While this columnist notes that the Marxist coup taking place in the United States under the cult of personality of messiah Obama has been bloodless thusfar, history shows that such coups never remain that way.
An eventual bloodletting will inevitably occur. Either by resistance, or when the Marxist hordes have entrenched themselves into enough power that the next step of physically eliminating any threat to their power is enacted. History proves that every single Marxist revolution from within ends up in a genocide of the people at the hands of the dictatorial government that the Marxists empower.
Ours will be no different, because history repeats.
Thusfar, America is comfortable with the slogans of “change” and redistribution of wealth at the hand of a narcissistic demagogue who has been lofted as messiah and his sycophants in the new politburo we once called Congress.
For now they stoke the proletariat with class envy and foment hatred for targeted classes and peoples for political destruction, and one day soon – pushed to act violently against those this regime wants destroyed.
Sandy Rios in her commentary notes this trend – but stops short of where all of this will end up, even here in this country. She correctly notes the history of the same kind of revolutions empowering the one Obama is leading and what their methods were. Where I disagree with her is the fact that even though the strategy of Saul Alinsky is being used to foster this revolution – mankind’s nature and history prove that once in power, such tyrannical ideologies always embark on the purging and genocides of people they see as a potential threat to their power.
And Obama and his Marxist hordes will be no different than Stalin, Mao, Pol Pot or Hitler were to the targets they chose for demonization and elimination.
Totalitarian movements have always destroyed their enemies. Peter the Great of Russia murdered members of the Streltsy military corps by taking the ax of the executioner to cut off their heads one by one himself. The Bolsheviks murdered the last Russian Czar—along with his wife and family—by telling them they were going to have their picture made. As they smiled into the camera, they were shot, buried and had acid poured over their remains.
Stalin continued the blood bath of the Russian Revolution by murdering thousands of his own who didn’t agree with Marxism. The Nazis had their gas chambers, not just for Jews, but also for dissenters. Fidel Castro turned his popularity into tyranny and brave Cubans gave their lives trying to free their beloved island. The Khmer Rouge in Cambodia tortured and murdered the intelligentsia in the S21, the regular folk in the Killing Fields. The slightest lack of support for Pol Pot and the new regime earned one a place in a mass grave.
There was a dreadful logic in all of this: By killing the opposition, you eliminated any possibility of future resistance, and you eradicated any personality who could possibly remind or rally future generations to any other way of thinking. Power was—at least for a time—absolute in each situation.
But times have changed and so have strategies. Saul Alinsky, radical of the ’60s, author of “Rules for Radicals” who was all about taking power, suggested that you target your opposition, make it personal and destroy him. Recent decades have seen this play out in the demonization and ruination of a host of people. They weren’t killed, but they were in essence destroyed so that no one in the mainstream culture would ever again listen to or heed their advice. Richard Nixon…Oliver North…Clarence Thomas…Dick Cheney…Tom DeLay…George W. Bush…Sarah Palin. Have Americans stopped to think that these destroyed people are all on the political right? Have they noticed that Bill Clinton and Ted Kennedy and Barney Frank still walk among us, exercising influence, with whatever reputations they have in tact?
Yes, times have changed. Under the careful guidance of Fidel Castro, the driving force behind the Sao Paulo Forum, a new method of gaining power has emerged: 1) Get elected through the system, 2) change the constitution, 3) corrupt the elections 4) nationalize banks and industry and 5) punish your opposition. A leader needs to make just a few bold moves in each category so that all will get the message. According to Alejandro Peña Esclusa, the former Venezuelan presidential candidate who has been tried on several occasions for his opposition to Hugo Chavez, this insidious method of instilling a totalitarian regime is now working in 17 Latin American countries.
“It would seem that the changes that started in Venezuela in the last decade of the 20th century have begun to reach North America,” Hugo Chavez said just last week even as he was jailing opposition mayors in at least three cities.
Now the president, however coyly, and the Democratic leadership, boldly, are seeking to prosecute the last administration for political disagreements by calling them crimes. They want to punish Bush officials who gave legal advice and permission to proceed with interrogation techniques including water boarding that documents show most assuredly saved American lives.
They have released top secret documents, jeopardizing American safety further by making the people who protect and defend us worried sick both for fear of retribution and the very real potential harm that could be done to the nation as a result.
Former President Bush, Vice President Cheney, Secretary of State Rice, Karl Rove and attorneys at Justice and the CIA won’t be lined up and shot, but they will, if this insidious method of taking power has its way, be destroyed financially and personally—with their reputation in shreds.
(Witness what was done to Miss California, Carrie Prejean by the sickening Leftists and Activists in this country.)
And then who will stand up to speak against the dominant left? No one. And that’s the point.
You know, Nancy Pelosi called the House Republicans “Unpatriotic” because they will not go along with the Democrat-proposed 700 Billion bailout of their rich banking scam artist pals and welfare class home-foreclosed constituents – and it’s DAMN INSULTING to watch these slimey vermin in Congress smear and castigate those who TRIED to stop this financial catastrophe that THEY WARNED ABOUT back in 2004!!
Watch this C-Span video of the House GOP trying to get regulators to obtain oversight of Fanie Mae and Freddie Mac – and WATCH what the Democrats did to them and what they had to say.
I do not think I have heard or read a more cogent explanation of the collapse into Fascism we witnessed this week than Talk Show host and Constitutional Lawyer Mark Levin.
On Friday evening’s show, Mark outlined in vivid detail the chronology of where all these risky loans and bad debt that crashed the big investment banks on Wall Street originated. Mark then goes on to showcase that the very people who created the mess are LYING THROUGH THEIR TEETH to blame Capitalism or Bush for their dirty work.
The show was so informative that I spent most of last night transcribing most of the first hour for readers.
This is informative to know, so that when you read these Leftists in Congress blame you and me and Bush and the GOP – for this mess that THEY helped create, we might someday hold these vermin accountable.
September 2008 will be remembered as the time when Socialism really, really took hold in this country.
Unfortunately these politicians are running for the hills because they do not want to take responsibility for what is going on, and I mean BIG TIME.
So I want to tell you a little story about your government; I want to tell you a little story about how it works and doesn’t work. I want to tell you a little story about how things go on in the shadows in this country and the massive bureaucracies of this country that you don’t know about, and yet they affect your lives every single day.
We have a massive Administrative State….and we have this massive bureaucracy, that’s utterly unelected, and unaffected by what you want or what you believe. It’s part of the Washington elite management system that controls so much of what goes on in this country.
…And I want to tell you a little bit about how the liberals in government whether they be elected or appointed, whether they be bureaucrats or politicians, how they work together and bring us to this point. And then tell YOU the problem is free markets, the problem is Capitalism, the problem is greed.
The Community Reinvestment Act, or CRA – is a federal law that requires banks and thrifts to offer credit throughout their entire market area. And it prohibits them from NOT giving loans to poorer areas within the reach of their communities. They call this redlining. They call violations of this redlining.
The purpose of this Act is to provide credit, including home ownership opportunities to what they call “under-served populations” and commercial loans to small businesses.
The law was passed by Congress in 1977 under Carter as a result of national grassroots pressure from groups like ACORN (an ultra-Left wing criminal enterprise in my humble opinion) which brought pressure for affordable housing for the poor. It was opposed significantly and aggressively by the banking community. But they had no choice. It became law 31 years ago.
The law mandates that “each banking institution be evaluated to determine if it has met the credit needs of it’s entire community” – that is, if it has given loans to enough poor people, or people who can’t really afford them.
And then that record is taken into account by the federal government when it considers an institution’s application for mergers and acquisitions.
And so the law is enforced by the federal government and in 1995, as a result of interest from Bill Clinton’s Administration – particularly Janet Reno and the Department of Housing and Urban Development, the implementing regulations for the law were strengthened by focusing the financial regulator’s attention on institution’s performance in helping to meet community credit needs.
So they really, really pushed them. They used the FORCE OF LAW to compel these private institutions to make bad loans.
These changes were very controversial.
…The Clinton Administration’s regulatory revisions with an effective starting date of January 31 1995, were credited with substantially increasing the number and aggregate amount of loans to small businesses and to low and moderate income borrowers for home loans. Clinton used to brag about this.
Part of the increase in home loans was due to increased efficiency in the genesis of lenders like Countrywide that DID NOT mitigate loan risk with savings deposits, which traditional banks do. They were using the new SUBPRIME AUTHORIZATION, of 1995. Are you listening to me? This is known as the secondary market for mortgage loans. The revisions in the law allowed the securitization of CRA loans containing subprime mortgages. In other words, they had to figure out how to give loans to people who do not qualify for the loans under traditional procedures. So they changed the procedures.
The loans were not capitalized. So you have No Down Payment loans, No Interest loans, Low Interest loans that turn into higher interest loans over time (ARMs), and on and on. They were trying to be creative in what they could do, and they HAD TO BE under the threat of losing business practices and activities as compelled by the Federal Government.
The Federal Government compelled this activity and compelled this behavior.
The first securitization of CRA loans, started in 1997 with Bear Stearns (remember them?)
Now in 2003, The Bush Administration recommended what the New York Slimes (Times) called “The most significant regulatory overhaul in the Housing Financial Industry since the Savings and Loan crisis a decade ago”. This change was to move governmental supervision of two of the primary agents guaranteeing subprime loans; Fannie Mae and Freddie Mac, under a wholly new agency created within the Department of Justice, which would give it more oversight power and more auditing power. It would require these two so-called “companies” to better capitalize their debt.
Even so, what remained was the implied guarantee that the American taxpayer, should anything go wrong, would back-up these loans.
But that legislation to strengthen these programs, to move the oversight to an independent separate agency WAS BLOCKED in 2003 by Congress. And it was blocked by the Democrats, because the Democrats were in bed with ACORN and these other “community activists grassroots groups”, of whom Barrack The Hussein Obama is quite familiar.
These are the constituents of the Democrat party – that is these Left wing groups like ACORN.
(Barney) Frank (D-MA) was in bed with them; Chris Dodd (D-CT) was in bed with them; the Clinton Administration was in bed with them; and so they blocked the reforms the Bush Administration proposed in 2003.
Barney Frank said at the time “These two entities Fannie Mae and Freddie Mac, are NOT FACING ANY KIND OF FINANCIAL CRISIS. The more people exaggerate these problems…the more pressure there is on these companies, the less we will see in terms of affordable housing”.
So basically, the Socialists FORCED the private sector to behave in ways the private sector didn’t want to behave but was forced to behave under threat of law. That is to give loans to people who were bad risks.
The two government run companies; Fannie Mae and Freddie Mac, when the Bush Administration said in ’03 “Look we got a problem here. They don’t have enough capital, they’re running wild over there. We don’t have enough oversight and auditing activity. We want to break out that activity – make it independent so they can oversee it. Force them to capitalize against their loans better”. They were BLOCKED.
Now I don’t know about people who say we can’t talk about party (blame) – We HAVE TO TALK ABOUT PARTY HERE because the only way you have accountability, and the only way you fix this situation, is to know WHO and WHAT is responsible, and what policies got us here!
Now these policies encouraged the development of the sub-prime debacle, through this CRA legislation, which forced banks to lend to uncreditworthy customers. Which they are now being criticized for having done. Before this debacle, while they are now attacking these huge financial institutions – they would praise them for all the uncreditworthy risky loans they were giving to ‘certain’ citizens (and non-citizens) in this country!
In 2003, the NY Slimes said of the Bush Administration’s plan “The plan is an acknowledgment by the Administration that oversight of Fannie Mae and Freddie Mac, which together have issued more than 1.5 trillion in outstanding debt, is broken”.
Former Treasury Secretary John Snowe from the Bush Administration, 2003 – “There is a general recognition, that the supervisory system for housing-related government-sponsored enterprise neither has the tools nor the stature, to deal effectively with the current size, complexity and importance of these enterprises.”
Michael Oxley, Republican from Ohio, former House Finance Services Committee Chairman, he said: “The current regulator does not have the tools or the mandate to adequately regulate these enterprises. In recent months, we have seen the mismanagement and questionable accounting practices went largely unnoticed”.
The Senate Republican Policy Committee, the Conservatives warned in 2003, that Fannie Mae and Freddie Mac threatened the U.S. economy and taxpayer “Although both firms seem to be performing well at the moment, it is far better for Congress to take pre-emptive action, instead of facing an enormously expensive corrective action after a destabilizing crisis strikes. Given how large these government companies have grown, and how much interest rate risk they retain, the risks posed by their current operations, should move Congress to increase their disclosure requirements, improve safety and soundness regulations, and examine how best to extricate the Federal Government from their operations. And through such steps, Congress could give regulators and investors a better sense of the risks that Fannie and Freddie’s operations pose and reduce the likelihood of a bailout.”
That was the Conservative Republican Policy Committee, Conservative Republican Senators.
What did the Democrats say? What did they say in 2003?
When the Bush Administration in 2003 was in fact, ringing the alarm bells, and did in-fact draft proposed legislation to address this, Republicans supported it and Democrats blocked it.
“These two entities Fannie Mae and Freddie Mac, are NOT FACING ANY KIND OF FINANCIAL CRISIS. The more people exaggerate these problems…the more pressure there is on these companies, the less we will see in terms of affordable housing”. – Barney Frank, 2003 (D-MA)
He told the AP a few weeks later: “I don’t think we face a crisis. I don’t think we have an impending disaster.”
In 2004 Frank said “I think Wall Street will get over it”, referring to the possible collapse of Fannie Mae and Freddie Mac.
In 2005, the Republicans in Congress offered legislation to basically do what the Bush Administration had proposed two years earlier, and here’s what the Democrat Minority Leader in the Senate Harry Reid had to say: “The legislation from the Senate Banking Committee passed today on a party-line vote by the Republican majority, includes measures that could cripple the ability of Fannie Mae and Freddie Mac to carry out their mission of expanding home ownership. While I favor approving oversight by our federal housing regulators, to ensure safety and soundness, we cannot pass legislation that could limit Americans from owning homes and potentially harm our economy in the process”. That was UPI quoting Harry Reid in July ’05.
This by the way is the same reason they won’t address the other looming disasters like Social Security, Medicare and Medicaid. They just won’t do it. Until we’re on the brink.
As recently as August 16, 2007 – a little over a year ago – Schumer and Dodd, the Chairman of the Banking Committee, called on Fannie Mae and Freddie Mac regulators TO LIFT THE PORTFOLIO CAPS SO THEY COULD GIVE OUT MORE LOANS, to MORE people. They argued that allowing the two firms to buy more mortgages, and we’re talking about these sub-prime mortgages, “at least temporarily” they said, “would inject much liquidity into the market and calm the financial markets.”
That’s what we’re talking about.
In November 2006, Schumer in an Op-Ed in the Wall Street Journal with New York Mayor Michael Bloomberg: “With the benefit of hindsight, the Sarbanes-Oxley Act of 2002, which imposed a new regulatory framework on all public companies doing business in the U.S., also needs to be re-examined. Since its passage, auditing expenses for companies doing business in the U.S. have grown far beyond anything Congress had anticipated. Of course, we must not in any way diminish our ability to detect corporate fraud and protect investors. But there appears to be a worrisome trend of corporate leaders focusing inordinate time on compliance minutiae rather than innovative strategies for growth, for fear of facing personal financial penalties from overzealous regulators.”
They were arguing for REDUCING the regulations that had been passed after Enron!!!!
…We will be paying for all of this now and down the road because of Socialism. That’s what I am trying to explain. That’s why I am taking the time to slog though this. Because it all sounds so foreign – because it has all been going on, behind the curtain. So we really haven’t been aware of it. It’s like Illegal Immigration, been going on for 45 years, they have been passing these laws, and we really haven;t been aware of it. We’re aware of it now, because we are on the hook for it.
What Chuck Schumer wrote in the WSJ Op-Ed in November 2006, is not what Chuck Schumer says today. Here’s what he said on the senate floor
“8 years of de-regulatory zeal by the Bush Administration, an attitude of “The market can do no wrong” have led us down the short path to economic recession. From the unregulated mortgage brokers, to the opaque credit default swaps market, to aggressive Short Sellers who were driving down the price of even healthy financial institutions based on innuendo, this Administration has failed to take the steps necessary to protect both Main Street and Wall Street”.
There may not be a silver bullet to fix what is currently dragging down the economy, but we can take steps to mitigate the costs and make sure that the impact of this crisis will be short-term. ” – Schumer, (D-NY)
See, our nation would be far better off without charlatans like Chuck Schumer. We have you dead to rights here Chuck. We have you in writing where you demanded LESS regulation and less oversight. So the fact you go to the senate floor and spew your talking points doesn’t work here.
We have you Barney – we have you dead to rights too. You’re a liar. You fought the reforms the Administration tried to put in place in 2005.
Yet Frank had this to say today:
“The fundamental issue is we have got to put an end to this situation in which there is no sensible regulation, and irresponsible individuals in the private market, or unwise individuals in the private market can incur the kind of risks that put us in a threatening situation,” said House Financial Services Committee Chairman, Barney Frank.
He’s a liar.
Now Barrack Obama, Obama is allied with radical groups like ACORN. These radical Left wing front groups like ACORN which pushed hard for the legislation that Carter put in place – the CRA forcing private financial institutions to make the riskiest of loans.
We have the Clinton Administration dead to rights – including Janet Reno, who insisted that these banks and financial institutions would not be able to survive and expand unless they took a certain amount of their assets and applied them to the riskiest of loans. That’s what they created in 1995 with this sub-prime market – of zero down loans. They were trying to come up with packages so they could meet their federal requirements. And they did.
Then step in the two government-run entities, Fannie and Freddie – and they are buying up these loans from the private sector as far as they can. Now that doesn’t promote home ownership, yet that is what they were in existence to do. So why were they buying up these risky loans?? Because they appeared as assets on their books, even though they weren’t. And the more assets they had, the bigger the bonuses for Franklin Raines, and Jamie Gorelick, and Jim Johnson – these three who are Obama’s ECONOMIC ADVISORS – that’s why they bought them up. It was in their OWN self-interest!!
This corrosive cronyism, has spread throughout the financial institutions in this country. That’s why they are hustling to fix it! Their fingerprints are all over this dammit! Don’t you see???!!! This wasn’t the private sector that did this, this wasn’t any individual company that did this, this is institutionalized corruption – we call it Socialism!!! Every effort to address it by the Bush Administration in ’03, by the Republicans in ’05, was rejected. Rejected by Chris Dodd, rejected by Chuck Schumer, rejected Barney Frank, rejected by Nancy Pelosi and Harry Reid. This is why I rail against this! This is why I rail against the Left and the Socialists.
This isn’t a joke! This is real life!
And now, over the weekend, the Treasury Secretary – who is a Liberal Democrat, and a Friend of Schumer’s – has a plan that sticks us with a bill of over 1 TRILLION dollars!
We’re nationalizing businesses, we’re subsidizing businesses, now we’re going to create a 1 trillion dollar trust??
Look what your government has done!!!!!! They have dragged us to the precipice!
You and I weren’t overseeing Freddie and Fannie – you and I had nothing to do with this CRA law – with all these Left Wing grassroots groups – or forcing banks and thrifts to cough up money for risky loans – we had nothing to do with this!
This is what goes on behind the scenes.
“Oh it’s Capitalism and Free Markets that are the cause” – no it’s not – THAT’S the problem!
What kind of a businessman gives a loan to someone who cannot pay it back unless they have a gun to their head???
…So all this crap that is out there – all these bad loans that are out there – they are going to pass them off into this fund, so every business out there that is loaded with these is going to dump them on you and me – the American taxpayer. To save those businesses. And by the way, those businesses – in many cases were forced to make these crap loans by the very people who are going to save us!!!
Senate Banking Committee Chairman Chris Dodd (D-Conn.) said on ABC’s “Good Morning America” said lawmakers were told last night “that we’re literally maybe days away from a complete meltdown of our financial system, with all the implications, here at home and globally.”
Why is Chris Dodd still chairman of the banking Committee?? Why isn’t he spooning out slop at some federal prison? Why isn’t he in charge of the soap at some Federal prison?
“What you heard last evening is one of those rare moments — certainly rare in my experience here — was that Democrats and Republicans decided we needed to work together, quickly,” Dodd said.
Funny how they want to work quickly to fix it now – but refused to do so in 2003 and 2005 BEFORE this collapse was triggered.
“Congressional leaders tell Politico that to expedite the rescue, Treasury plans to seek additional authority rather than creating a new entity. The plan involves buying up hundreds of billions of dollars in bad mortgages to take them off the books of financial institutions that otherwise might fail”.
…Yeah let’s hurry up (and fix this) let’s set this thing up before the American people figure out what’s going on. Let’s set it up – because as all the experts keep telling us, “this is just too big to fail!” That’s too big and this is too big – we have to nationalize everything! That’ll fix it! That’s because we know that whatever the government does is okay and whatever the private sector does is horrific.
For the last several weeks, as the mortgage, credit and financial crisis began to spiral out of control due to government meddling, mismanagement and greed – the government stooges who helped grease the playing field for this fiscal collapse in the first place, began to take over failed industries in a not-too-subtle nationalization of the banking, mortgage and credit industries.
With Lehman Bros going broke, in the wake of wreckage from Fannie Mae and Freddie Mac, the government takeover of AIG and the fact the FDIC is going broke faster than a wino in Vegas, it was apparently determined that the greed, sloth and criminality should be rewarded by making the you and I, the U.S. taxpayer and our children PAY for the HUNDREDS OF TRILLIONS OF DOLLARS in debt these institutions at behest of the government, have incurred.
It began with Morgan Stanley, and yesterday culminated in the government announcing it will MONETIZE ALL BAD BANK DEBT. So in one fell swoop, the U.S. government with the Fed has trashed Free Market Capitalism, Socialized the Debt and are willfully ignoring the moral hazard they have created.
As my friend and fellow contributor John Galt said in response to this:
I said they would monetize and they are.
I said they would commit un-Constitutional acts, and they are.
I said that hyperinflation would occur before deflation, and it is.
I said that somewhere close to 40,000,000 retirees just became wards of the state because their retirements were wiped out and they did; they just don’t know it yet.
I said this disaster would alter our nation forever and it will.
Equities will be destroyed.
Bonds will become worthless.
Money Market funds will be obliterated.
There is no incentive to save money.
The retirees who trusted the government to keep their money safe and earn a meager 4-5% annual return will be turned upside down by either destruction of their mutual funds or hyperinflation. A 5% return does nothing in the face of annualized inflation in excess of 20,30 or 50%.
Plus the entire tax structure of the U.S. will have to be redesigned.
John also warns that the action taken here signals the official end to the Right to Private Property in the United States. Ultimately, he is correct, because the government will now own everything; your mortgage, your loan, your insurance, your bank.
In short order, America has gone pure fascist. Not in the manner the Liberal Left had tried to redefine fascism in terms of Religious Conservatism, but TRUE Mussolini-style fascism – where the government runs industry, banking and commerce.
Of course the media makes it sound like the greatest thing since Welfare was created by FDR. Contrary to the headline, THIS IS NOT A RESCUE – it is a TAKEOVER that will be hung on your neck and mine and that of our children to cover:
Lawmakers Work With Fed, Treasury To Try to Restore The Flow of Money
By Binyamin Appelbaum and Lori Montgomery
Washington Post Staff Writers
Friday, September 19, 2008; A01
The Bush administration is urgently preparing a massive intervention to revive the U.S. financial system, including a plan to sweep away the unpaid loans that are choking banks and blocking the flow of money to borrowers.
Congressional leaders gave bipartisan support to the administration’s efforts after a meeting last night with Treasury Secretary Henry M. Paulson Jr. and Federal Reserve Chairman Ben S. Bernanke.
Paulson and Bernanke presented a “chilling” picture of the state of the financial system, according to a participant in the meeting who spoke on condition of anonymity. Lawmakers were told that the consequences would be grave if they failed to pass legislation by the end of next week. Sen. Harry Reid (D-Nev.) and Rep. Nancy Pelosi (D-Calif.) committed to meeting that deadline.
The plan involves using hundreds of billions of dollars in government funding to buy bad loans, leaving banks with more money and fewer problems, according to two sources familiar with what was said at the meeting.
After the meeting, Paulson told reporters the proposal was “an expeditious solution that is aimed right at the heart of this problem.”
Also last night, the Fed was considering offering backing for money-market mutual funds, which have had massive withdrawals in recent days, said a source familiar with the discussions.
And the Securities and Exchange Commission is considering further limits on short-selling, a practice that allows investors to bet on a decline in a company’s stock price, according to a person familiar with the matter. Critics of the practice say short sellers are driving down the share prices of financial companies, thereby contributing to their destruction.
The government has already tried three times this month to keep money flowing through the financial system. It took over the two largest providers of funding for mortgage loans, Fannie Mae and Freddie Mac. It created a new source of funding for investment banks. And it took over the insurance giant American International Group.
Now the government is contemplating its broadest — and perhaps most expensive — intervention to date.
The urgency has only grown with each successive intervention because the first three tries have not worked. People are withdrawing money from money-market mutual funds. Banks are refusing to lend to one another. Several large financial companies need money to stay in business, including the bank Washington Mutual, which is seeking a buyer.
Regulators and the banking industry are increasingly concerned about customer withdrawals from money-market funds. Crane Data, which tracks the industry, said total deposits in money-market funds fell Wednesday by at least $79 billion, or about 2.6 percent. Financial executives have told government officials in recent conversations that the rising pace of withdrawals is the equivalent of a bank run and that if it continues, it will drain a massive and critical source of funding.
Money-market funds are particularly important because they buy short-term debt, which is used by financial companies and other corporations to finance day-to-day activities.
According to legislative aides, yesterday’s meeting was arranged after Pelosi called Paulson’s office mid-afternoon to discuss the state of the markets. During that call, Paulson asked to meet with Pelosi, Reid and key lawmakers from the banking committees. That meeting took place at 7 p.m. in Pelosi’s office on the second floor of the Capitol.
Paulson and Bernanke did not present lawmakers with a written proposal but are expected to do so by tonight, congressional aides said.
During the meeting, one lawmaker worried aloud that Paulson was asking for “a blank check,” according to a participant. There was also a “healthy debate” about whether this action would finally stabilize the markets.
“They couldn’t answer yes to that question,” the participant said.
Paulson and Bernanke generally have kept Congress at arm’s length as they have sought to deal with the financial crisis. Yesterday, however, after meeting with congressional leaders, they exchanged awkward compliments with the lawmakers at a news conference. Lawmakers had been increasingly critical of the Fed and Treasury leaders for failing to consult with Capitol Hill. The administration will need congressional approval to commit taxpayer money to its new plan.
“We’ll do this as quickly as we can. We’re not talking about a month,” said Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, which would probably review the plan before it went to the House floor.
A hearing on the topic that Frank had scheduled for next Wednesday could now become a legislative drafting session, he said.
Also yesterday, Sen. Charles E. Schumer (D-N.Y.), chairman of the Joint Economic Committee, suggested that the government create an entity that would operate much like the Depression-era Reconstruction Finance Corp. — it would buy “equity and possibly secured debt,” providing desperately needed cash to companies while permitting the government to share in any profit.
“The government would get repaid before the others in the financial chain,” Schumer said.
If a plan does move forward, Democrats may try to demand concessions from the suddenly humbled industry, Schumer said, including support for a proposal to permit bankruptcy judges to modify mortgages for distressed borrowers. Currently, judges may set new terms for mortgages on second homes but not on primary residences.
That idea is contentious and has been fiercely opposed by the banking industry. Frank said he would instead demand that banks reduce the number of foreclosures.
Still, it’s not clear that Democrats would insist on such concessions at the expense of passing the plan quickly.
“The costs of doing nothing are enormous,” Frank said. He added that with the recent deterioration in the financial markets, “I think the timetable for something has been greatly sped up.”