Manipulation and Corruption


Corruption has become an issue of major political and economic significance in recent years and the necessity to take measures against it has become evident.

Explooring Manipulation ?...ask Mbah Ghus Taf..on the spot



The Opportunities During Recession & Stagflation


Opportunities During Recession & Stagflation

Many people often associate economic downturn with lack or absence of opportunities. “It’s simply impossible to make money much less to prosper during an economic recession or depression.”

This is absolutely not true.

Because the truth is, economic recessions or it’s uglier cousin, economic depressions, are just the perfect opportunities that anyone with vision can take advantage of to become not just rich – but filthy rich!

For the record no less than America’s second richest person alive, Warren Buffet whose personal fortune reached a dizzying $48 billion before he decided to give back to the society $31 billion can attest to this.

Warren Buffet built his massive fortune buying businesses and properties that most people had given up as lost. To many businessmen, he is the great rescuer who bailed them out of their economic miseries.

But of course Warren Buffet saw more than rescuing them out of their economic woes. If he sees no value or potential in their businesses, he sees no reason to buy them.

But what exactly does he know that ordinary mortals don’t usually know about economic downturns?

First and foremost, economic downturns don’t last. During bad times, Prophets of Doom would say the worst things about the economy.

Of course things are bad. But they only remain bad to a certain point. This is because of the thing called Economic Cycle.

Economic Cycles are periods in history of booms and busts. Economic cycles are the hallmarks of laissez faire system. Economic cycles behave just like the seasons.

And just like the seasons, the climate always changes. And just like the seasons you can predict a downturn or an upturn.

What happened just after just the turn of 20th century was a classic example of an economic boom suddenly gone bust.

In the roaring 20’s people thought that there was no stopping to the prosperous times. Until one day, people started dumping stocks at such a frenzy that it sent the whole world in probably the worst economic depression in history.

By all means the signs of a coming collapse were present. Stocks were at all time high. In fact unreasonably high. And people were living beyond their means.

The same thing happened again with the housing market in 2007 - 2008. Just a couple of years ago, the sense of affluence was everywhere with home values skyrocketing.

Because of the high cost of home ownership many Americans were forced to borrow beyond their means. The result was a credit crisis that sent the world reeling again in another round of recession.

So the question now is if we could predict an economic downturn, could we also predict an economic upturn?

The answer is yes.

If you religiously watch CNBC or read CNNmoney.com, you’d find that home prices had already gone low enough to attract the buyers back.

But how low it could get is the question. Prospective home buyers are still in the sidelines waiting for better bargains. The question this time is when will they decide that the price is already right enough to make them buy?

The following articles will open your eyes to the realities of economic cycles and the opportunities that you can take advantage of for your personal economic growth.

Competition vs. Collusion


Competition vs. Collusion
By Sah Dong-seok
Deputy Managing Editor

Several months ago, I dropped in at a legal counsel's office in the southeastern inland city of Sangju to have farmland my father-in-law had inherited from his ancestors registered. While having a consultation at the office, I felt disturbed because the clerks there were unkind and stiff, and so I left the office without entrusting the work to them. I visited several other offices but attitudes of the office workers there were similarly cool.

Later I found that most legal counsels in the city in North Gyeongsang Province were bound by a pact under which they were supposed to receive the same fees on a monthly basis irrespective of the number of cases taken. Paradoxically enough, both the legal counsel office and employees were gaining if they didn't receive orders. It looked as if collusion among the legal counsels to keep registration fees high and maximize profits without competition has brought enormous losses to consumers. Ultimately, I gave my order to a counsel not affiliated with the pact but I felt very bitter about losses and economic inefficiency arising from the lack of competition.

As is shown in this case, competition is uncomfortable and collusion is sweet. Everyone dreams of avoiding competition and leading an equal and easy life. Competition is not only severe and inhuman but also requires us to trample others. Therefore, an equal world without competition has been the mankind's long-cherished dream and the birth of socialism putting priority on equality was somewhat inevitable. Socialism, a comfortable and humane ideology rejecting competition, exists on restraint and cooperation, envisioning that people can own as much as they want without greed. Yet the very selfish human nature made the gigantic socialism experiment a total failure.

In acute contrast, capitalism is based on competition. In this society, competition is the driving force of progress and advancement. It goes without saying that without competition, people would be lazy and wouldn't make any effort. Companies grow by producing goods at lower costs and selling them through competition. Collusion enables companies to have short-tem gains but hampers corporate growth and hurts consumer interests in the long run. In this era of borderless unbounded competition, collusion could bring fatal results to a nation's economic growth and development.

For private companies, market competition is a natural phenomenon. Their failure to get favorable responses form the markets prevents them from reaping profits and they can see their existence threatened. In this process, the quality of goods and services improves, the economy makes progress and disposable income rises. On the contrary, governments and state firms, with their virtual monopolies, don't need to risk bankruptcy and are prone to laziness because it's okay if more taxes are collected. With monopolistic profits, their structure is apt to swell, raising the need for constant slimming down, restructuring and privatization.

The most controversial field involving competition is education. Since the introduction of an equalization education policy in the 1970s, South Korea has deprived middle and high school students of the right to choose their schools, allocating them in blocks, except for special cases. The equalization policy had been designed to stem excessive competition but regrettably enough, public education has been crumbling. An increasing number of parents are sending their children, including even those in elementary schools, abroad to study and the proportion of private spending to total education expenses is soaring.

While it's partly true that fiercer competition in school has prompted private education to prosper and public education to collapse, more educators contend that the lack of competition between schools and teachers has left schools desolate and public education falling apart. They claim that should each school teach students English and other subjects effectively and efficiently and the competitiveness of schools revive, parents would depend less on overseas studying and private cram schools.

The latest moves to introduce the nationwide evaluation system for teachers and allow students to choose high schools will lay a groundwork for sharpening the competitiveness of public education. What's important is that schools will offer better education services so that parents won't look for private educational institutions and send their children abroad to schools that could be beyond their ability. The school-choice system should go in such a direction as to encourage each school to differentiate educations programs to meet demand from students and parents.

Competition has two faces. On the one hand, competition engineers progress. On the other, however, competition could destroy human dignity and make the very existence of society hard amid constant conflict if the winner-take-all hypothesis becomes the norm. Therefore, it will be necessary to take policy measures such as the creation of safety nets for the losers who are dropped in the process of competition, in addition to the establishment of a level playing field.

sahds@koreatimes.co.kr

Bailout 101: What new law says

Bailout 101: What new law says
Here's a rundown of key provisions of the financial rescue plan.
By Jeanne Sahadi, CNNMoney.com senior writer

NEW YORK (CNNMoney.com) -- It took two tumultuous weeks of moral and fiscal debate, but Congress and the Bush administration on Friday finally put a capstone on the $700 billion bailout of the financial system.
President Bush signed the bill less than two hours after the plan, which had been amended and passed by the Senate on Wednesday, was approved by the House.
The changes the Senate made include the addition of a host of tax break extensions and some new provisions intended to help individuals and businesses.

Here's a breakdown of some of the economic rescue plan's main provisions:

Attacking credit crisis: The core of the bill the House will vote on is the same as what it rejected on Monday: the Treasury's proposal to let financial institutions sell to the government their troubled assets, mostly mortgage-related. It would only allow the Treasury access to the $700 billion in stages, with $250 billion being made available immediately.

Protecting taxpayers: The bill is also similar to the original House bill in that it includes a number of provisions that supporters say would protect taxpayers. One would direct the president to propose a bill requiring the financial industry to reimburse taxpayers for any net losses from the program after five years. And the Treasury would be allowed to take ownership stakes in participating companies.
The bill includes a stipulation that the Treasury set up an insurance program - to be funded with risk-based premiums paid by the industry - to guarantee companies' troubled assets, including mortgage-backed securities, purchased before March 14, 2008.


Curbing executive pay: The bill would place curbs on executive pay for companies selling assets or buying insurance from Uncle Sam. For example, any bonus or incentive paid to a senior executive officer for targets met would have to be repaid if it's later proven that earnings or profit statements were inaccurate.


Oversight: The bill would set up two oversight committees.
A Financial Stability Board would include the Federal Reserve chairman, the Securities and Exchange Commission chairman, the Federal Home Finance Agency director, the Housing and Urban Development secretary and the Treasury secretary.
A congressional oversight panel, to which the Financial Stability Board would report, would have five members appointed by House and Senate leadership from both parties.


Tax breaks: The Senate-version of the bill that the House is considering on Friday includes three key tax elements designed to attract House Republican votes.
It would extend a number of renewable energy tax breaks for individuals and businesses, including a deduction for the purchase of solar panels.
The legislation would also continue a host of other expiring tax breaks. Among them: the research and development credit for businesses and the credit that allows individuals to deduct state and local sales taxes on their federal returns.
In addition, the bill includes relief for another year from the Alternative Minimum Tax, without which millions of Americans would have to pay the so-called "income tax for the wealthy."


New accounting rules: The bill underlines the Securities and Exchange Commission's power to change accounting rules on how banks and Wall Street firms value securities, and directs the agency to study the issue.
Some observers argue that tight accounting rules are a major reason for the credit crisis in the first place. Others contend that changing the so-called mark-to-market rules will just bury problems lurking beneath the surface and could further shake investor confidence in the already battered financial sector.
(More about the rules.)

Shielding bank deposits: The bill temporarily raises the FDIC insurance cap to $250,000 from $100,000. The bill allows the FDIC to borrow from the Treasury to cover any losses that might occur as a result of the higher insurance limit.
Federal bank regulators, who first floated the idea to Congress late Tuesday, said that bumping up the insurance limits would help improve liquidity at banks across the country. It may also provide a much-needed dose of confidence for consumers who may be worried about the health of their bank.
(More about FDIC rules.)
The bill will also temporarily increase the level of federal insurance for credit union savings to $250,000.


Mitigating foreclosures: The bill calls on federal agencies to encourage loan servicers to modify mortgages by a number of means - including reducing the principal or interest rate. It also extends a temporary provision that exempts from federal income tax any debt forgiven by a bank to a borrower in a foreclosure.

Cost: The tax provisions of the bill - the bulk of which come from the addition of tax breaks from other legislation - may reduce federal tax revenue by $110 billion over 10 years, according to estimates from the Joint Committee on Taxation. More than half of that is due to the 1-year extension of AMT relief.
The Congressional Budget Office said it cannot estimate the net budget effects of the troubled asset program because of the many unknowns about that piece of the bill. However, the agency noted in a letter to lawmakers on Wednesday, it expects the program "would entail some net budget cost" but that it would be "substantially smaller than $700 billion."
Overall, the CBO said, "the bill as a whole would increase the budget deficit over the next decade."

Crisis Hits Main Street as Employers Cut More Jobs


Crisis Hits Main Street as Employers Cut More Jobs
By Shobhana Chandra and Rich Miller

Oct. 3 (Bloomberg) -- U.S. payrolls plunged in September, signaling the economy may be heading for its worst recession in at least a quarter century as the 13-month-old credit crisis on Wall Street finally hits home on Main Street.
Employers cut the most jobs in five years in September as cash-squeezed companies pulled back in an effort to bolster pinched profits. In its last employment report before Americans choose their next president, the Labor Department said the unemployment rate was 6.1 percent, a climb of 1.4 percentage points from a year before.
If credit markets remain dysfunctional, the current recession could turn out to be as severe as any in the postwar period,'' said former Federal Reserve governor Lyle Gramley, now senior economic adviser at the Stanford Group Co. in Washington.
The spreading crisis is also having reverberations on the campaign trail, as polls show anxious voters increasingly see Democrat Barack Obama as the candidate best placed to see the U.S. through its economic travails. The unemployment rate has only risen twice in the year leading up to elections since World War II, and in each case the incumbent party lost.
This country can't afford Senator McCain's plan to give America four more years of the same policies that have devastated our middle class and our economy for the last eight,'' Obama, 47, said in a statement.


McCain's Reaction
Arizona Senator John McCain, 72, took the opportunity to paint his opponent as a tax-and-spend liberal, whose prescriptions would exacerbate the crisis.
Unlike Senator Obama, I do not believe we will create one single American job by increasing taxes, going on a massive spending binge, and closing off markets,'' McCain said in a statement. Our nation cannot afford Senator Obama's higher taxes.''
Job losses accelerated as the credit crisis deepened last month, forcing the failure or government takeovers of Lehman Brothers Holdings Inc., Fannie Mae, Freddie Mac and American International Group Inc.
The figures came hours before the House of Representatives passed a $700 billion rescue plan for the U.S. financial industry pushed by Treasury Secretary Henry Paulson. The Senate approved the legislation two days ago after the House rejected an initial version of the bill Sept. 29.

Market Reaction
Stocks rose and Treasury securities fell. The Standard & Poor's 500 index climbed 1.8 percent to 1,134.6 at 1:39 p.m. in New York. The yield on the benchmark 10-year note rose to 3.71 percent from 3.63 percent late yesterday.
Today's report showed that hours worked -- considered a good proxy for the state of the overall economy -- matched the lowest level since records began in 1964. That indicates the likely current recession may be at least as severe as the 1981-82 slump, during which gross domestic product shrank by 2.7 percent.
Payrolls fell by 159,000 in September, the Labor Department said in Washington. Aside from a 9,000 gain in government payrolls, all major categories showed declines except education and healthcare.
The really bad news here is that job losses are now widespread,'' said Nariman Behravesh, chief economist at Global Insight Inc., a Lexington, Massachusetts, forecasting firm. ``The problems in housing and manufacturing are now spreading everywhere. We are in a recession, there is no debate about that.''


Health Services
Even the vibrant health-services industry is showing signs of succumbing to the economy's troubles. Health care employment rose 17,000, about half the average monthly gain for the prior 12 months.
Walgreen Co., the largest U.S. drugstore chain, reported Sept. 29 that its profits rose less than analysts estimated after it posted its smallest sales increase in a decade.
A private report today showed that services-industry growth remained stagnant in September. The Institute of Supply Management's non-manufacturing index slipped to 50.2 from 50.6 the month before. Fifty is the dividing line between growth and expansion.
Total payrolls were forecast to drop 105,000 after declining by a previously estimated 84,000 in August, according to the median of 76 economists surveyed by Bloomberg News. The jobless rate was projected to remain at 6.1 percent.

Rate Forecasts
Jan Hatzius, chief U.S. economist at Goldman Sachs Group Inc. in New York, said the unemployment rate may eventually rise to more than 7 percent as the credit crunch takes its toll on the economy. If that happens, that would make the overall rise in unemployment the biggest since the early 1980's.
Edelmira Clark, 53, of Chicago, said she was concerned about losing her job as a hotel housekeeper. Her company has already cut her work hours to two days a week.
"I'm trying to find a part-time job in the morning to balance, because I can't do only two days of work,'' said Clark, who immigrated to Chicago from Belize in 1997. "But a lot of people, my friends, have lost their jobs for good.''
Workers' average hourly wages rose 3 cents, or 0.2 percent, to $18.17 from the prior month. Hourly earnings were 3.4 percent higher than September 2007. Economists surveyed by Bloomberg had forecast a 0.3 percent increase from August and a 3.6 percent gain for the 12-month period.
After today, the total decline in payrolls so far this year has reached 760,000. The economy created 1.1 million jobs in 2007.
Americans will go to the polls on Nov. 4 and the October jobs report is due Nov. 7.

'Angry' Voters
"Voters are extremely angry, and they want someone to blame,'' said Scott Anderson, senior economist at Wells Fargo & Co. in Minneapolis.
Obama has opened up a lead over Republican rival John McCain in the aftermath of their first debate and amid growing concerns about the economy, according to a Pew Research Center survey taken Sept. 27 to Sept. 29. A mid-September poll from Washington- based Pew had shown the candidates were in a statistical tie.
Earlier in September, a Bloomberg/Los Angeles Times poll showed more respondents said Obama would do a better job handling the financial crisis than McCain, and almost half of the voters believed he had better ideas to strengthen the economy than his rival.

Factory Firings
Factory payrolls fell 51,000 after decreasing 56,000 in August. Economists had forecast a drop of 57,000.
Today's report also reflected the housing slump. Payrolls at builders declined 35,000 after falling 13,000. Financial firms decreased payrolls by 17,000, the most since November last year.
Service industries, which include banks, insurance companies, restaurants and retailers, subtracted 82,000 workers after eliminating 16,000 in the previous month. Retail payrolls slid by 40,100 after a 25,400 drop.
In the past month, Hewlett-Packard Co., the world's largest personal-computer maker, announced it will cut 24,600 jobs, and auto-parts maker Federal-Mogul Corp. said it would eliminate 4,000 positions globally.
Marriott International Inc., the world's largest hotel chain, yesterday reported third-quarter profit fell 28 percent as U.S. companies and consumers cut back on travel.
Without action from Congress, "the resulting credit squeeze could threaten businesses,'' Chief Financial Officer Arne Sorenson said on a conference call. There are "tens of thousands of jobs at stake in our company alone, and we are typical.''
Mounting job cuts will further limit consumer spending, which accounts for more than two-thirds of the economy. A Bloomberg survey in September predicted spending will be unchanged this quarter, the weakest performance since 1991.
The ISM on Oct. 1 said manufacturing shrank in September at the fastest pace since the last recession in 2001. The odds the central bank will lower its benchmark rate by a half percentage point, to 1.5 percent, were almost 100 percent today, up from 32 percent a week ago.

To contact the reporter on this story: Shobhana Chandra in Washington schandra1@bloomberg.netRich Miller in Washington rmiller28@bloomberg.net

Financial-Rescue Legislation


Senate May Try to Revive Financial-Rescue Legislation
By Alison Fitzgerald and Matthew Benjamin

Sept. 30 (Bloomberg) -- The U.S. Senate will try to salvage a $700 billion financial-rescue package after the measure was defeated in the House of Representatives. The lawmakers won't have a lot of room to negotiate.

While the legislation will need to be tweaked enough to win over reluctant House Republicans, the lawmakers will risk losing votes from Democrats if they veer too far from the delicate compromise that congressional leaders hammered out with the U.S. Treasury.


They're not going to totally revamp the bill,'' said Pete Davis, president of Davis Capital Investment Ideas in Washington, who spoke to House and Senate leaders yesterday. They'll make some minor changes and pass it. This is all about political cover.''
The House rejected the legislation yesterday in a 228 to 205 vote, sending the Dow Jones Industrial Average tumbling 778
points for its biggest point drop ever and erasing more than $1 trillion in market value. The Standard & Poor's 500 Index fell 8.4 percent, the most since Oct. 26, 1987. The S&P 500 today rose 40.09 points, or 3.6 percent, at 11:51 a.m. in New York. The Dow Jones Industrial Average gained 291.27 or 2.81 percent to 10,656.72.



A Different Result
Senators say they have no choice but to revive the measure, which is designed to restore confidence in the nation's banking system.
We don't intend to leave here without the job being done,'' said Banking Committee Chairman Christopher Dodd, a Connecticut Democrat. He said lawmakers will hopefully come back Wednesday and get a different result.''
Senate Minority Leader Mitch McConnell, a Kentucky Republican, vowed that the lawmakers would take action soon. We intend to pass this legislation this week and we will pass it on a broad bipartisan basis,'' he said today on the chamber floor. Senate Majority Leader Harry Reid, a Nevada Democrat, said approving the legislation is the top priority.
Money-market rates jumped in Europe today, with lenders hoarding cash as the third quarter ends. Rates on three-month loans in dollars were as high as 10 percent as of 10:50 a.m. in London, said Ronald Tharun, a money-market trader at Landesbank Baden-Wuerttemberg in Stuttgart.
To pick up the 12 votes needed to pass the bill in the House, the bill will need cosmetic changes, lawmakers and analysts say. Ninety-five Democrats joined the 133 Republicans who voted against the bill. Both sides are looking for changes.



Expanded FDIC Role?
House Republican conservatives are likely to keep pressing for a mandatory insurance program they initially proposed for mortgage-backed securities. They may also try to force the Securities and Exchange Commission to suspend mark-to-market accounting and require bank regulators to assess the real value of the troubled assets, lawmakers say.
Either measure could drive away Democratic votes.
The Senate may also consider expanding the authority of the Federal Deposit Insurance Corp., Dodd said today.
Under one plan, pushed by House Republicans, the FDIC would issue lenders certificates they could use as capital, which the banks would have to pay back with interest. The proposal would give the FDIC more say in how the institutions are run.
Democrats say they may also seek stronger oversight on the rescue plan, tougher limits on executive compensation and more relief for homeowners facing foreclosure.




Bankruptcy Provision
Some Democrats want a provision that would allow bankruptcy judges to alter the terms of a home mortgage for individuals in bankruptcy, even reducing the principal balance. That would be a deal-killer for many Republicans, a danger that presidential nominee Barack Obama recognized: He opposed including that in the original bill, angering fellow Democrats.
The Senate won't hold any roll-call votes today because several lawmakers will be celebrating Rosh Hashanah, the Jewish New Year. Gregg and Dodd urged investors not to view that pause as inaction.
We can certainly work,'' said Dodd.
House Majority Leader Steny Hoyer said he expects his chamber to be ready to take up the plan again after a Senate vote. We're not out of business until this is addressed,'' Hoyer said.
Hoyer said he has spoken with Republican Whip Roy Blunt and both are committed to working together on a compromise.
Some lawmakers are proving tough to sell on the plan.



Better Bill
We can craft a much better bill,'' said Representative Brad Sherman, a California Democrat who voted against the bill. He objected to the ``tens of billions of dollars'' that could go to foreign companies and said the oversight board the plan would create would be powerless.
Sherman wants more relief for homeowners and stronger restrictions on executive compensation, among other measures.
Representative Jeb Hensarling, a Texas Republican, said most Republican conservatives oppose the idea of Treasury purchasing troubled assets, because it puts too much of the expense on taxpayers.
That is a model that House conservatives feel is fundamentally flawed,'' said Hensarling, the chairman of a group of more than 100 House Republican conservatives called the Republican Study Committee.
Still, the markets may dictate that Congress act now.
It's just not acceptable for Congress to essentially tell Main Street or Wall Street to drop dead,'' said Chris Lehane, a Democratic consultant who was former Vice President Al Gore's communications director. The Dow dropping 777 points is a pretty powerful force to find another 12 votes.''


To contact the reporter on this story: Alison Fitzgerald in Washington at Afitzgerald2@bloomberg.netMatthew Benjamin in Washington at Mbenjamin2@bloomberg.net

Bailout by Stealth

Bailout by Stealth
While the public is distracted by the “bailout bill” and its rejection, trillions are pumped in to keep financial balloon inflated

James Corbett
The Corbett Report

The media is falling all over itself to report on every minutiae of the so-called Wall Street “bailout bill” and its rejection by Congress yesterday (just a few of the thousands of examples can be seen here and here and here and here). And why not? The media’s breathless coverage of the bill has produced a furious backlash by the public and hysteria on Wall Street in a self-justifying feedback loop that makes the media attention seem merited.
The startling truth which the controlled corporate media is not reporting, however, is that a bailout is actually taking place right now, completely out of the public spotlight. This program has already pumped trillions of dollars into Wall Street (compared to the mere $700 billion proposed in the legislation that the media is focusing on) to help prop up the faltering investment banks and promises to pump in even more, every dime of it to the detriment of the taxpayer though the public will have no stake in its success. Why, then, is this program not being talked about in the media?
Slipping under the radar last week amidst the hullabaloo in Washington over the bailout bill was this story noting that in the past week alone, the Federal Reserve had pumped an astonishing $188 billion per day into the system in the form of emergency credit. This means that in just four days, the Fed injected as much money into the system as the entire $700 billion bailout proposal. After the proposal was rejected, the Fed responded by immediately announcing it would pour another $630 billion into the global financial system.
The Federal Reserve, of course, is America’s central bank and although the above story conjures the reassuring image of a national bank lending out some of its vast reserves to help Wall Street weather the storm, the fact is that the Federal Reserve is not Federal and has doubtful reserves. In fact, the trillions of dollars that have been lent to the banks in the last few weeks were created out of nothing by the privately-owned Federal Reserve. When the Federal Reserve “lends” money to a bank through repurchase agreements (repos), credit auction or other method, it is not actually lending out money from its vaults. It is simply creating the money it “lends” out as electronic credits created in the recipient banks account. It is literally money out of thin air.
That the general public is on the hook for this money created out of nothing is not an exaggeration. It is paid for in a dimly-understood mechanism often known as the “inflation tax.”
Inflation is nothing more than an indication that the ratio of money to products that can be purchased with that money has been increased. Since the overall number of dollars has gone up without any corresponding increase in economic production (as happens when the Federal Reserve creates money out of thin air), the value of each individual dollar goes down. That means that the value of the money in each individuals’ bank account (not to mention their pension and social security dividends) can be reduced simply by the flick of a pen of a Federal Reserve paper-pusher. (Unless of course that individual just happens to be a billionaire investment mogul or a Vice President who can divest themselves of U.S. dollars in time for this inflation not to affect them.) This is sometimes known as an inflation tax because its overall effect is the same as if the government came in and took that value out of the individuals’ bank account.

The most insidious part of this inflation tax is that the inflation does not begin until the new money begins to circulate in the system. In other words, the first person (or, more likely, giant corporate conglomerate) to use the money receives its full value, while those at the bottom of the pyramid retrieve the diminished returns of a devaluing dollar.
Why, then, is the public not furious about this stealth bailout, now taking place at the blistering pace of nearly $1 trillion a week, and all to the taxpayer’s detriment? The obvious answer is that the media is not whipping the public into a frenzy about it, instead focusing its attention on a $700 billion program and allowing the public to feel like they scored a blow against Wall Street when the program gets rejected. If so, it’s time the public got wise to how the system is really being run by and for the benefit of private bankers and at the expense of the average taxpayer. Otherwise, the fleecing of the public will continue unabated even as the public thinks they’ve won the battle.

Fed Pumps $630 Billion Into Global Banking System

Fed Pumps $630 Billion Into Global Banking System


Sept. 29 (Bloomberg) -- The Federal Reserve will pump an additional $630 billion into the global financial system, flooding banks with cash to alleviate the worst banking crisis since the Great Depression.
The Fed increased its existing currency swaps with foreign central banks by $330 billion to $620 billion to make more dollars available worldwide. The Term Auction Facility, the Fed's emergency loan program, will expand by $300 billion to $450 billion.
The European Central Bank, the Bank of England and the Bank of Japan are among the participating authorities.
The Fed's expansion of liquidity, the biggest since credit markets seized up last year, came hours before the U.S. House of Representatives rejected a $700 billion bailout for the financial industry. The crisis is reverberating through the global economy, causing stocks to plunge and forcing European governments to rescue four banks over the past two days alone.
Today's blast of term liquidity will settle the funding markets down, and allow trust to slowly be restored between borrowers and lenders,'' said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. On the other hand, ``the Fed's balance sheet is about to explode.''
The MSCI World Index of stocks in 23 developed markets sank 6 percent, the most since its creation in 1970. Credit markets deteriorated further as authorities tried to save more financial institutions from collapse.

European Rescue
European governments have rescued four banks in two days and the Federal Deposit Insurance Corp. said today it helped Citigroup Inc. buy the banking operations of Wachovia Corp. after its shares collapsed. The Standard & Poor's 500 Index fell 3.8 percent and the cost of borrowing dollars for three months rose to the highest since January. The rate for euros hit a record.
If people think the authorities may give in to fears, they are wrong,'' Financial Stability Forum Chairman Mario Draghi said today in Amsterdam, where the international group of regulators and finance officials is meeting. There is willingness and determination on winning the battle to restore confidence and stability.''
Banks and brokers have slowed lending as they struggle to restore their capital after $586 billion in credit losses and writedowns since the mortgage crisis began a year ago. The bankruptcy of
Lehman Brothers Holdings Inc. also sparked fears among banks they wouldn't be repaid by counterparties, driving up the cost of short-term loans between banks.

Funding Risk
By committing to provide a very large quantity of term funding, the Federal Reserve actions should reassure financial market participants that financing will be available against good collateral, lessening concerns about funding and rollover risk,'' the central bank said.
The Bank of England and the ECB will each double the size of their dollar swap facilities with the Fed to as much as $80 billion and $240 billion, respectively. The Swiss National Bank and the Bank of Japan will also double their dollar swap lines, while the central banks in Australia, Norway, Sweden, Denmark and Canada tripled theirs.
All the banks extended their facilities until the end of April 2009.
The Fed is also increasing the size of its three 84-day TAF sales to $75 billion apiece, from $25 billion. That means the Fed will make a total of $225 billion available in 84-day loans. The central bank will keep the sales of 28-day credit at $75 billion.

Special Sales
In addition, the Fed will hold two special TAF sales in November totaling $150 billion so banks can have funding available for one or two weeks over year-end. The exact timing and terms will be determined later, the Fed said. The TAF program began in December, totaling $40 billion.
The bank-rescue plan being debated by Congress today would give the Fed more power over short-term interest rates by providing authority as of Oct. 1 to pay interest on reserves held at the central bank by financial institutions. That would make it easier for the Fed to pump funds into the banking system.
Paying interest on reserves puts a ``floor'' under the traded overnight rate, which would allow a central bank ``to provide liquidity during times of stress'' without affecting the rate, New York Fed economists said in a paper last month.

To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.netCraig Torres in Washington at ctorres3@bloomberg.net.

Banks borrowed $940 Billion


Banks borrowed $940 Billion Last Week Bank Borrowing From Fed Already Exceeded Bailout Total in Last Week


U.S. banks borrowed $188 billion per day on average in the latest week from the Federal Reserve, meaning that the Fed loaned out more money than the Treasury’s proposed bailout in just one week, still barely managing to keep the economy afloat.


Federal Reserve data showed on Thursday the total amount banks borrowed nearly quadrupled the previous record of $47.97 billion per day notched just the week before, Reuters reports.
$188 billion per day on average over the course of five days means that the total amount borrowed from the Fed in the week ending the 24th September stood at $940 billion - a figure that easily eclipses the proposed $700 billion bailout.
As we have already reported, the $700 billion number was simply pulled out of thin air by the Treasury.
The Treasury’s fact sheet about the bailout states, “The Secretary will have the discretion, in consultation with the Chairman of the Federal Reserve, to purchase other assets, as deemed necessary to effectively stabilize financial markets.”
This gives the government and the Federal Reserve carte blanche to do whatever they want to long as it is done in the name of stabilizing financial markets, they can nationalize any company or industry and use taxpayer money, above and beyond the initial $700 billion, for whatever purpose is deemed necessary, without any oversight. Paulson’s bailout plan is also unreviewable by any court, it will remain in perpetuity.
Paulson’s draft bailout plans says: “The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time.”
As Chris Martenson writes, “This means that $700 billion is NOT the cost of this dangerous legislation, it is only the amount that can be outstanding at any one time. After, say, $100 billion of bad mortgages are disposed of, another $100 billion can be bought. In short, these four little words assure that there is NO LIMIT to the potential size of this bailout. This means that $700 billion is a rolling amount, not a ceiling.”
If the bailout bill passes it is just the beginning of something much larger. $700 billion is a meaningless figure that will do nothing to shore up the economy. It is not a bailout, it is a giveaway that will allow insiders to purge themselves of bad bets and free to continue where they left off. The real reason for the bill is the unprecedented transfer of power to the Executive Branch and into the hands of the global corporate elite.

Asian marketsStock exchanges are down

US Senate vote unconvincing for Asian marketsStock exchanges are down.

Uncertainty persists over vote in US House of Representatives. Economists view plan as trivial compared to the enormity of the crisis, a temporary panacea that will not solve the underlying problems.




Hong Kong (AsiaNews/Agencies) – Asia stock exchanges are still in negative territory despite US Senate approval of the US government financial rescue plan last night. Japan's main Nikkei index ended the day trading down 1.9 per cent, whilst Hong Kong's Hang Seng slipped 1.4 percent. Australian shares also declined, losing 0.9 per cent on Thursday. In Singapore shares ended lower by 0.9 per cent and in Seoul they fell by 1.4 per cent.
Despite Senate approval the US financial rescue plan faces hurdles in the lower house which rejected a first version of the proposal last Monday.
The plan was slightly changed with the addition of tax breaks for the middle class and small and medium size business as well as a provision to increase bank deposit insurance to US$250,000 from US$100,000.
The core of the plan—which would see the government buy toxic debt from financial institutions to get banks lending again—is unchanged.
Public opinion in the United States remains hostile to a proposal that would save Wall Street and have US taxpayers foot the bill. What is more for hundreds of economists the plan is only a short-term solution, useless to tackled the financial bubble.
“There is little room for optimism. Even if the bill is passed, worries remain over the global economic outlook so financial markets are unlikely to stabilise,” said Masamichi Adachi, a senior economist at JPMorgan Securities in Japan.
“It's a completely different world now. All the things US authorities are doing now are simply aimed at preventing a global meltdown. They might trigger a short rally in markets but won't offer a fundamental solution,” he said.

This Recession, It’s Just Beginning


This Recession, It’s Just Beginning
By Steven Pearlstein


So much for that second-half rebound.
Truth be told, that was always more of a wish than a serious forecast, happy talk from the Fed and Wall Street desperate to get things back to normal.
It ain’t gonna happen. Not this summer. Not this fall. Not even next winter.
This thing’s going down, fast and hard. Corporate bankruptcies, bond defaults, bank failures, hedge fund meltdowns and 6 percent unemployment. We’re caught in one of those vicious, downward spirals that, once it gets going, is very hard to pull out of.
Only this will be a different kind of recession — a recession with an overlay of inflation. That combo puts the Federal Reserve in a Catch-22 — whatever it does to solve one problem only makes the other worse. Emerging from a two-day meeting this week, Fed officials signaled that further recession-fighting rate cuts are unlikely and that their next move will be to raise rates to contain inflationary expectations.
Since last June, we’ve seen a fairly consistent pattern to the economic mood swings. Every three months or so, there’s a round of bad news about housing, followed by warnings of more bank write-offs and then a string of disappointing corporate earnings reports. Eventually, things stabilize and there are hints that the worst may be behind us. Stocks regain some of their lost ground, bonds fall and then — bam — the whole cycle starts again.
It was only in November that the Dow had recovered from the panicked summer sell-off and hit a record, just above 14,000. By March, it had fallen below 12,000. By May, it climbed above 13,000. Now it’s heading for a new floor at 11,000. Officially, that’s bear market territory. We’ll be lucky if that’s the floor.
In explaining why that second-half rebound never occurred, the Fed and the Treasury and the Wall Street machers will say that nobody could have foreseen $140 a barrel oil. As excuses go, blaming it on an oil shock is a hardy perennial. That’s what Jimmy Carter and Fed Chairman Arthur Burns did in the late ’70s, and what George H.W. Bush and Alan Greenspan did in the early ’90s. Don’t believe it.
Truth is, there are always price or supply shocks of one sort or another. The real problem is that the underlying fundamentals had gotten badly out of whack, making the economy susceptible to a shock. The only way to make things better is to get those fundamentals back in balance. In this case, that means bringing what we consume in line with what we produce, letting the dollar fall to its natural level, wringing the excess capacity out of industries that overexpanded during the credit bubble and allowing real estate prices to fall in line with incomes.
The last hope for a second-half rebound began to fade earlier this month when Lehman Brothers reported that it wasn’t as immune to the credit-market downturn as it had led everyone to believe. Lehman scrambled to restore confidence by firing two top executives and raising billions in additional capital, but even that wasn’t enough to quiet speculation that it could be the next Bear Stearns.
Since then, there has been a steady drumbeat of worrisome news from nearly every sector of the economy.
American Express and Discover warn that customers are falling further behind on their debts. UPS and Federal Express report a noticeable slowdown in shipments, while fuel costs are soaring. According to the Case-Shiller index, home prices in the top 20 markets fell 15 percent in April from the year before, and Fannie Mae and Freddie Mac report that mortgage delinquency rates doubled over the same period — and that’s for conventional home loans, not subprime. United Airlines accelerates the race to cut costs and capacity by laying off 950 pilots — 15 percent of its total — as a number of airlines retire planes and hint that they may delay delivery or cancel orders of new jets from Boeing and Airbus. Goldman Sachs, which has already had to withdraw its rosy forecast for stocks, now admits it was also too optimistic about junk bond defaults, and analysts warn that Citigroup and Merrill Lynch will also be forced to take additional big write-downs on their mortgage portfolios.
Meanwhile, General Motors, already reeling from a 28 percent plunge in the pace of auto and truck sales, now confronts the fact that it won’t get any help this time from GMAC, its once highly profitable finance arm, which is reeling from an increase in delinquencies on home and auto loans. With the carmaker hemorrhaging cash, whispers of a possible default sent the price of insuring GM bonds soaring on the credit default market.
You know things are bad when middle-class Americans have to give up their boats and Brunswick, the nation’s biggest maker of powerboats, is forced to close 10 plants and lay off 2,700 workers.
For much of the year, optimists took comfort in the continuing strength of the technology sector and exports to fast-growing countries around the world. But even those bright spots have dimmed.
Tech stocks got hammered yesterday after software maker Oracle and BlackBerry maker Research in Motion warned that the pace of corporate orders had slowed.
And both India and China raised interest rates and bank reserves sharply in an effort to tame inflation and slow their overheated economies, even as the air continued to rush out of their real estate and stock market bubbles.
Like the rain-swollen waters of the Mississippi River, this sudden surge of downbeat news has now overflowed the banks of economic policy and broken through the levees of consumer and investor confidence. At this point, there’s not much to do but flee to safety, rescue those in trouble and let nature take its course. And don’t let anyone fool you: It will be a while before things return to normal.
Steven Pearlstein can be reached at pearlsteins@washpost.com.

Improve Your Salary

Recession Proof Jobs
Amid the daily din of news about a possible economic downturn, U.S. workers are left wondering what to do if a recession hits. What's the best business to be in during a recession? Are some industries safer than others? Experts say there are, in fact, some recession proof jobs that may be a better bet.
By Kristina Cowan

In the wake of the housing crisis, news abounds of a looming recession, with regular reports of financial gloom. It's no wonder workers are fretting over finances and the employment outlook for the coming months, as a recent
Hudson Employment Index shows.Workers shouldn't worry, experts say. Jobs in some industries do have good potential for weathering a financial storm. It's more important, though, for employees to focus on making themselves recession proof.

Best Businesses During a Recession
Even during boom times no job is fail-safe. But some industries are safer havens than others, experts say, such as healthcare, the federal government, clean technology, information technology, and sales and marketing."I think the recession proof jobs are where people need the goods and services regardless, like healthcare and pharmaceuticals. People are getting older, people are getting frailer, and demographics of the population are aging. Biosciences, physical therapy, occupational therapy-those are jobs that are as recession proof as they come. They also require specialized skills," says Jon Bender, managing partner with PrincetonOne, a New Jersey-based recruiting firm.
Sales and marketing positions and others supporting them are fairly sturdy, according to Kevin Donlin, author and creator of The Simple Job Search system. Anyone who makes or saves money for a company will be relatively safe, he says.Federal government jobs also may be worth considering.
"Uncle Sam hires approximately 2 percent of America's total workforce and the pay and benefits are outstanding. Few feds lose their jobs during a recession and most downsizing in the federal government is based on attrition, not filling vacant positions, rather than letting people go. I know firsthand; from 1969 through January of 2005, I worked for Uncle Sam and went through a number of recessions and agency reorganizations during that time," says author and retired federal employee Dennis V. Damp.
With baby boomers leaving government jobs, there are many opportunities to land these positions, Damp says, noting the best time to act is before a recession.


Surviving a Recession - What to Do if a Recession Hits
During a recession isn't the best time to take charge of your work life and make drastic decisions, experts agree.Marc Karasu, a career coach and former vice president of advertising and marketing at Yahoo! HotJobs, says workers should concentrate on their current job and highlight how they've exceeded expectations."Self-promotion is a fine thing, and there's nothing wrong with letting your superiors know in a professional and intelligent way that you're adding value. If you can, start demonstrating the value you add to a company through your annual performance review," Karasu says. "Also, meet with your boss and say where you are doing good, where you can improve. Bosses like to see people come to them proactively. The key is to do it today before a recession, so you don't look desperate."Career expert Les McKeown says it's more difficult to identify recession proof jobs or industries than it was 15 years ago, so workers trying to build a career must establish their own individual security.To do that, McKeown says, they must prove that it would cost their employer more to let them go than it would cost to keep them. Ultimately the employee is seen as someone who would flourish no matter where in the company he or she lands."At the end of the day the only way to make yourself recession proof is to make your opportunity cost as high as possible. [You want employers to] say, 'We can't let Jane go because we can put her anywhere,'" McKeown explains. "You must have a personal ability to add value. If you can do that, then you're as recession proof as anyone."
Kristina Cowan is the senior writer for PayScale.com. She has over 10 years of journalism experience, specializing in education and workforce issues.
Email Kristina Cowan.
This Recession, It’s Just Beginning

Asian markets down with fear of recession


Asian markets down with fear of recession stronger than US rescue plan.
Hong Kong falls by 2.9 percent; Tokyo is down by 1.4 per cent. US Congress is expected to adopt US$ 700 billion plan but the latter is not expected to improve market conditions.



Hong Kong (AsiaNews) – Asian stock exchanges continue to lose ground even if famous US
financial rescue plan is closer to passing. Experts talk about a “mild recession”.
Hong Kong fell 2.9 per cent on Friday as lower oil prices hammered energy stocks while shares in Hang Seng Bank sank 5.9 per cent, adding to Thursday's nearly 9 per cent fall.


In Tokyo the Nikkei average fell 1.4 per cent on Friday to hit its lowest point in more than three years on fears that the global economy will worsen even if the US Congress passes a US$ 700 billion bank rescue bill.
“Investors expect the US House to approve the bailout, but even if that happens, it would have a neutral impact on the market as its effectiveness is still questionable,” Takahiko Murai at Nozomi Securities told Reuters.
“With the G3 (US, Japanese and EU) economies expected to contract modestly and China's economy likely moderating to near-trend growth in coming quarters, we expect the Hong Kong economy to slide into a mild recession,” said Qian Wang, analyst with JP Morgan.
Energy and metal stocks tumbled on Friday after commodity prices fell overnight on fears the global economic slowdown will hurt demand.

Bailout may not be enough


Why the bailout may not be enough ?
Cleaning up banks' balance sheets is a start, but the government may need to do more.
By Colin Barr, senior writer

NEW YORK (Fortune) -- After much ado, the government appears ready to toss a lifeline to Wall Street. But with policymakers frantically battling to keep the economy out of a deep slump, it won't be the only one needed.
The House of Representatives is expected to approve a $700 billion rescue package Friday. The so-called Troubled Asset Relief Program would allow Treasury Secretary Henry Paulson to buy bad mortgage assets, in hopes of getting bank loans flowing through the economy again.

But using TARP to slim the bloated balance sheets of U.S. financial institutions may not be enough to restore the investor confidence that began ebbing last year - confidence that's necessary if banks are going to be able to raise the capital they need to stand behind their loans, and engage in the borrowing they need to keep their operations running on a daily basis.

The key is to vanquish the fear that has left banks hoarding cash - and potentially strangling growth by withholding the credit consumers and businesses need. That means recapitalizing troubled banks via purchases of preferred stock, and guaranteeing the senior debt of financial companies.
"Nationalization works because it creates confidence," said John Hempton, an investor and financial analyst based in Australia. Investors around the globe lost faith in American finance when it became clear that Wall Street had spent the boom years earlier this decade peddling bad debt, Hempton says.
But for the banks, restoring trust isn't merely a matter of saving face. Financial institutions borrow to finance their operations. Because Americans have been loath to save money in recent years, banks in the United States tend to have much smaller deposit bases than those in, say, Japan, where a high savings rate has given banks a surplus of deposits.
In America, by contrast, deposit-light financial firms have funded themselves in the short-term debt markets. That was a profitable strategy for years, because the wholesale funding markets generally offered low rates and abundant liquidity.

But since Wall Street's perfidy came to light in August of 2007, short-term lending rates have risen, squeezing firms that depended on market funding. The squeeze continued even as the Fed and other central banks created all sorts of new methods to lend to financial institutions. And the vise has tightened in earnest in the past month, with the failure of Lehman Brothers and Washington Mutual and the forced sale or nationalization of five other firms.
The collapse of short-term funding markets recently forced two blue-chip U.S. companies, Goldman Sachs (

GS, Fortune 500) and General Electric (GE, Fortune 500), to sell some $8 billion in preferred stock to billionaire investor Warren Buffett's Berkshire Hathaway (BRKB). Those sales will cost the companies dearly: the terms call for Berkshire to get a rich 10% dividend in each case.
But then, when credit isn't available, everyone pays, as policymakers are well aware.
Stop the bleeding
"A continued correction in credit supply, fiscal receipts, investment, employment and consumer balance sheets is inevitable," wrote Lena Komileva, an economist at Tullett Prebon in London, a broker that facilitates business between other brokers. "The question is about the slope and duration of the downturn, not about the direction of the economic cycle."
That's why Hempton says that however the next stage of the bailout unfolds, it's imperative that the government stand behind the senior debts of financial companies in a bid to restore the confidence of the lenders who supply the bulk of financing for U.S. banks.
Hempton cites last month's takeover of mortgage giants Fannie Mae (
FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) as proof that a government backstop can work, even in a market as large as the one for mortgage-backed securities. By signaling that the Treasury would stand behind the debt the agencies have issued, the Fannie-Freddie takeover brought the foreign central banks that have been the big buyers of Fannie and Freddie securities back into the market, reducing U.S. mortgage rates.
By contrast, the failures of Lehman Brothers and Washington Mutual left senior creditors with substantial losses - potentially discouraging investors from putting their money into other financial firms that need funding as well.
The government may also need to take a more direct role in providing new capital. One question about the TARP is whether the government's purchases of illiquid mortgage-related assets would help banks boost their capital cushions, which have been depleted by mortgage-related losses.
Paulson and Federal Reserve chief Ben Bernanke have indicated a preference for paying prices above the fire sale values quoted in the markets - which could, by forestalling further writedowns, help the banks' capital positions.
Don't overpay
But overpaying for assets may leave taxpayers exposed to big losses and may simply drag out the time it will take for the real estate market to finish making the painful correction that comes when a bubble is popped.
Even TARP backers such as Buffett have suggested the plan is workable only if the purchases are made at market prices.





So why not have the government recapitalize firms directly by buying senior preferred shares? It's a more straightforward, honest approach and, says David Merkel, chief economist at broker-dealer FinaCorp Securities, it puts taxpayers first in line to reap the benefits of any recovery down the road.
Yes, a government stake will dilute the ownership stakes of existing shareholders. But combined with backstopping the banks' debt, it will send a clear message that the U.S. is serious about restoring banks' capital and creditors' confidence before economic conditions worsen.
"As the rapid deterioration of market conditions following Lehman's collapse revealed," Komileva wrote, "a government move today is worth two tomorrow."

The American Recession

Bush Signs Historic Bailout Package
By JULIE HIRSCHFELD DAVIS, AP


WASHINGTON (Oct. 3) - With the economy on the brink of meltdown and elections looming, a reluctant Congress abruptly reversed course and approved a historic $700 billion government bailout of the battered financial industry on Friday. President Bush swiftly signed it.


The 263-171 vote capped two weeks of tumult in Congress and on Wall Street, punctuated by urgent warnings from Bush that the country confronted the gravest economic disaster since the Great Depression if lawmakers failed to act.
"We have acted boldly to help prevent the crisis on Wall Street from becoming a crisis in communities across our country," Bush said shortly after the plan cleared Congress, although he conceded, "our economy continues to face serious challenges."
His somber warning was underscored on Wall Street, where enthusiasm over the rescue gave way to worries about obstacles still facing the economy, and the Dow Jones industrials dropped 157 points. The Labor Department said earlier in the day that employers had slashed 159,000 jobs in September, the largest cut in five years.


The historic vote was a striking turnaround from the measure's spectacular failure earlier in the week, which had triggered a massive stock sell-off and prompted jittery lawmakers - fearing a crushing economic contagion that was spreading to their constituents - to reconsider.
"Let's not kid ourselves: We're in the midst of the recession. It's going to be a rough ride, but it will be a whole lot rougher ride" without the rescue plan, said Rep. John A. Boehner, R-Ohio, the minority leader, as he prepared to cast his vote for the most sweeping federal intervention in markets in decades.
Treasury Secretary Henry Paulson pledged quick action to get the program up and operating.


The bailout, which gives the government broad authority to buy up toxic mortgage-related investments and other distressed assets from tottering financial institutions, is designed to ease a credit crunch that began on Wall Street but is engulfing businesses around the nation.
"In these past two weeks, we've seen things we never thought we would see before in terms of the economic insecurity of our own country," said House Speaker Nancy Pelosi, D-Calif. She said the measure would "begin to shape the financial stability of our country and the economic security of our people."
Rep. Barney Frank, D-Mass., the Financial Services Committee chairman, said the rescue bill was just the beginning of a much larger task Congress will tackle next year: overhauling housing policy and financial regulation in a legislative effort he compared to the New Deal.
"We were the EMTs rushing to the rescue of an economy that suddenly found itself choking, but now we have to perform more serious reform," Frank said.
Just four days earlier, the previous version of the bill was sent down to defeat, largely at the hands of angry conservative Republicans. On Friday, a total of 33 Democrats and 25 Republicans switched from opposition to support. In all, 91 Republicans joined 172 Democrats to support the measure while 108 Republicans and 63 Democrats voted "no."
The reversal reflected a high-stakes political environment just four weeks before Election Day. Some lawmakers were worried about their own jobs, but others - mostly Democrats - focused on the prospect that a new president could have a far more significant effect on the economy than any one piece of legislation.
Several of the Democratic switchers were members of the Congressional Black Caucus who said they changed course after securing commitments from presidential candidate Barack Obama that he would back legislation to help struggling consumers and homeowners facing foreclosures if he wins the White House.
"It's not too often you get the future president telling you that his priority matches your priority," said Rep. Elijah Cummings, D-Md., one of 13 black lawmakers who switched from "no" to "yes."
Republican presidential candidate John McCain also lobbied for the measure, according to aides who declined to say whom he called.
Rep. Roy Blunt, R-Mo., the party vote-counter, said McCain phoned Rep. John Shadegg, a fellow Arizonan who switched to "yes."
The legislation's roller-coaster ride through Congress began at a somber meeting in Pelosi's office in mid-September, where Paulson and Federal Reserve Chairman Ben Bernanke frightened senior Democrats and Republicans with their warnings of an impending economic collapse without quick legislative action.
As lawmakers scrambled to draft a bill, they were barraged by angry calls from constituents to reject what many saw as a huge giveaway to the very financial institutions that helped cause the subprime mortgage meltdown at the root of the economic crisis - with nothing to help its ordinary victims.
"Pray for our republic," intoned Rep. Marcy Kaptur, D-Ohio, a leading opponent of the measure. "She's being placed in very uncaring and greedy hands."
Supporters said the prospect of economic disaster superseded their political fears.
"I may lose this race over this vote, but that's OK with me," said Republican Rep. Sue Myrick of North Carolina, who switched her vote to favor the measure. "This is the right vote for the country."
After the breathtaking House defeat on Monday, Senate leaders took custody of the rescue, adding on $110 billion in tax breaks designed to attract additional support. They attached the overall measure to a popular bill mandating broader mental health coverage in the insurance industry.
The rescue measure was changed to lift, from $100,000 to $250,000, the cap on government bank deposit insurance - a key priority for Republicans. Also key to winning GOP support was a decision by the Securities and Exchange Commission to ease accounting rules that require financial institutions to show the deflated value of assets on their balance sheets.
The revised measure won Senate approval Wednesday night, 74-25, setting up a furious round of lobbying in the House as the administration, congressional leaders, the presidential candidates and outside groups joined forces behind the measure.
The maneuvers worked - augmented by a shift in public opinion that occurred after the stock market took its largest-ever one-day dive on Monday.
The plan - initially a three-page request from the Bush administration for unlimited power to use $700 billion any way it saw fit to stabilize markets - swelled to more than 450 pages as negotiators added restrictions for the administration and sweeteners for anxious members of Congress.
Lawmakers added greater supervision over the $700 billion - including a process where Congress could vote to block half the money - measures to protect taxpayers, and steps to crack down on "golden parachutes" for corporate executives whose companies benefit from the bailout.


Copyright 2008 The Associated Press. The information contained in the AP news report may not be published, broadcast, rewritten or otherwise distributed without the prior written authority of The Associated Press. Active hyperlinks have been inserted by AOL.
2008-10-02 10:14:13

Recent Comments