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Web Letter

Many people lose sight of the fact that the market will not always be down. If one looks at the last downturn, then one sees that there is light at the end of the tunnel. This is very important, as the valuation of these assets is at the heart of a bank's worth and what the taxpayers will eventually have to pay. At the beginning of the savings and loan crisis, the RTC had thousands of properties that had to be sold, and in the beginning it was almost impossible to sell any of them; but as the market stabilized and prices started to rise, these assets were sold, in some cases at a profit. My point being that one has to take the long view and ask if nationalization will allow us to do that. Will the proposed deficit be as large as expected after everything is sold? Will this stabilize the banking system? No one knows for sure. We need to allow ourselves the time to work out this problem, and nationalization may provide that opportunity.

Douglas Williams

McKinleyville, CA

Feb 24 2009 - 5:01pm

Web Letter

Nationalizing banks is the best route to go, flushes all of the unwanted garbage out and allows us to start again, with more responsibility in check. We can't allow for another set of bailouts; let's use that money productively and do something like end global poverty.

The Borgen Project has some interesting insight into addressing the issues of global poverty, something we can remedy easily and sustainably.

Some interesting figures to ponder:
$30 billion USD: The annual shortfall to end global poverty.
$550 billion USD: The annual US defense budget.

Jon Lilly

Seattle, WA

Feb 24 2009 - 4:49pm

Web Letter

The entire "Stimulus Bill" is of course stupid, ineffective, and a total waste of our taxdollars.

Profit and loss is at the heart of the nation's business and economy. Those that profit ought to enjoy the fruits of their labors and be encouraged to continue forward. Those that generate loss ought to give it up, declare bankruptcy and find another line of work. Darwin and Wallace certainly would approve.

As far as the federal treasury helping out is concerned, the thing to do is simply purchase 100 percent of all outstanding mortgages, thus freeing up banks to do what they ought to have been doing, while at the same time working with mortagees (debtors) to keep these debtors in their homes while arranging for workable repayment arrangements, which easily could be integrated into deductions from monthly/weekly paychecks, just as is already done with Social Security and current tax withholding.

But no, the administration prefers paying off political campaign contributions to major contributors, without restrictions as to the use of our tax monies.

What a sham.

Tucano Fulano

Big Bear, CA

Feb 24 2009 - 3:15pm

Web Letter

If the banks are nationalized, the government will become the owner of the banks' good and bad assets and it will have to assume the banks' contractual obligations towards their creditors, investors and account holders. In particular, any contractual guarantees given by the banks to the owners of now-worthless risky "innovative" financial vaporware will become de facto contractual obligations of the government towards these owners.

They say that nationalization will "wipe the shareholders," etc., etc., but there is no nationalization law prescribing anything like that. On the contrary, nationalizing the banks will allow Congressional demoblicans to protect their trillionaire friends while uttering all kinds of pompous declarations about the government's "solemn duty to honor" the "contractual commitments" that the "glorious 2009 act of nationalization" entailed, as otherwise "the markets will lose all confidence in the USA government," bla bla bla.

Indeed, if we ignore small-fry investors, pension funds etc., the owners of worthless financial vaporware who truly matter to demoblicans are greedy domestic and foreign trillionaires who invested in the financial vaporware with full knowledge of its risks. These trillionaires will lose humongous amounts of money and hence will lose much, if not most, of their economic and political power, if the "financial system" is not "saved" by the taxpayers.

That's why the trillionaires have mobilized from very early on a mighty armada of bribed economists, journalists and politicians and ordered them to cry wolf about the cataclysms that will ensue if the "financial system" fails. "Saving the financial system" is indeed the obfuscating phrase invented by these bribed economists, journalists and politicians to try saving this neo-feudal class of trillionaires that is "essential" to what "America stands for" and to "how things should be after we help them out," as the "radical" Paul Krugman has put it in print repeatedly.

As you may remember, in the Middle Ages whenever the feudal class created a mess, they "rescued themselves" for the "sake of the country" by taxing the hell out of the serfs and the bourgeois, but now with "the triumph of liberty" all of that has changed... yeah, right!

But there is no need to save the trillionaires, regardless of how much money they have given to economists, journalists and politicians and of whether the flow of bribes may stop if the trillionaires fail for good.

The banks should be allowed to go through an orderly bankruptcy that preserve their real-economy presence and protect the savings of their non-reckless customers up to say 200k per account and up to, say, 1 million total net worth per person (IRS-declared), where a sliding scale could be used that reflects how "aggressive" the interest-gathering strategy chosen by each account holder was and the extent to which the account holder chose risky "lucrative" financial-speculation products over investments in actual production. The necessary paper trail is available...

One should fire everybody in the failed banks' upper management (because they failed, duh!) except for whistle-blowers and those essential to day-to-day operations, those managing customer accounts, and those having expertise in evaluating loans applications by companies that produce actual goods, be they trinkets, essential insurance products, etc.

Social criteria like protecting pensions could also be used by simply dividing the amount invested by each pension by the number of people the pension represents in order to determine what the pension can get in terms of protection and for which individual accounts (since pension-holders who chose especially reckless financial-speculation products should be protected less).

So it's not time to nationalize the losses of this self-anointed neo-feudal class of trillionaires masters of the universe. Rather, it's time to shut down their failed banks, let the greediest investors bite the dust, claw back any bailout money given so far to them and the banks, and use this and more money to jump start directly the flow of credit into the economy after "nationalizing" (hiring back!) the banks' existing experts in locating, evaluating, financing and following-through worthy entrepreneurial ventures in real production and giving them a new institutional backing and responsibilities.

This crisis must teach harsh lessons to the most reckless of investors and bankers, and spare those investors and bankers who tried the hardest to stay away from the greedy madness of the last thirty years, even if only for moral reasons.

Marc Dunord

Chicago, IL

Feb 23 2009 - 11:40am

Web Letter

Thomas Ferguson and Robert Johnson have written a great article. The devil, as they say, is in the details.

There are several competing interests here. As the authors point out, there are the takeover firms but there are also trillion-dollar decisions as to who is made whole, who gets a haircut and who is wiped out in the debt and equity.

What we are seeing now is the push by the preferred stock- and bondholders to remain whole. The tide is turning away from protecting common shareholders.

It is my view that it is the taxpayer that should remain whole if at all possible. In this regard I would pay off these equity- and debt-holders with "off-balance sheet assets" (QSPEs, Qualified Special Purpose Entities) and level 3 assets (the most questionable) at book value. In this way the most opaque and dubious assets will have to be sorted out by the previous owners and debt holders, not the taxpayers.

There is much more going on here than just the a move by the takeover firms, but they indeed are licking their chops.

Michael McKinlay

Hercules, CA

Feb 22 2009 - 3:41am

Web Letter

Congress should take back the authority to create money that was given by the Constitution!

Private banks have been granted the unconstitutional authority to create money out of thin air, whenever a loan is taken out, money that is backed by the "full faith of the United States government." This unconstitutional authority granted to private banks allows private banks to amass great wealth and wield huge power, shaping national and world events. According to Ellen Brown (see below), what we are seeing now with the private banks is the end of a 300-year Ponzi scheme--that is, Fractional Reserve Lending, which depends on an infinite cycle of increased borrowing to fund the interest on the loans.

Federalizing the Fed and nationalizing the banks, modeled after a system supported by Benjamin Franklin in Pennsylvania, i.e., only allowing national banks to create money, backed by the "full faith of the US government," would put the power of money creation back in the hands of the people and allow the profit of banking (i.e., reasonable and predictable interest on loans) to fund the government in lieu of an income tax.

I highly recommend Ellen Brown's Web of Debt. It's a well-documented explanation of the ominous role private banks have played in the history of our country and the world and provides a solution to our financial crisis--one that works for the people and eliminates the income tax. This book is a must read.

Here is an excellent article by Brown, "Sustainable Government: Banking for a "New" New Deal."

Ann Tulintseff

Seattle, WA

Feb 21 2009 - 2:40pm

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