David Stockman and his new book is critical of TARP, Henry Paulson, the Fed and "the most dangerous man in America," Ben Bernanke.

 David Stockman, former director of the OMB under President Reagan, former US Representative, and veteran financier is an insider's insider. Few people understand the ways in which both Washington DC and Wall Street work and intersect better than he does.

In his upcoming book, The Great Deformation: The Corruption of Capitalism in America, Stockman lays out how we have devolved from a free market economy into a managed one that operates for the benefit of a privileged few. And when trouble arises, these few are bailed out at the expense of the public good.

By manipulating the price of money through sustained and historically low interest rates, Greenspan and Bernanke created an era of asset mis-pricing that inevitably would need to correct.  And when market forces attempted to do so in 2008, Paulson et al hoodwinked the world into believing the repercussions would be so calamitous for all that the institutions responsible for the bad actions that instigated the problem needed to be rescued -- in full -- at all costs. 

Of course, history shows that our markets and economy would have been better off had the system been allowed to correct. Most of the "too big to fail" institutions would have survived or been broken into smaller, more resilient, entities. For those that would have failed, smaller, more responsible banks would have stepped up to replace them - as happens as part of the natural course of a free market system  (All of the above came from PeakProsperity.com).

Editor's notes:  understand that the Fed's policy of cheap and new money,  is raping the retirement futures of this country.  If that money is in interest bearing accounts, the retirement investor is making next to nothing (often 2% or less). 

This Review blog has carried several stories over the years detailing the fact that TARP was used as cover to recharge the banking and big money investment entities to the tune of between 7 and 24 trillion dollars.  We have been told that the $700 billion set aside prevented the markets from crashing.  We remember the 700+ market crash in one 24 hour period in September of 2008.  We remember the panic.  We remember congress,  Bush,  McCain,  Obama, et all,  giving sole authority to deal with this "crisis" to a Democrat macro-economist named Henry Paulson.  What we don't remember is the fact that in the ensuing four months,  the markets lost 4,000 additional points in spite of the TARP "rescue."  

The Obama Administration uses the record setting pace of Wall Street to argue for its "recovery."  Never mind that the market is feeding from the Fed's practice of perpetual "quantitative easing,"Ben Bernanke printing 85 billion dollar bills per month.  The second he stops printing money,  the stock market will collapse.  

The inflation rate that is more commonly reported is a thing called the Core Inflation rate.   It does not include the rising costs of food and fuel.  Understand that the dollar has lost 26% of its value in the last 20 years.  The Fed intends to accelerate that rate of inflation.  

In a February,  2012, announcement,  the Fed decided to devalue the dollar to the tune of nearly 50% over the course of the next two decades.  This deliberate decision reduces the buying power of the dollar,  of course,  and further punishes the working Middle Class of this country,  whose pay check increases do not keep up with the devaluation of the dollar.  In 2033,  a 1993 dollar will be worth just 23 cents.  

Why does Obama talk about "balance" when he does not believe "spending is a problem ?"

During the recent "negotiations" with Boehner,  B Hussein told the Speaker "there is no spending problem."  

Understand that he believes that wealth is a national treasure,  that it does not belong to any one individual,  unless that individual happens to be in leadership positions within the government,  or lives in Hollywood,  or expresses a hatred for America (when was the last time you heard Obama defend this country against the likes of Michael Moore,  or Al Gore,  or Dick Durban,  or any number of Hollywood types,  or members of the Congressional Black Caucus or Putin,  for that matter?).  

The chart is typical of our day,  with no one admitting to the TARP expenditure.  It is not on this chart, either in year 2008 or in 2009.  

Understand that somewhere between 7 trillion dollars and 24 trillion were funneled through the TARP legislation and there are plenty of articles on this subject,  confirming this charge.  Officially,  TARP was a 700 billion dollar bill.  It was passed into law to save the stock market,  which had lost nearly 800 points in a single 24 hour period of time in September of 2008.  The problem with the TARP rescue was this:  three months after TARP had been implemented,  the Market had fallen another 4,000 points  . . . .  so,  TARP did not do what we were told it would do,  and that was "stop the bleeding on Wall Street."  (This Midknight Review article will help you get started on your research concerning my "24 trillion" claim). 

At any rate,  back to the chart.  Without that pesky TARP thingy,  Bush's deficits averaged around 440 billion dollars per year.  The notion that he "spent money like a drunken sailor," could not be more misleading.  Obama,  by contrast,  has carried an average deficit of 1.3 trillion per year,  three times that of George Bush. Today,  under Obama,  we borrow 46 cents on every dollar budgeted.  Under Bush,  we borrowed around 15 cents per dollar spent. 

There are three economic functions that come into play when dealing with our national budget.  1) taxes or "revenues, 2) spending cuts,  3) and economic growth  (GDP).  Of the three,  economic growth may be the most important. If we had a GDP of 5% per month,  we could easily balance our books with modest tax increases and realistic spending cuts.  But our GPD has averaged less than 2% for most of the time Obama has been in office,  and ,  worse yet,  he could not care less as to the importance of this marker   . . . . . .   that is how untrained he is in the field of finance. 

While he brags about the Clinton economy,  his economy bears no similarity to those good times.  Why this was not an issue in the last presidential campaign,  I will never know.  But it is going to eat us alive,  if some in the Democrat Party will not help bring reality to the Oval Office.  

One thing for certain,  it is time for the GOP to stand firm.  They backed down on spending cuts and gave Obama what he wanted in tax revenues  (1.4 trillion dollars worth).  It is now time to deal with spending. 

Over the weekend, Biden accused the GOP of blocking foreclose aid – “Without the GOP, we could have help 12 million folks !!”

Biden claims the Administration could have helped 12 million folks in foreclosure but forgets to mention that only 800,000 took advantage of the Obama’s first plan to help  -  falling far short of the 9 million projection by the Administration.  Reason?  Those receiving assistance had to be current on their loan payments for six months and have reasonably good credit rating  --  not to mention the fact that  the application was 30 to 100 pages long.

From the Lefties at  PolitiFact,  we learn that the claimed “falure” of the Obama Administration with regard to the foreclosure crisis is/was true.  

The foreclosure prevention fund was the heart of his promise. He [Obama]  originally pledged $10 billion but ended up setting aside $75 billion, using [stealing]  TARP funds. He predicted the money would assist 9 million homeowners.   But after three years, only about 2 million people have won permanent mortgage help, according to the Department of Housing and Urban Development. . . . .

Some economists put the actual number of folks aided closer to 800,000.  Whatever the actual number,  the fact remains that Obama,  in side stepping Congress and stealing money from TARP¹,   accomplished comparatively  little,  proving,  of course,  that throwing money at a problem does not work,  in and of itself.  The PolitiFact article blames the failure on a market driven economy (capitalism).

Whatever the case,  it is clear that the GOP played NO ROLE in the failure. The program help those who were in the least trouble and did not prevent any  foreclosures already in progress.  It was a propaganda ploy and nothing more.  

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1   Understand that TARP (Troubled Assest Relief Program)  was never to have been used for such purposes.  Its only purpose was for the correction of banking losses due to the accumulative effect of mounting foreclosures .  It is estimated that in the days just before the creation of the $700 billion TARP fund,  the banking industry lost $7 trillion in financed equity.  Since then,  as much as 24 trillion with a "t" has been funneled through this program  --  Obama just as much in the tank with Big Banking as any of his predecessors.  

 This is confirmed in a Washington Times article:  

Think last year’s $700 billion Wall Street rescue package was beaucoup bucks to spend bailing out the nation’s floundering financial system? That’s chump change compared to what the overall price tag could be, a government watchdog says.

The inspector general in charge of overseeing the Treasury Department’s bank-bailout program says the massive endeavor could end up costing taxpayers almost $24 trillion in a worst-case scenario. That’s more than six times President Obama’s proposed $3.55 trillion budget for 2010.

Read more: Watchdog: TARP tab could hit $24 trillion - Washington Times 

I have seen estimates of 3 to 7 trillion dollars as the best guess regarding TARP actual expense totals,  the first of which,  was a decision to send unannounced bail-out money to GM and Chrysler  (see Barofsky's Bailout, pp 45 -47 -  Barofsky being TARP's Inspector General [a watchdog position] ) .

In time,  the Dems decided to keep the TARP "fund" open for more than two years (instead of a few months),  and used this "fund" as cover to funnel huge sums of money to labor unions,  the banking industry,  and untold special interest projects benefiting the Democrat super majority.  

Mother Jones and the Left gets it wrong, again, as the Lefies try to defend legislative fraud in the name of financial reform.

Editor's notes: today marks another legislative milestone, the passage of the so-called Wall Street Reform bill. It makes promises that cannot possibly be true; increases the power of the Federal Government; offering the banking industry bailouts in perpetuity: further isolates Wall Street from the "general population," protecting Wall Street form public supervision and doing nothing to resolve the actual causes of the subprime mortgage crisis. Here is a Leftist AP review of this event:

WASHINGTON – Congress on Thursday passed the stiffest restrictions on banks and Wall Street since the Great Depression, clamping down on lending practices and expanding consumer protections to prevent a repeat of the 2008 meltdown that knocked the economy to its knees.

A year in the making and 22 months after the collapse of Lehman Brothers triggered a worldwide panic in credit and other markets, the bill cleared its final hurdle with a 60-39 Senate vote. It now goes to the White House for President Barack Obama's signature, expected as early as Wednesday. READ MORE >>>

One can go to the referenced site immediately above but will not find a single comment about what was left out of this financial reform bill. And what was left out proves that this bill was not a serious effort at financial reform. Understand that there is not a single moment of thought given to a reform of Fannie Mae or Freddie Mac. More than this, the nations central banking institution, The Federal Reserve (also known as "the Fed") was actually given more power -- "the Fed" being a privatized money making concern that exists without outside oversite, created in the dark of night and out of view from the public, free to supervise itself.

Understand that Midknight Review does not see Fannie and Freddie as the originators of the financial collapse but their use by the financial leaders/superintendents in government render them complicit to the financial collapse without question.

The Quote

The Left rejects our conclusion. Here is part of an article written in Mother Jones "debunking" conservative theory as presented by Midknight Review in this post: But a look at the actual data shows that Fannie and Freddie—while certainly plagued with problems—are not the root causes of the subprime mortgage meltdown nor the financial collapse. First, context: Fannie and Freddie's roles, in part, consisted of buying up lots of mortgages in the secondary mortgage markets, i.e., taking them off the books of mortgage originators, and allowing those originators to extend more credit to potential homeowners. Over time, the two GSEs' positions as secondary purchasers of mortgages was used to try to expand homeownership to groups of Americans that traditionally didn't have access to this kind of credit—namely, low-income citizens. READ MORE >>

In the above summary, Mother Jones - another one of those Marxist web rags - has both correctly stated the case and proved itself wrong in denying complicity for Fannie and Freddie. Look, you cannot or should not write an article that begins with "It's time to put to rest a lingering myth that, all evidence to the contrary, just won't die [referring to Fannie/Freddie complicity - jds] and end that same article with "The Democrats say the twins are too big and complex and troubled to include in this bill. " Again we suggest that you READ the article here >>

Two considerations: first, if we are going to parse words, we will never see the problem solved. Whether we typify Fannie and Freddie's complicity as "causative" or "contributive" is beside the point. Mother Jones allows for the two GSE's (Government Sponsored Enterprises) to be hugely problematic, so much so that Congress must deal with them at a latter time. Remember the words quoted above: "the twins are too big and complex and troubled to include in this bill." Seems silly, then, to quote this in the same article in which the author tries to exonerate the institutions.

Secondly, look to "The Quote" above. The admission is made as to the purpose of Fannie/Freddie -- to take "subprime" mortgage paper out of the lending system giving the banks - as it turns out - the money and "room" to write more and more high risk, toxic paper -- Mother Jones prefers the word "subprime" but it is all the same.

According to the wacko's at Mother Jones, toxic paper - "housed" at Fannie and Feddie - was not the problem. Such flies in the face of TARP - Troubled Assets Relief Program. The first response to the financial collapse by Henry Paulson and Company, saw subprime loans (Troubled Assets) as causative to the degree that these loans received first attention as the corporate high rollers tried to salvage their financial ocean of money. Let's not forget that originally, the financial crisis was called "the subprime mortgage crisis," giving evidence to our point that subprime mortgage "paper" was causative, Fannie and Freddie being the two GSE's used to relieve the public banking world of these high risk loans.

Point of Post: (1) to support and even justify the conservative opinion that Fannie and Freddie played a central role in the subprime mortgage crisis of 2008-2009. (2) To ridicule the Left for their adolescent analysis of the financial disaster that has been front and center for nearly two years. Know this: leislators cannot possible know that the new financial reform law will prevent a similar disaster from ever happening again -- a claim of Mr. Novice, Barack Obama made today as he celebrated another legislative fraud imposed upon the people in his quest to centralize the power of government in the name of macroeconomics.

Midknight Review believes that the financial circumstance of this country is run by people we do not know and for reasons that will never be explained. We do not pretend to know more than this. Understand that it our belief that more than 24 trillion dollars has been run through the TARP, almost without notice. The reader is referred to the articles at Washington Times, the Sonoran Alliance, the Digital Journal, and Soda Head for a better understanding of the extravagance of the TARP sourced financial recovery.