Of Cats and Men
This Week in Elder News: 15 November 2008

The Bailout, Hope and Elders

Remember back in mid-September when Senator McCain parachuted into Washington to save the day when Treasury Secretary Henry M. Paulson, Jr. warned that life as we know it would disappear forever if Congress didn’t pass his bailout plan within about 24 hours?

Congress, ignoring McCain’s ludicrous Superman impersonation, balked, taking their own sweet time to hand over the $700 billion in taxpayer dollars (borrowed from China, Saudi Arabia and elsewhere), that Paulson, in his reverse Robin Hood disguise, demanded as condition for saving the United States from the Great Depression II.

Paulson’s idea back then, with the support of Fed chief, Ben Bernanke, was to buy up “troubled assets” (that is, those thousands of toxic mortgages in the form of convoluted derivative paper even the investors who invented them don’t understand) to keep the banks and brokerage houses from going belly up which, if allowed, would reduce the country and everyone in it, Paulson implied, to living in refrigerator cartons.

Congress caved and before long, Paulson had more money in hand than even Croesus could have imagined. But by then, Paulson had a new idea, he said:

Forget those toxic mortgages. Instead, he would use the first $350 billion to purchase stock in the banks that had been too blinded by greed to recognize their stupidity and approaching demise. In other words, partially nationalize the banks (an idea Congress had floated before caving in to Paulson’s original scheme) which would, with a bunch of cash in hand, reopen the lending doors they had slammed shut.

By Wednesday this week, Paulson had doled out about $290 billion in corporate welfare (see list here), but the recipient banks refused to use it for loans to keep their customers going. (Is it too thickheaded for someone as unversed in economic matters as I to inquire why such loans were not made a condition of accepting bailout money?)

So then, Paulson had a third idea, he said on Wednesday:

Now, he “hopes” (yes, “hopes”, according to The New York Times) to use $50 billion to create a new lending program run by the Federal Reserve to induce non-bank companies that finance car loans, student loans and issue credit cards to start lending again.

Although Mr. Paulson was short on details in his Wednesday announcement, apparently these companies, unlike the banks, will make loans to real people, although so far there is no indication that making such loans is any more a condition for accepting bailout funds than with the banks.

Meanwhile, the big three Detroit auto makers are down for the count, but Paulson made a point of saying they are not included in his newest bailout plan (one wonders if that statement carries any more weight than his previous ideas), so House Democrats are busy as we speak drafting legislation that would infuse the auto companies with a quick $25 billion. Other lawmakers want to put off any infusion of cash into Detroit until the new administration takes office.

On another front, earlier this week, President Bush announced a plan for Freddie Mac and Fannie Mae (of previous bailout fame) to fast-track restructuring of troubled mortgages they control so borrowers can avoid foreclosure. Given that Paulson is ignoring homeowners, it's not a bad idea except that the two companies control only a small percentage of the three or more million bad mortgages.

To fill up that gaping hole in Bush's plan, reports The New York Times, administration officials (here’s that word again) “hope” other lenders will follow Freddie’s and Fannie’s lead.

To add insult to all this apparent confusion and incompetence, it was reported Thursday evening by CNN that many of the beneficiaries of our government's corporate largesse have set aside billions of bailout dollars for annual bonuses next month. Did Paulson "forget" to include a condition forestalling this outrageous greed too?

If the stock market is to be the measurement of how recovery efforts are going, all this hope and all these maneuvers are not working as the Dow, NASDAQ, Fortune 500, etc. spike wildly each day, usually in a southerly direction.

(ASIDE: The most grievously cynical part of me wonders if there was a sudden financial crisis in mid-September at all. The Bush administration has spent eight years deliberately draining money from the middle class to pass along to the richest few. Could this "crisis" be a phony emergency - one last effort, since the bailout funds are borrowed from other countries, to capture even future funds before Bushco leaves office? Could it have been part of the plan all along? Could anyone be more cynical than I am to entertain such fantasy?)

For the few who have slogged through this far into today's post, what I want to get at is that in all the helter-skelter, haphazard scrambling by the federal government to avoid a full-scale depression, there has been not a word about elders, retired people, and people near retirement.

Reports tell us that individuals have lost more than $2 trillion from their savings in IRAs, 401(k)s and other kinds of investments. This is terrible for people in their 20s, 30s and 40s, but it is tragedy on a scale of grand opera proportions for old people because they will not live long enough to recoup their losses and will spend the rest of their lives scraping by, including those who did all the right things, saved their money and invested it safely – or so they thought.

A couple of days ago, Jan Adams of Happening Here, left a comment that said in part:

“Yesterday I heard that yet another of my retired friends has lost half of his income which came from a real estate investment trust he unwisely had counted on. His mistake certainly, but really, most of us aren't qualified to evaluate investments. We may have other wisdom, but not financial wisdom. I blame the peddlers of these dubious "securities" for taking advantage of the trust of millions.”

The operative phrase in Jan's note is “most of us are not qualified to evaluate investments.” Yes, and we relied on those “peddlers” Jan rightly blames. A large portion of my 30 percent loss is due to a Lehman Bros. bond. When I asked my peddler how smart it was to put that much into one investment, he replied that the interest rate (not all THAT much) was greater than most and the entire economy would need to collapse for Lehman’s to go under.

Uh-huh.

I remember saying at the time that I wasn’t so sure that wouldn’t happen. My advisor assured me there were too many regulations for such a disaster.

Again, uh-huh.

Obviously, I am not an economist. But they tell us repeatedly that consumer spending is two-thirds of the economy. Yet the first thought from Secretary Paulson was to bail out the banks. The bailout has now been extended to auto manufacturers, non-bank lenders, mortgage loan guarantors and only Paulson knows what other industries will be included next.

As I said, I’m not economist, but wouldn’t it be more productive to devise a plan that would put money into the hands of consumers instead of banks so people would continue to spend thereby keeping the economy moving? I have no idea what that kind of plan that would be. That’s for people like Henry Paulson to figure out, although it doesn’t appear likely to happen.

And I’m not saying that some money shouldn’t be used to shore up some banks along with other businesses and institutions. But if spending is what makes the economy go ‘round, what sense does it make to ignore the biggest driver of that economy? And a part of any such plan should be a program to help elders who have lost large portions of their savings before they start needing to eat cat food to survive.

Since aside from West Virginia Senator Robert Byrd, who will be 91 years old next week, there are no old people at the highest levels of the federal government, who speaks for elders in this financial crisis?

Comments

I'm a professional cynic, so sure, I'll join you in your cynicism. "Could this "crisis" be a phony emergency - one last effort, since the bailout funds are borrowed from other countries, to capture even future funds before they leave office?" You bet. Let the looting begin!

And though many fear 'socialism', I have a fear that we don't have enough socialism. Will President Obama look to the lessons that Roosevelt taught? I hope so...

Re cynical fantasy: I'd have the same sort of idea myself except for the often demonstrated fact that these guys, in the memorable words of Justice William O. Douglas, "can't fart and chew gum at the same time."

Have you checked the price of cat food lately?
Rice and beans is more like it.

Sometimes I think the economists with their PHD's make the economy more complicated than it is. Common sense gets lost in the equation.

It just makes sense to me to extend the unemployment compensation to those out of work and to refinance the mortgages of those who are about to lost their homes. That money would be pumped back into the system a lot faster that giving incomptent CEOs bonuses.

Let's just say it isn't the first time we've been lied to by the government and the people who earn their living cozying up to that den of thieves.

Ronald Reagan said, "The nine most terrifying words in the English language are: 'I'm from the government and I'm here to help.'"

Be agraid -- be very afraid.

In a severe crisis, who is most expendable? Who falls off the edge? They'd set us all out on ice floes if there were any left...

Be thankful for small mercies, there's still the catfood, or as Zuleme says, the rice and beans!

I have been on the Cynical Express for a long time. Glad to see that I am not alone. I have wondered how much of the Bush agenda they would try to get in under the radar before they leave office. Hamstringing the new administration seems to be the tactic of choice.

Add me to the list of cynics. I don't know if you've ever seen that underground film "Zeitgeist", but it does a pretty good job of explaining the world financial system and who's REALLY running things. I think that the fact that the bailed-out banks are arrogantly claiming that their executive bonuses aren't coming from bail-out money, but from annual profits - well what kind of moron BAILS OUT a business that has made sufficient profit to pay big bonuses to its execs? NONE of any of this contains one iota of logic. Yet Bush's minions just keep right on stealing from us, and probably will continue to do so (and yes - will continue to ramp it up) until the very day he leaves office. It's pretty amazing, isn't it, that they just keep right on - taking our money and using it however they want - and there doesn't seem to be a thing we can do about it except wait for it to stop?

Maybe it's my own fault. It's crossed my mind more than once that, if you need income to pay your bills, you shouldn't be in the stock market, no matter what. (When I say "income," I'm excluding interest, dividends, and capital gains--money made off money a person owns.) But I ignored myself.

Like Ronni, I heard "Ah, if that happens, Western Civilization will collapse," and believed it, at least enough to act on it.

I also believed people who warned me that inflation was the biggest threat to my ability to afford retirement...a bigger threat than the risk of losing principal.

With 5 more years to retirement, I'm planning on being out of the stock market by then. It's just not for people with a household income of less than $50K a year.

There isn't enough candor around actual dollar figures. I begged brokerage agents to tell me how much I needed to have to invest, and never got an answer.

You know those charts that show how your $10,000, invested with dividents reinvested, turns into six figures over a period of time? Has anybody ever seen the same chart showing what would have happened if that $10K was invested in prevailing-rate CDs over comparable periods of time?

I agree with what Michael Moore says here: http://www.michaelmoore.com/words/message/index.php?messageDate=2008-10-01 including his introduction...

"The richest 400 Americans -- that's right, just four hundred people -- own MORE than the bottom 150 million Americans combined. 400 rich Americans have got more stashed away than half the entire country! Their combined net worth is $1.6 trillion. During the eight years of the Bush Administration, their wealth has increased by nearly $700 billion -- the same amount that they are now demanding we give to them for the "bailout." Why don't they just spend the money they made under Bush to bail themselves out? They'd still have nearly a trillion dollars left over to spread amongst themselves!"

First, I must confess that I never believed that Jack Ruby wasn't a CIA plant. (Yeah, I wear a tinfoil beanie-You got a problem with that?)
Anyway, guys, I think we've been conned. The "Bailout" (AKA "The Big Bush Giveaway/Payoff) was W's final "Kiss my A**" to America" He managed to grab $700 Billion for his pals on Wall St. before walking out. And everbody in Washington including St. Obama just stood there and let him.
FOOL ME TWICE...! No, fool me 200 times

SHAME ON US!

I was against the bailout and am against the bailout for the auto industry even as I do understand that many jobs rest on them all. I just don't trust people to manage such things who don't believe in government to begin. I blame the automakers for not being willing to make their vehicles more fuel efficient from the '70s on when this was clearly going to be a problem someday. Worse than them not wanting to make them better, they had lobbyists keeping the feds from letting even states demand better fuel economy. Now it's suddenly our problem as a nation because they hold ransom all those jobs?

It's going to take a huge reorganization to make any of this work and money can't be thrown at problems especially not where greed was already the problem. What did some of the banks do with that money? according to what I read, pay increased dividends to stockholders, bonuses, we all heard about that expensive trip for the one bunch.

Constantly we hear the cry of must have a free market until it doesn't work then comes bail them out or else. I am afraid for what will come but our government is already hugely in debt. It cannot do a bailout without borrowing even more money.

It is going to take a lot of sorting and hopefully some time for the new government to figure out what happened and then come up with better answers than throwing money in the street. That never works. If we don't have people running the government who believe in the power and ability of government, then it can never work.

ONe other thought - during Paulson's earlier plan to buy up "troubled" assets, the economic gurus were saying America might actually MAKE some money with these transactions over the long haul. I doubted that, but more to the point, how does the government plan on recouping any of these funds now that Paulson's "plan" is totally off track and so convoluted as to make it near to impossible to figure out who owes what and when.

And who is managing all these loans?

And as Ronni has pointed out, no where do I see relief for elders struggling on fixed incomes and high medical bills.

By injecting fear into every American, Bush and Paulson paved the way for this giant national shell game.

I've not seen any figures comparing the financial plight of those about to be foreclosed upon and elders who have lost their life savings. And unfortunately, I'm not likely to see them, either.

It's my gut feeling that elders would be the greater losers in this financial fiasco we're mired in.

But elders are all but invisible to the government, except when it comes to Social Security and Medicare, which the Present Occupant would love to cut.

Maybe the Obama administration will change this attitude, but I fear that any change will be slow -- something like turning the Queen Mary around in a sewer ditch!

I listened to Paulson on the MacNeil Lehrer Report last night and came away awakened to the fact that he really doesn't know what to do. He spills pit a lot of verbage but when you trim the rhetoric, there's no substance there. I'm surprised GWB hasn't said something along the lines, "You're doing a heck of a job Hankie."


Ronni,

On the theory that if you don't laugh, you'll cry, I send you the following comment on current stock market conditions....


Please review any holdings you might have in the following stocks:

American Can
Interstate Water
National Gas Company
Northern Tissue Company.

Due to uncertain market conditions, I advise you to sit tight on your American Can;

Hold your Water and let go of your Gas.

You may be interested to know that Northern Tissue touched a new bottom today, and millions were wiped clean.

Now just smile and promise you will not look at CNBC all day.


Paulson was on CNBC today and he said this.

(Paulson again deflected such criticism, saying he was obligated to change strategies as the situation changed.)

"You're never going to get me to apologize for being so prudent as to change a strategy when the facts change, and to do it in a way that protects the taxpayer," he said.

I say, Send Paulson back to Wall Street. He is useless.

And yes Ronni, I am also cynical about this TARP bailout.
I don't trust Paulson and his 35 year old hot shot aide Kashkari to even consider us, the taxpayers, the real people who are hurting in this financial melt down

On 9/24/2008, I posted on my blog, "Fie on Fearmongering!
Our President just finished a special address to the nation--a most unfortunate example of fearmongering if I ever heard one. Does W think we've forgotten the rush to go to war in the Middle East? Rush, rush, rush...must get this done...before the American people wake up and discover what's been done to them. What a croc! One of the hysterical parts was when he claimed that failure to act would eventually result in a recession. In case he's not looking (or in case he actually believes the criteria that have been used to deny it), we have been in recession for some time, now. What he failed to mention was the real result of the government's "acting" on the financial situation--the most important result will be inflation. Do you need inflation? I don't. I've seen quite enought of that, thank you. Don't print up any more money on my account. *teeth grinding*"

Well...instead of talking about inflation, now they are wringing their hands over deflation. My stance is, "Bring on the deflation." I believe that it is the better option.

great post, ronni....you can't possibly be more cynical than i about the whole deal. if only the catholic bishops would order their priests to refuse holy communion to bankers and current government officials.....

Aha! Now I see the problem investors have with peddlers. The right question isn't being asked before investing:

"Will you give me a written insurance plan guaranteeing reimbursement of my investment if the whole economy collapses?"

(Of course, there's no guarantee the insurer won't collapse, too, so would it help if there was an insurer of the insurer? Probably not.)

Any of us would be assured knowing regulations on investments were in place, but in hindsight we now know another question should have been asked:

"Are these regulations actually being enforced?"

The advisor would probably reply, "yes," maybe even believing it was so.

I, too, am very bothered by Paulson's use of such non-specific language that does not specifically spell out the exact expectations and requirements in order to be a recipient of any of these bailout funds. I find it infuriating that Congress or someone in government does not speak up on behalf of the people. Of course, I know not to expect it from anyone in the current administration.

When I hesitantly and cautiously wrote in support of the bailout I did so with very strict provisos. I'm no genius, but I didn't just "hope" Congress and Paulson would act in certain ways. I couldn't enforce my requirements, but unlike me they certainly are in a position to make terms very definite -- "no money if you don't play by these rules."

I'm so sick of unproven conspiracy theories, but, regrettably, have no difficulty believing the one you propose since there seems little this administration is not capable of doing.

Great comments. Was there ever a more suspect character than Paulson. He just looks deceitful. I'd been waiting for W to pull a fast one. He did not disappoint. Why the Congress put any credence to this proposal is beyond me. Fear mongering is this administrations stock in trade.

I have a few props in my work area that serve as inspiration or reminders. Most prominent is an oversized insect with Y2K Bug embroidered on its chest. It is a constant reminder to cast a leery eye on any Henny Penny scenario. This bailout proposal deserved more deliberate
consideration and a whole lot more conditions and oversight. Sure hope the Obama Team can pull some of these chestnuts out of the fire. Unfortunately, I do not think this is the last of GWB's shennanigans. It's a long way 'til Jan. 20th.

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