Charts in the Babson Style for Tuesday 23 September

A Modest Proposal. Show Us the Money.

Is it too much to ask for a prioritized estimate of the banks which will be participating in this program, and what amounts they might require?

Yes it would be difficult to do, it might take a few days and some serious arm twisting, but in any organization we've ever seen there are no blank checks when there are discrete projects and businesses with varying degrees of needs and returns, probabilities of success and failure.

As we recall there was a course at university called "Finance." When you primarily deal with Other People's Money that sort of hard tack decision making is not naturally used, especially when you are a cost plus organization, but anyone who has been a manager in business will tell you that they do it all the time. We'll bet Hank knows all about it. He doesn't want to show us who needs what.

The banks won't want to disclose their problems. To participate in the program, they must, even if that particular knowledge is kept discreet. One of the Senators proposed an initial sum of $50 billion while the Fed and Treasury get their act together with a more reasonable process, and report back to the Congress with the results. That is a good idea. Certainly better than demanding a figure like $700 billion under duress with the haziest of details. How did they arrive at $700 billion?

Or as another Senator proposed, why not just loan the money to the banks in any amounts required to get their balance sheets in shape, but at some interest rate?

Are there one or two banks that require 400 of the 700 Billion? What if there are a few 'bad apples' that really are insolvent,that overreached to some extreme like Countrywide for example.

Should we save them all equally? Or make an intelligent cost-benefit decision on whom to save and on what terms?

Remember, this is not making loans available at market rates. This is a subsidy we are discussing. Like most welfare we need to understand who is getting what, and where the benefits and costs fall out.

The pushback of course is that this is a Gordian knot, resistent to any unraveling., hopeless entangled. Then perhaps what we need is someone with the strength and the courage to cut it, as gracefully as is possible. Otherwise this subsidy may drag on endlessly as it did in Japan, draining the entire economy.

Why is it that these fellows keep returning to the public trough asking for enormous sums, and now that the days of the Bush administration are closing, with ever more dire threats of financial conflagration? Remember not all that long ago that the Bush Administration kept pushing for the Social Security trust to be placed into stocks with Wall Street? Can you imagine what this situation would be like now if we had agreed to that?

Lehman failed, and the market is digesting the failure. We might be able to afford a few more, but we won't know unless we look at the data, and quit playing games of chicken and hide the losses with Wall Street.

How are George W. Bush and Hugo Chavez Alike?

"I nationalize strategic companies and get criticized,but when Bush does
it, it's OK," Chavez said on weekly television program Sept. 21. "Bush is turning
socialist. How are you, comrade Bush?"

Hugo Chavez

Like many people, Hugo Chavez is directionally correct is thinking that George W. Bush is acting excessively in the manner of a socialist, but wrong in one particular that may not be incidental.

Granted both men are statists. That is, they hold the power of the government, the state, of the few, to be pre-eminent over the rights of the individuals, of the worth of the human being when compared to their will to power.

Therefore both men would support the subordination of individual rights and wealth and distributing them as they see fit, as the state decides, outside of the normal process of taxation and public pursuits.

There is something inherently social in society, because some common purpose is the reason that societies exist. It is the limitations on that commonality with regard to individual rights that makes the difference between a social democracy and socialism.

Chavez decides to give favors and wealth putatively to the people, therefore he is a socialist. To the extreme, a socialist is one or two failures away from communism and then Stalinism, when the government fails so badly it must continually beat the people into submission because it has nothing productive to give.

Bush gives it to his friends and powerful corporations through no-bid contracts, selective tax cuts, and de facto or actual deregulation and decriminalization of the familiar frauds and schemes. He is a corporatist, one or two emergency orders removed from fascism, in which the people must be reduced to a form of debt peonage and service to the state and its surrogates, the corporations.

Is it an accident that the Bush administration sanctioned torture, illegal wiretapping, invasions of personal privacy, almost unprecedented secrecy, and executive actions? Is there any wonder Paulson would have the nerve to submit a proposal demanding $700 billion for a few Wall Street banks without any oversight and the suspension of the due process clause of the Bill of Rights?

Here is a chart that helps one to understand how little difference there can be between the approaches at the extremes. Both are unacceptable when measured by laws that respect the rights of individuals with the context of society. This is why it has been so easy for the neo-cons to move from the far left to the extreme right.



Rather than choosing socialism or fascism based on how well we think we might do, at some point the individual must stand for the principles that made America what it has been, or be consumed fear and greed, and then by the state.

We must agree to protect uphold and defend the Constitution of the United States of America.

The 'how' of that is not so straightforward, and has led to many interesting confrontations and evolutions throughout our history. But we have never abandoned it completely, never said it was worthless or outmoded, and always returned to it over time. This is what makes America what it has been, what it is, what it still can be.

Let's return to a government of the people, by the people, for the people, and renew the enduring commitment to freedom.