Smart Money

Dear Reader,

You have $1,000 to your name.  I want to borrow $10,000. How do you lend me the $10,000?

Jim

By Bob Bauman

During the Offshore Advantage Academy in Los Cabos last week where I spoke, both in my capacity as an attorney and as counsel to the Sovereign Society, I got a lot of questions about various offshore legal issues from our 330 attendees.

In one case, two of our attorney-speakers gave diametrically opposed opinions to an attendee on the same legal issue. I was asked to referee and the questioner went with my more conservative opinion.

Imagine how many differing opinions on the same question you could get from a court roomful of lawyers. Now up that roomful to one million…

According to the U.S. Department of State, in 2008 there were nearly one million lawyers in the United States…a number that represents over 70% of all the lawyers in the world. That total represents an increase of nearly 100% from the 1980 total of 542,000 and an incredible 150 % from the 1970 total of 355,000.

Sue and Be Sued

All these lawyers have been very busy.

According to the National Conference of State Courts, over 16.6 million civil cases entered the state court system in 2005, the most recent year for which numbers are available. Adjusting for population growth, the resulting aggregate rate of just over 5,500 cases for every 100,000 residents of the United States is nearly identical to the rate in 1996.

These dramatic numbers help to show how Americans traditionally believe a lawyer’s assistance is essential when faced with almost any kind of legal problem.

“After all,” a layman’s prudence suggests, “what does the average person know about the mysteries of the law?” That’s why attorneys are required to go to law school, isn’t it - so they can master a vast, complex field of knowledge?

The corollary fable is that all legal matters are “serious” by their very nature.

Thus, the conventional wisdom when a legal problem arises is, “Don’t try to do it yourself — get an attorney.” This theme has been repeated so often (usually by lawyers), it has been reduced to a modern aphorism, “One who acts as his or her own attorney has a fool for a client.”

All this “get-a-lawyer” propaganda is the product of a tacit conspiracy - a quietly organized facade constructed to fool the gullible and impress the uninformed.

Lawyers themselves are responsible for this conspiracy. Collectively they have hidden behind a legal magic curtain, protecting their interests by making “The Law” seem mysterious and beyond the comprehension of mere non-attorney mortals.

As an attorney for the past 44 years, I know many situations can have serious legal impact on your life - so serious that the best course of action is to retain a qualified attorney. If you think you need a lawyer, get referrals from trusted acquaintances, check Internet or the yellow pages of your phone book under “Lawyer Referral Services,” or contact the office of your state or local bar association which are also found on the Internet.

The Truth About “DIY” When it Comes to Lawyers…

In America, we have one of the best legal systems in the world. Yet, if you’re like most people, you’re overwhelmed and intimidated by that system.

You may have been indoctrinated to believe that there’s no way you can deal with the complexities of this system by yourself, so you don’t even try. You feel helpless – and you resent the “fact” that you have to hire a high-priced lawyer every time you need to sign a simple piece of paper.

Well, I don’t think that “get a lawyer” story is really true in every case.

You don’t have to have a law degree to handle most legal procedures. In fact, most of the legal stuff filling countless file cabinets and computer disks in any lawyer’s office reflects work done and decisions made not by the lawyer, but by the lawyer’s secretary, an office paralegal, or even a bright young student intern.

The vast majority of an attorney’s law practice consists of routine paperwork that any reasonably bright person can master in a short time. Computers loaded with specialized legal software programs now spit out hundreds of standard forms - wills, contracts, and premarital agreements, for example - into which the variables of each client’s name and relevant facts are inserted at appropriate places by a clerk.

You can do the same thing for yourself with a few inexpensive forms you can download from the Internet and you can research most legal issues using Google.

Mind you, I’m not saying you never need a lawyer, but I am saying, when faced with a legal matter that affects you, it is not at all foolish to find out whether you may be able to “do it yourself.”

Dear Reader,

For a long time I’ve been wondering:  are Americans stupid or cowards?

Let me explain.

Back in 1913 Congress passed the Federal Reserve Act.  This took the value of our money out of our control and put it in the control of a private banking cartel - The Fed.

During this 96 year period The Fed has managed to devalue our money by 98.2%.

This is based on the value of gold.  An ounce of gold in 1913 is the same as an ounce of gold today.  The only thing that has changed is how many Federal Reserve Notes it takes to purchase that ounce of gold.  In 1913 it took $20 to buy an ounce of gold.  As of today, November 11, 2009, it will take you $1117 to buy that exact same ounce of gold.  That means a Federal Reserve Note/U.S. Dollar is worth 98.2% less today than in 1913.  Or, put another way, a 1913 dollar would buy 55.85 times as much as today’s Federal Reserve Note.

Consider this.  Today’s average family income is $58,407.  In 1913 you would only have to earn $1,046 to have the same purchasing power.

But, it gets better.  With the $3,000 personal tax deduction, most people in 1913 didn’t have to pay income taxes or social security taxes.  Yet, they earned the same or more than most people earn today.

How did this happen?  You tell me:  are Americans Stupid or Cowards?

Dear Reader,

Back in 2008 the Bushwacker got Congress to go along with an alleged $700 Billion bailout of the banking industry.

Since then, thanks to King Obama, with direct loans, guarantees, and other promises, we the people are on the hook for as much as $23 TRILLION.

That works out to about $70,000 for every man, woman, and child in this debt ridden country.

A few days ago my brother-in-law’s wife gave birth to a beautiful little girl. I haven’t seen even a picture of her yet; but, if she looks like her mama, she’s beautiful. Imagine. A few days old and she’s already $70,000 in debt. Imagine what she’ll owe by the time she starts high school.

What have we gotten for our generous gifts?

Banks still aren’t loaning money. They’re charging higher interest rates, especially on credit cards. They’ve raised fees for such things as over drafts, over limit fees, late charges, and anything else they think they can get away with. They’ve lowered most everyone’s credit limit. They are aggressively foreclosing on homes and throwing families out in the street. They’re repossessing cars left and right and leaving people without a way to get back and forth to work, assuming they still have a job.

That’s gratitude for ya!

What if Congress had done things a little differently?

Instead of giving all this money to the banks, they gave us our own money?

We could pay off our credit card debts. Our mortgages. Our car loans. And what ever else we might owe.

We the people would be out of debt and the banks wouldn’t have those “toxic assets” to deal with. They would be paid off. We would still have to come up with the same $23 TRILLION or $70,000 for every man, woman, and child some time in the future; but hey, we could afford it now. We’re out of debt.

Or, even better. How about this weird, off the wall idea…

Congress could have done what the Constitution calls for – NOTHING.

Something smart, honest people would have DEMANDED.

Then, all these banks which have been run into the ground by a bunch of inept, incompetent, morons would have gone belly up. They, in turn, would have taken all our debts with them.

We wouldn’t owe the now non-existent bank for any credit cards, or mortgages, or car loans, or any loan. These greedy little parasites wouldn’t exist.

And, just as importantly, we wouldn’t owe $23 TRILLION or $70,000 for every man, woman, or child, in future taxes.

But, as Forrest Gump’s Mama used to say: Stupid is as stupid does.

Respectfully,

Jim

All this talk about “stimulus packages” and “bailouts”…

A billion dollars…

A hundred billion dollars…

Eight hundred billion dollars…

One TRILLION dollars…

What does that look like? I mean, these various numbers are tossed around like so many dogie treats, so I let’s try to get a sense of what exactly a trillion dollars looks like.

Start with a $100 dollar bill. Currently the largest U.S. denomination in general circulation. Most everyone has seen them, slightly fewer have owned them. Guaranteed to make friends wherever they go.

A packet of one hundred $100 bills is less than 1/2″ thick and contains $10,000. Fits in your pocket easily and is more than enough for week or two of shamefully decadent fun.

While a measly $1 million looked a little unimpressive, $100 million is a little more respectable. It fits neatly on a standard pallet…

And $1 BILLION dollars… now we’re really getting somewhere…

Next we’ll look at ONE TRILLION dollars. This is that number we’ve been hearing so much about. What is a trillion dollars? Well, it’s a million million. It’s a thousand billion. It’s a one followed by 12 zeros.

You ready for this?

It’s pretty surprising.

Go ahead…

Scroll down…

Ladies and gentlemen… I give you $1 trillion dollars…

Note the guy at far left…and those pallets are double stacked.

So the next time you hear someone toss around the phrase “trillion dollars”… that’s what they’re talking about.

“Shopping has become a patriotic duty in America,” writes Tom Leonard in the Telegraph .

Remind us how that works again…

Let’s see, the Wall Street insiders made billions in bonuses and fees during the Bubble Epoque – and they were smart enough to take the money off the table. Then, when the bubble popped, they were a little short of money down at the shop. And since they didn’t have any money, they couldn’t lend any. And since they couldn’t lend, well, Americans couldn’t borrow…and since they couldn’t borrow…they couldn’t shop…and since they couldn’t shop…the whole kit and caboodle of the U.S. economy came to a halt.

Worse, it started going into reverse. According to the official numbers, it went backwards 0.5% in the 3rd quarter.

And because businesses are selling anything, profits are falling…and investors are pulling out their money.

Last week, it looked like the much-anticipated Obama Bounce had finally gotten off the ground. But Monday, it was back into the mud. The Dow lost 679 points yesterday. Oil fell $5. Gold dropped 8 bucks to $770.

And get this: the yield on a 10-year T-note has fallen to 2.719%. We believe that is the lowest level ever recorded.

Bloomberg says the recession actually began in 2007. That means it is already the longest recession in nearly 20 years.

And it’s not just in the United States. Shipping has sunk. Manufacturing in Britain has had it biggest drop since the early ’90s. And house prices in the United Kingdom are back to where they were three years ago. India reports the first decline it in its exports in seven years. And in Iceland, people are holding rallies to “protest the economic meltdown.”

If you lived in Iceland, you’d think you’d be pleased to have a meltdown of any sort. The Icelanders are clearly wasting their time. Meltdowns are inevitable. They’re just part of the process of capitalism – wiping out mistakes so it can get on with things. They might just as well protest death…

But all over the world, people are getting edgy…depressed…worried…

O! Bama! Where is thy bounce?

Of course, everybody thinks we have a big problem on our hands. And they’re pretty sure what caused it – too much borrowing and too much spending in the bubble years.

The funny thing is that most people also are pretty sure that if we don’t start shopping more, things will get even worse.

And that’s where we come up short. But you’ll have to excuse us because we’re just a country lawyer… Or, we would be a country lawyer…if we lived in the country…and if we were a lawyer.

Well, what we’re really trying to say is that we’re a little slow, here at The Daily Reckoning . Sometimes we just can’t keep up with these smart fellas from the big city…

Let’s try again.

The U.S. government borrows money from taxpayers…gives it to Wall Street so they can lend it back to the taxpayers at a profit. Wall Street borrows ‘our money’ from the Fed at, say, 1%…then they lend it back to us at, say, 6% or 7%. That way, Wall Street makes money and we can still borrow what we need.

Nice system huh?

And take that Hank Paulson…please! Now, there’s a big city guy we admire. He made a fortune running Goldman, right up until he was tapped to run the U.S. Treasury. He knows all about those CDOs, SIVs, MBDs, – heck, he probably knows every letter in the entire alphabet. And he’s used them too – putting together those fancy sub-prime investments and such.

Well, that’s why he was the perfect guy to be the honcho at the Treasury Department. He knows all about that toxic investments that are causing so much trouble – after all, his firm created them.

Of course, if you ask him, he’ll deny it. He’ll say it was just some rogue investment engineers down in the basement who did all the bad stuff. He was attending important meetings and saving nature; how was he supposed to know what they were up to? Yes…he was the CEO. But c’mon…no chief exec can keep up with all that alphabet stuff, can they?

But that’s the kind of guy you want running the economy, right? Keeps his eye on the big picture…not distracted by the details…

And then there’s his replacement, Tim Geithner. We know he’s the man for the job. Why? Because he’s got experience. He’s been on the case for years. As head of the Fed in New York, he was right there while all those investment scientists were conducting their experiments…he was practically right in the room – keeping a watchful eye open – when they ran those fancy linear regression models…mixed in some subprime mortgage debt…and then tossed in a whole ton of fizzy derivatives. Nobody really knew what happened next. The windows blew out and a cloud of smoke rose so high in the air you could see it from New Jersey. But heck, it wasn’t his fault the stuff blew up!

And since these guys know so much about how we got ourselves into this crisis, they are clearly the ones to help us get out… Makes sense, right?

Sure, they’re going to give money to their old friends back on Wall Street…and do everything in their power to prevent the cost of living from going down…

…and of course they’ll be encouraging people to borrow and spend… then people can spend more money they don’t have on more things they don’t need. And then they’ll be deeper in debt than ever before.

…But that must be just the way this money thing works. We shouldn’t be so thick about it…

Bill Bonner
The Daily Reckoning

Pigs at the trough
November 10th, 2008

It’s almost too much to digest at once, the new revelations over how various aspects of the sundry bailouts came about. The information is too much, the outrage is too much. But let’s try.

First comes word that Hank Paulson rewrote tax law without Congress’s say-so, giving the banks a $140 billion tax windfall. Now one could argue the tax law Paulson circumvented was a dumb idea, but even mainstream analysts who don’t fuss over the plain language of the Constitution say Treasury overstepped its bounds here. I hope conservatives who hailed the “unitary executive” philosophy of Team Bush might be rethinking things by now… but I doubt it.

Meanwhile, Paulson and Ben Bernanke have gone back on their promise to disclose just who’s benefiting from all the Fed’s emergency loans. $2 trillion, no transparency. To its credit, Bloomberg News has filed a lawsuit under the Freedom of Information Act to bring this out into the open. (What if the Fed pleads it doesn’t have to comply because it’s not a government entity? No, I don’t really want to go there on a Monday morning…)

While the Bloomberg folks are at it, they might want to get their hands on Hank Paulson’s phone records. Over the weekend, one of the Seattle papers reported this: Two months before Washington Mutual collapsed, Paulson told WaMu’s CEO he ought to sell out to JPMorgan Chase because his company was in such poor shape.

So Big Hank knew bad things were going down. It’s enough to make me rethink the notion that Paulson and Bernanke were just making it all up as they went along. Maybe in fact the bailout bill was sitting on the shelf, waiting for the right moment to be rammed through Congress, just like the Patriot Act.

And to add insult to injury, AIG just got a do-over on its bailout. Neat trick. How many of us can consolidate two loans we took out barely two months before? And up the amount of the loan by 22 percent?

Had enough for one morning? Yeah, me too. Meanwhile the media will be fixated today on the face-to-face between the incoming president and the outgoing one, and what kind of body language the incoming and outgoing first ladies will demonstrate.

Can I just crawl into a hole for the next 15 years or so?

Desidooru Saloon

THE SUBPRIME TRUMP CARD:  STANDING UP TO THE BANKS

by Ellen Brown, June 26th, 2008

“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. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”

– Thomas Jefferson, Letter to Treasury Secretary Albert Gallatin (1802)

Jefferson had it right. More than 1.5 million homeowners are expected to enter foreclosure this year, and about half of them are expected to have their homes repossessed. If the dire consequences Jefferson warned of 200 years ago have been slow in coming, it is because they have been concealed by what Jerome a Paris calls the Anglo Disease – “the highly unequal economy whereby the rich and the financial sector . . . capture most of the income but hide it by providing cheap debt to the middle classes so that they can continue to spend.” He calls “finance” the “cannibalistic” sector in today’s economy. Writing in The European Tribune this month, he states:

“[O]ne of the more attractive features of the financial world, for its promoters, is its ability to concentrate huge fortunes in a small number of hands, and promote this as a good thing (these people are said to be creating wealth, rather than capturing it). . . . [O]f course, the reality is that such wealth concentration is created by squeezing the rest, as is obvious in the stagnation of incomes for most in the middle and lower rungs of society. This is not so much wealth creation as wealth redistribution, from the many to the few. But what has made this unequality . . . tolerable is that the financial world itself was able to provide a convenient smokescreen, in the form of cheap debt, provided in abundance to all. The wealthy used it to grab real assets in funny money, and the rest were kindly allowed to keep on spending by tapping their future income rather than their insufficient current one; in a nutshell, the debt bubble hid the class warfare waged by the rich against everybody else.”1

Now the debt bubble is bursting, with the anticipated real estate crash, banking crisis, foreclosures, and inevitable recession. “The income capture mechanisms set up during the bubble have not been reversed, so the pain is falling disproportionately on the poorest,” writes Jerome a Paris. Meanwhile, finance is being bailed out. What’s to be done? “[T]he financiers . . . will say that more ‘reform’ and ‘deregulation’ and tax cuts are needed,” he says, but “maybe it’s time to stop listening to what is highly self-interested drivel, and take back what they grabbed: it’s not theirs.”

Good idea, but how? The financiers own the media, and their massively funded lobbies control Congress. How can we the people get enough clout to take on the giant financial and corporate giants? What can we do that will make politicians sit up and take notice?

How about swarming the courts? New case law indicates that a majority of the 750,000 homeowners expected to lose their homes this year could have a valid defense to foreclosure. As much as $2 trillion in real estate may be vulnerable to this defense, providing a very big stick for a lobby of motivated debtors. Mobilizing that group, in turn, could light a fire under the investors in mortgage-backed securities — the pension funds, money market funds and insurance companies holding these “orphan” mortgages. These investors also wield a very big stick, in the form of major law firms on retainer. When the embattled banks demand a bailout because they are “too big to fail,” the taxpayers can respond, “You have already failed. It is time to try something new.”

The Legal Trump Card: Make Them Produce the Note

A basic principle of contract law is that a plaintiff suing on a written contract must produce the signed contract proving he is entitled to relief. If there is no signed mortgage note or recorded assignment, foreclosure is barred. The defendant must normally raise this defense, and most defaulting homeowners, unaware of legal procedure and concerned about the expense of hiring an attorney, just let their homes go uncontested. But when the plaintiffs bringing subprime foreclosure actions have been challenged, in most cases they haven’t been able to produce the notes.

Why not? It appears to be more than just sloppy paperwork. The banks that originally entered into these risky subprime arrangements generally did so because they had no intention of holding the loans on their books. The mortgages were immediately sliced and diced, bundled up as mortgage-backed securities (MBS), and sold off to investors. Loan originators sold the mortgages to financial institutions or other banks, which then sold the rights to the monthly mortgage payment income to investors, while transferring the responsibility to collect these payments to specialized mortgage servicing companies. The result has been to slice up the mortgage contract, with no party really having ownership of the original paperwork. When foreclosure has been initiated, the servicer or trustee acting as plaintiff now has trouble proving that it originated the mortgage or owned the loan. In order for a second bank or financial institution to have standing to bring a foreclosure lawsuit in court, it must have been assigned the mortgage; and with the collapse of the housing market, many of the subprime lenders have gone out of business, making it impossible to contact the originating mortgage company. Other paperwork has just been lost in the shuffle.2

Why weren’t the mortgage notes assigned to the MBS holders when they were first sold? Apparently because the investors aren’t even matched up with specific properties until after default. Here is how the MBS scheme works: when the mortgages are first bundled by the banks, all of the subprime mortgages go into the same pool. The bundled mortgages are chopped into “securities” that are sold to many investors — banks, hedge funds, money market funds, pension funds — with different “tranches” or levels of risk. The first mortgages to default are then assigned to the high-risk “BBB-” tranche of investors. As defaults increase, later defaulting mortgages are assigned down the chain of risk to the supposedly more secure tranches.3 That means the investors get the mortgages only after the defendants breached the agreement to pay. It also means the investors weren’t a party to the agreement when it was breached, making it hard to prove they were injured by the breach.

The investors have another problem: the delay in assigning particular mortgages to particular investors means there was no “true sale” of the security (the home) at the time of securitization. A true sale of the collateral is a legal requirement for forming a valid security (a secured interest in the property as opposed to simply a debt obligation backed by collateral). As a result, the investors may have trouble proving they have any interest in the property, secured or unsecured.4

The Dog-Ate-My-Note Defense

When the securitizing banks acting as trustees for the investors are unable to present written proof of ownership at a time that would entitle them to foreclose, they typically file what’s called a lost-note affidavit. April Charney is a Florida legal aid attorney well versed in these issues, having gotten foreclosure proceedings dismissed or postponed for 300 clients in the past year. In a February 2008 Bloomberg article, she was quoted as saying that about 80 percent of these cases involved lost-note affidavits. “Lost-note affidavits are pattern and practice in the industry,” she said. “They are not exceptions. They are the rule.”5

In the past, judges have let these foreclosures proceed; but in October 2007, an intrepid federal judge in Cleveland put a halt to the practice. U.S. District Court Judge Christopher Boyko ruled that Deutsche Bank had not filed the proper paperwork to establish its right to foreclose on fourteen homes it was suing to repossess.6 That started the ball rolling, and by February 2008, judges in at least five states had followed suit. In Los Angeles in January, U.S. Bankruptcy Judge Samuel L. Bufford issued a notice warning plaintiffs in foreclosure cases to bring the mortgage notes to court and not submit copies. In Ohio, where foreclosures were up by a reported 88 percent in 2007, Attorney General Marc Dann was reported to be challenging ownership of mortgage notes in forty foreclosure cases.7

Few defendants, however, are lucky enough to have advocates like Charney and Dann in their corner, and most defaulting debtors just let their homes go. A simple challenge can be filed to the complaint even without an attorney, and some subprime borrowers have successfully defended their own foreclosure actions; but retaining an attorney is strongly recommended. People representing themselves are often not taken seriously, and they are likely to miss local rule requirements. With that warning, here is some general information on challenging standing to foreclose:

Some states are judicial foreclosure states and some are non-judicial foreclosure states. In a judicial foreclosure state (meaning the matter is heard before a judge), if a promissory note or recorded assignment naming the plaintiff is not attached to the complaint, the defendant can file a response stating the plaintiff has failed to state a claim. This can be followed with a motion called a demurrer to the complaint. Different forms of demurrers can be found in legal form books in most law libraries. In essence the demurrer states that even if everything in the complaint were true, the complaint would lack substance because it fails to set out a copy of the note, and it should therefore be dismissed. Ordinarily there is no need to cite much in the way of statutes or case law other than the authority reciting the necessity of showing the note proving the plaintiff is entitled to relief.

In a non-judicial foreclosure state such as California, foreclosure is done by a trustee without a court hearing, so the procedure is a bit trickier; but standing to foreclose can still be challenged. If the homeowner has filed for bankruptcy, the proceedings are automatically stayed, requiring the lender to bring a motion for relief from stay before going forward. The debtor can then challenge the lender’s right to the security (the house) by demanding proof of a legal or equitable interest in it.8 A homeowner facing foreclosure can also get the matter before a court without filing for bankruptcy by filing a complaint and preliminary injunction staying the proceedings pending proof of standing to foreclose. A judge would then have to rule on the merits. A complaint for declaratory relief might also be brought against the trustee, seeking to have its rights declared invalid.9

An Equitable Settlement for Everyone

These defenses can help people who are about to lose their homes, but there is another class of victims in the sub-prime mortgage crisis: investors in MBS, including the pension funds and 401Ks on which many people depend for their retirement. If the trustees representing the investors cannot foreclose, the lucky debtors may be able to stay in their homes without paying. However, the hapless investors will be left holding the bag. If the investors manage to shift liability back to the banks, on the other hand, the banks could go down and take the economy with them. How can these tricky issues be resolved in a way that is equitable for all? That question will be addressed in a followup article. Stay tuned.

Ellen Brown, J.D., developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest book, she turns those skills to an analysis of the Federal Reserve and “the money trust.” She shows how this private cartel has usurped the power to create money from the people themselves and how we the people can get it back. Her websites are webofdebt.com and ellenbrown.com.

Here’s some thoughts I’ve found from others about the proposed bail out of banks.

From Matt Furey:

As you’re probably aware of by now, today is the day that Senator John McCain is back on Capitol HIll - presumably to “fix” our nation’s broken economy.

Hold the phone a minute.

Let’s ponder the question no one is asking: How does a government that is already a gadzillion dollars in debt “fix” the economy.

Think of this. If my business was a gadziillion dollars in debt, would you ask me for a loan. Would you ask me how to improve my financial situation. Would you allow me to “fix” things for you.

Not likely.

Yet, millions of Americans place their hopes in politicians and the Washington elite - most of whom have NEVER owned or operated a business - to ride to the rescue… to save the day…

Well, I got news for you. A band-aid on a cancerous tumor doesn’t make it go away. It may make you FEEL like things have changed - but your feelings may be dead wrong.

Yet, while all the finagling is going on in Washington to save our economy - there is a clandestine group of men and women who really don’t worry about which way the
economic winds blow. Why. Because no matter what - they are going to “find a way” to profit from it.

And these from the Rude Awakening:

First up, some thoughts from David Myhre reporting from, Stuart, FL…

Same message, different story. We MUST pass the Patriot Act NOW. Saddam has WMD - we MUST act NOW to protect America. The financial markets are falling - we MUST act NOW to save America. All I can say is, the town that heard the “WOLF !!” cry only took two fake calls to realize they were being conned. What about us and our “leaders” in DC ?? How many of these BS scares will it take to realize they’re blowing smoke again ? The Empire of George II falls back to its most successful ploy - act now or be destroyed. And anybody opposed is anti-American.

Answer me this, Hank and Ben - if Congress throws a couple trillion dollars after the stupid losses financial institutions have blown, will you GUARANTEE it will fix the problem ? Will you sign over your personal wealth to the US government to help pay for your plan’s failure ? The two most important questions are:

If we don’t accept your proposal, is a crash certain ?

Will this plan fix the problem and avert a crash ?

And therein lies the true question. Nobody that I know has said a crash is certain whether or not a “bailout plan” is carried out. Similarly, nobody I know of has certified that a “bailout” plan would fix the problem. It all boils down to credibility. And the administration of George II has none. Paulson in my book, who was head of Goldman Sachs during its massive increase of leverage, has none. And clearly, Bernanke’s opening of the Fed discount window has averted nothing and perhaps aggravated the situation.

Let the mismanaged financials fail and their assets get bought up by more ethical competitors. Let the fools who bought overpriced real estate using idiotic mortgage plans rent. Let the law of logical consequences solve this problem. Sure, some of Hank and Ben’s country club buddies may have to sell the house in the Hamptons, but hey, fair is fair. Bailouts aren’t.

In fact, it is not a slap in the face to people like me - it’s a right cross and a low blow by people who are in positions of trust who cannot be trusted. I worked hard, saved, invested wisely, never bought a new car, paid my bills and lived within my means. How dare you spoiled Wall Street brats tell me I should be responsible for scalawags such as you ? Millions of RESPONSIBLE Americans are NOT losing our homes to foreclosure because we bought homes we could afford. How dare you swindle us into paying for the irresponsible people who wrote loans to people who you KNEW couldn’t pay and the ignorant ones who bought more house than they could afford.

This plan in every aspect is UNAMERICAN. The FAIR way to solve this mess would be to sieze the assets of the offending financial institutions and use the proceeds to protect responsible Americans from the ill effects of the greedy financiers who caused this mess. The FAIR way to ensure it never happens again is to ban the officers and directors of the companies that created this mess from ever working in a financial company again.

But hey, socialists have never really cared what’s fair. Or Capitalists, for that matter. And former capitalists who want to socialize losses after pocketing profits couldn’t care less about the poor shmucks they con into paying for their irresponsible behavior.

I do not believe one word Paulson or Bernanke say. I believe a shakeout is the only thing that will scour the scum out of a largely dysfunctional financial sector that operates without ethics and is more casino gambling than responsible investing.

In 1930, the perps jumped out of windows. In 2008, the perps get a golden parachute. We’ve come a long way, baby, and it isn’t all for the better.

And this, from Marc Abramsky, a sympathetic Canadian…

Always interesting reading your eletter. Very informative with a nice tidbit of useful information daily.

I am Canadian and I agree strongly with your take on Paulson and the way in which he Fed is acting in bailing out their rich buddies.

I think people have long understood this double standard but never before has it been so blatantly waved in front of the public’s face. I simply can’t fathom how this debacle has been allowed to take place. That the clear minority should be able to exercise this appalling act without so much as a peep from the tax payer and general populace. Even here in Canada (where we are deemed very conservative compared to our southern North American’s) this would cause a minor revolution. Especially in Quebec. These greedy, self-serving, ego centric, morons, should be herded up and thrown in jail. Nothing less. This is a crime scene, no different than Enron or any other scandal where greedy executives have deliberately taken the public’s money.

In fact thieves might be better here, at least they are anonymous unseen faces until they are caught. These jokers are supposed to be leaders. The whole world watches now with complete disgust as liars, cheats, thieves and crooks are rewarded for their crimes.

What a sad place the USA has become. What was once a worldly icon of freedom, opportunity and integrity has become a sham. A place where white collar crime flourishes.

What are your thoughts?

Today’s comment is by Bob Bauman, JD, former U.S. Congressman and long-time Senior Writer and Legal Counsel for The Sovereign Society.

Dear A-Letter Reader,

Not far from America’s financial epicenter, universally known as “Wall Street,” is a huge, empty crater where the Twin Towers of the World Trade Center once stood.

Within weeks of the disaster that annihilated those once-glorious free market icons, fear served as the justification for a panicked U.S. Congress to enact the so-called PATRIOT Act.Without even seeing the text of the bill, the congressional herd mentality to “do something!” produced one of the greatest assaults on the American Constitution ever passed into law. Its odious impact on our liberties still remains today. And barring the miracle of a new Congress emerging with both courage and common sense, it will continue on for years to come.

And now we find ourselves 7 Septembers after 9-11, in a different yet all too familiar national media “panic.”

“The experts” are telling us that the Congress must act immediately to bailout Wall Street, adding nearly a trillion dollars to the national debt. (The existing public debt alone figures out to be US$31,600 for every man, women and child in America, and this new demand will add another estimated US$2,300 for every American).

But wouldn’t hindsight prompt us to think before acting this time around?

Welfare on Wall Street

I am not going to review here the immediate and past history that TV talking heads recite ad nauseum that leads to a media-induced national migraine. Instead, let’s go back to the beginning.

Wall Street’s name is a direct reference to a defensive wall that Dutch settlers erected on the southern tip of Manhattan Island in the 17th century. The area didn’t become famous as America’s financial center until the end of the 18th century, when 24 of America’s most prominent brokers signed an agreement that created the New York Stock Exchange.

But now, in my humble opinion, it is time to resurrect that wall, at least figuratively, and certainly politically and legislatively - in order to defend America against Wall Street.

The garrulous Senator from Delaware, Joe (The Mouth) Biden made the news last week in saying that paying greater taxes was wealthy Americans’ “patriotic duty.” But even he could not foresee the dimensions of what would come next…

Yes, the “panic” came quickly. Lehman Brothers Holdings Inc. filed for bankruptcy protection. The government took control of AIG. Liquidity froze up. They’re saying this could be the most dire market malfunction since the crashes of 1987 - or even 1929.

But the crash was not a surprise to everyone. Here at The Sovereign Society we have long been warning you individually and collectively for quite some time. We told you that the House of Cards was going to collapse - it was just a matter of when. And we have been offering sound investment alternatives to avoid the disaster.

What Lies Beyond the “End of an Empire” Closeout Sale?

“The financial market crisis of 2007 may be remembered as the beginning of the nationalization of a large part of the financial system.” So wrote Floyd Norris in The New York Times. (Dec. 14: A Worrisome New Wrinkle in Bailouts).

Norris also noted that it was foreign governments’ billion dollar “sovereign wealth funds” that came to the rescue last year: “It took a [Singapore] government bailout to shore up UBS…it was Citigroup that got [Abu Dhabi] government aid to help recover from its bad investments.”

Now we are told that the United States government, headed by a Republican president, must create its own US$700 billion sovereign wealth fund (or sovereign debt fund) to rescue us once again. This fund must buy up an untold amount of investment vehicles gone bad - home and other real estate mortgages, sub-prime derivatives, exotic instruments few understand and no one seems able to evaluate - except by calling it “junk.”

And all this, only weeks after Congress adopted a US$300 billion housing bill that was supposed to solve the crisis!

If It Looks Like a Duck and It Quacks Like a Duck…

Bank bailouts may or may not be necessary to avoid a major economic recession, but government owning private businesses and banks smacks of fascism.

Yes, dear readers, if you enjoy reality TV shows, you’ll love the reality of the same kind economic fascism once promoted by Mussolini, Hitler and Juan Peron, among other economic crackpots. Hugo Chavez, anyone?

America, welcome to “backdoor fascism.”

Added to all their other horrors, these fascist leaders put their national economies under government control without outright confiscating the means of production.

Fascist governments nationalized key industries - especially banks - managed currencies and made massive state investments. True, fascist economies were based on private property and private initiative. But these were contingent upon agreement with and service to the state.

The industrial and business aristocracy of a fascist nation often put the government leaders into power. In doing so, they created a mutually beneficial business/government relationship and power elite.

Have you checked how much Wall Street has donated to both Democrats and Republicans in Congress who are now writing the new emergency bailout laws?

Fascist regimes were governed by groups of friends and associates who appointed each other to government positions. They then used power and authority to protect their friends from accountability. Fascist governments instituted state-regulated allocation of resources, especially in the financial sectors.

“Oh, but that can’t happen here,” you protest.

Hey, folks, just look around. Isn’t any of this beginning to appear sickeningly familiar? What is past is prologue!

At Least Someone Out There is Making Sense

Newt Gingrich is one of the few urging Congress to step on the brakes in this US$700 billion bailout plan,

In National Review online, former speaker of the U.S. House of Representatives, Gingrich writes: “Congress was designed by the Founding Fathers to move slowly, precisely to avoid the sudden panic of a one-week solution that becomes a 20-year mess.”

In an NPR radio interview, Gingrich said he thinks the bailout plan is “just wrong,” and that “it’s likely to fail, and it’s likely to make the situation worse over time.”

Will America ever Wake Up and Smell the Totalitarianism?

Wouldn’t it be unusual - even heroic - if the two current candidates for the U.S. presidency stopped their irrelevant hollering at each other? If they dropped their absurd daily nostrums that even they know will never become law?

Isn’t it about time that they cancel their campaign whistle stops and return to the U.S. Senate Chamber, (where, after all, they are both still members), and participated in a real debate? Perhaps about where America and the national economy truly should be headed - and what they would do about it?

If ever there has been a point in modern times when true leadership was needed, that time is now.

BOB BAUMAN, Legal Counsel