Does The Bailout Pass The Smell Test?

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Paul Craig Roberts
Infowars
October 15, 2008

The explanation that has been given for the financial crisis does not match up with the solution that has been devised. Moreover, the windows into the crisis offered by the authorities are opaque rather than transparent.




	There is not an unmanageable number of defaulting mortgages. According to the US Treasury estimate, 90-93% of the mortgages are good. How does a 7% or 10% default rate on US mortgages translate into a systemic worldwide financial crisis?

The only clarity we have is that the crisis is resulting in financial concentration and that the bailout constitutes a massive raid by financial crooks on both taxpayers and central bank reserves in the US and Europe.

The public monies that are being directed to private financial institutions are huge. According to news reports, Germany is devoting $540 billion to shoring up German banks, England is devoting $73 billion, and France has pledged over $400 billion. The US now has four separate bailouts underway, $800 billion for banks, $200 billion for Fannie Mae and Freddie Mac, $85 billion for the insurer AIG, and $25 billion for the US auto industry. These figures add to more than $2.1 trillion.

Some of these public monies are for purchasing troubled paper assets. Others are to be directly injected into the banks as public supplied capital for private financial institutions, an ironic outcome for the free market ideology that resulted in the deregulation of the US financial system. According to news reports, in England the entire $73 billion is being poured into banks as publicly supplied new capital. In Germany $135 billion is for recapitalizing troubled banks. In the US Treasury Secretary Paulson is talking about using bailout money to purchase non-voting bank shares.

How is it possible that a financial crisis of such magnitude hit with such suddenness and urgency, catching finance ministries and central banks unaware?

If the problem is what the public has been told, namely that defaulting subprime mortgages are reducing the income flows through to the holders of the mortgage-backed securities, why isn’t the bailout money being used to refinance the defaulting mortgages and to pay off the foreclosed mortgages?

That would restore the value of the mortgage-backed securities, and it would not be necessary to pour huge amounts of taxpayers’ money into recapitalizing banks and purchasing their bad assets.

There is not an unmanageable number of defaulting mortgages. According to the US Treasury estimate, 90-93% of the mortgages are good. How does a 7% or 10% default rate on US mortgages translate into a systemic worldwide financial crisis?

The popping of the US real estate bubble could not produce worldwide systemic financial crisis without the mark-to-market rule, short-sellers, and a great deal of hype and orchestration. Why did Secretary Paulson let Lehman Bros. fail when every other firm is bailed out? Did Lehman’s failure, by unwinding its own large portfolio, push hedge funds and banks into panic selloffs that spread the crisis at home and abroad?

A d v e r t i s e m e n t

The US Congress held no hearings on the crisis and consulted no independent experts. Congress responded dumbly to the financial crisis, just as it did following 9/11 when the Bush regime handed it the PATRIOT Act and the Afghan invasion. To secure Congress’ acquiescence to the Paulson bailout, the Bush regime used threats of meltdown and martial law to panic Congress into turning over vast amounts of money for which accountability is lacking. The hype behind the Paulson bailout is the financial version of the mushroom cloud evocation used by the Bush regime to panic Congress into accepting the US invasion of Iraq. Is yet another hidden agenda at work?

It is unclear how the bailout will play out. The monies for the US bailout will have to be borrowed abroad or printed. If foreign central banks need their dollar reserves in order to bail out their own banks that are polluted with toxic US financial instruments, the US Treasury might not have an easy time in the debt market. Moreover, the interest expense on an additional borrowed $700 billion will raise the US current account deficit and burden US taxpayers with higher interest payments. If the money has to be printed, inflation and dollar devaluation will depress living standards for most Americans.

If the US economy sinks deeper into recession, lost jobs and rising interest rates on troubled mortgages will result in more defaults and foreclosures, thus further impairing mortgage-backed securities and requiring Congress to put more burdens on hard-pressed US taxpayers in behalf of the banks.

The authorities have blamed subprime mortgages for the crisis. Why then does their solution fail to address the problem of the mortgages? Instead, the solution directs public money into an increasingly concentrated private financial sector, the management of which is not only vastly overpaid, but also has escaped accountability for the financial chicanery that, allegedly, threatens systemic financial meltdown unless bailed out by the taxpayers.

Perhaps my nose is too sensitive, but this bailout doesn’t pass the smell test.

Comment Rules

23 Responses to “Does The Bailout Pass The Smell Test?”

Vickie Adair Says:
October 15th, 2008 at 11:05 am
I received this letter that everyone can copy and send to the presidential candidates before the debate to let them know we are watching:
“Since the concern for most people watching the debates is the economy and the recent bailout that many voters are still angry over, I think it would be appropriate for you when questioned on the economy to discuss the Federal Reserve System’s role and how this private banking system makes money from our debt. I have noticed that all the banks being “bailed-out” are connected to the Federal Reserve System; I would like to know why. What are your exact plans to curb the influence of the Federal Reserve on our economy and our politicians?

The bailout has also alarmingly increased the Gestapo-like powers of the IRS, but that has never been publicly discussed or written about. I think you should discuss this issue if you want to get the people’s trust. Do you not think the American people would be better served with the “Fair Tax” or the “Flat Tax” and not be threatened with the Gestapo tactics of the IRS?

I would also be interested in the candidates giving a concrete answer including numbers and timeframes on how our national debt will be paid. I am one of the “undecided,” and I want real answers to the big issues from one of the two big parties – or I want a third party.”
Kyle Bates Says:
October 15th, 2008 at 11:15 am
No way,

the only way the “theft” will work is if they give it back to the stupid taxpayers with 10% interest.

We all know that won’t happen ! PAYMENT for anything to any gentile is a SIN in the joo rulebook.
Take'n it on Says:
October 15th, 2008 at 12:24 pm
AJ needs another money bomb. How many times do we have to listen to the James Bond Theme?
carol Says:
October 15th, 2008 at 12:41 pm
Question–Does The Bailout Pass The Smell Test? Answer–HELL NO!!! (puts on gas mask)
don't drop the constitutional soap Says:
October 15th, 2008 at 1:26 pm
zeitgeist people should check this site out:
http://www.whiteshouse.org/ass.....tgeist.htm
Joe Rogers Says:
October 15th, 2008 at 1:47 pm
Response to #1 Vicki Adair,
Focus on Independent candidates instead of the 2 in the debate. Spend time calling and contacting Mr. Independent Lou Dobbs of Cnn to have Independent candidates on his show. If he had Cindy Sheehan on his show she would beat Pelosi. If he had Nader on his show it would be a three way race. Do not mention McCain or Obama anymore, it is not worth your time. Go get involved with Sheehan, Nader and others who are trying to do the same things you are trying to do.
Alex develop a means to forward these articles to others similar to what MSN website has. It is too much effort to send links to others. They do not want to open the links or go to your websites all the time. I have sent links for months and very few open them. I was about to send this article out with a link since this is a good article but decided not to since everyone would rather have a formal link to an article like MSN and others.
Caveman Says:
October 15th, 2008 at 3:57 pm
Question Paul Roberts is if your nose realy is too sensitive?
I just think it’s smells awfull like a gas attack.
I also like to think I have an high IQ knowing more than the people surround me but I am afraid it is the smelly mainstream media.
ha ha Says:
October 15th, 2008 at 5:00 pm
wELL FROM WHAT I SEE ON MSM IS THAT THEY MEANING MOST BANKS ARE IN FACT INSOLVANT. THEY ARE BROKE………WEALTH IS CHANGING HANDS AND IT TOO PAY OFF CREDIT DEFAULT SWAPS THAT ALL. DO YOU UNDERSTAND THAT. FIVE MORE BANKS HAD CREDIT EVENTS SINCE LEHMANS BRO FELL AND LEHMANS PAYOUT AS YOU KNOW WAS AROUND 360 BILLION DOLLARS. THAT PAYMENT IS DUE IN FULL NO LATER THEN OCT-23 THE SAME DAY AS AIG TO HAVE AN AUCTION ON THIER CDS SWAP. SO THE REAL BAIL OUT PRICE TAG IS IN OR AROUND 5 TRILLION SMACKEROOOS. THE PRESIDENTIAL CANIDATES KNOW THIS. WILL THEY TELL YOU THE TRUTH, NO. SO GET OVER IT. MY QUESTION IS WHERE DO THEY GET THE MONEY FROM? YOU DONT HAVE TO PAY FOR THIS FOLKS. STOP PAYING TAXES AND STOP FEEDING THE BEAST. EVERYBODY NEEDS TO TAKE A WEEK OFF WORK LIKE THIS WEEK. STOP BUYING GAS AND STOP BUYING STUFF THAT YOU CANT EAT. SEND A MESSAGE THAT WE OWN USA NOT SOME CORPORATION THAT GIVE TO OTHER CORPORATIONS THE SHIRTS OFF YOUR BACKS. IF WE DO LIKE THEY DID TO CUT THE INTREST RATE THEN WE CAN MAKE THEM HEAR US DOWN ON THE REAL MAIN STREET NOT THE ONE NEXT TO WALL STREET. IT WONT BE LONG BEFORE THEY USHER IN A NEW CURRENCY SO THE TIME IS NOW. WE DONT NEED A LEADER WHEN WE ALL ARE LEARDERS!
ERIC COUFAL Says:
October 15th, 2008 at 7:02 pm
The political crisis in the US began with the fraudulent election of GWB, a nefarious attack to democratic principles, as endorsed by the US Supreme Court, so no wonder there is both a political and a financial crisis now.

If the US government (at least the incoming administration soon after taking office) doesn’t incarcerate a significant number of white collar criminals in the US and impounds their assets (both from the private and the public sectors; entrepreneurs and politicians alike, at the highest levels, whether members of the Illuminati clan or not) who are to blame for unfair business practices, political corruption, insider trading, favoritism on juicy war and other public contracts, self demolition of buildings and institutions, abusive secrecy about relevant information and technology that should be made public for the advancement of mankind (i.e. the Disclosure Project), including all sorts of tax / financial simulation and manipulation schemes, which combined blatant crimes have led the US to this collapse, and whose conduct is legally sanctionable by law and in equity, so as to demonstrate that there are rooted solid principles in the US legal system, sufficiently strong and valuable to shelter those main street citizens who abide by decent standards of living, and to punish wrongdoers until they repair the damage, with punitive and decisive action, the conclusion is simple: NO MONETARY BAILOUT WILL EVER BE ENOUGH FOR THE US TO REGAIN CREDIBILITY, because it is conducted at the expense of innocents and for the shared benefit of criminals. That is abuse of power … pure and intolerable injustice. If the Judicial system remains a silent puppet, just as the two other branches of government have clearly become noisy ones, the free fall of this crisis will not end, because what is being done is simply immoral, no matter how it is labeled or justified.

THE WORLD URGENTLY NEEDS A MORAL BAILOUT, and both the US Executive branch and the Legislature (composed of politicians mostly interested in their selfish careers, and not in the common good as public servants) don’t seem to have a clue of what that means or how to implement it, except with more of the same which wont solve the roots of the problem.

It is the Judiciary (not composed of biased politicians but by persons of allegedly good moral character with standards of ethical behavior), through the Supreme Court, the branch of government that is constitutionally in charge of administering Justice, so IT IS ABOUT TIME FOR THE JUSTICES TO DO THEIR JOB and save us all from what is coming.

Regardless of the merits, the US achieved international respect when President Nixon was impeached, which led to his removal from office after Watergate. During the last few administrations all kinds of lies and deceit by Presidents in the US have not been sanctioned and have not only been tolerated but continue to be even applauded, with a much worse component of dishonesty than the Nixon era, including shameless ridicule, so the outcome is exactly what we have and where we stand right now: economic, political and moral decay.

If a country has the government it deserves … there’s no more time to waste and the US as a country should regain worldwide credibility, because further delays in taking effective action with a principled bailout will unfortunately turn over governmental leadership to others abroad, just to save those few liable criminals in-house (politicians and bankers), and that will be at the expense of freedom and international peace, let alone the continued bankruptcy trends of the US economy and its political system, fundamentally due to more than obvious moral insolvency from the top down.

Eric Coufal, Esq.
Attorney and Counsellor at Law
admitted to practice in Mexico,
and in the United States by the
New York and New Jersey Bars

Montevideo 2695
Colonia Providencia
44630 Guadalajara,
Jalisco, México

(+52) (33) 3641-1834
(+52) (33) 3641-1791
Larry Says:
October 15th, 2008 at 7:03 pm
After that display of childish voice mimic and Endless interrupting during the interview with Peter Joesph today, the “WWF interview”. I had to cancel my subscriptions and I advise all other members to do so as well. If Alex can not act like an Adult when interviewing guest then he should just stick to preaching at local churches were faith based dogma is praised.
UNITED CREATIONS Says:
October 15th, 2008 at 8:31 pm
“who led us into the burning theater” ZDLR
Caveman Says:
October 15th, 2008 at 8:37 pm
HEADLINES:

- Novus Ordo Scum (New World Order Scum) finally outsmarted themselves with their “Created derivatives”.

- The heart of the crisis is the Quadrillion plus OTC derivatives market.

- The fuse to the quadrillion dollar powder keg waiting to blow any day now are the Real estate derivatives.

- Europe now they are the proud owners of 75% of all the toxic waste derivatives produced by the American branch of the Illuminati.

FROM:
The Quadrillion Dollar Powder Keg Waiting To Blow
Bob Chapman
The International Forecaster
October 12, 2008
http://www.theinternationalfor.....ng_To_Blow
Casual Observer Says:
October 15th, 2008 at 8:38 pm
That $700 B is long gone. The US citizen has forgotten it.. It has been more than three episodes of American Idol and Survivor…

Forget the money.. it is no more.. They knew that when they took it…

The only remnant is the re-payment by the taxpayers..and most can’t tell you what they pay in taxes.. can’t read a pay stub..

Now a private business person can tell you what they pay.. THEY KNOW…
Letsbereal Says:
October 16th, 2008 at 1:33 am
#14 SUPERQUOTES TOP 3 LAST MONTH
My Mom Told Me So! Says:
October 16th, 2008 at 1:55 am
I have never posted a comment before but I am now living in the surreal world of what my mom told me would happen. From the time I was 11 I new about a one world government, how the Illuminate or the elite including the trilateral commission would cause our world ruin in order to establish the reasoning for this.

The bailout is a farce. I work for what was known one week ago a solid company and today I watched in horror, 3/4 of our corporate office close because of the credit crunch. What kind of help was that to us? It gets worse, for a positive thinker who thinks I can manifest my reality, my reality looks scary right now! I live in an expensive neighborhood in CA and because I am in commision sales, my mind can’t keep up with the farce. My sales have declined as well as the rest of the office. I feel like screaming… WAKE THE F UP PEOPLE! This is not a test, this is the real thing. WE ARE BEING TAKEN OVER BY EVIL.

What can I do as a mom and as a human being just trying to make the rent for next month???? How can my voice be heard and how can I fight evil when the force is so great. WE HAVE SO MANY PEOPLE AND WE DON’T KNOW WHAT TO DO.

Bailout, my ass! We are mearly prostitutes of a society that has gone so wrong.
Brian M. Says:
October 16th, 2008 at 5:03 am
Smells like H2S1. Hydrogen Sulfide smells like rotten eggs. Totally criminal.
rae indigo Says:
October 16th, 2008 at 7:34 am
i wrote this song about this exact bullshit that is going on right now…

http://www.myspace.com/raeindigo
rae indigo Says:
October 16th, 2008 at 7:35 am
i wrote this song about this exact bullshit that is going on right now…

http://www.youtube.com/watch?v=uzJJcoIhk5s

http://www.myspace.com/raeindigo
potangent Says:
October 16th, 2008 at 7:39 am
People that don’t even care that their own sons and grand-sons are blown to bits on a daily basis so their economy can continue making a profit only start screaming when their comfortable lifestyle is threatened.
Use my son for cannon fodder and to boost our economy[that's ok] but don’t touch my profits.
Letsbereal Says:
October 16th, 2008 at 8:29 am
THOSE WHO WARNED FOR HYPERFLATION:

- Bob Chapman (The real stuff former Wallstreet best economic Proza)

Say no more; he said it a gaziljoen times! “Hyperinflation, hyperinflation, hyperinflation…..

- Max Kaiser (former Wallstreet, Journalist)

“dollar is worth bananas”

Most Goofy fun to watch economical journalist I ever saw!
Watch foryourself! http://www.youtube.com/watch?v=VMA19SBB7EQ

- Martin Hennecke (Private investment advisor)

“….this is the first step down the road to hyperinflation,”

- Michael Hudson (former Wall Street economist and much more)

“Debt deflation is being imposed on the “real” economy” – “sponsored asset-price inflation ”

- Jim Rogers

“inflationary holocaust”

- Puru Saxena (Investment analyst)

“raging inflation”
Letsbereal Says:
October 16th, 2008 at 8:59 am
THOSE WHO WARNED FOR HYPERFLATION:

- Bob Chapman (The real stuff former Wallstreet best economic Proza)

“Just bend over and kiss your butt goodbye.”

“……incredibly destructive power of rampant hyperinflation.
The end result will be double-digit interest rates, and that will light the fuse that leads to the IRS powder keg.
When that sucker blows, there will be no place where anyone can run and take cover.
Just bend over and kiss your butt goodbye.”
http://www.theinternationalfor.....et_Disease

- Max Kaiser (former Wallstreet, Journalist)
“dollar is worth bananas”
Most Goofy fun to watch economical journalist I ever saw!
Watch foryourself! http://www.youtube.com/watch?v=VMA19SBB7EQ

- Martin Hennecke (Private investment advisor)
“….this is the first step down the road to hyperinflation,”

- Michael Hudson (former Wall Street economist and much more)
“Debt deflation is being imposed on the “real” economy” – “sponsored
asset-price inflation ”

- Jim Rogers
“inflationary holocaust”

- Puru Saxena (Investment analyst)
“raging inflation”
Incriminally Sane Says:
October 16th, 2008 at 9:00 am
Eat the RICH……They smell like fish, Taste like shit and will give you the worst upset stomach ever!
Bobbipin Says:
October 16th, 2008 at 10:39 am
How can a pile of BS ever pass a “smell test”? Bush and his gang have delivered yet one more $trillion dollar payday to his pals. What a pantload.