Where is the $700 billion coming from?

[undergroundpanther]

And have you heard one question asked as to where Paulson is going to get the $700 billion in bailout money from?


From a conflict of interest perspective, the Fed has approved Goldman Sachs to be a bank holding company. Just what banks do they plan on buying and what is going to happen to the mortgages those banks hold? Isn't there potential for huge abuse of the price paid for mortgages held by banks Goldman Sachs acquires, since Paulson was the CEO of Goldman before becoming Treasury Secretary? What about Carlyle Group and the insider connections they have (Including Papa Bush who was a senior adviser before he retired)and the fact that a mortgage backed securities firm they ran collapsed and is just about to be re-organized? Who is going to supervise the prices they get for any mortgages they decide to sell? Clearly, Warren Buffett thinks there is some kind of edge for Goldman Sachs becoming a bank holding company. Less than a week after Goldman announced that the Fed had approved it becoming a bank holding company, Buffett, the man who always looks for the investment edge, announced he is investing $5 billion in Goldman. And, within 24 hours of Goldman receiving approval by the Federal Reserve to become a bank holding company, private equity (read Carlyle Group) was approved by the Federal Reserve to increase stakes in bank stocks up to 33%. Again, isn't there potential for huge abuse of the prices paid for mortgages held by banks Carlyle invests in? Why the sudden rush by Carlyle and Goldman to position themselves to buy into banks, when there is supposed panic everywhere?

From a political perspective what happens if some political pressure group wakes up to the fact that the United States government controls $700 billion in mortgages and decides certain special interests groups within that pool of mortgages held by the government should receive reduced mortgage payments and that others should receive increases in their mortgage payments. Is this not socialism?

From a long-term perspective, how is this bail out to be financed? Will it be an increase in taxes? Will the Fed just print the money? Will the Treasury just issue more debt and hope foreigners buy it, and at the same time crowd out private borrowers? Will it be a combination of the three? Any of these options will most assuredly suffocate the economy.
http://www.economicpolicyjournal.com/2008/09/bad-news-bailout.html

[livelongandprosper]

1. And why $700 billion? How is it that noone is asking that? n/t

[undergroundpanther]

3. Good Question

You know the $700 billion price tag of the proposed bailout? Treasury pulled that number out of thin air.

As Forbes writes:
In fact, some of the most basic details, including the $700 billion figure Treasury would use to buy up bad debt, are fuzzy.

"It's not based on any particular data point," a Treasury spokeswoman told Forbes.com Tuesday. "We just wanted to choose a really large number."

http://georgewashington2.blogspot.com/2008/09/treasury-says-700-billion-is-not-based.html



Trillion Dollar Treasury Defects: Truth and Consequences


By Richard Benson Printer Friendly Version
Sep 24 2008 10:25AM


www.sfgroup.org

One of my recent articles explained why the US Treasury deficit, without financial bailouts or government stimulus, was heading towards $600 billion a year. Another one forecasted that the bill for the financial bailouts would also be huge. This week, the cost of the bailout was confirmed with the nationalization of Fannie, Freddie, and AIG, added to the failure of Lehman Brothers, and the new massive $700 billion plus Treasury “Taxpayer Cash for Wall Street Trash”
The proposal will shift hundreds of billions of taxpayer dollars to purchase rotten financial assets from Wall Street institutions and banks for more than they are worth.
http://www.kitco.com/ind/benson/sep242008.html

Regardless of the reason, the financial system did not work the way we have a right to expect it to, and therefore a major overhaul is indicated with entirely new management. That's what they would do in a heartbeat if it was a professional sport team. What's happening instead is as if a team lost every game and the answer was thought to be to increase all the players' and coaches' salaries for next season.

http://www.unknownnews.org/0809-26HR.html


Felix Zulauf, founder of Zulauf Asset Management and long-time contributor to the “Barron’s Roundtable” in this week’s interview section of Barron’s notes that “the level of Treasury paper on the Fed’s balance sheet has now reached such a low point that it cannot expand more without really monetizing debt.” He goes on, “You can’t stop this or turn it around without going to monetization, a step the central bank hesitates to make. But eventually the developments will force the Fed to do it.”

http://www.kitco.com/ind/Kasun/sep232008.html

What is Monetization?

Monetization: Federal Reserve buys US government debt using freshly printed money. Supposedly very inflationary in the long run as it increases the money supply and decreases
the value of existing money.
http://www.unknownnews.net/

I hope you have a wheelbarrow...

[arcadian]

2. It's coming from thin air.

Fiat money, like those worthless pieces of paper in your pocket is dependent on debt for it's value.

[undergroundpanther]

4. yep

EXPLODING THE MYTHS ABOUT MONEY

Our money system is not what we have been led to believe. The creation of money has been "privatized," or taken over by a private money cartel. Except for coins, all of our money is now created as loans advanced by private banking institutions — including the private Federal Reserve. Banks create the principal but not the interest to service their loans. To find the interest, new loans must continually be taken out, expanding the money supply, inflating prices — and robbing you of the value of your money.

Not only is virtually the entire money supply created privately by banks, but a mere handful of very big banks is responsible for a massive investment scheme known as "derivatives," which now tallies in at hundreds of trillions of dollars. The banking system has been contrived so that these big banks always get bailed out by the taxpayers from their risky ventures, but the scheme has reached its mathematical limits. There isn't enough money in the entire global economy to bail out the banks from a massive derivatives default today. When the investors realize that the "insurance" against catastrophe that they have purchased in the form of derivatives is worthless, they are liable to jump ship and bring the whole shaky edifice crashing down.

Web of Debt unravels the deceptions in our money scheme and presents a crystal clear picture of the financial abyss towards which we are heading. Then it explores a workable alternative, one that was tested in colonial America and is grounded in the best of American economic thought, including the writings of Benjamin Franklin, Thomas Jefferson and Abraham Lincoln.
The Web of Debt: Ellen Hodgson Brown J.D.


http://www.marketoracle.co.uk/Article6450.html
http://www.brasschecktv.com/page/135.html

[Dr Fate]

5. All the millionare & billionare bankers are going to pool it together from their private savings....

...and give it to the treasury as a patriotic, nationalistic gesture.

LOL! I made a funny!