quickly, and the cleaner the better."

Democratic presidential nominee Barack Obama said in a radio address that he "fully supports" Paulson and Fed Chairman Ben S. Bernanke's efforts to stabilize the financial system. The plan, however, should benefit both main street and Wall Street, he said.

Republican Presidential nominee John McCain "looks forward" to reviewing the proposal while focusing at least in part on "minimizing the burden on the taxpayer," said Jill Hazelbaker, communications director for the McCain campaign.

The Bush administration seeks "dictatorial power unreviewable by the third branch of government, the courts, to try to resolve the crisis," said Frank Razzano, a former assistant chief trial attorney at the Securities and Exchange Commission now at Pepper Hamilton LLP in Washington. "We are taking a huge leap of faith."

Unreviewable Dictatorial Power

Notice how everyone wants to rush this through even though it is the biggest financial crisis in history. One might think that something this big should be carefully considered but no... Bush says: "This is going to be a big package because it's a big problem" and "We need to get this done quickly and the cleaner the better."

It seems the bigger the problem the quicker and cleaner it can be fixed. Indeed Congress will argue more over the cost of toilet seats than they will over this $700 billion (and counting) bailout.

Democrats Want To Expand The Bailout

"We're going to be buying up a lot of mortgage paper," said House Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat. "Between Fannie Mae and Freddie now owned by the federal government and the mortgage paper we'll be acquiring here" and the Federal Deposit Insurance Corp. running failed bank IndyMac Bancorp Inc., "we should now be able substantially to reduce foreclosures," he said.

My Comment: Barney Frank is an incompetent socialist fool. Buying mortgages in and of itself will not prevent a single foreclosure. All buying mortgages will do is bail out the banks holding those mortgages. And one thing you can be most certain of is that it will be a selective bailout with no oversight as to who gets bailed out or why.

The Treasury plans to hire asset managers to purchase the assets through so-called reverse auctions, seeking the lowest prices, one of the people said. Congress will need to raise the limit for the federal debt to allow the government to borrow enough to fund the program, the person said.

Senator Richard Shelby, an Alabama Republican who has advocated that markets should be allowed to penalize bad bets, warned that bailout could saddle taxpayers with large debts.

"This could be the biggest bailout in the history of the country and could ultimately cost $500 billion to $1 trillion," Shelby, the ranking Republican on the Senate Banking Committee, said in a Bloomberg Television interview today. "Congress is not going to rubber stamp something."

My Comment: The odds of Congress not rubber stamping this are very slim.

Senator Christopher Dodd, the Banking Committee chairman, said the plan's framers should consider the full debt load of U.S. consumers, possibly including credit cards.

My Comment: Hells bells why not? Let's throw in credit cards, auto loans, boats, and casino debts? Why stop at credit cards and housing? Let's just have the government guarantee every debt in the country.

The temporary plan is likely to include a "second stimulus" proposal with infrastructure funds, low-income energy aid and Medicaid assistance, Frank said.

My Comment: Why stop at two? Why not four? Hell, let's just give everyone $1,000,000 and be done with it.

Officials devising the plan "need to make sure that they keep that hard-headed approach so that people are not profiting off this," said Martin Baily, who was chairman of the Council of Economic Advisers under Democratic President Bill Clinton.

My Comment: Hard headed approach? What are these clowns smoking? Paulson asks for $700 billion and idiots like Frank and Dodd are clamoring for more already.

"To some extent that's unavoidable," said Baily, now a senior fellow at the Brookings Institution in Washington. "Anytime you do something like this you have the problem of bailing people out and creating moral hazard. That's the reason why you hold your nose. But it's better than the alternative."

Perfectly Avoidable

Martin Baily is another fool. This was perfectly avoidable. All we had to do we eliminate the Fed and fractional reserve lending. And that is what still needs to be done.

Instead Congress is lining up to give "Unreviewable Dictatorial Power"to the Treasury while increasing the size of the already ridiculous proposal.

Contact Your Senator Today!

It's time to contact your senator. Here is contact information for Senators of the 110th Congress.

Phone or Email your Senators today. Tell them in your own words

* Urge your senator to Filibuster any bailout legislation.
* Emphatically state you do not want a bailout of any kind for anyone.
* No Dictatorial power for Paulson or Bernanke
* Taxpayers should not have to bail out banks making bad loans
* Tell them that "The Fed" and Paulson are systemic risk".


Email AND Phone Senators Shelby, Bunning, Kyle, Hagel

Whether Senator Shelby is your Senator or not, flood him with calls and emails asking for a filibuster and to stop the insanity. Senators Shelby, Bunning, and Kyle might be sympathetic to the cause, based on past statements. I am taking a stab at Hagel.

Please email and phone the following. Specifically ask for a filibuster and tell them to vote no to any bailout.

Shelby, Richard C.- (R - AL)
110 HART SENATE OFFICE BUILDING WASHINGTON DC 20510
(202) 224-5744
E-mail: senator@shelby.senate.gov

Bunning, Jim- (R - KY)
316 HART SENATE OFFICE BUILDING WASHINGTON DC 20510
(202) 224-4343
Web Form: http://bunning.senate.gov/public/index.cfm?FuseAction=Contact.ContactForm

Kyl, Jon- (R - AZ)
730 HART SENATE OFFICE BUILDING WASHINGTON DC 20510
(202) 224-4521
Web Form: kyl.senate.gov/contact.cfm

Hagel, Chuck (R - NE)
248 RUSSELL SENATE OFFICE BUILDING WASHINGTON DC 20510
(202) 224-4224
Web Form: hagel.senate.gov/public/index.cfm?FuseAction=Contact.Home

Please email and phone both of your senators as well.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Forecast: U.S. dollar could plunge 90 pct

By UPI

Well, gee, do ya think so ?? and this is only the TIP of the iceberg. How are things going to get to MARKET, guyz ..? Plus, for the umpteenth time, this guyz making policy have NO IDEA, none at all how to handle ALL THAT PAPER! The corporate culture mitigates against it .. mortgages, currencies, DEEDS, paperwork related to shifting staffs at financial institutions, reorganizing office structurally to deal with MORE paper and more EFT, . . . it's all quite, quite staggering. Even the accounting staff at these financial institutions will NOT BE ABLE TO KEEP up doing the books, let alone calculate future value and strategies. Oh, dear!!

But then you'd had to work on Wall Street and the City of London like I did to see what the next "synthetic" terror event is actually going to be, folks! They don't need to detonate the Twin Towers' equivalent for HELL to come and bit all our heels.

Turf the idiots out of their bars! Don't let them see their doctors for more pills to handle their high blood pressure! Give them an 86!! Intervene the addicts/gamblers and fantasy folks!! Don't rely on the government to do it, we're gonna HAVE to do it !! Keep up the PRESSURE.

Ps, subscribe to peoplenomics.com and to Mish Shedlock, Whiskey and Gunpowder.com. GET THE FACTS. Also, check out gata.com and the Privateer. Get some truth going. Try Dr. Michael Hudson, Dennis Kucinich's economic advisor for information, too. Don't let anyone MINIMIZE what is comoing, that's UNHEALTHY. Dont' let them rationalize or deny it. And don't fall for DELUSIONAL THINKING. The bulk of the economists don't know what they are talking about, they really DON'T.

Veeger

11/24/07 -- -, Nov. 19 (UPI) -- A financial crisis will likely send the U.S. dollar into a free fall of as much as 90 percent and gold soaring to $2,000 an ounce, a trends researcher said.

"We are going to see economic times the likes of which no living person has seen," Trends Research Institute Director Gerald Celente said, forecasting a "Panic of 2008."

"The bigger they are, the harder they'll fall," he said in an interview with New York's Hudson Valley Business Journal.

Celente -- who forecast the subprime mortgage financial crisis and the dollar's decline a year ago and gold's current rise in May -- told the newspaper the subprime mortgage meltdown was just the first "small, high-risk segment of the market" to collapse.

Derivative dealers, hedge funds, buyout firms and other market players will also unravel, he said.

Massive corporate losses, such as those recently posted by Citigroup Inc. and General Motors Corp., will also be fairly common "for some time to come," he said.

He said he would not "be surprised if giants tumble to their deaths," Celente said.

The Panic of 2008 will lead to a lower U.S. standard of living, he said.

A result will be a drop in holiday spending a year from now, followed by a permanent end of the "retail holiday frenzy" that has driven the U.S. economy since the 1940s, he said.

"A Generalized Meltdown of Financial Institutions"

Take a Look at Professor Roubini's Crystal Ball

By Mike Whitney

11/24/07 "ICH" -- - Reality has finally caught up to the stock market. The American consumer is underwater, the banks are buried in dept, and the housing market is in terminal distress. The Dow is now below its 200-Day Moving Average -- the first big "sell" signal. Anything below 12,500 could trigger program-trading and crash the market. The increased volatility suggests that we are watching a "real time" meltdown.

International Business editor for the UK Telegraph, Ambrose Evans Pritchard, summed up yesterday's action in the Asian markets:

"The global credit crisis has hit Asia with a vengeance for the first time, triggering a massive flight to safety as investors across the region pull out of risky assets. Yields on three-month deposits in China and Korea have plummeted to near 1pc in a spectacular fall over recent days, caused by panic withdrawals from money market funds and credit derivatives.

"'This' is a severe warning sign,' said Hans Redeker, currency chief at BNP Paribas. 'Asia ignored the credit crunch in August but now we're seeing the poison beginning to paralyze the whole global economy.'" (Credit 'Heart attack' engulfs China and Korea" Ambrose Evans Pritchard,UK Telegraph,)

The credit storm that began in the United States with subprime mortgages has spread to markets across the globe. In fact, the train has already crashed. What we're seeing now is the boxcars piling up on top of each other.

On Tuesday Chinese government officials ordered a complete halt to bank lending to slow the speculative frenzy that has created an enormous equity bubble in the stock market. According to the Wall Street Journal:

"Chinese authorities are slamming the brakes on bank lending, in their latest attempt to curb the runaway investment threatening to overheat what is soon to be the world's third-largest economy. In recent weeks, regulators have quietly ordered China's commercial banks to freeze lending through the end of the year, according to bankers in several cities. The bankers say that to comply, they are canceling loans and credit lines with businesses and individuals." ("China freezes lending to Curb Investing Frenzy" Wall Street Journal)

The move illustrates how concerned the Chinese are that a slowdown in US consumer spending will trigger a crash on the Shanghai stock market. It also shows that the Chinese are having difficulty dealing with the inflation generated by the hundreds of billions of US dollars absorbed via the trade imbalance with the US. China is awash in USDs and that surplus is causing a steady rise in food and energy costs. This could be mitigated by allowing their currency to "float" freely. But a sudden, steep increase in the Chinese yuan's value could also send the world headlong into a global recession. For now, the lending freeze and price fixing appear to be the way out.

Another sign that the markets have reached a "tipping point" appeared in a Reuters article on Wednesday; "Interbank Covered Bond Trading Halted on Volatility":

"Renewed credit turmoil and volatility led the European Covered Bond Council (ECBC) on Wednesday to suspend inter-bank market-making in covered bonds until Monday, Nov. 26.

The move is a sign of the stress in the covered bond market, which is dominated by German institutions that have almost a trillion euros of covered bonds outstanding.

Covered bonds -- backed by pools of assets that remain on the borrower's balance sheet -- are usually highly liquid and typically rated triple-A by ratings agencies. The ECBC's recommendation is aimed at relieving the pressure on market makers who are forced to quote prices at a fixed bid-offer spread.

"In light of the current market situation and in order to avoid undue over-acceleration in the widening of spreads, the 8-to-8 Market-Makers & Issuers Committee recommends that inter-bank market-making be suspended," the ECBC said in a release."

Note: This isn't mortgage-backed junk that's being sold, but highly liquid bonds that are usually easy to cash in. The ECBC's action is a sign of pure desperation and indicates that credit paralysis has infected the entire euro banking system.

Reuters: "Due to general market conditions and the specific mechanics of the inter-dealer market making it even seems possible that inter-dealer market making will not be resumed this year."

That's bad. The mechanism for converting covered bonds into cash has broken down.

The dollar took another pasting on Wednesday, sliding to $1.49 on the euro; another new record. Gold shot up to $814 per ounce. Oil continues to flirt with the $100 per barrel mark, and the yen rose to 107 per dollar forcing a sell-off of hedge fund assets levered through the carry trade.

Jon Basile, economist at Credit Suisse, summed it up like this: "There's a heck of a lot of bad news out there." Indeed.

In California Governor Arnold Schwarzenegger has joined with four mortgage lenders to freeze adjustable interest rates (ARMs) for some of the state's highest-risk borrowers; another unprecedented move. The Governor hopes to avoid a collapse of the California real estate market which has gone into a tailspin. Home sales have plummeted more than 40 per cent for the last two months. Prices have dropped sharply---roughly 12 per cent statewide. New construction has slowed to a crawl. Layoffs are steadily rising. Jumbo loans (mortgages over $417,000) have been put on the "Endangered Species" list. Even qualified borrowers can't get mortgages. Nothing is selling. California housing is "off the cliff".

Schwarzenegger's plan to keep over-extended subprime mortgage-holders in their homes faces an uncertain future. What incentive is there for homeowners to continue paying exorbitant monthly rates when their payments are not applied to the principle? The homeowners would be better off bailing out, accepting foreclosure, and starting over with a clean slate.

It's unrealistic to thinks that Schwarzenegger can stop the tidal wave of foreclosures that are sweeping across the state. An estimated 3 million homeowners will lose their homes nationwide.

If you want to blame someone; blame Alan Greenspan. He's the one who created this mess. According to the economist Mike Shedlock:

"The Fed caused the credit crunch by slashing interest rates to 1 per cent to bail out its banking buddies in the wake of a dotcom bubble collapse. All the Fed did was create a bigger bubble. This bubble is so big in fact that it cannot even be bailed out. It's the end of the line for a serially bubble blowing Fed.

"So not only was this the biggest credit bubble in history, this was also the biggest transfer of wealth from the poor and middle class to the already enormously wealthy. That is the real travesty of justice regardless of whether or not the price tag is $1 trillion, $2 trillion, or $10 trillion." (Mike Shedlock, "Mish's Global Economic Trend Analysis")

The problem has gotten so serious that even Secretary of the Treasury, Henry Paulson, is putting up red flags. Last week, Paulson ignited a sell-off on Wall Street when he made this statement:

"The nature of the problem will be significantly bigger next year because 2006 [mortgages] had lower underwriting standards, no amortization, and no down payments....We're never going to be able to process the number of workouts and modifications (to mortgages) that are going to be necessary doing it just sort of one-off. I've talked to enough people now to know that there's no way that's going to work."

The desperation is palpable. Like Schwarzenegger, Paulson is trying to get mortgage-lenders to provide a safety net for struggling borrowers who are defaulting on their loans.

Paulson is calling for emergency legislation that will allow the Federal Housing Administration to play a greater role in the relief effort. The FHA has already expanded its traditional role by taking on hundreds of billions in extra debt just to keep a few "private" mortgage lenders and banks from going bankrupt. Of course, when Paulson's plan goes kaput and the debts pile up; it'll be the taxpayer that foots the bill.

"Paulson also called the Senate's failure to pass legislation overhauling mortgage giants Fannie Mae and Freddie Mac frustrating," saying that the two government-sponsored entities need to be playing a bigger role in the housing market.

"If we ever need them it's during times like today, and they're most valuable when there is distress in the mortgage market," he said. "I'd like to see them playing an even bigger role."(Wall Street Journal)

Fannie and Freddie, have already posted enormous quarterly losses and don't have the capital reserves to put millions of subprime mortgage-holders under their "government-sponsored" umbrella. Paulson is just grabbing at straws.

Similar troubles are brewing in the broader market where late-payments and defaults have spread to credit card debt and new car loans. Every area of "securitized" debt has suddenly veered off the road and into the ditch. Last week the Fed injected more credit into the teetering banking system than anytime since 9-11.

No one has predicted the downward-spiral in the market more accurately than Nouriel Roubini. Roubini is a Professor at the Stern School of Business at New York University. His analysis appears regularly on his blogsite, Global EconoMonitor. Last week's prediction was particularly dire and is worth reprinting here:

"It is increasingly clear by now that a severe U.S. recession is inevitable in next few months...I now see the risk of a severe and worsening liquidity and credit crunch leading to a generalized meltdown of the financial system of a severity and magnitude like we have never observed before. In this extreme scenario whose likelihood is increasing we could see a generalized run on some banks; and runs on a couple of weaker (non-bank) broker dealers that may go bankrupt with severe and systemic ripple effects on a mass of highly leveraged derivative instruments that will lead to a seizure of the derivatives markets... massive losses on money market funds with a run on both those sponsored by banks and those not sponsored by banks; ..ever growing defaults and losses ($500 billion plus) in subprime, near prime and prime mortgages with severe knock-on effect on the RMBS and CDOs market; massive losses in consumer credit (auto loans, credit cards); severe problems and losses in commercial real estate...; the drying up of liquidity and credit in a variety of asset backed securities putting the entire model of securitization at risk; runs on hedge funds and other financial institutions that do not have access to the Fed's lender of last resort support; a sharp increase in corporate defaults and credit spreads; and a massive process of re-intermediation into the banking system of activities that were until now altogether securitized." (Nouriel Roubini's Global EconoMonitor)

"A generalized meltdown of the financial system".

Looks like Chicken Little might have gotten it right this time; "The sky IS falling."

Mike Whitney lives in Washington state. He can be reached at: fergiewhitney@msn.com