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 It comes as no surprise to Point-Spreads.com that internet gambling advocate and Texas Congressman Dr. Ron Paul is against the current Wall Street Bailout being proposed by the Federal Reserve Chairman Ben Bernanke, Treasury Secretary Henry Paulson and the Bush Administration. In a speech to the Joint Economic Committee earlier this week, conservative Republican Ron Paul stated that government intervention was the primary cause for the economic meltdown in the first place and that Congress should not allow the administration to bail out the banks with the Paulson Plan.
“This bailout is a slipshod proposal, slapped together haphazardly and forced on an unwilling Congress with the threat that not passing it will lead to the collapse of the financial system. Some of the proposed alternatives are no better, for instance those which propose a government equity share in bailed-out companies. That we have come to a point where outright purchases of private sector companies is not only proposed but accepted by many who claim to be defenders of free markets bodes ill for the future of American society.”
Ron Paul has been a die hard supporter of a true free market and has railed against the Federal Reserve for years. A recent Times/Bloomberg poll has found that most Americans don't believe the government has responsibility for bailing out financial firms with taxpayer money with 55% of the poll's respondents saying they did not believe the government should be responsible for funding a bailout plan. Online betting giant BetUS.com has posted odds on the OVER 60.5% of register votes showing up on election day to cast their vote at +110 odds which I believe is a great bet because this issue is sure to bring the vote out for the 2008 Presidential Election.
The stock markets were rattled after hope of a fast deal evaporated. Apparently a deal was agreed to in principle between the Democratic leadership in the House and Senate Republicans. The only problem was that no one cared to get with House Republicans to see if they would support the Paulson Plan. Several conservative Republicans in the House of Representatives were withholding their support of the Paulson Plan and Wall Street Bailout proposal in its current incarnation and were working on their own proposals.
President George W. Bush finally emerged from the White House at 9 PM on Wednesday the 24th to address the Nation, taking his pitch directly to the American taxpayers.
“We're in the midst of a serious financial crisis, and the federal government is responding with decisive action. We've boosted confidence in money market mutual funds, and acted to prevent major investors from intentionally driving down stocks for their own personal gain. Most importantly, my administration is working with Congress to address the root cause behind much of the instability in our markets. Financial assets related to home mortgages have lost value during the housing decline. And the banks holding these assets have restricted credit. As a result, our entire economy is in danger. So I've proposed that the federal government reduce the risk posed by these troubled assets, and supply urgently-needed money so banks and other financial institutions can avoid collapse and resume lending.”
Are we really on the brink of disaster like the President says? Can we even take him serious this time around? Avery B. Goodman, a licensed attorney concentrating in securities law, in one of his editorial contributions on SeekingAlpha.com questioned the real motive behind the Paulson Plan and $700 Billion Wall Street Bail Out.
“So, is the $700 billion being disguised as a bailout for banks, when it is really for bailing out the Federal Reserve? Is it a way of avoiding the embarrassment of walking into Congress and admitting the truth of the need for Congress to authorize issuance of new Treasury bills to recapitalize the nation’s central bank? Will the stock market drop sharply if the Fed “slush fund” is not recapitalized? Will recapitalization of the Federal Reserve allow it to create a series of false rallies to allow people-in-the-know to dump equities into a temporarily rising stock market?”
Avery holds a B.A. in history from Emory University, and a Juris Doctorate from UCLA Law School. Goodman is a member of the roster of neutral arbitrators of the National Futures Association (NFA) and the Financial Industry Regulatory Authority (FINRA). Avery blames an organization known as the “PPT”, or “Plunge Protection Team” set up under Presidential Order after the 1987 Stock Market Crash.
“The official name is the “President’s Commission on Working Capital Markets”, but PPT believers allege that it has devolved into a conspiracy between the biggest banks in the nation (primary dealers of the Fed), the Chairman of the SEC, Treasury Secretary and Federal Reserve Chairman to control markets. Allegedly, the PPT’s original mission was to infrequently intervene, only in emergency situations, when the falling markets might get out of control, by using cash injections, delivered by the Federal Reserve, through its various money delivery “windows”, such as the repo loan window, and, now, the secretive dealer discount window, term auction securities window, etc.
According to PPT theorists, the organization is now dedicated to using the Fed balance sheet to produce trading profits for its private players, by manipulating markets up and down, and doing the “pump & dump” while using taxpayer funds to pay the costs of the program. I don’t know if PPT really exists, but, if it does, it certainly explains a lot. When you look at the history of money given out at the so-called “repo” window, and the amount of free cash that is floating at any one time, there does seem to be a distinct relationship to the rising and falling of the stock market.
After reading some of the articles, I began thinking about the $700 billion bailout. I took the time to recalculate the Federal Reserve balance sheets, and suddenly realized that it has accepted almost exactly $700 billion worth of toxic mortgage paper, in return for ostensible loans that many of the big banks cannot possibly repay. It just so happens that that is the sum of money they want to extract from Congress. You can’t help but see that the so-called “loans”, given by the Fed to the banks, have changed the composition of its balance sheet dramatically. The Fed’s assets went from nearly 100% liquid Treasury bills, to mostly illiquid “cash for trash” mortgage bonds. The illiquidity of the mortgage bonds would mean that the Fed could no longer raise sufficient funds to adequately support the PPT conspiracy, if, in fact, that is what it wants to do.”
Ron Paul had this to say about the President's strategy to bail out the banks:
“It’s the same destructive strategy that government tried during the Great Depression: prop up prices at all costs. The Depression went on for over a decade. On the other hand, when liquidation was allowed to occur in the equally devastating downturn of 1921, the economy recovered within less than a year.” Now I am not a political science major or a securities attorney, but I use to work in at a bank for a few years and I think Avery Goodman might be on to something. Also, this could be part of the grand scheme to introduce the Amero. Regardless if Goodman is right or wrong about the motive, I know that Ron Paul is right on this issue because he is one of only a small handful of people on Capitol Hill that actually has the people’s back. McCain should be replaced with Ron Paul on the 2008 Presidential Ticket if the Republicans want a chance at retaining the White House especially after selecting Sarah Palin as the Republican Vice Presidential Candidate. The oddsmakers at BetUS.com have the Republican Party listed as +160 underdogs to win the White House and those numbers look to get even longer with the current economic downturn and after Palin does her whopping fourth interview with the media.
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