AIG: A Joke of a Scandal

This whole thing is stupid.

The Federal government knows how to, and is quite good at, placing conditions on receiving federal funds. Don't tell me that they couldn't have expressly required that the cash they gave to AIG did not go to bonuses, or anything else deemed wasteful. Of course they could have.

They chose not to. It was deliberate.

And now that the funds are being used for that, everyone's pissed at AIG, and it's Congress rousing the rabble.

Does anyone else find that at least a little disconcerting?

Let's Raise Taxes During a Recession!

Thoughts on the Financial Crisis, From a Democrat

And by far the best article I've read this campaign season.

I'm just glad that someone in the business has the courage to speak up when something is going horribly, horribly wrong.

H/T: Neptunus Lex

This Ad Sums It Up Perfectly

I just don't get how we are where we are right now.



This one's almost as good:

The Truth Is Out There

TheMouthPeace has released another video. The message: Don't trust the media. Don't trust the politicians. Do your own research. And TMP has a few Google suggestions for you.

Arming Yourself With Facts

The Mountain Sage has taken the time to link each and every article in Burning Down the House. Check it out. H/T: The Real Barack Obama.

UPDATE: Sage has also provided links to all the articles listed in another MouthPeace video.

As a bonus, here's a short history lesson from FNC, posted to the same site.

Friends of Freedom

OI will be monitoring which sites are taking down political videos like "Burning Down the House" to see where free speech is valued by the site owners and where it is not.

I want to be very clear on this point. This is in essence, not a free speech issue per se, but a property issue. Sites like YouTube are the property of their owners, who have the right to decide how their property is used.

But, the internet users of the world can and should exercise their "dollar votes"/"site-counter votes" on forums and sites where censorship is not tolerated. We just need to know where those sites are and choose to use them instead politically censored sites like YouTube.

As of the time of posting, I'm aware of two sites that have posted Burning Down the House that have not deleted it. They are LiveLeak and DailyMotion.
I'll be watching to see if that changes.

UPDATE: MetaCafe has a censored version of the MouthPeace video. They didn't approve of the language in "Money for Nothing." Well, neither to I, but I can't approve of this form of censorship either. They differ from YouTube in degree, but not in kind.

OUTRAGE: Political Blackout by YouTube (Financial Crisis Part V)

It was only a matter of time, I suppose.

For all the talk about how the internet was a bastion of free speech, the truth is that too few people own the primary public forums on the net. Which means those forums are their personal property and are good for free speech for only as long as the owners allow them to be.

The outstanding political infomercial, posted on this site and elsewhere around the internet, has been removed by YouTube. As of last night, only V1 was deleted; but V2 and V3 have since been removed as well. YouTube claims that these were deleted due to copyright claims over the soundtrack used.

Let's test that theory. Right now.

The soundtrack of the video is as follows:
Dire Straits--Money for Nothing
Tom Petty--Free Falling
Talking Heads-Burning Down the House
Bonnie Tyler--Holding Out for a Hero
AC/DC--Money Talks
Remy Zero-- Save Me
Survivor--Eye of the Tiger

The following videos, as of 1400hrs CDT 9/30/2008, were found on YouTube. All of the examples I'm posting are apparently unauthorized uses, such as DVP rips, Guitar Hero hacks, amatuer music videos, et. cetra.

Money for nothing:


Free Falling


Burning Down the House


Holding Out for a Hero


Money Talks


Save Me


Eye of the Tiger


YouTube is 0/7. Quite simply, YouTube's argument holds no water.

As for the legal side of this, this is called Fair Use.

§ 107. Limitations on exclusive rights: Fair use

Notwithstanding the provisions of sections 106 and 106A, the fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include —

(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;

(2) the nature of the copyrighted work;

(3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and

(4) the effect of the use upon the potential market for or value of the copyrighted work.

The fact that a work is unpublished shall not itself bar a finding of fair use if such finding is made upon consideration of all the above factors.

The copyright argument is just a cover for censorship. There was a video spreading on the internet that presented facts that, if known by the average voter, could hurt Obama's chances of winning the election. So it was silenced. It's that simple.

Unless we do something very quickly about who controls the public fora in this country, our democracy will be a fig leaf as well.

PS: Here's the link to the video on another site: http://www.dailymotion.com/video/x6wxmr_burning-down-the-house-what-caused_news

Let Them Die? (Financial Crisis Part IV)

The news of the week is that the bailout failed. And interestingly enough, it seems that the reason the bailout failed was that millions of motivated voters jammed the phone and fax lines of their representatives, demanding that the bailout not be passed. That impresses the hell out of me--maybe the voters just saved us big time.

I'm not an economist, so I'm not entirely clear on what we can do to get out of this mess. To a large degree, I have to defer to the judgment of others. But, as Neptunus Lex so succinctly put it:

Does it occur to anyone else that the only people qualified to really explain to us the consequences of the “credit crisis” - not the politicians who dither, not the newscasters that blather - but the ones who really understand the consequences are 1) the ones who got us here in the first place, and 2) the ones who have the most to gain from our intervention saving their bacon.

Color me a Luddite, but if the same doctors that sent me into toxic shock assured me that only they could fix me, given another $700 billion, I’d be a little skeptical.

Nevertheless, I still can't write my own recovery plan. My instinct, though, is that a controlling principle of any whatever we do must be "the stupid will be punished." Any company that made or bought up these high-risk loans (other than, perhaps, the ones that only did so because of government-arm twisting) deserves everything bad that happens to them. They deserve to fail. Let them die. What I would want from a recovery package would be to protect the companies that are only in the situation they're in because they were forced to.

And at least one guy who knows a few things seems to agree:

The obvious alternative to a bailout is letting troubled financial institutions declare bankruptcy. Bankruptcy means that shareholders typically get wiped out and the creditors own the company.

Bankruptcy does not mean the company disappears; it is just owned by someone new (as has occurred with several airlines). Bankruptcy punishes those who took excessive risks while preserving those aspects of a businesses that remain profitable.

In contrast, a bailout transfers enormous wealth from taxpayers to those who knowingly engaged in risky subprime lending. Thus, the bailout encourages companies to take large, imprudent risks and count on getting bailed out by government. This "moral hazard" generates enormous distortions in an economy's allocation of its financial resources.

Thoughtful advocates of the bailout might concede this perspective, but they argue that a bailout is necessary to prevent economic collapse. According to this view, lenders are not making loans, even for worthy projects, because they cannot get capital. This view has a grain of truth; if the bailout does not occur, more bankruptcies are possible and credit conditions may worsen for a time.

Talk of Armageddon, however, is ridiculous scare-mongering. If financial institutions cannot make productive loans, a profit opportunity exists for someone else. This might not happen instantly, but it will happen.

H/T: Neptunus Lex

Buring Down the House (Responsibility for the Financial Crisis Part III)

I came across some amazing videos today.

This video walks you through the origins of the financial crisis, from its foundation to the explosion, complete with a clever soundtrack including Freefalling and Money Talks. It includes the efforts in 2003 and 2005 that I posted about earlier, but it puts all the pieces of the puzzle in place better than I ever could. This is a must see for any informed voter, and I highly encourage people watching it to pause it to read the posted articles, take notes for Google follow-ups, and to do everything in their power to see to it that others see this video as well.



This one is some old C-Span coverage getting people on the record--some sounding the alarm against Fannie and Freddie; others sticking their heads in the sand.



And finally, here's a link to McCain's Senate Testimony in support of the Federal Housing Enterprise Regulatory Reform Act of 2005.

For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac--known as Government-sponsored entities or GSEs--and the sheer magnitude of these companies and the role they play in the housing market. OFHEO's report this week does nothing to ease these concerns. In fact, the report does quite the contrary. OFHEO's report solidifies my view that the GSEs need to be reformed without delay.

If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.

UPDATE: As of Tuesday 30 SEPT 2008, all three versions of the video infomercial above have been removed by YouTube. I found another copy here

Burning Down The House - What Caused Our Economic Crisis ?
Uploaded by Ibn-Khaldun

The Bill that Would Have Averted Financial Disaster

Last week, I mentioned a Bush administration proposal in 2003 to clamp down on Fannie and Freddy. This week, Bloomberg reports on a 2005 Fannie/Freddie reform bill that was shot down was supported by Republicans in committee but kept from a full vote in the Senate by Democrats.

Some might say the current mess couldn't be foreseen, yet in 2005 Alan Greenspan told Congress how urgent it was for it to act in the clearest possible terms: If Fannie and Freddie ``continue to grow, continue to have the low capital that they have, continue to engage in the dynamic hedging of their portfolios, which they need to do for interest rate risk aversion, they potentially create ever-growing potential systemic risk down the road,'' he said. ``We are placing the total financial system of the future at a substantial risk.''

What happened next was extraordinary. For the first time in history, a serious Fannie and Freddie reform bill was passed by the Senate Banking Committee. The bill gave a regulator power to crack down, and would have required the companies to eliminate their investments in risky assets.

But the bill didn't become law, for a simple reason: Democrats opposed it on a party-line vote in the committee, signaling that this would be a partisan issue. Republicans, tied in knots by the tight Democratic opposition, couldn't even get the Senate to vote on the matter.

And the icing on the cake:

But we now know that many of the senators who protected Fannie and Freddie, including Barack Obama, Hillary Clinton and Christopher Dodd, have received mind-boggling levels of financial support from them over the years.

Throughout his political career, Obama has gotten more than $125,000 in campaign contributions from employees and political action committees of Fannie Mae and Freddie Mac, second only to Dodd, the Senate Banking Committee chairman, who received more than $165,000.

Oh, and there is one little footnote to the story that's worth keeping in mind while Democrats point fingers between now and Nov. 4: Senator John McCain was one of the three cosponsors of S.190, the bill that would have averted this mess.

Well, folks, the facts are in. We know how we got here. We know who tried to fix it, and who tried to keep it broken (and we know he was paid off to do so). So the only question now is, why the fuck are Obama's numbers climbing from the Wall Street news? Why is the "failed Bush policies"/"failed economic philosophy" argument winning with the public when the facts say exactly the opposite?

Which Party Is Responsible for the Financial Crisis?

it's Bush's fault, of course! Bush's failed economic policies! The White House is the Government! Never mind that the Dem's controlled congress... and never mind this Bush proposal that Dem's in Congress opposed! We have an image to sell, don't let the facts get in the way...

From 2003's NYT:

The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.

The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac -- which together have issued more than $1.5 trillion in outstanding debt -- is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.

***

The proposal is the opening act in one of the biggest and most significant lobbying battles of the Congressional session.

***

Significant details must still be worked out before Congress can approve a bill. Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.

''These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''

Representative Melvin L. Watt, Democrat of North Carolina, agreed.

''I don't see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,'' Mr. Watt said.

H/T: Neptunus Lex (yet again!)

Update: Follow-up posts here and here.