Guard your wallet, negotiators in Congress have reached an agreement:

Congressional leaders and the Bush administration agreed Sunday on the main elements of a $700 billion bailout for the financial industry, paving the way for swift enactment of the largest government intervention in markets since the Great Depression.

Negotiators sought to iron out the final shape of the legislation and it still had to be reviewed by House Republicans, whose fierce opposition to a federal rescue nearly torpedoed an emerging bipartisan pact late in the week. Officials in both parties said they hoped for a House vote Monday.

You can read more about the proposal here.

South Carolina Gov. Mark Sanford is a voice of reason on the latest bailout:

I am worried for our country — not so much because of the tumult in the financial markets but because of the federal government’s response and its implications.

A recent LA Times/Bloomberg poll shows that 55 percent of the American people do not support a taxpayer bailout of the financial sector of the economy, while only 31 percent think it is the government’s responsibility to provide these funds to the struggling firms. The first plan presented, drawn up by Treasury Secretary Henry Paulson and the Bush administration, has drawn fire from many legislators and political action groups. The Paulson plan calls for $700 billion dollars to be spent to purchase the assets that the mortgage companies are unable to sell, a transfer of more authority over the markets to the Federal Reserve, and no oversight or judicial review. That would be a hard pill to swallow for any legislation, let alone a taxpayer bailout of financial corporations.

The late Samuel Francis stated that the United States has a two-party system, the Stupid Party and the Evil Party. Occasionally, you find a bi-partisan effort and when you do so, you can count on that proposal being both stupid and evil. I am incensed that Washington power-brokers have come together to bail out the greed of both big business and big government. Noted economist Jim Rogers has said that this bailout would make our economy more communistic than that of Red China. Do we really want that much more infusion of government into our economy? Years ago, I heard Congressman Phil Crane state that Government does nothing well. While observers should have noted the failure of statist systems and the growth of free market economies, our nation promises more from government. How blind do our leaders need to be before they realize that government spending is breaking the taxpayer and damaging the economy.

Please give careful attention to the wise warnings of my friend Matt Chancey.

Dear friends,

The reason I am writing you today is to ask you to join me in contacting your congressman and senators to urge them to reject the $700 billion bailout being rammed through Congress this week.

By: Dr. David T. Beito

Here is a rare respite for the standard pro-New Deal newsreels that usually can be found on youtube. It is a sympathetic depiction of Fred Perkins, a battery manufacturer from York, Pennsylvania who chose to go to jail rather than obey the mandates of the National Recovery Administration.

While the $700 billion bailout seemed a certainty only two days ago, outcry from the public and bi-partisan concern about giving the Treasury Department carte blanche has put some speed bumps in the path of passing this historical legislation. Though there is some finger-pointing going on between the two parties about who caused this crisis in the first place, it appears that an equal number of Republicans and Democrats are now questioning the wisdom of Secretary Paulson’s bailout plan and are willing to take a deep breath, step back, and consider all the options before saddling the tax-payers with this enormous and unpopular government intervention. Observing that the urgency placed on passing this plan immediately is reminiscent of Bush’s insistence on funding for the disastrous Iraq War, lawmakers are showing trepidation about making the same mistake twice. These kind of high pressure tactics are normally reserved for the used car lot, and our legislators are wise to think twice before investing the American public’s money into another Bush Administration lemon.

Bailouts Will Lead to Rough Economic Ride

By: Dr. Ron Paul - CNN

“The solution to the problem is to end government meddling in the market. Government intervention leads to distortions in the market, and government reacts to each distortion by enacting new laws and regulations, which create their own distortions, and so on ad infinitum.”

Socialism in the Treasury Chest

By: Mark Hemingway - National Review

“If you believe that the best way to handle the current economic crisis is hurling gobsmackingly large amounts of money at it, all to be used at the discretion of the Treasury secretary and the chairman of the Federal Reserve, you may well be an idiot. That’s according to a rule of thumb devised by famed investor Warren Buffett.”

This Friday evening, on the campus of the University of Mississippi, the two major contenders for the US Presidency will square off in a debate on foreign policy. While one might expect differences over the Iraqi War, I declare that few substantive differences separate the two candidates on foreign policy.

Dr. Paul and his dire warnings have been ignored and/or ridiculed for years, but the media is finally paying attention. Pulling no punches, Congressman Ron Paul lays out the truth for Glenn Beck and Wolf Blitzer- how we got to this point, and some simple, though politically incorrect, solutions. Most disturbing is the realization that the bailouts have been orchestrated without express permission from Congress, the only governing body with the Constitutional authority to allocate money. Will this financial crisis cause America to finally wake up?  Are we truly prepared for the consequences we face for being asleep at the wheel? It’s easy to point fingers at our elected leaders, who appointed the culprits responsible for this disaster; but the fault and the fall-out will ultimately be owned by the voters who put those politicians in office in the first place.

The terrorists we must fight are not crouched in caves thousands of miles away.

The terrorists we must fight are threatening us with financial weapons of mass destruction that are destroying our economic system.

As described by Warren Buffet in his 2003 letter to Berkshire Hathaway shareholders, the financial industry has created new types of derivatives that he described as “financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.”

As summarized in this BBC article:

Contracts devised by ‘madmen’

Nothing like a midnight press release from the SEC to let us know that all is well:

SEC Halts Short Selling of Financial Stocks to Protect Investors and Markets

FOR IMMEDIATE RELEASE
2008-211

Commission Also Takes Steps to Increase Market Transparency and Liquidity

Washington, D.C., Sept. 19, 2008 — The Securities and Exchange Commission, acting in concert with the U.K. Financial Services Authority, today took temporary emergency action to prohibit short selling in financial companies to protect the integrity and quality of the securities market and strengthen investor confidence. The U.K. FSA took similar action yesterday.

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Additional Materials

 

• Emergency Order, Release No. 34-58592.pdf
• Emergency Order, Release No. 34-58591.pdf
• Emergency Order, Release No. 34-58588.pdf
• Form SH
• Form SH Instructions

 

 

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The Commission’s action will apply to the securities of 799 financial companies. The action is immediately effective.

SEC Chairman Christopher Cox said, “The Commission is committed to using every weapon in its arsenal to combat market manipulation that threatens investors and capital markets. The emergency order temporarily banning short selling of financial stocks will restore equilibrium to markets. This action, which would not be necessary in a well-functioning market, is temporary in nature and part of the comprehensive set of steps being taken by the Federal Reserve, the Treasury, and the Congress.”

I visited China in the summer of 2007 while everything was bubbly and beautiful in their equities markets. Our group met with a representative of the Shenzhen stock exchange, who told us how the Chinese government had taken steps to ensure that China’s markets would always be stable and prosperous. The government knows who is buying and selling every position, so they can identify “market manipulators.” Most importantly, the government has outlawed short selling.

How has this transparency and forbidding short selling helped the Chinese market over the past year?