A word from Dennis Kucinich on the Bailout, Tuesday 9/30/08

[chknltl]

(also posted in GD)

The Bailout and What's Next

Dear Friend,

Yesterday marked a day that will go down in history, when Congressional Democrats and Republicans alike took on full responsibility to protect the interests of taxpaying Americans, and defeated the deceptive bail out bill, defying the dictates of the Administration, the House Majority Leadership, the House Minority Leadership and the special interests on Wall Street.

Obviously Congress must consider quickly another course. There are immediate issues which demand attention and responsible action by the Congress so that the taxpayers, their assets, and their futures are protected.

We MUST do something to protect millions of Americans whose homes, bank deposits, investments, and pensions are at risk in a financial system that has become seriously corrupted. We are told that we must stabilize markets in order for the people to be protected. I think we need to protect peoples' homes, bank deposits, investments, and pensions, to order to stabilize the market.

We cannot delay taking action. But the action must benefit all Americans, not just a privileged few. Otherwise, more plans will fail, and the financial security of everyone will be at risk.

The $700 billion bailout would have added to our existing unbearable load of national debt, trade deficits, and the cost of paying for the war. It would have been a disaster for the American public and the government for decades and maybe even centuries to come.

To be sure, there are many different reasons why people voted against the bailout. The legislation did not regard in any meaningful way the plight of millions of Americans who are about to lose their homes. It did nothing to strengthen existing regulatory structures or impose new ones at the Securities and Exchange Commission and the Federal Reserve in order to protect investors. There were no direct protections for bank depositors. There was nothing to stop further speculation, which is what brought us into this mess in the first place.

This was a bailout for some firms (and investors) on Wall Street, with the idea that in doing so there would be certain, unspecified, general benefits to the economy.

This is a perfect time to open a broader discussion about our financial system, especially our monetary system. Such a discussion is like searching for a needle in a haystack, and then, upon finding it, discussing its qualities at great length. Let me briefly describe the haystack instead.

Here is a very quick explanation of the $700 billion bailout within the context of the mechanics of our monetary and banking system:

The taxpayers loan money to the banks. But the taxpayers do not have the money. So we have to borrow it from the banks to give it back to the banks. But the banks do not have the money to loan to the government. So they create it into existence (through a mechanism called fractional reserve) and then loan it to us, at interest, so we can then give it back to them.

Confused?

This is the system. This is the standard mechanism used to expand the money supply on a daily basis not a special one designed only for the "$700 billion" transaction. People will explain this to you in many different ways, but this is what it comes down to.

The banks needed Congress' approval. Of course in this topsy turvy world, it is the banks which set the terms of the money they are borrowing from the taxpayers. And what do we get for this transaction? Long term debt enslavement of our country. We get to pay back to the banks trillions of dollars ($700 billion with compounded interest) and the banks give us their bad debt which they cull from everywhere in the world.

Who could turn down a deal like this? I did.

The globalization of the debt puts the United States in the position that in order to repay the money that we borrow from the banks (for the banks) we could be forced to accept International Monetary Fund dictates which involve cutting health, social security benefits and all other social spending in addition to reducing wages and exploiting our natural resources. This inevitably leads to a loss of economic, social and political freedom.

Under the failed $700 billion bailout plan, Wall Street's profits are Wall Street's profits and Wall Street's losses are the taxpayers' losses. Profits are capitalized. Losses are socialized.

We are at a teachable moment on matters of money and finance. In the coming days and weeks, I will share with you thoughts about what can be done to take us not just in a new direction, but in a new direction which is just.

Thank you,


Dennis
www.Kucinich.us
216-252-9000 877-933-6647

PS Watch the 47 minute 'Money as Debt' animated documentary in http://video.google.com/videoplay?docid=-90504743625834... . This is a useful, though by no means definitive, introduction to the topic of debt and the monetary system. Let me know what you think.

[mike_c]

1. first rec-- wish I could recommend this one thousand times....

Dennis Kucinich is one of the most lucid voices in Congress, and one of the most consistently spot on. Kucinich is the leader America needs!

[pleah]

2. K&R! I love this man! He says things in a way that anyone could understand.

I wish we had more like him fighting for us.

[cascadiance]

3. Now is the time to remove the cap on Social Security REGRESSIVE taxation...

It would be as simple as this:

a) moving forward EVERYONE would pay the same "flat percentage" of payroll tax to fund social security. NO cap at around $100k of salary.

b) In order for Obama to honor his commitment to not give any tax increases to those paying under $250k, he would the DROP the percentage of taxation of roughly 6.2% of wages down to 2.48% so that the person who makes $250k pays the same amount of raw tax ($6200) that he pays now under the new plan, but where he's taxed $6200 (2.48%) on his full $250k instead of $6200 (6.2%)on his first $100k. Everyone making more than $250k would pay an additional 2.48% on the rest of their earnings that they didn't before and pay more into the system, and everyone under $250k would in fact get a tax cut of as much as more than 50% of their previous contributions.

c) Everyone moving forward would be entitled to the same benefits that they get now from Social Security, but those making less than $250k would get a shot in the arm of getting in effect a big tax cut in their salaries.

d) This should make Social Security solvent, and also make those making less than $250k less of a corporate liability to the bottom line than the rich fat cats to the top if their salaries remain heavily overinflated. It would be added incentives for companies to lower their fat cat's salaries, and less so to doing massive layoffs as a means of cutting costs.

I would think the extra few thousand here (which wouldn't require a big income tax infrastructure overhaul that perhaps could be put into law immediately) would help a lot of families get more relative wealth and spending power to help them make ends meet on their mortgages, etc.

[pberq]

4. Kick & Nominated - excellent!

[distonworker]

5. blackout is a sad commentary

where is Kucinich's voice heard? Not on any of the television stations I view. Not in the press. Where are any 3rd Party voices to be heard. This is the silence of the Lambs. Congress has silenced the voice of the people and that is why they can get away with this bailout.
They present a scare scenario that has to be acted on instantly but in truth, its no different than the other lies about Iraq, Iran, and Yellow cake. This truly is a big cow paddy with a dab of whipping cream. Good Eating.

[chimpymustgo]

6. Thank you for posting this. K&R.

[blue97keet]

7. Peter DeFazio / Marcy Kaptur interview on "No Bailout" plan

DOBBS: This breaking news just in to CNN. The Senate will vote on a massive $700 billion Wall Street bailout tomorrow evening. That vote scheduled, it will come two days after the House of Representatives voted down that Wall Street bailout, sending a powerful message to the Bush administration and the Democratic leadership in Congress, which apparently the Senate leadership now wants to ignore. The House is due to reconsider the bill again Thursday after the Jewish holiday. Again, the Senate will be voting on the Wall Street bailout tomorrow evening.

Meanwhile, a group of House Democrats today proposing an alternative plan to deal with this financial crisis. Announcing a five-point plan, they call this legislation the no-bailout act. The plan calls for government regulators to step in and regulate the markets rather than a taxpayer bailout of Wall Street. Congressman Peter DeFazio of Oregon and Congresswoman Marcy Kaptur of Ohio leading the new effort, and they join us now. Good to have you both here. What will be the cost of the taxpayer of your new plan, congresswoman?

REP. MARCY KAPTUR (D), OHIO: Our plan doesn't cost anything because we oriented toward the market, not the government. And we follow the plan that was used back in the '80s and late '70s for the Resolution Trust Corporation, with all of the troubles back then, 3,000 bank failures, hundreds of agriculture banks, continental Illinois bank failure, inflation at 21 percent. And over 3,000 banks were resolved. Frankly, all the banks in Texas were closed. But at that time, William Isaac, who was chair of the Federal Deposit Insurance Corporation developed a net worth certificate as well as procedures so that $100 billion worth of resolution was accomplished for $1.8 billion out of the insurance fund of the FDIC.

DOBBS: Congressman, let me ask you here, have you had any reaction from the House leadership at all, the speaker to this plan? Because as Congresswoman Kaptur said, it's reminiscent of the Resolution Trust Corporation. It also sounds like it draws on some of the experience from the early '90s in both Sweden and Finland as suggested by Bill Isaac, former head of the FDIC. Is there any truth to that? REP. PETER DEFAZIO (D), OREGON: Absolutely. And what we're offering them is something that enjoys broad Republican support, should enjoy broad Democratic support. Let's try the minimalist, regulatory approach. Now, the markets spoke before we voted down that plan yesterday. If you read "The New York Times" today, they say actually liquidity and lending froze up yesterday in anticipation that the Paulson bailout would pass. I think the Paulson bailout is based on a false premise, shoveling this money into bad debt on Wall Street is going to solve this problem.

DOBBS: Can I ask you both something? The head of the Congressional Budget Office said this idiotic bailout of Wall Street was likely, was likely to cause a deeper crisis than the one that we're currently going through. Why isn't anybody paying attention to this in either the White House, the Democratic leadership or the campaign trail? Both Obama and McCain act like they have no knowledge of what the heck is going on here.

KAPTUR: They haven't really identified the basis of the problem. Our banking system is fundamentally sound. This is a credit crunch and a housing foreclosure challenge. They haven't identified the root cause. We can deal with the credit crunch through changes in accounting standards. The Securities and Exchange Commission today, as a result of the work that we've been doing so much over the last week and a half, to try to get them to look at those accounting standards is the reason that our local banks are short on credit to re-evaluate those standards and then to deal with the home foreclosure crisis in a way that it matters on Main Street, locks in on Main Street.

DEFAZIO: Lou, you know, credible economists say to us, look, if you adopt Paulson's plan, you throw this money at the top on Wall Street under the premise it will free up credit among the banks, which many of them question, 400 at least, they say but it definitely doesn't go to the root of the problem in housing. And what do you do when housing values go down and there's another trench of maybe another trillion dollars of bad securities on Wall Street and Paulson comes back for more money or the next treasury secretary? We've got to try something else.

DOBBS: We should point out here, just so everybody keeps it straight, no one has any idea of the so-called toxic securities, no one has any idea how many of these there are in the system, period. We have no idea, nor can the Treasury Department suggest what the number is. Some people have estimates but we know we're being low balled right now, right?

KAPTUR: Lou, we know 75 percent of the sub prime loans are good and performing -- 25 percent that may have trouble, we're not sure what the composition of those are, but we should put those into a special housing trust corporation where we can work them out with bank examiners in a way that we did back in the '80s and be very disciplined and prudent about the way we do this.

DOBBS: Two questions and one is sort of a statement as my want from time to time. One is, there can't be much excitement because you're not calling for taxpayer money in the leadership or the White House. And that will upset Henry Paulson because he won't be able to take care of his buddies on Wall Street. But the second part of this is, will we have public hearings? Will you actually invite the American public to have a voice here? Will you actually put together hearings in which we can hear competing viewpoints on this issue from the world's best -- the country's best informed experts?

DEFAZIO: Look at it this way. We got a lot of experts who back this approach, doesn't cost anything. Why not try this and if this works, great. If it doesn't work, that would give us time to go through the regular process with hearings, hearing from the American public, looking at getting at the underpinnings of this crisis. And then if we're going to put taxpayer money on the line, having a much better way of doing it. But maybe we can do it without putting the taxpayers on the line.

KAPTUR: And Lou, among those experts, 9 would like to invite Raymond Stall (ph) from my district in Vermillion, Ohio, who basically says "let all the Wall Street people hurt just like the rest of us normal people do. I don't owe them a living. Corruption and poor management brought on all of this. If these people were to be fired and prosecuted and put into prison, then that might be one thing. But to allow the same people to be in charge makes no sense to me or anyone else."

DOBBS: You know what? I think he sounds like an expert to testify anywhere. I like the sentiment. Is this bailout plan, I mean, the arrogance of the Senate, the arrogance of these two presidential candidates, Obama and McCain, demanding that this legislation be passed, this Wall Street bailout, is this thing going to die tomorrow?

DEFAZIO: I hope so. I hope the Senate has the guts to stand up for the people they represent. I've already talked to a few senators called me today, Maria Cantwell from Washington is very interested in our approach and says she's taking it to Judd Gray (ph).

DOBBS: Good.

KAPTUR: You know what I hope for, Lou? I hope for one courageous senator who will filibuster for the sake of the nation.

DOBBS: You know --

DEFAZIO: Maybe two.

KAPTUR: Maybe two.

DOBBS: So they can stay rested, because they've got a lot of fools to work against in that Senate. I would hope that there's enough courage there. The House proved itself to be filled with men and women who are willing to stand up for what's right and to turn down the special interest and the ignorant, arrogant leadership of your House, the Senate, and of course, the fellow over at 1600 Pennsylvania. Thank you both. It's an exciting proposition. I wish you all the best.

KAPTUR: Oh by the way, have your listeners go to Kaptur, let's play bailout on YouTube. They'll be surprised.

DEFAZIO: Even better, have your listeners post the number for the Capitol switchboard, flood the Capitol switchboard tomorrow and call the Senate.

KAPTUR: That's a good idea.

DOBBS: Now that's a good idea. We're going to help you. We're going to have that and we're going to have -- we'll have that on our Web site, LouDobbs.com. We're going to put up that number. Now you want the number for the Capitol or you want the number for the House?

DEFAZIO: For the Capitol. It's the side on the Senate. We got to go for the Senate. We've got to stop the Senate tomorrow just like the House stopped it yesterday.

DOBBS: OK, we're going to have that number up. We're going to put that number up at the end of this -- on the other side of this break and ask everybody to do as Congressman DeFazio suggested. Call, e-mail and god speed. Thank you both very much. Congresswoman Kaptur, thank you Congressman DeFazio.

Up next, the presidential candidates, well they're out of control, they're out of touch. Now they're fighting to save the Wall Street bailout that the American people absolutely reject. Three of the most popular radio talk show hosts in the country will be here. And it took six years for the federal government to pass legislation that may, maybe not, could possibly protect our food supply. It's outrageous. That report on country of origin labeling, next. We'll be right back.