Economic Indicator on Main Street: Gas, Electric Cut-Offs Soar

It's not Wall Street, stupid. It's main street. Check this out:

Shut-offs have been running 17 percent higher than last year among customers of New York state's major utilities, and 22 percent higher in economically hard-hit Michigan. They are up in all or part of dozens of other states, including Pennsylvania, Florida and California, according to an Associated Press check of regulators and energy companies.
Despite stepped-up efforts by state and federal governments, utilities and private groups to help people avoid shut-offs this winter, some worry the problem will only get worse in the coming months, particularly with the downturn on Wall Street.
Read more...

Greenspan-Gramm's $45 trillion Fantasy Scam Becomes Self-Aware

Devilstower's great dkos diary tells the history, and intentions, behind the Wall Street/Financial debacle that has Bushco wants YOU to BAIL OUT NOW for 700 Billion Dollars, putting America in 11.7 Trillion Dollars Debt.

It's best to read the article, but just to get a sense of what's at the heartless heart of it, meet Phil Gramm and "Maestro" Alan Greenspan's financial cyborg: the name's credit default swaps.

As if bent on terminating America and its prosperity and riches altogether, Republican anti-regulationists decided to make greed the ultimate moral determinator: Greed = The American Dream. It is "Our Dream" to "Get Rich, or Die Tryin'", or better yet, let someone else die while the elite don't die, and get rich with a minimum of work (aka, "tryin'"). And John McCain's economic idol, Phil Gramm, helped author this anarchist, regulation-free debacle.

It all started with GOP icon Reagan and his voodoo economics, where the rich bilking the rest of us was supposed to result in some sort of drip-drip-drip down to... the rest of us. They de-regulated - i.e., put out into the Wild West with no laws - the Savings and Loan industry, which more or less exploded with greed and collapsed.

Then, after that debacle, Gramm & friends - notably, Alan Greenspan, American Financial Idol - worked very hard to build a totally lawless world of ever-expanding Finance, where Monsters eat Dogs, and Dogs eat Pipsqueaks, and Pipsqueaks pay taxes. And Monsters eat each other in Carnival Cannibalia, where no monster is too big to become bigger and, of course, bigger means better, right?

And in the middle of this greed, law-bashing fest was good ol' John McCain, basking in Republican elitism: grab the money, say we're defending America and the Individual. While in fact they are doing the exact opposite.

Gramm-Leach-Bliley reversed those rules, allowing not only more bank mergers, but for banks to become directly involved in the stock market, bonds, and insurance. Remember the bit about how S&Ls failed because they didn't have the regulations that protected banks? After Gramm-Leach-Bliley, banks didn't have that protection either.

Gramm wasn't done. The next year he was back with the Commodity Futures Modernization Act, which was slipped into a "must pass" spending bill on the last day of the 106th Congress. This Act greatly expanded the scope of futures trading, created new vehicles for speculation, and sheltered several investments from regulation.

As with both Gramm-Leach-Bliley and Garn-St. Germain, large parts of this bill were written by industry lobbyists. This famously included the "Enron Loophole" that exempted energy trading from regulation and was written by (big suprise) Enron Lobbyists working with Gramm. Not coincidentally, Senator Gramm, the second largest recipient of campaign contributions from Enron, was also key to legislating the deregulation of California's energy commodity trading.

Thanks to this fortunate trifecta of Gramm-crafted legislation, Enron was able to create "EnronOnline" and trade electricity in California with absolutely no oversight or transparency. They quickly worked out how to game the system. Previously, there had been only one Stage 3 rolling blackout in the history of California. Within months, the system had been manipulated by traders to generate 38 such blackouts and wholesale electrical prices had gone up more than 3000%. Despite production capacity equal to four times the demand during winter, energy traders even engineered a blackout in mid-January.

The Enron debacle, the S & L collapse, and now the meltdown of virtually everything on Wall Street - right after Republicans have changed the system to put retirement money for "ordinary Americans" - i.e., non-elite Americans - in Wall Street, all of this was engineered by Republicans Gramm and his senatorial supporters, including John McCain.

Notice that it's always propaganda selling Americans the false and misleading line: the Government is BAD because it wants to REGULATE us free & individualistic all-American Americans and we want America First!

Is that drivel or insanity? Then why do people buy this crap? Did anybody notice that all the meltdowns and disasters occurred from LACK OF REGULATION. They want to OVERREGULATE and SURVEILL YOU, the American People, while they, in their Big Elitist Superrich Protected Corporations and Agencies, go free unregulated, not subject to laws or scrutiny. They peer into your emails and underwear, while they want to fly "under the radar" while screwing you and this whole country for their own personal profit, power and fantasy ideologies.

Of these, the worst are the Credit Default Swaps.

Among those instruments which the CFMA sheltered from regulatory scrutiny was something called the "credit default swap." A kind of insurance one bank could exchange with another, credit default swaps supposedly made it safe for banks to take on ever riskier forms of debt. The Act didn't invent these swaps, though they were relatively new. Instead, by placing them in a state where they were not only unregulated but almost perfectly opaque, credit default swaps were turned into the perfect vehicle to fuel a Wall Street revolution. No one had any idea what these things were actually worth, they were traded "over the counter" without being administered by any exchange, and even the SEC could monitor their existence only indirectly.

So how did the Credit Default Swaps become self-aware???

A secondary market for trading swaps exploded into existence, and swaps were traded with absolutely no consideration for the nature or quality of the underlying investment. Swaps changed hands a dozen or more times, growing in "value" as they went. Worse still, no one regulated who could buy a swap, so it was (and is) perfectly possible for a company to acquire swaps that theoretically cover billions of dollars in loans, even if that company doesn't have a red cent on hand to cover those swaps should the loans default.

How big did this market become? Here's business correspondent Bob Moon and host Kai Ryssdal on American Public Media's Marketplace from back in the spring.

BOB MOON: OK, I'm about to unload some numbers on you here, so I'll speak slowly so you can follow this.

The value of the entire U.S. Treasuries market: $4.5 trillion.

The value of the entire mortgage market: $7 trillion.

The size of the U.S. stock market: $22 trillion.

OK, you ready?

The size of the credit default swap market last year: $45 trillion.
KAI RYSSDAL: That's a lot of money, Bob.

As in three times the whole US gross domestic product, Bob. And the truth is that Moon probably underestimated. The unregulated and poorly reported credit default swaps may have actually passed $70 trillion last year, or about $5 trillion more than the GDP of the entire world.

Look at what, of all people, Ben Stein said:

The crisis occurred (to greatly oversimplify) because the financial system allowed entities to place bets on whether or not those mortgages would ever be paid. You didn't have to own a mortgage to make the bets. These bets, called Credit Default Swaps, are complex. But in a nutshell, they allow someone to profit immensely - staggeringly - if large numbers of subprime mortgages are not paid off and go into default.

The profit can be wildly out of proportion to the real amount of defaults, because speculators can push down the price of instruments tied to the subprime mortgages far beyond what the real rates of loss have been. As I said, the profits here can be beyond imagining. (In fact, they can be so large that one might well wonder if the whole subprime fiasco was not set up just to allow speculators to profit wildly on its collapse...)

These Credit Default Swaps have been written (as insurance is written) as private contracts. There is nil government regulation of them. Who writes these policies? Banks. Investment banks. Insurance companies. They now owe the buyers of these Credit Default Swaps on junk mortgage debt trillions of dollars. It is this liability that is the bottomless pit of liability for the financial institutions of America.

Did you see that???
This is a mainstream financial analyst, Ben Stein.
So what if the whole subprime fiasco was "set up just to allow speculators to profit wildly on its collapse"?

So the Swaps themselves became real. Somebody has to pay. They got the US government in a back room, and gave them an ultimatum. Pay up, boys, or we take over.
Wonder why the entire government is jittery, paying up $700 Billion and more?
The Credit Default Swaps have become self-aware.
God help us.

GOP Legacy: Financial Meltdown, Not Trickle Down

Years ago I wandered into a Georgia grocery store run by two twin men in their 70's with a fondness for milk - and wisdom. Bush I was president then, and we got to talking politics. He told me that throughout his life, he noticed a clear repeated pattern: whenever the Republicans were in power, they ruined the economy and started wars. Any wars, even little wars (like Reagan's invasion of Grenada), but they had to start wars. He said that's basically what the Republicans were all about.

Now we have the Republican agenda taken to its logical extreme: war without end Amen (the GWOT with its "fronts" in Iraq, Afghanistan, Somalia, and elsewhere), and Total Economic Meltdown.

Not only have some of the biggest banks gone bad, oil prices become an issue, and the housing market gone bad, but the stock market made its worst decline in years, and most analysts are saying this is the worst thing to happen since the Great Depression.

Not just "internet rumors", no...everybody who knows. Take Bloomberg, for example:

In the biggest reshaping of the financial industry since the Great Depression, two of Wall Street's most storied firms, Merrill Lynch & Co. and Lehman Brothers Holdings Inc., headed toward extinction.

But to most people, what is a "reshaping of the financial industry"? What does it mean that

``The tectonic plates beneath the world financial system are shifting, and there is going to be a new financial world order that will be born of this,'' said Peter Kenny, managing director at Knight Capital Group Inc., the Jersey City, New Jersey-based brokerage that handles about $1 trillion worth of stock transactions a quarter. ``It's an ugly and painful process.''

?????

What is this "new financial world order"? Ugly and painful to whom?

Lehman, which employed 25,935 people at the end of August in 61 offices around the world, had a balance sheet totaling $786 billion as recently as February.

What will happen to those 25,935 people? And $786 billion can't just evaporate. Can it?

But where does the pain spread beyond Wall Street hotshots? Main street and the middle class are now in this boat since the Republicans' touted mixing of speculative stock market investments with retirement funds, pictured as a "free-market" bonanza a la Reaganomics gone futuristic, made 401K's a form of universal retirement security. It was the GOP dream of replacing the government with big corporations and Big Business. And it is a total disaster. Witness, oh world, the debacle.

The GOP attacks the US economy on multiple fronts: attempting to gut their sole source of adequate revenue, taxes, from their largest source, the rich and powerful including corporations; spending uncounted - and I mean black budgeted - treasure on wars and war equipment to the point of bankrupting the government; and rampant deregulation, trusting businesses to regulate themselves, pushing it with the glorification of greed and the denigration of compassion.

In short, the GOP
- Guts revenue from the wealthy, called "cutting taxes" (but only for the rich)
- Spends heavily on wars without accountability
- Deregulates all sectors of business and industry, leading to abuse
- Privatizes what should be accountable public services

Note the features of these policies:
- Lack of accountability, especially for the rich/powerful
- Faith-based "belief" in the moral authority of greed and self-serving
- War on compassion as somehow morally objectionable, a "free lunch"

The net result of these policies for the economy?
- Unregulated businesses can't make the hard realistic choices
- The big swallow the small - even in the bailout and aftermath of the debacle
- Smaller investors, small business owners, employees are crushed
- There's a culture of continual increase without balance or realism
- Without balance, there's collapse

The results are in:

The industry convulsions that started last year have already eliminated Bear Stearns Cos., forced into a cut-price sale to JPMorgan Chase & Co. with government support in March. A week ago, the U.S. Treasury placed mortgage companies Fannie Mae and Freddie Mac into conservatorship, guaranteeing their widely held debt securities while all but erasing their equity value.

American International Group Inc., once the world's largest insurer, is struggling to raise cash to avoid a credit-rating downgrade that could cripple its business. AIG shares fell as much as 52 percent in New York Stock Exchange composite trading today and were down $5.49, or 45 percent, to $6.65 at 10:50 a.m.

The five New York-based securities firms that dominated Wall Street have been reduced to two: Goldman Sachs Group Inc. and Morgan Stanley. While both firms are scheduled to report a drop in third-quarter earnings this year, their business has remained profitable throughout 2008 -- unlike Lehman and Merrill. As concerns swirled about their futures, Goldman's stock dropped as much as 7.9 percent and Morgan Stanley's fell as much as 13 percent in New York Stock Exchange composite trading today.

That's the problem with the "free market", and even more so with greed. Values can't just keep rising indefinitely. If this is the ABC of logic, why didn't anyone act on it? Because this is GOP-driven faith-based investing. Housing will always go up, they say. Based on what? That real estate is Jesus. It will wash away our sins.

``I've been on Wall Street for many years, and I've never seen a weekend like this one,'' said Michael Holland, 64, chairman and founder of New York-based Holland & Co. ``We are unwinding what has been years of silliness in the financial markets, and the silliness is being vaporized as we speak, unfortunately with the stock price of a number of companies involved in it.''

But is it just "silliness" being vaporized, or billions of dollars? And whose money is this? Whose property? Am I living in one piece of this debacle? Probably, yes.

In fact, this AP report indicates that the repercussions are much greater than anyone can really grasp:

Banks are not the only ones struggling in the growing financial crisis. The fund established to insure their deposits is also feeling the pinch, and the taxpayer may be the lender of last resort.

The Federal Deposit Insurance Corp., whose insurance fund has slipped below the minimum target level set by Congress, could be forced to tap tax dollars through a Treasury Department loan if Washington Mutual Inc., the nation's largest thrift, or another struggling rival fails, economists and industry analysts said Tuesday.

Treasury has already come to the rescue of several corporate victims of the housing and credit crunches. The government took over mortgage finance companies Fannie Mae and Freddie Mac, and helped finance the sale of investment bank Bear Stearns to J.P. Morgan Chase & Co.

Eleven federally insured banks and thrifts have failed this year, including Pasadena, Calif.-based IndyMac Bank, by far the largest shut down by regulators.

Additional failures of large banks or savings and loans companies seem likely, and that could overwhelm the FDIC's insurance fund, said Brian Bethune, U.S. economist at consulting firm Global Insight.

"We've got a ... retail bank run forming in this country," said Christopher Whalen, senior vice president and managing director of Institutional Risk Analytics.

Now hold on a second. What does that mean? It means the banks are making a run on the federal government and on the FDIC itself. Yes, it's not people making a run on banks. It's the banks making a run on their sole guarantor, the FDIC. What would America be without the FDIC?

A Washington Mutual failure would dwarf the largest bank collapse in U.S. history — Continental Illinois National Bank in 1984, with $33.6 billion in assets.

By comparison, WaMu and its subsidiaries had assets of $309.73 billion as of June 30 and IndyMac had $32 billion when it shut down.

And where does WaMu go when their assets are deemed "junk"? The Fed.

Arthur Murton, director of the FDIC's insurance and research division, said that when large institutions have failed in recent years, the hit to the fund has been about 5 to 10 percent of the company's assets.

Or, failing that, Daddy Warbucks... I mean, the Department of Treasury.

If the FDIC doesn't have enough cash to cover the initial costs of a bank or thrift failure, one option would be short-term loans from the Treasury. That last happened in 1991-92, during the last part of the savings and loan crisis, when the FDIC borrowed $15.1 billion from the Treasury and repaid it with interest about a year later.

But nobody asks, what if Daddy Warbucks is actually Daddy WarSpender? What if the Treasury Department can't take all the pressure?

Think about it for a second. Greed. Deregulation. The rich get richer. The poor get poorer. Then the "Supply Side" itself starts to collapse. Who's going to shore them up? The People?? They're the first to go. We always say, "Don't worry. The FDIC guarantees all." It's faith-based Republican economics. The FDIC is now Jesus. The FDIC will save us. But what if the FDIC itself can't save us?

Then we turn, at long last, to the Grandaddy of them all, the GOP's Great Satan: The Federal Government. But the businesses whose taxes were gutted to make way for their greed and profit have no more profits. Without profits, their tax revenues will be even less. And without revenues, the Federal Government will go bankrupt. And if the Federal Government goes bankrupt, we face the following:

We lose the war in Iraq and head home, 'cause we can't afford to be there.
We lose the war in Afghanistan, 'cause we can't afford to be there either.
We lose the war on terror, because we haven't yet figured out what the hell it is, let alone afford it.
We lose our status in the world, because we will have major problems with all the countries financially entangled with our affairs.

Oh, and on the home front? Our "homeland" will have a lot more crime, thanks to poverty, a lot less justice, thanks to "Homeland Security", and a lot more homelessness, thanks to ... "trickle down" housing crisis.

All those things hyped by the GOP will be lost. Because the Great Satan is not government corruption, but corruption itself is the Great Satan, and no corporation or powerful entity or nation, for that matter, is immune. Corruption starts with immunity to compassion. It holds nothing sacred but self-interest. And self-interest, as we are beginning, hopefully, to see, is blind, and ultimately self-defeating.

Or was it only the GOP? The Clinton years saw a lot of the same policies and deregulation. Some say,

This is not about Republican or Democratic policies, but systemic bipartisan deregulation. Only a quick bout of sweeping and decisive regulation can fix what's broken.

The New Deal's Glass-Steagall Act essentially put federal regulation in control of greed, by "saying" to the banking industry:

"If you want to raise capital through speculative investors at home or overseas -- fine. But as an investment bank, you don't get our backing and you don't get to mix it up with citizens' lives or use their capital to fund your trading activities."

McCain is still pandering to the disastrous notion of tax cuts being a panacea for all financial ills. It never worked before, and it will only make things worse. At least Barack Obama is using his mind. And note that the New Deal was a Democratic idea. It basically saved America from the brink. Now we are again on the brink. Why doesn't anybody feel it? Or maybe they will...

And if they don't, and put the GOP back at the helm, it will give a chance for the rest of the world to "inherit the earth." The ultimate GOP legacy seems to be the destruction of all their stated goals.

While Americans Starve, Burn Furniture, the Pentagon Trashes the Treasury

This incredible article by Matt Taibbi at Rolling Stone exposes what's really happened to the economy: the fallout of Republicanomics, of robbing the poor to feed the rich and their military-expansionist fantasies.

It started with a stark description of individuals' lives as described by Middle Class Vermonters to their Senator Bernie Sanders who asked his constituents how the economic "downturn" was affecting them. Expecting a few letters, he was swamped with over 700, telling of such harrowing experiences as burning furniture to stay warm and property taxes (thanks to RepubliBush Federal Tax Cuts to the Rich) are eating into their food money, not to mention education. Health care and dental care, of course, already are out of question. Welcome to Third World America.

Sanders got letters from working people who have been reduced to eating "cereal and toast" for dinner, from a 71-year-old man who has been forced to go back to work to pay for heating oil and property taxes, from a worker in an oncology department of a hospital who reports that clinically ill patients are foregoing cancer treatments because the cost of gas makes it too expensive to reach the hospital. The recurring theme is that employment, even dual employment, is no longer any kind of barrier against poverty. Not economic discomfort, mind you, but actual poverty. Meaning, having less than you need to eat and live in heated shelter -- forgetting entirely about health care and dentistry, which has long ceased to be considered an automatic component of American middle-class life.

Don't ask me, though, ask a U.S. Senator.

"The middle class is disappearing," says Sanders. "In real ways we're becoming more like a third-world country."

Wow! the Republicans' drained our Treasury, from which they removed their largest contributor, the Superrich, by the most profligate adventurism imaginable in Iraq. Funding for the Pentagon has gutted the American people's public fund into which their lifeblood has been drained via IRS-enforced taxes.

We've all seen the stats -- median income has declined by almost $2,500 over the past seven years, we have a zero personal savings rate in America for the first time since the Great Depression, and 5 million people have slipped below the poverty level since the beginning of the decade.

We have a government that is spending two and a half billion dollars a day in Iraq, essentially subsidizing new swimming pools for the contracting class in northern Virginia, at a time when heating oil and personal transportation are about to join health insurance on the list of middle-class luxuries. Home heating and car ownership are slipping away from the middle class thanks to exploding energy prices -- the hidden cost of the national borrowing policy we call dependency on foreign oil, "foreign" representing those nations, Arab and Chinese, that lend us the money to pay for our wars.

Oh, so now we're a debtor nation. Some "Superpower". We're throwing away democracy and prosperity at home so we can "export democracy" to Iraq and Afghanistan. What a great way to take revenge against the terrorists who caused 9/11! Kill off the American Middle Class! Send their sons to war to get killed or, more likely, maimed for life, and ruin their livelihood and starve their parents! That'll serve those terrorists! And set up a military dictatorship that looks for all the world like a democracy, except that it really isn't!

Security.

And while we've all heard stories about how much waste and inefficiency there is in our military spending, this is always portrayed as either "corruption" or simple inefficiency, and not what it really is -- a profound expression of our national priorities, a means of taking money from ordinary, struggling people and redistributing it not downward but upward, to connected insiders, who turn your tax money into pure profit.

Ooops! I mean, the "Security Industry." Take a look:

You want an example? Sanders has a great one for you. The Senator claims that he has been trying for years to increase funding for the Federally Qualified Health Care (FQHC) program, which finances community health centers across the country that give primary health care access to about 16 million Americans a year. He's seeking an additional $798 million for the program this year, which would bring the total appropriation to $2.9 billion, or about what we spend every two days in Iraq.

"But for five billion a year," Sanders insists, "we could provide basic primary health care for every American. That?s how much it would cost, five billion."

As it is, though, Sanders has struggled to get any additional funding. He managed to get $250 million added to the program in last year's Labor, Health and Human Services bill, but Bush vetoed the legislation, "and we ended up getting a lot less."

Okay, now, hold that thought. While we're unable to find $5 billion for this simple program, and Sanders had to fight and claw to get even $250 million that was eventually slashed, here's something else that's going on. According to a recent report by the GAO, the Department of Defense has already "marked for disposal" hundreds of millions of dollars worth of spare parts -- and not old spare parts, but new ones that are still on order! In fact, the GAO report claims that over half of the spare parts currently on order for the Air Force -- some $235 million worth, or about the same amount Sanders unsuccessfully tried to get for the community health care program last year -- are already marked for disposal! Our government is buying hundreds of millions of dollars worth of Defense Department crap just to throw it away!

Yes, that's where all those IRS payments are going, and aren't you feeling more and more secure??

We are in the midst of a political movement to concentrate private wealth into fewer and fewer hands while at the same time placing more and more of the burden for public expenditures on working people. If that sounds like half-baked Marxian analysis... well, shit, what can I say? That's what's happening. Repealing the estate tax (the proposal to phase it out by the year 2010 would save the Walton family alone $30 billion) and targeting "entitlement" programs for cuts while continually funneling an ever-expanding treasure trove of military appropriations down the befouled anus of pointless war profiteering, government waste and North Virginia McMansions -- this is all part of a conversation we should be having about who gets what share of the national pie. But we're not going to have that conversation, because we're going to spend this fall mesmerized by the typical media-generated distractions, yammering about whether or not Michelle Obama's voice is too annoying, about flag lapel pins, about Jeremiah Wright and other such idiotic bullshit.

So, let's see, our journalists are whores for the status quo, our people are going belly-up, our businesses and banks are clenching their fiscal teeth, and the war is going to keep going, according to Mr. In-Touch John McCain, for another 100 years.

Right. Democracy. Let's just solve it all and wave some flags, kids! And wave some guns, too - for security, kids, for security. So you can starve securely in a depleted uranium planet.