Selling our independence one dollar at a time

"The rich rules over the poor, And the borrower becomes the lender's slave."
- Proverbs 22:7 New American Standard Bible

On the night of July 12, Fannie Mae Chief Executive Officer Daniel Mudd was having a quiet night with his wife and a glass of wine when his phone rang. The person calling was Treasury Secretary Henry Paulson and he was very worried.
Fannie Mae, the biggest mortgage finance company in the history of the world, was in trouble. It's stock prices had dropped 45% since the start of the year. It's borrowing costs were rising as creditors became worried about the chances of Fannie Mae defaulting on its debt. "We're trying to solve a crisis of confidence," Paulson told Mudd after he explained the taxpayer bailout designed by the Bush Administration. "Would this do it?"

It seems that Paulson's boss had called him just a few hours earlier and explained in no uncertain terms that America was in for an economic nightmare if the American taxpayer didn't backstop Fannie Mae.

The problem was his boss in this case wasn't President Bush.
It was China.

Investors in Asia, the biggest foreign owners of Fannie Mae's $3 trillion of bonds, were asking the Treasury to bolster the government- sponsored company and its smaller competitor, Freddie Mac, said three people with knowledge of the talks.

The next afternoon, before financial markets opened Monday in Asia, Paulson announced the rescue plan, saying he would seek authority to buy unlimited equity stakes in the companies and their bonds if needed, while the Federal Reserve would lend directly to Fannie and Freddie. Congress included the proposals in a broader housing bill that President George W. Bush signed into law last week.

Freddie and Fannie rely on foreign institutions. Investors and central banks outside the U.S. own about $1.3 trillion of Fannie and Freddie's corporate and mortgage bonds, according to the Treasury. Chinese institutions are the biggest holders in Asia.

For some reason most Americans don't seem to care that 10% of our GDP has just been pledged in a bailout (that we can't possibly afford) that disproportionately benefits wealthy foreign investors. I honestly can't fathom the reason for this indifference, but that's not the point of this diary.
If the American public can't shake itself out of this malaise over its taxpayer money being directly funneled overseas, then perhaps the American public can find in itself a reason to care that the most important domestic legislation today is being directed by foreign governments. To put it another way, the politicians that you vote for are becoming puppets of foreign governments like China.

Paulson had visited China just a few months earlier and failed to win any concessions from China concerning their currency practices. He also caved in to China last December.

The reason I point this out is because Paulson met with the Chinese President just two weeks after the Bear Stearns collapse.
A month later Paulson was on his way to the middle east.

United States Treasury Secretary Henry Paulson will fly to the UAE and other Gulf states this week to reassure regional governments on their funds in the US following recent furore about the role of their investments.

At the same time that America was entering the worst financial crisis since the Great Depression, our Treasury Secretary, instead of tending to the domestic upheaval, was jet-setting around the world like an international salesman.

To a large extent, that is exactly what the Treasury Department has become - an agency to sell American debt to foreigners.

When they no longer want our debt, they will come for our assets.
Unfortunately, America doesn't have many companies worth purchasing. So in order to maintain our unsustainable lifestyles of excess consumption with no savings, we are selling our infrastructure. Since much of our infrastructure is in poor condition, this usually means selling our taxpayer-built highways to foreign investors at rock-bottom prices.

Chicago built a toll-way; it brought $1.83 billion, leased for 99 years to a foreign financial group.

Indiana built a toll-way; it brought $3.85 billion, leased for 75 years to the same foreign financial group.

Texas wants to build a toll-way; the offer is $7.2 billion for 50 years.

Governments are going berserk looking for highways, bridges, and other municipally-owned revenue-producing infrastructure that may be leased to private operators for big bucks up front. Government officials praise the idea as the perfect answer to budget shortfalls. The idea is sort of like manna from heaven for the current officials; they get tons of cash to spend, but will be long gone when the people who are paying the bill begin to want accountability from their government officials.

This idea of selling off (long-term leasing) of American infrastructure is fundamentally flawed.

It's fundamentally flawed for a 1st-world nation. For a 3rd-world nation selling off infrastructure for pennies on the dollar to foreigners makes perfect sense. When foreigners own everything worth owning then they will also call all the shots. Your vote will mean nothing.

Soon the maps of Latin America will start at the Canadian border.

Comments

yup, wealth transfer

What's even more frightening to me is it appears we have simply transferred jobs, middle class and wealth to China...at the expensive of the US middle class and workers.

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Indiana Toll road

Cintra promplty doubled the tolls on the tollway, and has cut maintenance, and so far none of the promised improvements have occured. Truckers and drivers are increasing using the state hiways and rural rotues to avoid the tolls.

Meanwhile, Indiana's Governer, Bush crony Mitch daniels is claming to have balanced the state budget - he did so with the toll road money - while our schools remain underfunded, roads and bridges in sorry shape and mfg jobs leaving in droves

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Toll road

While that sale is more visible than others. I think that's what people are screaming about in terms of wanting something done, yet the problem is the people in Congress willing to take action do not have a majority.

The way I see it is people want dramatic policy change and legislation but after the primaries and so on, the choices end up being Tweedledum and Tweedledee, neither candidate has overall good policy positions, or let's say a candidate in the primary did have some good policy positions, but in terms of overall character, well, they might be kind of nuts.

People don't seem to be voting in primaries on policy positions either. Take the GOP primary, McCain I know has so many positions Republicans hate, yet they voted for him and not someone say Duncan Hunter, who I believe had most of the positions they are screaming about.

So, that's another issue to get people to vote on policy positions instead of personalities.

So, we're in this corporate lock, this lobbyists stranglehold on even our choices in elections.

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US Dept of Transportation Policy

Here is a link to an article I had saved re this issue.  The article itself is a bit wishy washy,  but the "money line" that makes it worthwile is that critics of Transportation secretary Mary Peters call her policy of selling off assets  "a bizarre, neo-con view of transportation"

www.governing.com/articles/0805potomac.htm

BTW - just figured out how to work the rich text editor 

 

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thx

hey, did you see the button on how to make a link? Or the way to make one in the user guide? ;) hint hint.

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We've been here before...

.....luckily we got Clinton and he was able to reverse the slide into debt.

I welcome the toll road sell off because very soon folks pick up on what's going on and demand a change.

The amounts of debt we are looking at can be dealt with by changing the idiotic tax structure we have which allows the folks at the fat end of the L-curve to just sit on their money. That has to be changed and soon. FDR and Clinton both demonstrated that higher taxes increase productivity. We need to take charge of the dialogue and show the citizenry that the 'conservative' economic theorists are wrong. That their ideas are at the root of the economic problems we face and must be totally rejected as the basis for economic policy. If folks really understood the damage to our economy that Friedman and 'The Maestro' have caused they'd lynch the one still alive and piss on the other's grave.

Unfortunately, unless the Dem party wakes up and throws the idiot Obama under the bus and puts Clinton in the WH we are going to be in serious trouble after four more years of McSame.

We bloggers can spread the word: 'Everything the Republicans, and Obama, know about economics is....

....wrong.

Let us do so.

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'When you see a rattlesnake poised to strike, you do not wait until he has struck to crush him.'

The People's policy

I think we need to push hard for reality based facts and one thing that really isn't discussed much is policy recommendations.

For example, I just ripped in a pretty vague way, the Democratic Platform draft, but what specifics do we want to see in their place?

I have an obvious principle, which is US Citizens, US workers first in all policy. That isn't an only, that's simply citizens of a nation-state and their jobs, this labor market should make their citizens the top priority in terms of income, jobs, careers and so on.

I also say that because this is the policy of pretty much other nation-states.

The concept translates into a host of details. For example, make layoffs very very hard for companies to do, priority US citizens. The practice of turning the workers into disposable commodities, where corporations can just do layoffs to help their bottom line, as if this is an elastic cost, should be highly discouraged through economic incentives.

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Four Policy Possibilities to End the Trade BloodBath

Status Quo with Failed Bilateral Trade Pacts.
All of our 3Coms become Chicoms.
In spite of the recession and slight increases in exports, the size of the trade deficit persists. We heard this in 2001 and 1990: exports will grow us out of the trade deficit. It has not and will not happen.

Get Sensible like the EU and get Tariffs.
The very first act of the U.S. Congress in 1789 was a tariff on 60 manufactured goods made in the USA. Trade protection lasted until the 1970s and contributed to economic preeminence. Just look at the growth of the external debt starting with the earliest WTO days in the mid 70s. The pattern is clear. Put tariffs on the ChiComs.

Some help for the what is left of the Industrial Base.
Asset loans for plant and equipment and a return of the Investment Tax Credit on domestically located plants. Banks and Wall Street can't help themselves now, never mind manufacturing. Private equity is the only game and way too scarce.

The Nuclear Option.
Like actual nukes, there are the Dr. Strangeloves out there.
One of them one day, one is going to advocate or conspire to
to shutdown the air supply of Asia trade: U.S. Securities held by the Bank of China. This is not very far-fetched.

All U.S. Securites are held in book form now. Much of that
debt can be canceled by keystrokes. No less than Ole Hickory reneged on U.S. debt with Britain in the 1830s. Don't say impossible.

Tariffs and subsidies look more sensible every day.

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Burton Leed

tariffs

Firstly, tariffs will be deemed illegal by the WTO.

Secondly they are fairly harsh in terms of tunings.

Check out a VAT and a BAT tax, which are legal under the WTO.

Then, check out the Horizon project. I wrote an overview on some of their policy recommendations and they cover trade extensively.

I think people need to learn about options, recommendations from experts who really are blasting what is going on, along with you and I.

Tariffs have a very bad connotation and I think people screaming for tariffs are possibly simply not aware of all of these other tools.

In other words, there are many ways to skin a cat but some are much more acceptable than others.

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