Bailout package *passes* house

[Mulu]

Greenspan finally speaks!

The absence of significant controls on how mortgages are repackaged into larger and more complex securities has been cited as a central cause of the current financial crisis.

In testimony before the House Government Oversight Committee, Greenspan said that as a result of the current situation the United States is heading for a "significant rise in layoffs and unemployment" and a continued downturn in home values as the world works through a crisis that is "broader than anything I could have imagined."

Greenspan, who called the current financial crisis a "once-in-a-century credit tsunami," said that he remained "in a state of shocked disbelief" that banks and investment firms did not do a better job of analyzing the risks involved with investing in home mortgages extended to less creditworthy borrowers.

Under questioning from Rep. Henry Waxman (D-Calif.), the committee chairman, Greenspan acknowledged that the failure of that expected self-regulation represented "a flaw in the model" he used to analyze economics. "I was going for 40 years or more on the perception that it was working well."

As Fed chairman for 18 years, Greenspan opposed regulation of the practices that allowed those sub-prime mortgages to be bundled into larger securities and sold to investors. Those securities subsequently weighed down the balance sheets of banks and other companies when the underlying loans began to sour.

Greenspan also oversaw a period of low interest rates that helped encourage sometimes loose lending.
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"I have found a flaw," said Greenspan, referring to his economic philosophy. "I don't know how significant or permanent it is. But I have been very distressed by that fact."

Geez, *I* could draw the political cartoon for that comment. I suspect "I have found a flaw" will get it's own section in the pol cartoons soon..

[Mulu]

House Republicans voted down the first bailout bill because they were afraid it would become just another government boondoggle. But after it was loaded up with more pork than all the pigs in Iowa, they changed their minds. Guess what? It has become just another government boondoggle. Sec. Henry Paulson's idea was to buy up all the toxic mortgages to get them off the banks' books. He long since shelved that plan. His next idea was to buy stock in the banks so they would have fresh capital and could start making loans again. However, instead of making loans, some banks are using the money to pay dividends, give executives bonuses, and buy other banks. For example, PNC Financial Services received $7.7 billion in government money and promptly spent $5.6 billion of it to buy National City Corp. Lawmakers are protesting but they should hardly be surprised since they gave Paulson unlimited authority to spend the money any way he wanted to, with hardly an supervision and no restrictions on what the recipients did with the money. In addition, Paulson hired the Bank of New York Mellon to run the program. On the same day Bank of New York Mellon received $3 billion itself, apparently deciding that it could use some cash. Hardly anyone noticed.

[Mulu]

Geez, *I* could draw the political cartoon for that comment. I suspect "I have found a flaw" will get it's own section in the pol cartoons soon..

Took longer than I thought, but here they are.