You know what the problem is with America?
The poor don't get just how great they have it.
I've hear this a lot lately; the basic thrust of the discussion is that all those cars, TVs, DVD players, refrigerators, and stoves that have found their way into the homes of the economic underclass are proof there's really no such thing as "poor" in America.
If they were truly poor, the argument goes, well...think recycled corn.
And if the poor want things to get better, let 'em pull themselves up by their own bootstraps - and if they can't, then let 'em rot, because that's the best thing for the economy.
But I don't buy all that, and by the time we're done today, I hope to have given you a whole new perspective on how jobs get created in this country.
As we prepare for the inevitable yet welcome defeat of at least 5 of the 6 propositions on today's ballot (come on No on 1F!) talk is growing of federal aid for California's budget mess. Of course, had the US Senate not gutted the state stabilization funds in the stimulus bill we might not be in this mess, but hey, Olympia Snowe and Arlen Specter had to be appeased! Ezra Klein, himself an Orange County native, offered his take on a "bailout":
As a Californian, I find this argument comforting. But as a Californian, I find the need for this argument extremely troubling.
California, which like many other state and local governments is still experiencing extreme budget problems, has an economy larger than all but about 10 countries. Even without the actions that the federal government has already taken to provide corporate bailouts, there is little likelihood that Washington, D.C., could or will allow a default in the municipal bond market to occur in the current economic and financial environment. In fact, through the stimulus bill and other actions, the federal government has already taken a number of steps to make that less likely.
...That said, a lot of companies that proved too big to fail weren't too big to change. Wall Street was given compensation caps. GM had to renegotiate its labor contracts. If Washington is going to bail out the Golden State, it should make the money contingent on structural reforms that leave the state better able to balance budgets in the future. This should be like an IMF intervention (maybe Simon Johnson has some thoughts?).
California's legislature is in a strange position: It needs a two-thirds vote to raise taxes but also has to fund ballot propositions that require a simple majority of an uninterested public. The majority party in the legislature, in other words, can neither control how much money it raises nor how much money it spends. That's not a sustainable state of affairs.
As I've been writing about here at Calitics recently, this is not a far-fetched possibility. It is entirely possible that DC could use this as leverage to force Arnold to accept a majority vote budget. There's no legal way for the federal government to force our Constitution to change, but as with most forms of federalism post-1933, the power of the purse is usually sufficient.
What concerns me much more is Ezra's comment "this should be like an IMF intervention." The sad irony is "IMF interventions" themselves were invented to deal with a default of an American government - in this case New York City in 1975. Lots of folks remember Gerald Ford's famous "Ford to City: Drop Dead" moment where he refused a federal bailout for NYC. Few know the follow-up to that story, where the bondholders took Milton Friedman's theories for a test drive. They demanded and received massive cuts to social services in exchange for renegotiating the city's debt. The successful model was then used on Mexico, Argentina, and many other countries.
We've seen workers crammed down in the auto bailout and seen homeowners get screwed in the bank bailout. I am not confident that a federal bailout of CA would avoid similarly nasty outcomes.
From what I can tell the most likely outcome is something less than an outright "bailout" that could stabilize things for a little while, but not solve the deeper problem. Congress is likely to come up with some solution by which the Treasury backs California's short-term Revenue Anticipation Notes. That might be enough to avert a near-term cash crisis. It won't be enough to right the ship.
Of equal importance is the upcoming fight over the stimulus rules. It is critically important that the Obama Administration refuse to bend those rules. Republicans are already demanding that we be given a waiver from the rules in order to make massive cuts to social services and education, cuts that were forbade as a condition of accepting the stimulus.
Otherwise Arnold Schwarzenegger's efforts to play the role of Fernando de la Rúa will come to fruition. And that's the last thing we want.
I've been wondering what the federal government plans to do if California really cannot pay our bills any more? Will they allow us to descend into further cuts to already bottom dwelling public services? Will we be forced into it by the Republican minority in the state Legislature? And more importantly, if we cannot come to an agreement, and we actually see the Republicans pull the trigger on the gun they have had to pointing at California for years, what will the feds do? Will there be a bailout? Must our state leaders crawl on glass or something to prove our desperate we really are?
Well, perhaps there is an indication in the situation with our revenue anticipation notes (RANs). There is indication that the feds might help out.
"We're going to need cash-flow borrowing the likes of which California has never seen, at a time when market and economic forces are stacked against us," said Tom Dresslar, spokesman for state Treasurer Bill Lockyer. "That's a recipe for calamity."
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A spokesman for the House Financial Services Committee, chaired by Rep. Barney Frank, D-Mass., confirmed that Lockyer had met with Frank in late March, and that Frank was in the process of drafting legislation designed to aid states and local governments with problems similar to California's.
"There is something in the works," said spokesman Steve Adamske, "and that should be drafted by the end of this month ... there are several ideas being considered."(SacBee 4/15/09)
RANs are the state's version of commercial paper. The money that the state needs to operate comes in unevenly throughout the year, so we have to sell bonds based upon our expected revenues. Usually it works quite smoothly, but because of the credit squeeze and our poor credit rating, things aren't expected to be as easy this summer.
So, we go a-calling on the feds to guarantee our loans or something else to get our credit moving. Perhaps this is revealing as to what will happen the next time we come a-calling. If the feds don't back us now, well, our day of reckoning will come sooner rather than later. If they do help us out, perhaps the pattern, co-dependent as it may be, will continue.
Either way, it is important that we get this loans, but the tea leaves aren't quite clear as to the future.
When will the those who really need it get their bailout?
There will be another economic stimulus package in the next few months. President-elect Obama made it clear at his first press conference last week: "If it does not get done in a lame-duck session, it will be the first thing I do as president of the United States." A glance at headlines from the past few days drives the seriousness of the situation home:
This is a letter sent to our Congressman, Adam Schiff.
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We are in a cold fury one week after your hasty vote. You Congressional lemmings are wrecking the country. Those who created our financial crisis can't fix it. Paulson called for self-regulation of investment banks for years. Greenspan extolled the value of derivatives and adjustable rate mortgages; Bernanke had no contingency plans. You didn't read that 450 page bailout bill, full of pork and deception.
YOU AND THE LEMMINGS PRETENDED TO GIVE US A QUICK AND EASY FIX. . .YOU LIED. Congress pretended to oversee the Treasury. Paulson hires Wall Street cronies, like Morgan Stanley, to buy securities at above market value- if they don't pay above market value, the banks lose. Congressional oversight? No way that after the fact hearings can change anything. What can you do if you don't like the prices that the insiders paid? The British took a much wiser step to help their banks. They bought shares and fired the bosses, instead of buying worthless securities. Their plan is much better than the Paulson plan. Paulson now talks about buying shares, but nonvoting shares. Why let a drunk or incompetent driver stay at the wheel?
As Congress passed the $700 billion handout bailout of Congress, news broke here in California of a $7 billion problem that has immediate and massive impact on regular working folks.
California may need an emergency loan of up to $7 billion from the federal government within weeks, the Los Angeles Times on Friday quoted Gov. Arnold Schwarzenegger as saying in a letter to U.S. Treasury Secretary Henry Paulson.
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On Wednesday, California Treasurer Bill Lockyer said the most populous U.S. state's cash reserves may be exhausted near the end of October, and various state-funded services are at risk of grinding to a halt.
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In the letter, Schwarzenegger noted California's plans to issue $7 billion in revenue anticipation notes in the coming days to fund short-tern cash needs -- now put in doubt by the crisis in the credit markets.
Even a broken clock is right twice a day and Governator AHnold may actually understand what a dire situation this economic climate is becoming for the states:
"The economic fallout from this national credit crisis continues to drain state tax coffers, making it even more difficult to weather the continuation of frozen credit markets for any length of time."
Sean-Paul Kelley over at The Agonist spells out the implications:
Look, if the States can't function we're all hosed. And the so-called Congressional bailout does nothing to address these issues. It's not even remotely close to a 'clear resolution.' Even Krugman says as much, "Aid to cash-strapped state and local governments, which are slashing spending at precisely the worst moment, is also a priority."
Remember Jefferson County and the City of Vallejo in California? We mentioned them here, as proverbial canaries in the coal mines and where was our government? Pretty much saying, "it's contained."
Here's a question for Paulson and others: how do you contain Armageddon?
How bad is it? Normally sober people are sounding apocalyptic. On Thursday, the bond trader and blogger John Jansen declared that current conditions are "the financial equivalent of the Reign of Terror during the French Revolution," while Joel Prakken of Macroeconomic Advisers says that the economy seems to be on "the edge of the abyss."
As Congress and the President argue over exactly how many zeroes to add to the Wall Street bailout, California teeters on the brink.
If "across the board bailouts" are going to be the safe bet with the current leadership then lets make sure we apply this standard across the board. Because I don't trust Bush and Paulson not to gamble that California can be allowed to fail too. And Paulson's bets have been going bad lately:
The wave of bad news began on Sept. 14. Henry Paulson, the Treasury secretary, thought he could get away with letting Lehman Brothers, the investment bank, fail; he was wrong.
For a fifth of the cost of the Bear Stearns bailout, a tenth of the cost of the Fannie Mae/Freddie Mac bailout, and one one hundredth of the cost of the Wall Street bailout, we can keep California state government from going under.
Bear Stearns, Fannie Mae and Freddie Mac, Lehman Brothers, and now California. The Bush economy is turning into a black hole and threatens to suck us all in.
Today, for the second time this week, David Dreier voted YES on the House version of the bailout bill. While many smart people on both sides of the aisle might disagree on the merits of this bill and the urgency of doing something now even if it's bad, it's worth exploring why Dreier supported this bill.
David Dreier will tell you that he hates the position we find ourselves in. He'll tell you that he supported this bill "reluctantly" and today on the House floor he even called the bill a "necessary evil."
But here are a few things Dreier won't tell you:
David Dreier received $254,000 in donations from the finance sector this cycle and $590,000 two years ago. Both times, this amount has represented more than two and a half times the donations he received from any other industry.
The American Bankers Association was the top donor to David Dreier's American Success PAC this cycle.
David Dreier continues to vote against bills that would have curbed this crisis. In May of 2008, Dreier voted with Bush against measures designed to impose "increased oversight and regulation of housing-related government sponsored entities." Sound familiar?
Yesterday I voted against H.R. 3997, the Emergency Economic Stabilization Act (EESA), compromise legislation to bailout financial institutions saddled with large debts.
While the Bush Administration worked with Congressional leaders to fast-track this legislation, it was indifferent to the needs of Main Street. I cannot, in good conscience, vote for legislation that gives $700 billion to the same firms that helped cause the current financial crisis through irresponsible lending without providing meaningful help for homeowners who are in danger of foreclosure.
The economic crisis facing our nation began with bad mortgage and lending practices, including the use of predatory and sub-prime mortgages. It was these sub-prime mortgages which were then transformed by the market into securities and sold around the world. In the 32nd Congressional District of California which I represent, housing foreclosures have nearly tripled in the past few months. Over 1,500 families have lost their homes and over 2,300 are going through the foreclosure process.
The impact of such widespread foreclosures on our local economy and community is devastating. Homeowners living near foreclosed properties could see their property values decrease by an average of $5,000. It is expected that nationwide more than $100 billion in housing wealth will be lost through 2009 in foreclosures and their effects on neighboring properties. $166 billion in gross domestic product could be lost as a result of foreclosures, a loss that will lead to 524,000 fewer jobs being created.
Homeownership is a foundation that strengthens our families, stabilizes our communities, and boosts our economy. Yet, this bill lacked needed reform of bankruptcy laws to allow consumers to renegotiate the terms of their mortgage in bankruptcy courts to help keep their homes. Without addressing bankruptcy, provisions in the bill aimed at stemming foreclosures are not enough to provide real relief to struggling homeowners.
Homeowners on Main Streets should have the same rights to renegotiate their loans, especially those for their primary residence, as Wall Street. That is why it is critical that any solution to this financial crisis address the underlying instability in the housing market and provide relief for homeowners struggling under the burden of excessive mortgage debt. In addition to changes in the bankruptcy laws, I believe there should also be a mandatory moratorium on foreclosures for the limited period of time before the rescue plan takes effect. If we are going to help keep banks solvent, we should also consider creating a fund to help families facing foreclosure stay in their homes.
I agree with civil rights organizations which today called on the leadership to also include an aggressive approach that will allow parties to modify the terms of their loans before these loans are purchased by the federal government. This approach would not only help keep families in their homes but would keep taxpayers from acquiring unnecessary debt.
I also believe working families deserve enactment of the Main Street Economic Stimulus Package, which I was proud to vote for last week. This bill would have extended unemployment benefits for the growing number of Americans looking for work for an additional seven weeks. It would have helped to sustain the safety net of services for our country's neediest families by providing additional Food Stamp and Medicaid assistance. It is incredibly disappointing that in the face of skyrocketing unemployment and increased need for food and healthcare assistance, the Bush Administration is instead prioritizing a huge cash infusion for Wall Street instead of needed investments for our country's working families.
Congress and the Administration need to focus on real regulatory reform on Wall Street and real help for homeowners who face foreclosure. We must enact bankruptcy court protections for foreclosures on primary residences. We must pass comprehensive financial sector reform to restore integrity and stability to our financial system. We must address the root of this financial crisis in order to prevent future problems. And we must grow jobs by investing in our nation's infrastructure and funding green collar jobs training.
These are the actions that Congress must take to produce widespread and meaningful reform in our financial sector, provide a lifeboat for the thousands of families facing foreclosure, and provide economic security for families across our nation. These are the actions that I will support.
While the traditional media is focusing on the spat between the House Republicans and Nancy Pelosi, credit also goes to progressive Democrats who refused to go along with a huge giveaway to Wall Street that lacked accountability and repayment guarantees. Some of them have given statements explaining their votes.
Today, I voted against H.R. 3997, the Emergency Economic Stabilization Act (EESA), compromise legislation to bailout financial institutions saddled with large debts. I am very concerned about the credit crisis created by the housing market meltdown and while I appreciate efforts of the Democratic leadership to work in a bipartisan fashion to improve the Bush Administration's proposal, this legislation lacks needed taxpayer protections and assistance for Main Street families like those in the Congressional District I represent.
"I cannot in good conscience, vote for legislation that gives $700 billion to the same firms that helped cause the current financial crisis through irresponsible lending without providing meaningful help for homeowners who are in danger of foreclosure. In the 32nd Congressional District, housing foreclosures have nearly tripled in the past few months, with over 2,300 homeowners currently going through the foreclosure process. The impact of such widespread foreclosures on our local economy and community is devastating.
"Unfortunately, this legislation will not help the families who are stretching paychecks and trying to hold onto jobs without additional steps to stabilize our housing market. It lacks needed reform of bankruptcy laws to allow consumers to renegotiate the terms of their mortgage in bankruptcy courts to help keep their homes. Homeowners on Main Streets should have the same rights to renegotiate their loans, especially those for their primary residence, as Wall Street.
Pete Stark:
President Bush tells us that we face unparalleled financial doom if this $700 billion bailout is not approved today. He and his Treasury Secretary - a former Wall Street fat cat - tell us that we have reached the point of "crisis." That is a familiar line from this President. It sounds like the disastrous rush to war in Iraq and the subsequent stampede to enact the Patriot Act. As I opposed the Iraq War and the Patriot Act, I stand in opposition to his latest rush to judgment.
"We are not in a sudden crisis. It has been building over the past 8 years of the Bush Administration. Lax oversight of the financial industry ballooned into a house of cards....
"The bill before us today is basically the same three-page Wall Street give away first put forth by President Bush. The fig leaf adjustments are not enough to outweigh the fact that no one knows if this bill is what's needed. I'm not willing to make a $700 billion gamble that President Bush is right after 8 years of seeing all that he's done wrong.
A 0.25% tax on all stock trades and "exotic transactions" such as derivatives trading as a kind of "progressive PAYGO" to ensure that the taxpayers won't be paying the costs of the bailout.
Equity shares in any companies that benefit from the bailout
"Major bankruptcy reform" including homeowner renegotiation of mortgages. Obama undercut progressives on this when he said bankruptcy reform didn't need to be part of the package, perhaps a telltale sign of how unprogressive an Obama administration might be. But it's still a necessary part of any financial solution.
A detailed list of new regulations to protect consumers and provide more stable, responsible regulation of the financial industry to prevent a recurrence of this crisis.
If we want to ensure that we have more and better Democrats to push progressive economic policy in the Congress next year, we need to help them win this November. Join our Calitics Match and help send Charlie Brown and Debbie Cook to Congress, and Hannah Beth Jackson, Manuel Perez and Alyson Huber to Sacramento.
UPDATE by Dave: On the flip, a list of the ayes and nays among out Congressional delegation.
The letter insists that 4 kinds of reform be included in any bailout:
A 0.25% tax on all stock trades and "exotic transactions" such as derivatives trading as a kind of "progressive PAYGO" to ensure that the taxpayers won't be paying the costs of the bailout.
Equity shares in any companies that benefit from the bailout
"Major bankruptcy reform" including homeowner renegotiation of mortgages. Obama undercut progressives on this when he said bankruptcy reform didn't need to be part of the package, perhaps a telltale sign of how unprogressive an Obama administration might be. But it's still a necessary part of any financial solution.
A detailed list of new regulations to protect consumers and provide more stable, responsible regulation of the financial industry to prevent a recurrence of this crisis.
The progressives' move in Congress comes as more economic observers question the need for a bailout. It's possible that this represents the first move by the 74 members of the Progressive Caucus to block a bill that in particular lacks bankruptcy reform. Even so, an axis of Bush Dogs, House Republicans, and timid/weak/complicit House Democratic leadership may prove to be too much for the Progressive Caucus to overcome.
Still, this letter is a welcome move by California progressives like Barbara Lee and Lynn Woolsey. The bailout needs to be either made a fundamentally progressive policy move or stopped entirely. If a progressive coalition is to come together to stop it leadership from the Progressive Caucus is a necessary component. Even if it is too little too late, it potentially marks the beginning of a push for truly progressive solutions to our economic crisis - the kind that FDR and the Democratic Party stood for 75 years ago, but that current Democratic leaders from Obama on down have now eschewed.
UPDATE: A deal has been announced, although the details have been slow to materialize - a likely sign that the deal isn't exactly set in stone. More significantly Republicans are being pressured to deliver 70-100 votes which suggests that Congressional progressives, especially those from California, do have leverage to stop this train wreck. Universal health care, green infrastructure, a jobs-and-wages economic recovery - all those things are imperilled by this bailout. Better to deal with this after January 20.
The current plan to give $700 billion away to Wall Street - the same ones who got us into this mess - is a sign we need Clean Money public financing of campaigns more than ever. Finance, insurance, and real estate firms have poured over $5 billion in contributions into politicians' hands since 1990. They've already been paid back by special interest giveaways many times over, and now they're asking for over $2,000 from every man, woman, and child in the country.
Clean Money is the Only Way to Stop this Madness From Happening Again and Again!
Urge Governor Schwarzenegger to sign AB 583, the California Fair Elections Act, to start ending special interest dominance of politics by sending him a fax right now:
I will be on KRXA 540 AM at 8 this morning to discuss this and other California politics issues
One of the defining features of capitalism in the 21st century has been the arrogance of its most wealthy practitioners, now manifested by their belief that they'll be bailed out and not forced to suffer any consequence for their criminally reckless bad judgment.
So it's not just coincidence that as the financial robber barons of our time are demanding a massively unpopular bailout, another wealthy baron who made his money at the expense of Americans is seeking a bailout from California voters this November.
T. Boone Pickens is worth about $3 billion, a fortune amassed from his years as a corporate raider during the 1980s and his large stake in oil companies like ExxonMobil and Occidental.
Along the way he became a leading funder of right-wing causes, and was the primary backer of the notorious Swift Boat veterans, whose lie-filled ad against John Kerry helped swing the 2004 election to Bush. T. Boone promised he'd pay $1 million to anyone who could disprove the allegations, but reneged when John Kerry himself took him up on the offer.
T. Boone is seeing the handwriting on the wall for the oil economy, and wants to build up his natural gas business. Problem is, he wants to build up that business at our expense. He put Proposition 10 on the ballot and is spending his own money to run ads for it. Essentially he wants California taxpayers to bail him out to the tune of $5 billion.
The LA Times last week editorialized against Prop 10, explaining it and why it is such a bad idea. They call it a "reprehensible scam":
This measure asks taxpayers to fund $5 billion in bonds -- at a time when the state is in desperate financial straits and may be approaching a dangerous level of indebtedness -- for a scheme disguised as an effort to benefit the environment. Yet its true aim is to subsidize vehicles powered by natural gas, which would build a customer base for its sponsor: Clean Energy Fuels Corp., a company Pickens co-founded that operates natural gas filling stations throughout the U.S. and Canada.
The measure generously doles out taxpayer money for a variety of green-sounding initiatives: $200 million for alternative energy demonstration projects at eight California cities, none of which are clamoring to perform them; $1.5 billion in grants and incentives for research and development of clean energy technologies and alternative fuel vehicles, a field that venture capitalists are already shoveling cash into; $250 million for renewable energy generation equipment. But the lion's share of the bond money, $2.875 billion worth, goes for rebates on purchases of alternative fuel vehicles.
The rebates are structured so that only a small amount of money goes to truly environmentally beneficial vehicles, while most would subsidize those that run on natural gas.
The American public rightly opposes the Bush Bailout for Wall Street crooks. Why should Californians support a bailout for an already-wealthy oilman, one responsible for some of the most disgusting political lies of our time?
As this is being written we are in the midst of the second day of testimony before Congress by Ben Bernanke and Henry Paulson in support of the Administration's proposed financial rescue package.
The basic sales pitch is that the Nation's financial problems are at this moment so severe that the only solution is to expose to risk $700 billion dollars of taxpayer money to buy assets with a currently unknown price...and to give the absolute and total power over what those valuations are, what should and should not be bought, what repayment terms will be sought-and additionally, what happens to any money recovered--to one man, Henry Paulson.
There are those who are not on board. They have critics, who continue to stress the dire consequences of inaction.
With all due respect to those critics...we have been down this road before with this Administration-and last time, they weren't so big on telling the truth...or getting the job done effectively.
We'll cover that ground, we'll talk a bit about "mark to market" issues-and on a positive note, we'll address the role of "warrants", the negotiating power of Warren Buffett, and how the taxpayer could actually see substantial recoveries of money down the road.
AUTHOR'S NOTE: This was originally published on February 14th of this year, but it seems to be exceptionally timely today.
We had a lively discussion last week regarding the causes and possible future of the "subprime crisis" that is on everyone's lips these days.
Having examined the sources of the problem, and noting the lack of holistic thinking about how things might be resolved, I've taken it upon myself to come forward with an idea that can actually get at the root causes of today's difficulties...and do it in a way that offers a potential "win-win-win" outcome for homeowners, investors-and the taxpayer.
Paying attention, Presidential candidates?
Good-because time is short, and we need to get to work.
As the discussion over the horrific bailout plan unfolds - you know, the one that gives Henry Paulson the powers of a Caesar - it is becoming clear that the biggest risk to our nation's future is the usual political formulations that have crippled the Democratic Party these last eight years, and turned Nancy Pelosi's speakership into one of the most ineffective of the modern era.
Specifically, the problem is the ongoing ability of the Blue Dogs - and one Charles Schumer, Senator from New York - to frustrate anything that is not pro-corporate and ultimately pro-Bush. They have succeeded in neutering the Democratic Congress that was elected in 2006, and if they aren't stopped this week, they may succeed in crippling an Obama Administration before it can even get started.
Schumer...said that legislators would not imperil the proposal by adding too many extras. "We will not Christmas-tree this bill," he said Sunday on Fox. "The times are too urgent."
A stimulus package, he added, "doesn't necessarily have to be part of the bailout."
"Christmas tree" is conservative framing designed to equate any efforts at accountability, reregulation and economic recovery as a kind of pork. Schumer shows his true colors in repeating this framing.
This is partly an attack on Speaker Nancy Pelosi. Pelosi has long been pushing a "second stimulus" package that would include infrastructure projects, aid to state budgets for Medicare (especially important for us in California), and other common-sense policies. Pelosi has started to suggest that the bailout should be linked to something like a second stimulus, if not the second stimulus itself:
She says the bailout should include provisions to help families facing foreclosure to stay in their homes, as well as create jobs, extend unemployment benefits and prevent CEOs of failed companies to leave with multimillion-dollar "golden parachutes."
Schumer is here signaling his intention to prevent any of that from being attached to the bailout. But as the "second stimulus" and its affiliated concepts have not been able to break through the Republican working majority in the House (that is GOP + Blue Dogs), attaching it to a bailout seems the best chance of putting it into action.
Schumer is also undercutting Barack Obama, who today listed six conditions that must be met for him to support any bailout, conditions that are not unlike those Pelosi has been pushing.
It's not hyperbole to say this is a crossroads moment for America, California, the Democratic Party, and for Nancy Pelosi's speakership. It's time for her to show the leadership she has not yet been willing to show in this Congress, and flatly refuse to support any bill that does not include meaningful stimulus and reforms. Sen. Bernie Sanders has a great list of ideas that should be the baseline.
And it's time for we Californians to pressure our elected officials to support Pelosi and Obama, and to categorically reject the failed policies of Schumer, the Blue Dogs, and the Bush Administration. Now is the time to call your representatives and our senators - especially the unreliable Dianne Feinstein - and insist that they support Pelosi, Obama and Sanders and ensure that any bailout helps Main Street, not Wall Street, and punishes failure, instead of rewarding incompetence.
Like the proverbial thief in the night, the US federal government snuck in Friday night and bailed out Fannie Mae and Freddie Mac. I hate to say I told you so, but I wasn't surprised. They didn't really have a choice
The Ministry of Finance and the Federal Reserve had no choice but to intervene due to one single reason: The collapse of Fannie Mae and Freddie Mac could have precipitated a core meltdown of the American bank and stock market systems, dragging the rest of the world with it into the abyss.
That is because these two banks are responsible for $5.3 billion (3.7 billion euros) of America's $12 billion (8.4 billion euro) total mortgage debt. That corresponds to one third of America's gross domestic product.
But never fear, the CEOs of the collapsing companies are safe:
Under the terms of his employment contract, Daniel H. Mudd, the departing head of Fannie Mae, stands to collect $9.3 million in severance pay, retirement benefits and deferred compensation, provided his dismissal is deemed to be "without cause," according to an analysis by the consulting firm James F. Reda & Associates. Mr. Mudd has already taken home $12.4 million in cash compensation and stock option gains since becoming chief executive in 2004, according to an analysis by Equilar, an executive pay research firm.
Richard F. Syron, the departing chief executive of Freddie Mac, could receive an exit package of at least $14.1 million, largely because of a clause added to his employment contract in mid-July as his company's troubles deepened. He has taken home $17.1 million in pay and stock option gains since becoming chief executive in 2003.
Meanwhile more than one half of the state governments in the U.S. are running massive deficits too, but no bailout is in store for them.
At least twenty-seven states, including several of the nation's largest, face budget shortfalls in fiscal year 2009. Of these 27 states, specific estimates are available for 22 states and the District of Columbia; the combined deficits of these 22 states plus the District of Columbia are expected to total at least $39 billion for fiscal 2009 -- which begins July 2008 in most states. Another 3 states expect budget problems in fiscal year 2010, although some of those gaps may occur earlier than expected.
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The 22 states in which revenues are expected to fall short of the amount needed to support current services in fiscal year 2009 are Alabama, Arizona, California, Florida, Illinois, Iowa, Kentucky, Maine, Maryland, Massachusetts, Minnesota, Nevada, New Hampshire, New Jersey, New York, Ohio, Oklahoma, Rhode Island, South Carolina, Vermont, Virginia, and Wisconsin. In addition, the District of Columbia is expecting a shortfall in fiscal year 2009. The budget gaps total $39.1 to $40.8 billion, averaging 8.9 - 9.3 percent of these states' general fund budgets.
