U.S President George Bush said his nation faces a "long and painful recession" if Congress does not pass his massive financial rescue plan. In stark language, he said "our entire economy is in danger." Speaking to the nation in a prime-time address, Bush pushed for his $700 billion government rescue plan. "Without immediate action by Congress, America could slip into a financial panic and a distressing scenario would unfold," he said from the White House East Room. He said the goal of the plan is to buy up troubled and underpriced assets so that credit can start flowing again. Bush said the rescue plan was aimed at the entire economy, not any individual company or industry. He also seemed to endorse a number of changes that had been offered from lawmakers, from both the left and the right. He said executives should not receive any windfall from taxpayers, a key Democratic demand. But he said he would draw the line at some compromises. "Efforts to regulate Wall Street should not hamper our economies ability to grow," Bush told lawmakers. Bush also gave the American public a rather-odd five-minute history lecture on how the economy found itself in such a dire situation, considering how well-told that story is. – CTV
Dominant Social Theme: My children, this medicine won't taste good, but it is necessary.
Free-Market Analysis: US President Bush hit the airwaves last night to hype the administration's $700 billion bailout of America's largest financial firms. He spent a good deal of time explaining the reason why the nation was in the fix it is in. He explained that a large influx of money into the US along with low interest rates allowed entrepreneurs and families to profit from easy times in the 2000s. But there were negatives as well. Eventually, the number of houses being built exceeded people who wanted them and the market faced a glut. At this point, homeowners began to default and mortgage-backed securities packaged and sold around the world became questionable. Fannie and Freddie bought these mortgage-backed securities and were big losers as well when they proved to be faulty.
The president said that the banks began to stop lending money and he faced a choice – to step in or allow the irresponsible actions of some to ruin the economy for all. He said he was a "free market" person but he listened to his top economic experts who explained that America could slip into a panic with bank failures, stock market dives and foreclosures. Millions of Americans could lose jobs – and that could not be allowed to happen. After painting a grim picture, he ended his short speech on an upbeat note, saying that a deal was in the works that would include oversight of the bailout, which would free up banks to resume providing credit to businesses, large and small.
As a final note, he pointed out that the nation's 21st century global economy was regulated by 20th century laws and that Treasury Secretary Henry Paulson's proposal that the American Fed be allowed to look at a wide spectrum of financial entities to ensure that they were healthy was an idea worth serious consideration.
Despite all the president tried to do to allay suspicion about the upcoming funding package, suspicion about what was going on in DC was thick on the Internet, with many blogs and bloggers railing against the size of the bailout, about Wall Street and about the players themselves. Here's a recent sample from Canada's Globe and Mail blog: Martha Stewart from Canada writes: "Note that this is an intentional drain of "slosh", or liquidity, from the banking system. $125 billion in the last four days drained? The Fed has claimed that this is a "liquidity crisis." Really Ben? Then perhaps you can explain this? You wouldn't be trying to intentionally cause a bank failure or two to bolster your call for the $700 billion "bailout" plan, or perhaps intentionally lock the short-term credit markets, would you Ben? If the market has a liquidity crisis, why would you be intentionally draining reserves from the banking system? Don't you think you ought to explain that to Congress?"
Meanwhile, Ron Paul, former Republican free-market presidential candidate and friend of ARBP, is circulating the following letter:
Whenever a Great Bipartisan Consensus is announced, and a compliant media assures everyone that the wondrous actions of our wise leaders are being taken for our own good, you can know with absolute certainty that disaster is about to strike. The events of the past week are no exception.
The bailout package that is about to be rammed down Congress' throat is not just economically foolish. It is downright sinister. It makes a mockery of our Constitution, which our leaders should never again bother pretending is still in effect. It promises the American people a never-ending nightmare of ever-greater debt liabilities they will have to shoulder. Two weeks ago, financial analyst Jim Rogers said the bailout of Fannie Mae and Freddie Mac made America more communist than China! "This is welfare for the rich," he said. "This is socialism for the rich. It's bailing out the financiers, the banks, the Wall Streeters."
That describes the current bailout package to a T. And we're being told it's unavoidable. The claim that the market caused all this is so staggeringly foolish that only politicians and the media could pretend to believe it. But that has become the conventional wisdom, with the desired result that those responsible for the credit bubble and its predictable consequences – predictable, that is, to those who understand sound, Austrian economics – are being let off the hook. The Federal Reserve System is actually positioning itself as the savior, rather than the culprit, in this mess!
• The Treasury Secretary is authorized to purchase up to $700 billion in mortgage-related assets at any one time. That means $700 billion is only the very beginning of what will hit us.
• Financial institutions are "designated as financial agents of the Government." This is the New Deal to end all New Deals.
• Then there's this: "Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency." Translation: the Secretary can buy up whatever junk debt he wants to, burden the American people with it, and be subject to no one in the process.
There goes your country. Even some so-called free-market economists are calling all this "sadly necessary." Sad, yes. Necessary? Don't make me laugh. Our one-party system is complicit in yet another crime against the American people. The two major party candidates for president themselves initially indicated their strong support for bailouts of this kind – another example of the big choice we're supposedly presented with this November: yes or yes. Now, with a backlash brewing, they're not quite sure what their views are. A sad display, really.
Although the present bailout package is almost certainly not the end of the political atrocities we'll witness in connection with the crisis, time is short. Congress may vote as soon as tomorrow. With a Rasmussen poll finding support for the bailout at an anemic seven percent, some members of Congress are afraid to vote for it. Call them! Let them hear from you! Tell them you will never vote for anyone who supports this atrocity.
The issue boils down to this: do we care about freedom? Do we care about responsibility and accountability? Do we care that our government and media have been bought and paid for? Do we care that average Americans are about to be looted in order to subsidize the fattest of cats on Wall Street and in government? Do we care?
When the chips are down, will we stand up and fight, even if it means standing up against every stripe of fashionable opinion in politics and the media? Times like these have a way of telling us what kind of a people we are, and what kind of country we shall be.
There are wire reports that Congress is closing in on a "deal" as Bush alluded to in his speech. But given the level of suspicion and controversy over what is going on, one has to wonder whether the fragile consensus in America about what the country stands for – free-markets or socialism – will only increase. Additionally, there is plentiful underground suspicion that the crisis is at least to some degree being manufactured, or at least exacerbated by the powers that be to shove this still-republican country toward some sort of closer union with Canada and Mexico – a low-key version of the European Union. Whether or not this is the case, it is fairly obvious that the monetary elite has a sizeable chunk of work cut out for it to reintroduce confidence into the system. Tens of millions of Americans have watched the wheels come off the markets. That sort of realization will have a long-term ripple effect on confidence in the current system no matter what happens now.