The Death Of Capitalism ?  

Its hard to ignore the financial world at the moment (though I'm trying hard) but there are a few stories around that caught my eye, outside the mundane morass of muddled thinking served up by the mainstream media - so here's a selection which should leave you struggling to tell the left from the right (note the last one is on-topic, even if the rest are pretty tangential to my usual subjects).

I'll start off with the Housing PANIC blog, which is sounding a little panicked - The end of America as you knew it is at hand. It was a good 232 year run. But it is about to be stolen in the night..

America is about to be legally stolen from the people, and given to a very small group of powerful men. Yes, HP can be a bit dramatic sometimes. This is not one of those sometimes.

The Patriot Act of Finance, otherwise known as Paulson's $700 billion bailout bill, if passed in its present form will be the nail in the coffin for an America by, for and of the people. Just like the Patriot Act appeared to be written before 9/11, so does this Patriot Act of Finance appear to be written before the housing crash. And yes, both were rushed through a panicked Congress and complacent media in the middle of the night.

A nation founded by the people, for the people will be given to a very select group of bankers. Legally. Without a shot fired. Because Americans were too distracted and too dumb to know what was going on. Brilliant.

Here's how it will be done:

1) The key line in the proposed bill is this one:

"The Secretary's authority to purchase mortgage-related assets under this Act shall be limited to 700,000,000,000 dollars outstanding at any one time"

What this does is give Hank Paulson, acting as an emperor with unchecked control over the nation's treasury, a $700 billion line of credit in which he can buy up toxic debt for whatever price he'd like to pay, $700 billion at a time. In other words - he could buy trillions. Trillions and trillions and trillions. Buying and selling, buying and selling.

He can sell the junk he buys from his banker friends for whatever price he wants, saddling the taxpayers with the loss. He keeps this process going, using his $700 billion credit card. Buy for 60 cents on the dollar, sell for 30 cents on the dollar. Buy for 80 cents on the dollar, sell for 5 cents on the dollar. He's in charge.

$700 billion folks IS JUST THE LINE OF CREDIT. He can purchase trillions and trillions of bad debt with this credit card, as long as only $700 billion is OUTSTANDING at any one time.

2) Hank Paulson, CEO of Goldman Sachs on leave, has complete and total control over the nation's treasure. He would be unchecked by Congress, unchecked by the President. He will be king. Here's the text:

"The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation"

Using this power, Hank Paulson of Goldman Sachs could pay Goldman Sachs anything he wanted for their mortgage assets. Let's say the market value was 20 cents on the dollar. Hank Paulson could pay them 100 cents on the dollar. Its his decision and his alone. No oversight. No limitations. Hank Paulson could simply give the nation's treasure to Goldman Sachs.

Get it now?

3) Deputizing the banks and investment banks as "agents of the government". Seriously. Here's the text:

"Designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them"

4) Have no outside control over the firesale of assets and loss to the taxpayer. Again, Hank Paulson and Hank Paulson alone shall be in control. No auditors. No oversight. No multiple bids. No nothing. Hank Paulson and Hank Paulson alone. Here you go:

"Sale of Mortgage-Related Assets. The Secretary may, at any time, upon terms and conditions and at prices determined by the Secretary, sell, or enter into securities loans, repurchase transactions or other financial transactions in regard to, any mortgage-related asset purchased under this Act."

5) Hank Paulson has final say. Hank Paulson knows what's best. Hank Paulson cannot be reversed. Hank Paulson cannot be sued. Hank Paulson is king.

"Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency"

So, what can you do? Normally here I'd say contact your corrupt Congressman or Senator. Contact the media. But folks, Congress has been bought. The media have been bought.

The American people have lost.

Next, Naomi Klein in The Guardian - Free market ideology is far from finished.

Whatever the events of this week mean, nobody should believe the overblown claims that the market crisis signals the death of "free market" ideology. Free market ideology has always been a servant to the interests of capital, and its presence ebbs and flows depending on its usefulness to those interests.

During boom times, it's profitable to preach laissez faire, because an absentee government allows speculative bubbles to inflate. When those bubbles burst, the ideology becomes a hindrance, and it goes dormant while big government rides to the rescue. But rest assured: the ideology will come roaring back when the bailouts are done. The massive debts the public is accumulating to bail out the speculators will then become part of a global budget crisis that will be the rationalisation for deep cuts to social programmes, and for a renewed push to privatise what is left of the public sector. We will also be told that our hopes for a green future are, sadly, too costly.

What we don't know is how the public will respond. Consider that in North America, everybody under the age of 40 grew up being told that the government can't intervene to improve our lives, that government is the problem not the solution, that laissez faire was the only option. Now, we are suddenly seeing an extremely activist, intensely interventionist government, seemingly willing to do whatever it takes to save investors from themselves.

This spectacle necessarily raises the question: if the state can intervene to save corporations that took reckless risks in the housing markets, why can't it intervene to prevent millions of Americans from imminent foreclosure? By the same token, if $85bn can be made instantly available to buy the insurance giant AIG, why is single-payer health care – which would protect Americans from the predatory practices of health-care insurance companies – seemingly such an unattainable dream? And if ever more corporations need taxpayer funds to stay afloat, why can't taxpayers make demands in return – like caps on executive pay, and a guarantee against more job losses?

Now that it's clear that governments can indeed act in times of crises, it will become much harder for them to plead powerlessness in the future. Another potential shift has to do with market hopes for future privatisations. For years, the global investment banks have been lobbying politicians for two new markets: one that would come from privatising public pensions and the other that would come from a new wave of privatised or partially privatised roads, bridges and water systems. Both of these dreams have just become much harder to sell: Americans are in no mood to trust more of their individual and collective assets to the reckless gamblers on Wall Street, especially because it seems more than likely that taxpayers will have to pay to buy back their own assets when the next bubble bursts.

With the World Trade Organisation talks off the rails, this crisis could also be a catalyst for a radically alternative approach to regulating world markets and financial systems. Already, we are seeing a move towards "food sovereignty" in the developing world, rather than leaving access to food to the whims of commodity traders. The time may finally have come for ideas like taxing trading, which would slow speculative investment, as well as other global capital controls.

And now that nationalisation is not a dirty word, the oil and gas companies should watch out: someone needs to pay for the shift to a greener future, and it makes most sense for the bulk of the funds to come from the highly profitable sector that is most responsible for our climate crisis. It certainly makes more sense than creating another dangerous bubble in carbon trading.

Charlie Stross is wondering if the October surprise has come early this election year - Knock knock! Who's there? October surprise! But it's still September .... Personally I'm thinking its just about time for the traditional pre-election "Osama bin Laden" video to be broadcast to the credulous masses. My tip is that this year good old "Osama" will be telling American voters to vote for his "muslim brother" Obama - I'm sure Rove would like to reinforce that meme as strongly as possible.

Is it reasonable to believe that the past week's instability in the financial markets — Lehman Brothers being sold for the value of their data centers plus 10%, AIG being bailed out (thus saving the US airline industry), the shockwaves taking down one of the UK's biggest banks and panicking the government into bending the rules to permit an otherwise-illegal merger, the Russian stock exchange closing to avoid cratering, and the $455Tn global derivatives market teetering on the edge — was anticipated, but happened too early?

Charlie's dark suspicion: it was expected to arrive in January; a nice welcome mat for the new proprietors, courtesy of the outgoing bustout crew.

I learnt one thing from that post - what a "bustout" is, which describes the last 8 years pretty well - G. W. Bush - asset stripper.

Charlie also has a cool "Palin for president" video (yes - he means the right Palin, not the moose eater).

Lew Rockwell has a look at Your Bill for the Bailouts.

The Federal Reserve System's bailout of American International Group will cost $85 billion. After the expense is apportioned among three hundred million American citizens, your personal bill for AIG's bailout will be $280. If you have a family of four, their share is $1100.

Do you feel that you're getting your money's worth from this bailout? Has the AIG bailout been a rewarding experience for you and your family, well worth a thousand dollars subtracted from the college funds of your children so that a CEO who crashed his company can afford a mansion in the Caribbean?

Here's another way of looking at how much the AIG bailout has cost you. The average commuter uses about six hundred gallons of gasoline a year, and gasoline has gone up about a dollar a gallon this year, for a total cost increase of $600. Yet that's only roughly half the cost per family of the AIG bailout!

Strangely, the public seethes over gas increases but yawns over bailouts. Maybe it's the lack of visual impact. Maybe people would react more if they had to pull into a "Federal Reserve Station" and watch their life savings pumped into the tank of a corporate bailout.

They might react even more strongly when they see that the line at the money pump is growing. Only months ago the Federal Reserve provided the investment bank of JP Morgan with $30 billion to bail out the investment bank of Bear-Stearns. At least the math was easy: thirty billion dollars divided by three hundred million people is $100 for every man, woman, and child in America, or $400 for a family of four.

Hey, aren't the antics of the investment bankers every bit as entertaining as the internet access you'll have to cancel in order to pay for them?

Besides becoming more frequent, the bailouts are swelling. Now the government is "rescuing" Fannie Mae and Freddie Mac, the mortgage industry corporate giants whose "official" bailout cost rose from $100 billion to $700 billion in a year, and in reality could cost $2.5 trillion. That's over $8,000 for every American – $32,000 for a family of four!

The pretext – er, justification – for the bailouts is that these mortgage-financing companies help families buy homes. Really? This may come as a shock to millionaire presidential candidates, but when the government slaps on a $32,000 bailout surcharge, middle class families find it harder to budget for a monthly mortgage payment. ...

Politicians claim the financial industry needs more regulation, but when I'm being robbed I don't want the cops to subsidize the robbery and I don't want them to "regulate" it either. I want them to stop it. When they don't, I smell a payoff.

The call for regulation is, of course, just a dodge to avoid public debate that might challenge the philosophy of government intervention on behalf of the Friends of the Fed. The goal is to keep billing the citizens no matter the cost. For while in the eyes of politicians these companies are "too big to fail," you and I aren't too big to fleece.

Billmon (still doing the occasional drive by blog post at Daily Kos instead of reopening the Whiskey Bar as he should) notes Things Become More Serious.

I realize this may sound like financial gobblygook -- the same snake oil doubletalk that Wall Street and its army of whores used to flimflam their way into this mess in the first place. So think of it this way: What happened last week was a giant run on the bank, with people lining up to get their money back -- like that scene in It's a Wonderful Life, except in cyberspace, not Bedford Falls, and with Ben Bernanke and Hank Paulson, not Jimmy Stewart, standing in the electronic doorway and explaining to people that they their money isn't in the bank, because it's been loaned to hedge fund in London, which loaned to a Wall Street investment bank, which loaned it to a mortgage banker in Nevada, who stole it and deposited it in a numbered bank account in the Cayman Islands. (OK, so maybe it's not like that scene in It's a Wonderful Life -- it's more like the scene where Jimmy Stewart comes back to find that he was never born and Mr. Potter owns the whole town. But you get the idea.)

What we saw today, however, was something different: a dawning suspicion among the customers that the bank was paying them off with counterfeit bills.

If this suspicion takes hold and spreads, it could open up broad new avenues for financial disaster. Up until now, the Fed and the Treasury have been able to use their respective balance sheets to absorb the systemic shock of the crisis. As private institutions have deleveraged (i.e. shed both assets and debts) the government has leveraged up -- expanding its own assets and liabilities, either through the Fed's various emergency lending operations or the Treasury's acquisitions of bankrupt companies (like Fannie Mae, Freddie Mac and the late, unlamented AIG).

So far, so bad (although not far or bad enough, thus the need for another $700 billion in borrowing and lending authority.) But these rescue operations are only feasible because the Treasury is assumed to have unlimited ability to borrow dollars and lend them on to the banks. This is the only reason Uncle Sam could, at the stroke of a pen, insure more than $3.5 trillion in money market funds last week -- and have those guarantees accepted without question in the markets. As far as Wall Street's concerned, there's always plenty more where that came from.

But this assumption, in turn, ultimately rests on the fact that the Treasury is borrowing in a currency that can be created on demand by its bureaucratic doppleganger, the Federal Reserve. Unlike, say, Mexico or Argentina, there is absolutely no chance the US will be forced into default because it can't service or roll over its debts. It's just a question of how much pain (in the form of higher interest rates) the Fed is prepared to accept before it cranks up the electronic printing press.

So far, the Fed has tried very hard not to monetize (i.e. print up new money to pay for) its various bail ventures. Instead, it has been liquidating its existing portfolio of Treasury securities, essentially swapping them for toxic crap. But that string has now run out, meaning the Treasury is going to have to go to the bond market and borrow the money for the MOAB (or as some have already dubbed it, the Taxpayer Anal Rape Program). Since Americans don't save nearly enough to buy all those bonds -- not without sending interest rates into the stratosphere -- the bulk of the financing will have to be provided by our foreign creditors, such as the central banks of Japan, China and the major oil exporting countries.

The problem, of course, is that our creditors are already into us for a cool $13 trillion (about 90% of US GDP) and have shown a growing reluctance to lend us more (by using their export earnings to purchase US Treasury bonds and other dollar-denominated assets) as the crisis has worsened.

It's not that they want to blow up the US financial system, mind you -- as the British economist John Maynard Keynes quipped, if you owe the bank $10,000 and can't pay it back you've got a big problem, but if you owe the bank $10 million and can't pay it back the bank has a big problem. Our official creditors (the foreign central banks that have been covering the bulk of our borrowing needs for some years now) certainly understand that they have a big problem, but a lot of them have other big problems -- such as their own market bailouts that need to be paid for and/or serious inflationary spirals that are very tough for them to fight as long as they have to keep expanding their balance sheets to loan us money and prop up the dollar.

Even worse: their own citizens appear to be dumping their US assets, meaning our central bank creditors not only have to extend more loans, they also have to buy up the dollars their own citizens no longer want to own. Even the deepest purse has a bottom, and the point may be approaching where the costs of propping up the world's largest debtor nation (i.e. us) begins to outweigh the benefits.

Or maybe not -- given that a systemic run on the dollar would devastate our creditors as well as us (the People's Bank of China alone holds over $500 billion in dollar assets) and would probably blow their financial systems to kingdom come as well as ours. But the system of financing arrangements that keeps the dollar afloat (which some have dubbed "Bretton Woods II") was under enormous stress even before the bubble popped. Some, such as NYU economist Noriel Roubini (a.k.a. Dr. Doom) predict it won't survive the crisis, at least not in its current form.

If that happens, and the Treasury can't find buyers for its debt at interest rate levels that a rapidly weakening US economy can afford to bear, the Fed is going to face an excruciating dilemma: Fire up the printing presses to make the dollars to buy the bonds the Treasury can't sell in the private market, and watch inflation and confidence in the dollar go tearing off in opposite directions (the wrong ones in either case) or allow rising interest rates to push the economy even deeper into recession -- potentially undoing all the damage control paid for with the MOAB.

Again, putting econospeak aside, the basic problem is actually fairly simple: As long as the problem is a shortage of dollars (both to restore "normal" liquidity to the markets and make good the banks' losses on toxic mortgages) the Fed and the Treasury have unlimited resources. That's not to say they actually would print an infinite number of dollars to pay for the MOAB, but they could if they had to -- which in turn makes a bailout of this size credible.

If, however, dollars are no longer enough -- because private investors have lost confidence in the currency (or, more accurately, in the Fed's willingness to defend the value of the currency) then the MOAB is no longer credible. The Fed may be able to print dollars on demand, but it can't print oil or wheat or gold or any of the other commodities that can, in a pinch, be used as substitutes for dollars.

At that point, another turn of the systemic screw could only be unwound with the full-out support and cooperation of our foreign creditors -- cooperation which so far they appear reluctant to supply in the quantities needed.

This is why I've always believed that the great American debt-and-consumption binge would ultimately end in a whopping big dollar crisis -- and not before. The US economy is by nature bubble prone, but there are many ways for the monetary powers-that-be to cushion the blow when bubbles burst and inflate new ones to take their place (as the Greenspan Fed proved several times over). Too much political capital has been invested in the model (i.e. asset price inflation as the engine of growth in an increasingly distorted economy) for it to be otherwise.

That being the case, it was probably inevitable that the bubbles would continue to grow in size and destructive force until they finally outstripped even the US government's ability to manage them without triggering a run on the biggest bank of all -- itself.

We may not be there yet. Both the dollar and the commodity prices could stabilize, at least temporarily -- particularly if the Cheney Administration (or should I say the Goldman Sachs Administration?) and the Dems in Congress can quickly reconcile their differences and ram the MOAB through the legislative colon (and ours). Further disasters are not inevitable -- or at least, they don't have to happen all at once.

But if and when it comes, disaster (the kind that turns financial panics into searing generational memories) will unfold in a string of events that will look very much like what we saw in the markets today -- only on steroids.

Glenn Greenwald is finding some black humour in the sudden switch in some of the more reprehensible members of the conservative movement to embrace limited government once again (all powerful police states crushing individual freedoms are one thing it seems - a perfectly acceptable one to the Limbaughs of the world, but government intervention in the economy - gasp - that's unamerican - time to pretend to be ineterested in liberty again) - Single funniest blog post I ever read.

I wrote earlier today about the sudden right-wing resistance to vast executive authority that has emerged in opposition to the Paulson plan, but still, this post from Ed Morrissey at Michelle Malkin's Hot Air -- full-fledged advocates of every last expansion of unfettered executive power over the last eight years -- is just so exquisite, so perfectly constructed, so unbearably hilarious, that it really expands the definition of "self-satire" and demanded its own featured space:

The crux of the [Right's] skepticism over the plan comes from an absurd protocol at the heart of it. It makes Henry Paulson a de facto financial czar, in charge of potentially a trillion dollars in taxpayer money with no accountability whatsoever for his actions. Here's the relevant proviso in the legislation:

"Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency."

We don't allow this kind of free agency from elected officials, let alone political appointees. Not even in his role of Commander-in-Chief does a President have a mandate that is completely unreviewable. Henry Paulson may or may not be the most brilliant thinker in high finance, but even if he was, why would Americans want to give him literally a carte blanche with the equivalent of one-third of our annual budget? With no review possible?

It's absurd, and at its heart, it's un-American, in the sense that America exists precisely because of our desire to rein in government and make it accountable to the people. We gave up on the monarchy in 1776. We certainly didn't do that to trade in King George for Czar Henry. Only in a panic, in which Congressional leadership abdicates its role to keep executive power in check, would any American Congress agree to surrender its Constitutional mandate for oversight. And that panic may be taking place now.

How is it humanly possible for that to be written without the author recognizing that everything he claims to oppose is what he's spent the last eight years endorsing? Even given the well-established authoritarian capacity to simultaneously embrace two precisely antithetical thoughts, wouldn't a minimally functioning human brain -- the kind necessary just to do things like turn on a computer -- alert someone to the fact that the ideas they are vehemently criticizing are the ones that have animated everything they've said and done for the last eight years? How does a human brain evade that recognition?

In the areas of national security and war -- so broadly defined as to include almost everything the President does both abroad and on U.S. soil -- the central theory of the Bush presidency has been, as John Yoo put it: "These decisions, under our Constitution, are for the President alone to make." The Bush administration's central strategy has been repeatedly to tell courts that they have no right to review the Leader's decisions. The Military Commissions Act, the Protect America Act, the FISA Amendments Act, the Detainee Treatment Act, and the Patriot Act all provide, to one degree or another, the exact same absolute executive discretion and prohibition on judicial review that the Paulson Plan provides, and in doing so, allows the President to decide which individuals -- including Americans -- are spied on, arrested, detained, rendered, and subjected to all sorts of interrogation methods without any review at all. The administration repeatedly told Congress and courts that what they did -- in general -- was far too secret to allow any oversight or review of any kind.

The same people who cheered all of that on are now parading around proclaiming that "that America exists precisely because of our desire to rein in government and make it accountable to the people" and "only in a panic, in which Congressional leadership abdicates its role to keep executive power in check, would any American Congress agree to surrender its Constitutional mandate for oversight" and invoking the tyrannical specter of Britain's King George, who didn't even possess some of the powers that they insisted on vesting in their own contemporaneous King George.

Digby has an important post here describing some of the political motivations behind the Right's sudden re-discovery of small government principles in the context of this bailout (it's basically the cynical strategy Newt Gingrich has been advocating for more than a year) . While some of the Right's leading lights are undoubtedly conscious of those cynical political calculations, many of them -- and I'd bet anything Morrissey is included in this group -- actually believe what they're saying about how outrageous unlimited executive power and a lack of oversight are and don't realize how any of that fits in with everything they've been doing this decade. If there's an Obama presidency, they're going to start righteously spouting limited government "principles" without realizing any of this, either. It's sometimes quite jarring -- and, in a really dark and perverse way, incomparably hilarious -- to see what the human mind is capable of doing.

Chris Hedges has an article at TruthDig on Fleecing What’s Left of the Treasury.

The lobbyists and corporate lawyers, the heads of financial firms and the crooks who control Wall Street, all those who spent the last three decades assuring us that government was part of the problem and should get out of the way, are now busy looting the U.S. treasury. They are also working feverishly inside the Democratic and Republican parties to blunt any effective regulatory reform as they pass on their distressed assets to us. The process is stunning in its hubris and mendacity, and two of the most potent enablers of this unprecedented act of corporate welfare are John McCain and Barack Obama.

The federal government, reeling backward from the meltdown of financial markets, is now considering taking responsibility for the bad assets of numerous financial companies. But if that intervention does not include robust new mechanisms of regulation, accountability and control we will see nothing more than a massive taxpayer-funded bailout of stockholders and the financial industry.

The rhetoric of the two presidential candidates about the crisis has been filled with pious outrage about the abuses of Wall Street and short on actual solutions. John McCain and Barack Obama know, after all, who funds their campaigns. The financial industry has given $22.5 million in the current election cycle to Obama and $19.6 million to McCain, according to the Center for Responsive Politics. And the financial industry has come around to collect. Two of the biggest financial groups in Washington, the Financial Services Roundtable and the Mortgage Bankers Association, have been holding meetings with McCain and Obama’s economic advisers. They are working with the campaigns to protect the unregulated power of financial industries and at the same time to shift bad debt to taxpayers.

William Greider, meanwhile, has dubbed the "Paulson Bailout Plan a Historic Swindle".

Financial-market wise guys, who had been seized with fear, are suddenly drunk with hope. They are rallying explosively because they think they have successfully stampeded Washington into accepting the Wall Street Journal solution to the crisis: dump it all on the taxpayers. That is the meaning of the massive bailout Treasury Secretary Henry Paulson has shopped around Congress. It would relieve the major banks and investment firms of their mountainous rotten assets and make the public swallow their losses--many hundreds of billions, maybe much more. What's not to like if you are a financial titan threatened with extinction?

If Wall Street gets away with this, it will represent an historic swindle of the American public--all sugar for the villains, lasting pain and damage for the victims. My advice to Washington politicians: Stop, take a deep breath and examine what you are being told to do by so-called "responsible opinion." If this deal succeeds, I predict it will become a transforming event in American politics--exposing the deep deformities in our democracy and launching a tidal wave of righteous anger and popular rebellion. As I have been saying for several months, this crisis has the potential to bring down one or both political parties, take your choice.

Christopher Whalen of Institutional Risk Analytics, a brave conservative critic, put it plainly: "The joyous reception from Congressional Democrats to Paulson's latest massive bailout proposal smells an awful lot like yet another corporatist lovefest between Washington's one-party government and the Sell Side investment banks."

A kindred critic, Josh Rosner of Graham Fisher in New York, defined the sponsors of this stampede to action: "Let us be clear, it is not citizen groups, private investors, equity investors or institutional investors broadly who are calling for this government purchase fund. It is almost exclusively being lobbied for by precisely those institutions that believed they were 'smarter than the rest of us,' institutions who need to get those assets off their balance sheet at an inflated value lest they be at risk of large losses or worse."

Let me be clear. The scandal is not that government is acting. The scandal is that government is not acting forcefully enough--using its ultimate emergency powers to take full control of the financial system and impose order on banks, firms and markets. Stop the music, so to speak, instead of allowing individual financiers and traders to take opportunistic moves to save themselves at the expense of the system. The step-by-step rescues that the Federal Reserve and Treasury have executed to date have failed utterly to reverse the flight of investors and banks worldwide from lending or buying in doubtful times. There is no obvious reason to assume this bailout proposal will change their minds, though it will certainly feel good to the financial houses that get to dump their bad paper on the government.

A serious intervention in which Washington takes charge would, first, require a new central authority to supervise the financial institutions and compel them to support the government's actions to stabilize the system. Government can apply killer leverage to the financial players: accept our objectives and follow our instructions or you are left on your own--cut off from government lending spigots and ineligible for any direct assistance. If they decline to cooperate, the money guys are stuck with their own mess. If they resist the government's orders to keep lending to the real economy of producers and consumers, banks and brokers will be effectively isolated, therefore doomed.

Only with these conditions, and some others, should the federal government be willing to take ownership--temporarily--of the rotten financial assets that are dragging down funds, banks and brokerages. Paulson and the Federal Reserve are trying to replay the bailout approach used in the 1980s for the savings and loan crisis, but this situation is utterly different. The failed S&Ls held real assets--property, houses, shopping centers--that could be readily resold by the Resolution Trust Corporation at bargain prices. This crisis involves ethereal financial instruments of unknowable value--not just the notorious mortgage securities but various derivative contracts and other esoteric deals that may be virtually worthless.

Despite what the pols in Washington think, the RTC bailout was also a Wall Street scandal. Many of the financial firms that had financed the S&L industry's reckless lending got to buy back the same properties for pennies from the RTC--profiting on the upside, then again on the downside. Guess who picked up the tab? I suspect Wall Street is envisioning a similar bonanza--the chance to harvest new profit from their own fraud and criminal irresponsibility.

Matthew Rothschild (who doesn't seem to be backing McCain) thinks if the government simply took over the mortgages on houses facing foreclosure it would save money compared to the current scam - Where’s the Relief for those Facing Foreclosure?.

With the feds prepared to throw a trillion dollars of our hard-earned money to prop up Wall Street and the investor class, is it too much to ask them to do something for the people who are the real victims of this mess? I’m talking about the people who’ve already been forced into foreclosure or those who are just about to be.

I mean, if the government is going to back the mortgage securities, why doesn’t it just pick up the mortgages itself, and let people stay in their homes. Let the government, at least on a temporary basis, become the savings and loan officer, with the power to renegotiate the mortgage downward and adjust the payments and interest rates downward, as well.

The government would have to shell out less money than it’s planning to at this moment, and it would be buying up real property, which will retain most of its value, unlike some of the bad paper the government is scooping up right now. Assume there are three million people in, or facing, foreclosure. And assume that the media value of each home is $200,000. That’s $600 billion. Even if the houses were overvalued by 30 percent, the government would be on the hook for $420 billion—far less than it’s exposing itself to now.

Or, the government could let people stay in their homes and become renters, as Dean Baker of the Center for Economic and Policy Research has proposed. Unfortunately, the Democrats aren’t advocating any of this. But they are urging Congress to pass a law that would allow judges the power to renegotiate the mortgages of those who file for bankruptcy.

Check this out: Under current law, judges are not allowed to do that on your primary residence, only on those other houses you might own. But who owns more than one house?

John McCain and his friends, I suppose, and that’s who the laws have been written for. We need to change not only this class-biased law, but the entire upper-class orientation of the government. And now’s the perfect time to start.

And lastly, Steven G Brant at the Huffington Post - Celebrating Capitalism's Death? Not so Fast.... Pay attention to this one.

Our government has stopped something it considers to be bad. It saw the collapse of the economic system coming. The action it has taken has -- and this is me talking, not our government, of course -- ended Capitalism here in America.

Actually, its not just me talking. Here's a report from The New York Times on what financial leaders in the rest of the world think about what we are doing here. They know America is no longer a Capitalistic society either. From this September 18th report...

"I fear the government has passed the point of no return," said Ron Chernow, a leading American financial historian. "We have the irony of a free-market administration doing things that the most liberal Democratic administration would never have been doing in its wildest dreams."

The bailout package for A.I.G., on top of earlier government support for Bear Stearns, Fannie Mae and Freddie Mac, has stunned even European policy makers accustomed to government intervention -- even as they acknowledge the shock of the collapse of Lehman Brothers.

"For opponents of free markets in Europe and elsewhere, this is a wonderful opportunity to invoke the American example," said Mario Monti, the former antitrust chief at the European Commission. "They will say that even the standard-bearer of the market economy, the United States, negates its fundamental principles in its behavior."

Mr. Monti said that past financial crises in Asia, Russia and Mexico brought government to the fore, "but this is the first time it's in the heart of capitalism, which is enormously more damaging in terms of the credibility of the market economy."

We no longer have a "market economy" here in America. Capitalism is dead.

But what are the people on Wall Street and other financial centers celebrating? The end of something bad. But -- I assert -- not the start of something new that is good.

Our government literally sees that the Titanic is sinking. And it is using its extraordinary power to raise the Titanic out of the ocean, shake all the water out of it (literally bailing it out), and place it back in the ocean hoping it will then sail on.

But the Titanic cannot sail on.

That's because the Titanic that is our global economic system is fundamentally flawed. It is based on a belief that we are still sailing in a zero-sum world, a world of scarcity, a world where there will always be too many people chasing too few resources. The sustainability scientists... and those schooled in advance social and managerial sciences as well... know this is no longer true. They know an abundance-based world is what we live in now, from an objective reality point of view. They know that the only thing in the way of that becoming the reality we all live in is the design of our political-economic system.. because it is still a scarcity-based design.

The American government's effort is very impressive in scope... but not in sophistication. It is an 800 pound gorilla approach, involving a huge willingness to throw money at the problem. But, intellectually speaking, it is "the blind leading the blind". It is "experts in the past" attempting to solve a problem whose root cause they cannot see. None of them has ever even heard of - as best I can tell - that scarcity is an objectively obsolete way to view the world. None of them has ever seen what is at the foundation of the work of people such as William McDonough, Amory Lovins, or the late Buckminster Fuller.

It is a tragedy in the making, because they are missing a huge opportunity to truly do the right thing... to take a sophisticated -- rather than 800 pound gorilla -- approach to this crisis.

A sophisticated approach.... one led by people who know how to work with the fact that the present is different from the past -- i.e. designers -- would address the fundamental fact that our economy is based on a zero-sum mental model in a global reality that is actually an abundance-based world waiting to be born. ...

The business world will prosper beyond its wildest imagination once it sees the future for what it can be. Some businesses will have to change more than others to take advantage of this new opportunity, but that's what the best businesses do, right? (Weapons manufacturers will have to change the most, as war is finally seen as the obsolete "international development tool" that it is. But that's okay. The skills of those corporations can easily be used to study, analyze, and produce constructive solutions -- especially highly scientific ones -- to our sustainable development challenges.)

This business world mindset is why the business strategy book Blue Ocean Strategy has been a global best seller since its release in 2005... because business leaders are always looking for the "blue ocean" of "no competition"... the economic landscape where they can operate first.. offering new products and services that do and offer things that no other business is selling.

Well, there is a huge blue ocean available to all the world's businesses now. It is the post-scarcity, post-zero sum Capitalism world that is waiting out there.... just waiting for us to reach out for it.

I hope at least some of our business and political leaders are in enough of a shock that they will look for new ideas and new answers such as those I am talking about here.

We don't have to settle for 800 pound gorilla thinking. We can innovate our way out of this crisis, with our eyes completely open to the true nature of the challenge we face... open to understanding the root cause of the challenge we face. And by understanding the root cause of the crisis we are in - that we literally see fighting as the "first principle" of living when cooperation and collaboration should be the first principle -- we can design our way to a better future... to an economic system that will provide all businesses -- and all the people on Earth - with more prosperity than they ever believed possible.

We must not just stop something old that is bad. We must start something good that is new.