Patrick.net has an illuminating powerpoint from Merrill Lynch (opens in PDF).

Wow, this is good.

Cartoon from sinfest via The Big Picture.

It really is beyond all satire that Hank Paulson has appointed Neal Kashkari to dole out the $700 billion in taxpayer money to Wall Street banksters.

And yes, that's pronounced "cash-carry."

Naomi Klein:

The best summary of how the right plans to use the economic crisis to push through their policy wish list comes from Former Republican House Speaker Newt Gingrich. On Sunday, Gingrich laid out 18 policy prescriptions for Congress to take in order to "return to a Reagan-Thatcher policy of economic growth through fundamental reforms." In the midst of this economic crisis, he is actually demanding the repeal of the Sarbanes-Oxley Act, which would lead to further deregulation of the financial industry. Gingrich is also calling for reforming the education system to allow "competition" (a.k.a. vouchers), strengthening border enforcement, cutting corporate taxes and his signature move: allowing offshore drilling.

It would be a grave mistake to underestimate the right's ability to use this crisis -- created by deregulation and privatization -- to demand more of the same. Don't forget that Newt Gingrich's 527 organization, American Solutions for Winning the Future, is still riding the wave of success from its offshore drilling campaign, "Drill Here, Drill Now!" Just four months ago, offshore drilling was not even on the political radar and now the U.S. House of Representatives has passed supportive legislation. Gingrich is holding an event this Saturday, September 27 that will be broadcast on satellite television to shore up public support for these controversial policies.

What Gingrich's wish list tells us is that the dumping of private debt into the public coffers is only stage one of the current shock. The second comes when the debt crisis currently being created by this bailout becomes the excuse to privatize social security, lower corporate taxes and cut spending on the poor. A President McCain would embrace these policies willingly. A President Obama would come under huge pressure from the think tanks and the corporate media to abandon his campaign promises and embrace austerity and "free-market stimulus."

I doubt it. Greater oversight of a bad plan doesn't make it better.

The devil is not in the details. The devil is the idea itself. A bailout with this big of a price tag will destroy the dollar, no matter how big the committee to oversee it.

There is no other word for it:

Paulson said that "it pains me tremendously to have the American taxpayer put in this position but it is better than the alternative."

Both Paulson and President Bush have argued that the alternative would be credit markets that remain frozen, meaning that businesses will fail because they can't get the loans they need to operate and the economy will grind to a halt because consumers won't be able to get loans to make the purchases that keep the economy moving forward.

“If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their fathers conquered.”

- Thomas Jefferson, in a letter to Treasury Secretary Albert Gallatin, 1802. Jefferson added: "The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."

Via Gabriel, how to make money out of turmoil:

If you had purchased £1000 of Northern Rock shares one year ago it would now be worth £4.95, with HBOS, earlier this week your £1000 would have been worth £16.50, £1000 invested in XL Leisure would now be worth less than £5, but if you bought £1000 worth of Tennents Lager one year ago, drank it all, then took the empty cans to an aluminium re-cycling plant, you would get £214. So based on the above statistics the best current investment advice is to drink heavily and recycle.

In the flurry of commentary and news reports about the economy this week, here is one point that I hope you didn't miss, from the Big Picture on Thursday:

As we learn this morning via Julie Satow of the NY Sun, special exemptions from the SEC are in large part responsible for the huge build up in financial sector leverage over the past 4 years -- as well as the massive current unwind

Satow interviews the above quoted former SEC director, and he spits out the blunt truth: The current excess leverage now unwinding was the result of a purposeful SEC exemption given to five firms.

You read that right -- the events of the past year are not a mere accident, but are the results of a conscious and willful SEC decision to allow these firms to legally violate existing net capital rules that, in the past 30 years, had limited broker dealers debt-to-net capital ratio to 12-to-1.

Instead, the 2004 exemption -- given only to 5 firms -- allowed them to lever up 30 and even 40 to 1.

Who were the five that received this special exemption? You won't be surprised to learn that they were Goldman, Merrill, Lehman, Bear Stearns, and Morgan Stanley. 

As Mr. Pickard points out that "The proof is in the pudding — three of the five broker-dealers have blown up."

So while the SEC runs around reinstating short selling rules, and clueless pension fund managers mindlessly point to the wrong issue, we learn that it was the SEC who was in large part responsible for the reckless leverage that led to the current crisis. 

You couldn't make this stuff up if you tried.

This point may be lost on the average voter, but it is firmly grasped by millions of the pro-business Republicans that John McCain needs to win the White House.

Add to that their disgust at the reckless and seemingly random government intervention in the markets, and you have the makings for a major backlash among a critical segment of the Republicans base this November.

It's no wonder McCain's post-convention bounce this week plummeted faster than the Dow on Monday. Bush has bankrupted this country -- the Republicans have wrecked America -- and the end result for the GOP is a coalition in complete tatters and disarray.

Funny what eight years of plundering by the masters of the universe will do to a country, eh?

My good friend Joe Costello sends an email:

John Thain, Kenneth Lewis, Dick Fuld, Hank Paulson, Ben Bernanke, Robert Rubin, Sandy Weill, Alan Greenspan, and let's not forget the Clintons, indeed, the list is quite long. In fact, you could stand for weeks beneath Washington's statue on the steps of Federal Hall, armed with several containers of lipstick just unloaded from Shanghai, and attempt to cover the faces of everyone walking past, and still be unable to dress-up the flatulence and gluttony of the animals mired in Wall Street's slop.

Squealing like a stuck pig might be more appropriate. Day after day, squeals of panic rise from the former august institutions of finance. So, this is how the Age of Neo–Laissez Faire ends, not from popular disgust, but with trembling fear and pleadings for Federal help from Wall Street's former masters of the universe. We are witnessing the deleveraging of what the financial press likes to call the “shadow banking system,” and this is fast threatening the banking system -- if one can tell them apart.

Another Sunday, and as we have now come to expect, more bad moves by the Fed and Treasury. Two very important things happened yesterday. First, Bank of America, one of the nations largest banks, was allowed to takeover Merrill Lynch, one of the nation's largest brokerages. The financial press talked about how great an idea this was because B of A had such a large “deposit base.” Isn't that great! What they're talking about, that deposit base, is your bank account. Yes, the federal government just allowed the deposits of millions of Americans to now directly prop up the stock market and tons of other worthless paper.

Secondly, the Fed announced it would now accept, not only Mortgage Backed Securities and other “exotic” valueless paper as collateral, they would also accept equities. Since March, when the Fed opened its window to investment banks in an attempt to prop-up not just the financial system, but the stock market, the Fed has swapped 2/3 of its Treasuries for worthless paper. By accepting plummeting equities, the last 250 billion of Fed assets will not last long.

This leads to many existential financial questions. Can you swap Fannie and Freddie equities with the Fed? Can the Fed become insolvent? Finally, just what exactly does full faith and credit of the Federal government mean when the Federal government is 10 trillion dollars in debt? Faith is being shaken -- “I know that thou canst do all things, and that no purpose of thine can be thwarted,” so believed Job anyway.

What we are witnessing is the results of the damage to our system of self-government caused by the last century's complete disregard for a fundamental democratic-republican tenet – separation of powers -- not simply, separation of powers in the architecture of government, but in our social and economic systems, the entire body politic. The concept of “too big to fail,” that an institution must be saved for the health of the system, is anathema to any republic. How can a people, who overthrew a monarchy, the single greatest institution of the day, now accept “too big to fail” as reason for any course of action?

The sickly condition of our republic is self-evident, but we are quickly approaching an even graver condition. With a series of bailouts and unprecedented entwining of the federal government with financial and corporate power, we are fast locking into place permanent decline. We are institutionalizing the status quo and making it impenetrable to forces of healthy change. We are creating ever bigger pigs. The antithesis of “too big to fail” is to begin a restoration of this republic by bringing the troops home and closing the bases across the globe, taking government power out of DC and placing it in cities and counties and connecting them in a distributed network, limiting the size of any economic entity, and resurrecting the citizen.

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