Kicking Another Can Down the Road

The Federal government, that failed to use regulations that were there to keep economic disaster from happening, announced today that it will take over Freddie Mac and Fannie Mae. The revision of their operations and structure is left for the next Congress. Actually, though it displays the existing officials' inability to deal with the crisis they produced, it is reassuring that better office holders will be handling the restructuring.

A failure would affect the ability of Americans to get home loans, auto loans and other consumer credit and business finance," Paulson said.

Both companies were placed into a government conservatorship that will be run by the Federal Housing Finance Agency, the new agency created by Congress this summer to regulate Fannie and Freddie.

The Federal Reserve and other federal banking regulators said in a joint statement Sunday that "a limited number of smaller institutions" have significant holdings of common or preferred stock shares in Fannie and Freddie, and that regulators were "prepared to work with these institutions to develop capital-restoration plans."

The two companies had nearly $36 billion in preferred shares outstanding as of June 30, according to filings with the Securities and Exchange Commission.

Paulson said that it would be up to Congress and the next president to figure out the two companies' ultimate structure.

This is another instance of legislating appearance, which this occupied White House chooses because it expects the public to accept appearance rather than demand substance. Once again, no accountability occurs until after January 21, 2009.

The crises that have occurred over and over because regulations were not used, by Alan Greenspan more than by Paulson, are a proof of failed philosophy, one that the wingers will not own up to. Their aim is to keep up an appearance that will reassure investors and the financial community that the 'fundamentals are sound', a bit of voodoo economics if there ever was one. If they can scoot out before the total collapse of house prices descends on the economy, they are going to consider the two terms in high office as a success.

If we can manage to get responsible administration into office, the regulations that were there all along will be adequate to prevent further disasters. The protections we need are those against dysfunctional executive branch officials. More independence from the White House for the financial regulators, and the Department of Justice, is something that needs to be explored.

You Don't Have To Be House Shopping. This Hurts.

Just as your government and media neglect to mention that job increases need to rise by a percentage equal to the increase in population, so they're expecting that you will forget that that has to be added to increase in housing starts. As much as the population increases each year needs to be added to the figure - 2.9% - to appreciate how much of a squeeze that means for those seeking homes. Now remember the law of supply and demand? Supposedly that's how much additional price your new home buyers are going to need to ante up for their homes.

A downturn in new starts doesn't mean that that many fewer are buying houses, but that there is so much downward pressure on prices that builders can't afford to build. Without building homes, the companies doing the building also can't hire contractors like plumbers, airconditioning/heating suppliers, gardeners/landscapers, all the industries associated with building homes. Then you can throw in the furniture, appliance, curtain and carpet manufacturers. On the heap, toss some real estate businesses. You are by now seeing immense loss of income, and to that you can mix in the businesses not selling to the workers in those industries.

Got the picture? A large segment of the total economy is affected, which means that income and profits are significantly down over that large segment. When is that going to change? It's not soon.

Construction of homes and apartments fell in July to the lowest level in more than 17 years, but some economists said the drop could aid the slumping housing sector by helping reduce a glut of unsold properties.

The Commerce Department on Tuesday said builders broke ground on 965,000 housing units on an annualized basis, down from a pace of 1.08 million in June and the weakest showing since March 1991.

The report showed that July construction of single-family homes fell by 2.9 percent from the previous month to a pace of 641,000. That was the lowest since January 1991, when the economy also was in distress.

Construction of apartments and other multifamily dwellings also fell sharply, after a large jump in June due to a change in New York City’s building codes. That change, which went into effect July 1, gave a rare lift to overall housing construction in June.

Economists said the drop could help reduce the glut of unsold homes, a step toward turning around the slumping real estate market. Homebuilders are competing with foreclosed homes selling at steep price discounts.

“Slower starts means less adds to inventory,” said Adam York, an economic analyst at Wachovia Corp. “We have too much supply on the market.”
(snip)
Housing permits in July fell to a rate of 937,000, a 17.7 percent drop from June, but still above analysts’ expectations of 925,000. Permits are considered a reliable sign of future activity.

“The correction in the housing market has yet to find its bottom,” Richard Fisher, president of the Federal Reserve Bank of Dallas, said in a speech Tuesday.

New home construction last month was down a steep 39.2 percent compared with July 2007, illustrating how much ground the housing market has lost in the past year.

These are dismally large numbers. That kind of shock is happening to any number of families, and it's happening to you, too. I had to pay U.S. Airways for water with my dinner on my flight here, and I had to pay for almost $2 pounds when I got to London. Lucky that the exchange rate is down a bit.

Of course, if your business writer threw all this information into their reporting, the panic would send all his/her readers into shock. Advertisers would complain to the editor that consumers would start saving for the future instead of spending themselves into oblivion, and the business writer would be out on the streets.

Let me repeat. The housing starts in the U.S. are down 39.2% in one year. Now, go shopping.

Fear Based Economy

Hello again. Sorry but am having a problem typing.

As I have written previously, we have a new set of rules. I recommend you read that post, it gives basis that I just can't type right not

Your dollar/euro is a pretense. You accept it as having a particular value...at one time that was the gold standard, which is behind the "black gold"that described the slave trade, then oil. What was required to make the society function at time was each of us doing a job society needed. Wealth was created, leisure, culture even. Then there was energy. When it became oil that was a value. When it was horse power or labor-yours and mine- that was value.

What happened after we got into the reagan/neocon rule is all deception, as the real values were taken away and wages diminished,though the workload increased. The deception was substituted for the reality of producing. The management/executive/deceiver took the value and slipped it away from you and me. As long as we accepted the value management said existed, the system worked. It just didn't work for you and me. The money was based on belief. Your brave punditsa of course went with and for the $$.

The credit crunch has been created by the total collapse of regulation, that has allowed criminal elements to remove value and substitute fanciful valuations.

Assessments that gave real value to loans that did not have any possibility of being finally paid off, then putting those with good loans and calling them all good - as long as the pyramid scheme held up and no one was left holding the empty promise - yep, the financial industry's golden standard gave up the concept of value altogether. Then our system of economics was broken.

When we got to falsified assessments, we had only the concept left of actual value. As long as the investor banks would accept a valuation that had no real value, the wink and nod, we moved to fear. As long as no one spoke, no one would admit to false basis for the dollar, everyone would be fine. The crooks were calling this 'consumer confidence'. Though the same banks/investors knew the subprime loans were for the most part scams, they took the whole package, because no one would be the first one to speak our about the deception. Your Fed had the power to call for solid standards, and decided everyone better keep the pretense going.

Hope you're ready to be afraid. Because the bottom fell out. It's going to fall as far as it needs to reach basic values.

If you, or in this case, your banker, don't accept the pretense of value, you have to see your dollar has become valueless. You and I are the value.

That house you are watching tumble is the last remains of belief.

Without regulations being enforced, without the rule of law, there isn't any value.

Recession? More like end of the era of the rule of the jokers. No, I don't have to use stronger language. We know what they were. We have to rebuild the constitutional government that made the whole system work.

When we have laws that are enforced, we have value. Meantime, I have my little garden planted.

Moritori Te Salutant

Surely everyone recognizes the motto supposedly intoned by the gladiators, who incidentally were usually slaves, when they entered the Coliseum? 'Course, I learned 'salutamus', (we salute you).

I've just been puzzling through a few analyses of the disaster we are now in, that, like the one I cited yesterday from Molly Ivins, foresaw what was about to happen. The comparison I came across that really stood out was about the bubble economy Spain developed after it hit gold in this American continent.

When Africa was the main source of gold and silver, you see, traders prospered. This Brave New World was discovered, and suddenly Spain was mining precious metals less expensively because they simply took over the primitive cultures here instead of dealing with established owners of the resources in Africa. That left Africa in the lurch as to trade, so slaves became the substitute for gold.

Back in the 1st century, farmers in Africa used slaves as workers. The first Europeans to expand this practice and transform it into an international and extensive trade (in terms of volume) were the Portuguese in the 16th century. This was the beginning of what is called the Atlantic slave trade. In the 17th century, slaves, or black gold, even replaced gold as the most important and valuable export merchandise.

Are you feeling like the new black gold? because what is replacing the manufactured goods that in the industrial age made the U.S. prosperous? Look in the mirror. A description at Salon in 2003 by David Pollard gave a rather ugly look at that aspect of our economy.

how we 'make our living': by selling our labour to commercial-industrial enterprises (extractors, producers, distributors, and servicers) whose economic mission is to create and distribute ever more goods & services to ever more consumers.

As such, this acquisitive, capitalist economy might be better called a consumer economy: It requires the human citizens of Earth to be insatiable consumers, and relegates us to be merely that. We are largely valued, as individuals, by how much we produce and how much we consume -- our wealth -- and most commercial-industrial enterprises aspire to be the largest, most profitable and fastest-growing enterprises in Earth's history. We have become wage-slaves to this economy, toiling away at an unprecedented rate so we can afford to consume more, believing this is the only way to 'make a living'.

In addition to our indentured state as 'human capital' in the life-long service of commercial-industrial enterprises, the cost of this new economy is:

* the requirement to produce more than a replacement level of new consumers every generation,
* the ravaging of our natural environment,
* the production of massive amounts of pollution and waste as by-products of our enterprise, and
* the occupation of most of the planet's livable land area,

so that much of the planet's land, air and water have been poisoned, and our planet's biodiversity is in a tailspin.

Notice, things have only gone downhill since this observation was made, and like Molly Ivins' prophetic insights, we see a real disaster growing from the mistakes that were realized in the earlier Salon post. What is the most likely outcome? Let's look at history, say, "Empire of Dirt" by Bill Bonner.

For Spain, the conquests were extremely profitable – after they found huge quantities of gold and silver. But nothing ruins a nation faster than easy money. The money supply grew larger with every ship's return from the New World. People felt rich, but prices soon soared. Worse, the easy money from the new territories undermined honest industry. In the bubble economy of the early 16th century, Spain developed a trade deficit similar to that of the U.S. today. People took their money and bought goods from abroad. By the time the New World mines petered out, the Spanish were bankrupt. The Spanish government defaulted on its loans in 1557, 1575, 1607, 1627. and 1647. The damage was not only severe, it was long-lasting. The Iberian peninsula became the 'sick man of Europe' and remained on bed-rest until the 1980s. (Emphasis added.)

Enter us new slave goods. The 'consumer confidence' theme I have railed against that is being used as a substitute for actual value - you knew I was getting to that, didn't you? - makes us that slave trade.

In a business culture that sees its role as selling to the consumer something it doesn't need to produce its profit, deception becomes a necessity. Calling the present disaster a 'strong economy' presumes you the consumer will allow yourself to be given dirt and believe it's gold.

When we are cajoled to buy products because they supposedly will increase our feeling of self-worth, not because they are a good value, we as consumers have been reduced to ignorant slaves. We are caricatured as having no judgment, but only ego needs, and are a commodity to be used and discarded.

Bread and circuses don't feed and give health care to the public, and it's time we torched the facade that has been set up for us instead of real value, something we get only from a really good economy.

I'm borrowing Diane's theme - 353 more days.

*************************************************************

Just went over to Avedon Carol's The Sideshow, and doesn't she have up Susie Madrak reminding us of the prescience of William Grieder on the economy's eminent demise.

Thanks for the nice touch and the h/t, Avedon.

Those Magical Beans

I'm continuing my newfound archaic term binge. Beancounters is the derisive way the accounting department of a business was referred to sometime back, in my youth. Assuming no one exciting enough to notice would ever deal with the money, we sailed on towards glamor fields.

The Revenge of the Beancounters is upon us.

The economy almost stalled in the final quarter of last year with a growth rate of just 0.6 percent, culminating its worst year since 2002.

The Commerce Department's report on the gross domestic product, released Wednesday, showed an economy that had deteriorated considerably during the October-to-December quarter as worsening problems in the housing market and harder-to-get credit made individuals and businesses more cautious in their spending. Fears of a recession have grown.

For all of 2007, the economy grew by just 2.2 percent, the weakest performance in five years, when the country was struggling to recover from the 2001 recession. The housing collapse dealt the economy its biggest blow last year. Builders slashed spending on housing projects by 16.9 percent on an annualized basis, the most in 25 years.

The fourth-quarter's performance was much weaker — half the pace — than economists were expecting. They were forecasting growth to clock in a 1.2 percent pace.
(snip)
Consumers whose spending is critical to the economy's well-being tightened their belts.

See, you might have thought that you weren't buying up all those precious goodies because you couldn't afford them, but it's all in your mind. You're cautious because you 'fear' recession, you tightened your belt. No way did you barely make it from one payday to the next without feeding your kids gruel and hitching a ride since your car doesn't run on the fumes you can afford.

The economics writers are carefully taught that times are not hard, no, it's about self-fulfilling prophecies and consumer confidence.

The clever accounting that sold houses at far above any value they reasonably could represent, to buyers whose incomes were far below that traditional level that could justify the expense, at interest rates that were only affordable for the limited time the buyers were supposed to rampage through getting the next ludicrous loan - that is the beancounters' way of printing valueless money. In the ARM world, value has disappeared, and the investors who were sold that fiction are now holding not the cow but the magical beans (Jack and the Beanstalk for the M.B.A.).

I really expected that the Dr. Strangelove persona was going to pop out from behind the occupied White House puppet at the SOTU Monday, and we'd hear "Go Shopping!!" once again. The 'stimulus' plan seems to have served as an adequate substitute, so the Go Shopping concept is understood for now.

When the Democratic administration to come is in place, our financial planners will be able to start reviving our economy by such sound economic practices as; ending war on Iraq, eliminating tax breaks for corporations to offshore jobs and income, ending income inequalities, discouraging exorbitant corporate welfare, regulating financial manipulation of investments, and returning services to our wounded veterans, retirees and dispossessed. The scam of consumer confidence games needs to end before serious efforts will begin.

Business and individual spending is not done because of hope for the economy, but out of actual performance by that economy that gives them the means to spend.

It's called earnings.

If It's All Good, It Must Be Partisan

While it has been touted as a glowingly 'bipartisan' measure that is going to pass because it has support from both sides of the aisle in Congress, the stimulus package that is being proposed in reality is completely partisan. It adopts the Democratic aim of using government to benefit the people. That is as partisan as it gets.

The debacle that the U.S. economy has become was never anything but partisan, GoPervian, abuse of the working class that has made household expenses almost impossible to afford.

The rescue that their abuse has made necessary isn't exactly bipartisan, when it is forced on the occupied White House by the very economic disaster created by partisan, corporate welfare, policies. Only because it can't face another recession is the executive branch leaving behind its wide stance of resistance to benefits for the working class. Coming into the light is hardly bipartisan. It is actually extremely partisan - just not on the usual dark side.

Calling the stimulus package that leaders of both parties have agreed to 'bipartisan' is just an attempt to gloss over the disastrous policies that have led us into economic free-fall. The stimulus is absolutely partisan; it is good policy that benefits the working class.

The Senate is considering making the coming stimulus package more partisan yet, and that may be a very good idea. If the Congress can write a bill more to the left, it may just be able to force the extremists, that favor the very wealthy and corporate welfare, into signing onto that bill or throw away the votes they are going to need to retain any power in government. The more benefits go to the desperate, the more sure they are to be spent, and get into the economy.

If the right wing balks at making a real effort to rescue our working class, it may create the spectacle of stalling government. That would on a temporary basis make greater hardship for not only the working class, but corporate and financial institutions as well. Would that be such a bad thing? I'm inclined to think that letting the right wing bring itself down for the next decade or so might be the best thing for the country that we can hope for.

The U.S. Senate is likely to increase unemployment benefits in the economic stimulus plan agreed to by the House and the Bush administration, said Senator Charles Schumer, chairman of the Joint Economic Committee.

Spending additional money on unemployment benefits and food stamps will generate ``more bang for the buck,'' said Schumer, a New Yorker who is the Senate's No. 3 Democrat. The package of provisions designed to boost economic growth was announced Jan. 24 by House Speaker Nancy Pelosi of California, Minority Leader John Boehner of Ohio and Treasury Secretary Henry Paulson.

``The economists tell us that the No. 1 thing to get money into the economy fast is extending unemployment benefits and maybe increasing them by a little bit temporarily,'' Schumer said yesterday in an interview on Bloomberg Television's ``Political Capital with Al Hunt,'' scheduled to air this weekend. ``It's something we'd like to see added in.''

Schumer is among senators looking to make changes to a bipartisan deal that the House and the Bush administration worked out this week to help the U.S. avoid recession. Under that agreement, the Internal Revenue Service will distribute tax-rebate checks to 117 million families earning at least $3,000, give businesses incentives to invest in equipment and allow federally chartered mortgage-finance companies Fannie Mae and Freddie Mac to buy mortgages of up to $729,750.

That plan is a ``good fundamental foundation to work from,'' Schumer said, adding that Pelosi has known all along that the Senate would make changes.

The vetoes that have been used to keep remedial legislation from helping the U.S. public may just have to be renounced if the stimulus our economy needs is going to get into our hands within a reasonable time period.

We will watch with interest if the lame duck presidency is going down to a totally ignominious end, refusing to work for a solution to the crises it has created. If the need to pitch another tantrum proves too tempting to the worst president ever, that may well be the result.

Of course, prosecution for war crimes is beginning to loom on that horizon. Impeachment is a beginning.

Over Our Heads In Debt

There are a few cliches that we are familiar with, while knowing they really are not reality, but invention. The Welfare mom in a Cadillac comes to mind, as well as the anchor baby. For the 109th Congress, there was the high roller bankrupt.

Under the fiction that consumers were profligate and wound up avoiding well-earned debt by high living, the GoPerv-dominated Congress of 2005 passed punitive legislation restricting the ability to get out from under massive debt by filing a simple bankruptcy and avoiding paying off overwhelming debt. The fiction of high-rolling spenders overshadowed the reality of abusive lender sales and loan origination practices that gave high fees to agents for placing expensive loans, regardless of the consumer's ability to pay.

Since the passage of bankruptcy legislation that raised the costs, because of complicated paperwork and required counseling, to 50% to 100% over its previous costs, bankrupty filings decreased in 2006. In 2007, with huge increases in irresponsible and high-pressured loan pushers, the levels rose again to close to their former level, even with that increased expense. The lenders had prevailed over the consumer in more than just lobbying Congress.

\The slowing economy, job losses, and the housing and credit crisis are sure to feed more bankruptcies, experts said.

"They will continue to go up because the economy is going into the ditch," Mr. Westbrook said.

Bankruptcy experts said there are several reasons why bankruptcy filings went down under the new law. They indicate the increased challenges that debtors face in trying to regain financial health.

"By far the biggest effect is that it's raised the cost of bankruptcy very substantially – by 50 to 100 percent," said Mr. Sommer, the consumer bankruptcy attorney leader. "Attorney fees have gone up 50 to 100 percent."

That's because of more paperwork on short deadlines and increased liability for lawyers. Court filing fees also have increased.

"Bankruptcy is just flat far more complicated and far more expensive," said Charles Chesnutt, an Addison bankruptcy lawyer. "I've had to change the way I work because the additional requirements make it far more difficult to properly do a bankruptcy."

Mr. Ross, his client, said, "The law really caused me to go through a lot of paperwork to make sure I qualified every step of the way."

Contrary to what some may believe, the new law's income test hasn't emerged as the main roadblock to bankruptcy, experts said.

The test requires anyone with income above a state's median income to file for Chapter 13.

"It's not having that much effect because there were never that many people who could afford to pay their debts [in bankruptcy], and the means test has just proven that," Mr. Sommer said. "Most people were not living high on the hog."

Some consumers believe that bankruptcy is no longer available to anyone, attorneys said.
(snip)
Legislation pending in Congress could change bankruptcy laws further.

The legislation would allow bankruptcy judges to alter the terms of a mortgage on a debtor's principal home.

Lenders oppose the proposal, saying it would raise mortgage payments for consumers by allowing courts to write down the value of home mortgages in the event of bankruptcy by the borrower.

No surprise there, that the same lenders who have been paying agents for placing higher fees than they could afford on the consumer they sold into debt now don't want to let any pressures be eased from their backs.

If you, like me, get a mailbox full of offers to lend you money constantly, and see endless ads about how easy it is to get financing for those wildly impractical vacation trips, jewelry, luxuries, you know how deceptive those lenders are about what you can and do buy.

All the sympathy of a GoPerv Congress built huge barriers to a consumer surviving his getting into the hands of lenders. It's overdue that in the face of the disaster that abusive credit practices have created, the object of individuals' survival become at least as important as the lenders' demands. In the interests of the country's economic health, a big dose of reality is overdue.

Easy credit should bear consequences for the lender, not just the bamboozled borrower. For our country's economic health, controls on lending need to be enabled, and bankruptcy eased.

The U.S. needs to give the respect to consumers that it has for too long extended only to lenders.

Meeting those rising costs of living does not need punishment, it needs encouragement.

Fencing In The Wild, Wild Financier

The credit crunch has hit our libertarian/neo-con free marketeers where it hurts, in the wallet. While there are still injunctions from the Ayn Rand loyalists to let the bodies fly, it's all good, when losses worldwide are mounting, reality has hit us all hard.

The Eat Thy Brother Doctrine fails from a simple equation. Beggaring the consumer cuts 'way into profits. Our laboring class has turned into a third world country right here at home, while our capitalists are still expecting civilized country's profits. It doesn't make sense, in addition to being rotten morally.

For more than a quarter-century, the dominant idea guiding economic policy in the United States and much of the globe has been that the market is unfailingly wise. So wise that the proper role for government is to steer clear and not mess with the gusher of wealth that will flow, trickling down to every level of society, if only the market is left to do its magic.

That notion has carried the day as industries have been unshackled from regulation and as taxes have been rolled back, along with the oversight powers of government. Faith in markets has held sway as insurance companies have fended off calls for more government-financed health care, and as banks have engineered webs of finance that have turned houses from mere abodes into assets traded like dot-com stocks. For more than a quarter-century, the dominant idea guiding economic policy in the United States and much of the globe has been that the market is unfailingly wise. So wise that the proper role for government is to steer clear and not mess with the gusher of wealth that will flow, trickling down to every level of society, if only the market is left to do its magic.

That notion has carried the day as industries have been unshackled from regulation and as taxes have been rolled back, along with the oversight powers of government. Faith in markets has held sway as insurance companies have fended off calls for more government-financed health care, and as banks have engineered webs of finance that have turned houses from mere abodes into assets traded like dot-com stocks.

But lately, a striking unease with market forces has entered the conversation. The world confronts problems of staggering complexity and consequence, from a shortage of credit following the mortgage meltdown to the threat of global warming. Regulation – nasty talk in some quarters, synonymous with pointy-headed bureaucrats choking the market – is suddenly being demanded from unexpected places.
(snip)
But when things go wrong, demands grow for the government to step in and make them right.

"Untethered market forces lead to bad things," said Mr. Bernstein of the Economic Policy Institute. "You simply can't run an economy as complicated as ours on ideology alone."

While we all know there will be screams about making Amerika uncompetitive in the world market, the proof is in the puddin'. Following the tax cut for the rich, send the jobs offshore, fantasy has failed to make that great economy it was supposed to produce. The rich are richer, but their dollars are going south, investments losing value.

Their free market philosophy has failed the right wingers - and the whole world is losing along with their ill gotten gains.

A rational economic policy would be refreshing, but with the administration proposals I posted yesterday, it doesn't look likely until January 20, 2009.

You Lose

In case you were an investor during the past few years, I think this is worth your paying attention.

Sometimes it appears that the bankers at Goldman Sachs (NYSE: GS) are much smarter than their counterparts elsewhere. Now, there is some fresh evidence that that is true. The firm bet that securities backed by risky home loans would drop in value. According to The Wall Street Journal, taking that position "generated nearly $4 billion of profits during the year ended Nov. 30." The paper says that a small number of bankers in a very small division of the bank made most of the investment that lead to the gain.

Clearly, the group did not share the information with many of the firm's clients, who gambled in the opposite direction and lost.

Investors have to wonder whether the people at Goldman drink different water or breathe different air. The investment bank is the only company in it peer group to have a stock that is up for the year. It has never been in any danger. One of its hedge funds, Global Alpha, did poorly and lost a great deal of money, but the rest of the firm was not affected.

As I have been working in the financial community, I was very aware that the housing boom was going to burst, and have been very conservative. I am interested to know, did you know too that the subprime mortgages were coming to the fore, and did you act accordingly?

As many of my posts were about this, I am also interested to know; did you get any warnings of those I posted?

Potemkin Plan from Occupied White House

Today we will get that credit crunch "Plan" the occupied white house has been trumpeting about, that will give relief to only those home buyers who can meet and have been meeting scheduled payments on their sub-prime loans, and has been bought into by mortgage financers.

The administration is finally forced to act because it is threatened with actual solutions to the overall problems being offered in Congress. This patch on a bursting industry is being pressured out of an industry that knows it has taken the whole country into highly dangerous territory by its greed and mammoth malfunctions. The small number of loans affected will help to boost that new Gold Standard, 'consumer confidence'. That may save the country from disaster, but as I reported in my post earlier this week, most industry insiders are dubious.

Shareholder suits are the threat the mortgage industry chooses to cite, but precedent is perhaps more important to them. This acquiescent administration has let them get by with misfeasance to the peril of our entire economy. Being successful in acting now, might the cretin in chief get the idea that he might gain more legacy points? Oh, horrors, act against the corporate world in order to preserve the public from further harm? I wouldn't worry much if I were they. This corporate servant has no taste for public interest, in fact disdain seems to be its motivation in that realm.

Proposed congressional remedies would include a provision that would give irresponsible lenders no say over workouts - meaning their beloved authority over whether to allow time to homeowners threatened with foreclosure would be lost. Of course, foreclosure gives them other fees, off which they make their beloved profits, so they much prefer foreclosure. Insurance required of subprime borrowers won't pay the mortgage firms in the case of a workout, but only in the case of foreclosure.

The possibilities of a particular bill have been pointed out by responsible financial analysts. Senator Durbin has proposed that bill, and hearings on it were held yesterday that provided real Oversight of the executive branch. His proposal would remove the optional/voluntary nature of financiers' working with the abused loan recipients. It would provide curative solutions to the credit crunch, rather than try to ensure financiers' survival, the emphasis of the executive branch's efforts.

Of all the economists offering their opinions on the mortgage meltdown, few have offered a more bleak picture over the last week than Mark Zandi of Moody's Economy.com, although today, in testimony in the Senate, Zandi said passing one particular piece of legislation would help ease the coming economic pain.

In testimony before the Senate Judiciary Committee, Zandi offered praise for a bill introduced by Illinois Senator Richard Durbin. Among other things, that bill would allow judges to modify mortgages in bankruptcy proceedings in order to help homeowners stretch out their payments and keep their homes.

Zandi said today that this change would 'significantly reduce the number of foreclosures,' and said about 570,000 homeowners would likely benefit from this change in the coming years.

Without the change, Zandi argued today, the US runs a greater risk of a recession caused by escalating foreclosures.

'The odds of a full-blown recession are very high,' he said. 'There is no more efficacious way to short-circuit this developing cycle and forestall a recession than passing this legislation.'

Some bankruptcy judges and university professors argued today that Congress should move cautiously, and that a bill allowing bankruptcy judges to modify mortgages could have a host of unintended consequences, including higher credit costs and more uncertainty in the financial markets.

Pepperdine University (Ken Starr haven) representative Mark Scarberry argued vehemently at hearings yesterday about the "cram down" aspect that would give the mortgage financiers no power over negotiations about loan payments. The threat of interest rate increases were thrown out, but were countered by the facts that auto and farm loans - that had had the same proviso thrown at them - had not had such interest rate advances, and that the homeowners concerned do not comprise a very large proportion of the loanholders in toto. A further remark about the bankruptcy courts' being overwhelmed was roundly reputed by bankruptcy court representatives at the hearing.

The counter arguments appeared to be mainly the usual corporate tactic of fighting against any remedy that allows the public's money to escape its grasp. In this case, even the corporate world itself is greatly threatened, but it will still fight to the death - even if it is its own.

(Thank you, Supreme Commander Thor, for referring to the Potemkin Village of the Great Leader, which gave me the Potemkin part of my title.)