September 19, 2008

September 19, 2008
Hey there! Thanks for stopping by to read another blog entry about my life.

I ended up going to bed very early last night after a very busy day. I normally get it bed between 10pm and midnight but last night I was in bed by 9pm at the latest. I knew it was going to be another busy day today.

Have you been watching how our economy continues to implode. Now most of the has been caused by the greed of the rich in our country. And now our politicians and government are going to spend hundreds of billions of tax payer money to make sure the rich stay rich.

First, the SEC bans short-selling of 799 financial stocks. Federal securities regulators, in an effort to boost investor confidence in the face of a market crisis, took the dramatic step Friday of temporarily banning the trading practice of betting against financial stocks. The move, announced on the Securities and Exchange Commission's Web site, will temporarily ban what is called short selling of nearly 800 financial stocks. Short selling is a legitimate method of trading, but has been blamed for widening the scope of the recent financial crisis and contributing to the collapse of values of investment and commercial bank stocks in particular. The turmoil has swallowed some of the most storied names on Wall Street. Three of its five major investment banks Bear Stearns, Lehman Brothers and Merrill Lynch have either gone out of business or been driven into the arms of another bank. Short selling involves betting against company stocks by borrowing its shares, selling them, and pocketing the difference when they fall. In its announcement, the commission said it was acting in concert with the U.K. Financial Services Authority in taking emergency action which announced a similar ban there on Thursday. The SEC said it hoped its move would protect the integrity of the securities market and boost investor confidence.

"The commission is committed to using every weapon in its arsenal to combat market manipulation that threatens investors and capital markets," SEC chairman Christopher Cox said in a statement. "The emergency order temporarily banning short-selling of financial stocks will restore equilibrium to markets." The move, he said, would not be necessary in a well-functioning market and is only a temporary step that is part of the actions being taken by the Federal Reserve, the Treasury and Congress. Short-selling can contribute to efficiency while adding liquidity to the markets. But a recent wave of the maneuvers profiting by selling unowned shares of companies in the anticipation their prices will drop has been blamed in part for the demise of venerable investment firm Lehman Brothers and other big financial companies. Some British politicians also claim that short-selling attacks were partly responsible for HBOS PLC's abrupt takeover by banking rival Lloyds TSB PLC on Thursday amid a sharply falling share price. Market regulators in Britain, citing "current extreme circumstances," announced a temporary ban on short-selling Thursday.

Cox held a closed-door meeting with members of Congress Thursday night, Treasury Secretary Paulson and Federal Reserve Chairman Ben Bernanke. The SEC said its action calls a time-out to aggressive "unbridled" short-selling in financial stocks and said it would consider measures to address short-selling in other publicly traded companies.

The California Public Employees' Retirement System, the nation's largest pension fund, is no longer lending out shares of Goldman Sachs Group Inc. and Morgan Stanley, joining a growing number of public pension funds that are attempting to curb short-selling of two investment banks' stocks.

On Wednesday, New York Sens. Charles Schumer and Hillary Clinton, both Democrats, had appealed to the SEC for a temporary short-selling ban, saying the watchdog agency "has the power to take a temporary but important step to help restore a measure of stability to our financial markets." The SEC on Wednesday had adopted rules it said would provide permanent protections against abusive instances of "naked" short-selling, where sellers don't even borrow the shares before selling them, and then look to cover positions immediately after the sale. Those new rules took effect Thursday, restricting but not banning short-selling by, for example, shortening the required time for short sellers to deliver the stocks underlying the sale transactions.

But some critics assailed those new measures as inadequate to stem the tide of short-selling, and asked for a prohibition on all naked short-selling similar to the SEC's 30-day emergency ban this summer covering the stocks of mortgage finance giants Fannie Mae and Freddie Mac and 17 large investment banks. New York Attorney General Andrew Cuomo said his office is launching an investigation into whether some short sellers engaged in conspiracy or spread rumors and negative information to drive down the share prices of Lehman, American International Group Inc., Goldman Sachs, Morgan Stanley and other firms. Some investors contend that naked short-selling, if left unchecked, would have given hedge funds and other aggressive short sellers an unfair advantage to attack other victims after Lehman Brothers Holdings Inc., which made the biggest bankruptcy filing in U.S. history on Monday.

Merrill Lynch & Co. being bought by Bank of America Corp. in a $50 billion shotgun deal or giant insurer AIG, rescued with an $85 billion cash injection from the Federal Reserve, were said to be among the likely targets. Shares of regional banks and investment firms nationwide continued to be targeted by aggressive short sellers after the SEC's emergency ban took effect in mid-July, according to banking industry representatives.

Secondly, the Bush Administration and most of our politicians could be at least partially to blame for the current housing and banking crises. The Bush administration sketched out a multi-faceted effort on Friday to confront the worst U.S. financial crisis in decades, outlining a program that could cost taxpayers hundreds of billions of dollars to buy up bad mortgages and other toxic debt. President Bush, flanked by Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, acknowledged that the program will put a "significant amount of taxpayers' money on the line."

The administration is asking Congress to give it sweeping new powers to execute the plan. Paulson said it "needs to be big enough to make a real difference and get to the heart of the problem." Paulson gave few details but said he would work through the weekend with leaders of Congress from both parties to flesh out the program, the biggest proposed government intervention in financial markets since the Great Depression. Members of the Senate Banking Committee said they had yet to receive details of the proposal, but were ready to move quickly when they do. Speaking to reporters at the Treasury Department, Paulson said that the new troubled-asset relief program that he wants Congress to enact must be large enough to have the necessary impact while protecting taxpayers as much as possible. "I am convinced that this bold approach will cost American families far less than the alternative -- a continuing series of financial institution failures and frozen credit markets unable to fund economic expansion," Paulson said in a prepared statement. (Amazing how politicians can try to spin situations that look like they are the good guys coming to the rescuers when they were part of the problem.)

Paulson said mortgage giants Fannie Mae and Freddie Mac will step up their purchases of mortgage-backed securities to help provide support to the crippled housing market. He also said the Treasury Department will expand a program, announced earlier this month, to buy mortgage-backed securities, which have been badly hurt by the housing and credit crises. "As we all know, lax lending practices earlier this decade led to irresponsible lending and irresponsible borrowing. This simply put too many families into mortgages they could not afford," Paulson said. (Which our government officials did not regulate!) At a news conference in which he only took three questions, Paulson was asked the approximate dollar size of the government intervention. "We're talking hundreds of billions," he said.

Paulson did not address specifics about the plan to buy back bad debt or whether the government would take a direct stake in troubled banks in exchange for its help.

"These illiquid assets are clogging up our financial system, and undermining the strength of our otherwise sound financial institutions. As a result, Americans' personal savings are threatened, and the ability of consumers and businesses to borrow and finance spending, investment, and job creation has been disrupted," Paulson said. He said that the administration would present Congress with a proposed legislative package and then work with lawmakers "to flesh out the details through the weekend. And we're going to be asking them to take action on legislation next week." "This is what we need to do. Because for some time we've been saying that the root cause of the problems in our economy and our financial system is housing, and until we get stability in the housing market we are not going to get stability in our financial markets," he said.

Earlier, Bush authorized Treasury to tap up to $50 billion from a Depression-era fund to insure the holdings of eligible money market mutual funds. And the Federal Reserve announced it will expand its emergency lending program to help support the $2 trillion in assets of the funds. Both moves are designed to bolster the huge money market mutual fund industry, which has come under stress in recent days.

The Fed said it is expanding its emergency lending efforts to allow commercial banks to finance purchases of asset-backed paper from money market funds, which should help the funds meet demands for redemptions. The Securities and Exchange Commission early Friday imposed a temporary emergency ban on short-selling, which had been contributing to the collapse of stock values of investment and commercial banks.

Congressional leaders said they expected to get the rescue plan Friday and act on it before Congress recesses for the election. So once again with a lot of double talk and deflection of blame, our government is again saddling our country with hundred of billions of dollars of debt on the taxpayers. I guess the big question is when will citizens have had enough?

I guess it does not matter than this plan may not work but still set future generations will trillions of dollars of debt. What has happened to America?

Signing off for now. I hope you had a great day. Wishing you health, hope and happiness.

Big bear hug,

Daddy Dab