September 23 2008 show notes

  • The bailout of the banks. People are asking the wrong question.

  • Guest: John Berlau, director of the Center for Entrepreneurship at the Competitive Enterprise Institute. The economic crisis.

  • Guest: Brad Friedman, Brad Blog. Voter fraud, election fraud.

  • Guest: Robert Kuttner, Distinguished Senior Fellow, Demos. "Obama's Challenge".

  • Guest: Senator Bernie Sanders, Independent of Vermont. Senator Bernie Sanders suggests we could soon see a Reed-Pelosi-Bush bailout bill, and that this could be the October Surprise, the game-changing event, that ties Barack Obama to George Bush and cuts McCain away from Bush. Transcript. Clip.

  • Guest: "Advertiser Success Story": Rosemary Roberts, Communications & Marketing Director for Horwitz, Horwitz & Associates (Chicago lawfirm).

Topics, guests, upcoming events, quotes, links to articles, audio clips, books & bumper music.

Tuesday 23 September '08 show

  • Thom's been giving bailouts some serious thought. If he was in Congress, he would say this is nuts, do not bail outthese companies.
  • Article: Henry M Paulson Jr. Forbes top 100 executives list 2006. He was number 81. "Henry M Paulson Jr has been CEO of Goldman Sachs Group (GS) for 8 years. Mr. Paulson Jr has been with the company for 15 years". Stock owned in Goldman Sachs $632.4 million. The industry standard is $500,000.
  • Article: $521,000: The average pay of Goldman Sachs employees ­ and that includes secretaries. 12 February 2006.
  • Article: Paulson Debt Plan May Benefit Mostly Goldman, Morgan.
  • Goldman Sachs and Morgan Stanley announced yesterday that they weren't going to be investment banks any more, once they get their bailout.
  • Article: People are Asking the Wrong Question, midtowng (the source for several of the following quotes).
    "All discussion about the proposed taxpayer-funded bailout of Wall Street banks is centered around the idea of, If we don't bail them out, they will fail. It seems no one is asking a much more important question of, "Will this bailout do any good?" Or to take this one step further, "Will this bailout do more harm than good?"

    We badly need to consider what history teaches us before we repeat the same mistakes all over again.
  • Clip:
    "Now, what did I see going on? Last week you watched the equity markets, the stock markets, which most people see, drop by 1,000 points then rally by 1,000 points on the news of this program. But underneath the surface, credit markets and capital markets were freezing up. And when the capital markets freeze up, then mainstream American companies have trouble raising money to do their job...

    the job is buying these illiquid assets to unclog the system and let the credit markets work the way they need to and to restore confidence...

    because the system is frozen, there's not a market for them.
    The "Mother of All Bailouts": As Paulson Defends $700B Plan To Buy Bad Debt, Congress Sees No End In Sight. Face the Nation, Sept. 21, 2008.
  • Will this bailout do more harm than goood" Will it even work? They are not trying to fix the system or stop another great depression, there is nothing systematic or structural in it. They are trying to buy 6 weeks.
  • Article: Real Estate Men On Hoover Plan, New York Times, October 8, 1931.
    "Skepticism as to President Hoover's plan to liquidate frozen bank assets was expressed yesterday by Charles G. Edwards, president of the Real Estate Securities Exchange. The exchange deals almost exclusively in real estate bonds, of which it is estimated that $1,500,000,000 at par value are in default throughout the country.
    "President Hoover's financial plan," Joseph P. Day said in part, "is a step in the right direction towards making real estate investment more liquid. The system will make it possible for the Federal Reserve Bank to issue acceptance notes against sound real estate securities, thus stabilizing their values. Real estate mortgages are commonly regarded in banking as frozen assets. The Hoover plan seeks to take these substantial investments from the frozen asset class and give them a recognized value."
  • They did the Hoover plan and nearly all the banks failed; it bailed out the fat cats. ("frozen" is Thom's emphasis.) Japan tried the same thing in 1988 starting with 60 trillion yen (12% of GDP), then another 7.5 trillion yen 6 months later. It didn't work.
  • Article: Rickety Japanese Banks; As Borrowers Collapse, Is New Bailout Needed? September 8, 2000.
    ""We are standing at the same divide where we were standing two years ago, when we recapitalized the banks," said Yasuhisa Shiozaki, a youngish legislator from the governing Liberal Democratic Party, who has been a rather lonely advocate of painful financial restructuring. "We can either recapitalize the banks again, or we can just let them go bust."
    Mr. Shiozaki doubts that the government has the will for a second round of refinancing in the wake of Sogo's collapse, when a plan to spend close to $1 billion to waive debt and keep the company afloat was swamped in an outcry of public disapproval.

    Ruling-party politicians quickly scrapped the plan, and Sogo failed, blowing away the fig leaf that covered Japan's supposedly resolved bad-debt problems. "What we found out with Sogo and afterward is that the essential and fundamental problems of the Japanese economy were still there or perhaps even worse," Mr. Shiozaki said.
  • Bumper Music: Rockin' in the Free World, Neil Young.
  • Article: What if the bailout plan doesn't work? Eamon Javers.
  • Article: Fears emerge over $700bn rescue.
    "Morgan Stanley said earlier it would sell a stake of 10-20 per cent to the Mitsubishi UFJ Financial Group (MUFG) in a deal worth up to $9bn. The news came just hours after Nomura, Japan

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