Dear Sumit:

Americans are overwhelmingly opposed to any more bailouts of private institutions, including the automakers. Secretary Paulson, Chairman Bernanke and the rest of the Bush administration have been slow and ineffective at implementing their financial rescue plan signed into law October 3. While members of both parties made it clear that approval of the plan was contingent on congressional oversight, there has not been a free flow of information between the administration and Congress.

The continued instability of our financial markets has left many Americans questioning the decisions made by Treasury and doubting that this plan will ultimately succeed. To earn back the trust of Americans, our government must stop spending money we do not have, implement needed reforms and let competition determine success or failure in the market place.

Warmest Regards,
Zach Wamp
Member of Congress

The proposal of the massive bailout package for large corporations back in late September caused massive unrest for most Americans. Many wrote their representatives in such mass numbers that the congressional e-mail system suffered congestion and downtime. I’m assuming the above is a general response to many of Wamp’s constituents who commented on the bill.

It is important to note that although Wamp voted no on the first economic package¹, he did vote yes to the second one². Furthermore, all these packages have done is allow large banks to consume small ones, removing competition. Through the use of TARP funds and tax breaks, large banks can do this at no cost, sometimes even turning a multimillion dollar profit, while small banks are allowed to fail with no possibility of a bailout; effectively letting the Treasury and the Federal Reserve chose which banks live and which ones die³.

National City Bank is the 11th largest bank in the country⁴. This 168 year old Cleveland bank, the largest bank in Ohio, was denied an application for TARP funds, although it is unclear exactly which agency denied their application⁵. They may now have to be consumed by PNC which expects to purchase them for $5 billion.

The treasury has rewritten tax law, without knowledge of Congress, so that PNC would get a $5 billion tax credit for the purchase, essentially allowed them to buy National City for free. In similar fashion earlier this year, Wells Fargo acquired Wachovia for $15 billion, but will receive $20 billion in tax credits causing the merger to result in a $5 billion profit for Wells Fargo³.

¹ Project Vote Smart – Representative Wamp on HR 3997 – First Economic Package

² Project Vote Smart – Representative Wamp on HR 1424 – Second Economic Package

³ Bank Eat Bank: Bailout Encourages Mergers Ivory. American News Project. November 21, 2008.

⁴ Nations Largest Banks Retrieved on December 4, 2008.

⁵ GAO report suggests regulators played biggest role in National City’s demise Koff and Murray. Cleveland.com. December 2, 2008.

During AIG’s bailout, a congressional hearing put AIG executives on the hot seat for being in economic turmoil yet still finding the capital to host a week long conference in southern California where they spent $200,000 for hotel rooms, almost $150,000 for catered banquets, $23,000 at the hotel spa and $1,400 at the hotel salon¹. GM stands in the same boat with their executives flying to DC in their corporate jets at a cost of approximately $15,000 per flight to ask congress to fund their failing industry².

With gas prices starting to hit the ceiling of what consumers are willing to pay, demand for smaller more fuel efficient cars has risen as well as demand for alternative fully electric and hybrid vehicles. In March 2008, the total amount of miles traveled in the US dropped by 4.3%; the first drop in number of miles driven since the early 80’s³. Even though gas prices have dropped considerably during the past few weeks, the vehicle and lifestyle changes made by many Americans is less likely to change.

The small Silicon valley startup Tesla Motors gave hope of restoring viable electric cars with their all electric sports roadster. However even they have hit hard times with a recent layoff cutting over half of the companies staff⁴. GM, Toyota and others gave up on electric vehicles (EVs) in the early part of this decade in what still remains a controversial move⁵. Now GM hopes to reenter the electric market in 2010 with its Chevy Volt. Even with falling gas prices, the emphasis GM and Ford put onto their lines of large trucks and SUVs has cost them significantly. Electric and hybrid vehicles may be too little and too late. Now the big US auto makers are asking the government for a bailout, similar to the package given to the banking industry earlier this fall.

Meanwhile Toyota, BMW, Honda and Volkswagen, although they are by no means immune to the economic downturn, are still keeping above water. These companies have domestic factories and, although they are held by foreign owners, contribute significantly to the American market. The argument that the loss of GM, Ford and Chrysler would bring massive job loss to all the intermediate jobs in the US that depend on these large companies, such as parts manufacturing and sales dealerships, is ridiculous. After all there are other auto makers, and these small companies must adapt to new customers in order to stay viable.

The idea that the auto industry names are too relevant; that they would damage the American psyche if they were to disappear is just as irrelevant an argument. Does anyone remember RCA? What about Zenith? The American industry for consumer grade entertainment electronics is a fraction of what it use to be. Years ago Panasonic and Sony took a market that had been dominated by US industry by offering a higher quality product for a lower price.

If a business can not innovate and prepare for a new era, then that company must be allowed to fail in order to allow for new and innovative ideas to flourish. Propping up massively inefficient companies who have made poor business decisions, such as major investment banks and auto manufactures, will only lead to a stifling of potential new small business, startups and innovators.

Yes there will be economic hardship and turmoil as people shift jobs and are reorganized, but out of such a mess there is the potential for growth. People with massive amounts of stockpiled invested assets may lose those savings, but they’ll see it trickle down into a new economy that is more sustainable. Those without much money may be on a more even playing field. There is no need to redistribute wealth by means of taxes and government mandates when, if allowed to, the market can do so on its own.

Taken to the extreme the government must be prepared to do something if absolutely necessary. President Hoover was ambivalent to he plight of the American people during the great depression believing that market forces would eventually right everything. But we are in a dramatically different time and we are nowhere near the depravity of the great depression. However if we continue to prop up bad debt, inefficient industry and the various other old rotting branches on a tree that is otherwise healthy at its core, those branches: that bad industry, will eventually collapse the economy under its own weight and take most of the middle class with it.

¹ Flogging of AIG Execs American News Project. October 7, 2008.

² Auto execs fly private jets to beg for $25B bailout Puzzanghera and Simon. Chicago Tribune. November 20, 2008.

³ Traffic Volume Trends US Department of Transportation. March 2008.

⁴ Credit Crunch Slowing Electric Cars Kestenbaum. NPR. November 3, 2008.

⁵ Who Killed the Electric Car (Film 2006)

What is the population Over 18?

To find this we need to use the data from previous united states census to calculate the population % of the past.

We can use this data to estimate the % of population over and/or under the age of 18

% of the population under 18 has remained almost the same, so lets assume the current population % under 18 is at the 2000 level

Estimate Illegal Population

Let’s assume the illegal population distribution by age is the same as found in the legal population

Overall legal population of the United states by age demographic

Total Cost of the Bailout per Citizen

Sources

• Note for source #2, this number is based on the results of projected growth statistics. Please follow the link to verify if desired

Earlier this week, Bush made an address to the nation concerning the economy.

“…We are in the midst of a serious financial crisis and the federal government is responding with decisive action…our entire economy is in danger. So I propose that the Federal Government reduce the risk posed by these troubled assets and supply urgency needed money so that banks and other financial institutions can avoid collapse and resume lending…” -President Bush’s national address concerning the economic bailout¹

The speech was straight forward, well rehearsed and ensured the American people about the realities of a crisis that must be avoided and the steps that Bush was taking to correct it. It was not entirely unlike the direct voice of absolute certainty Bush used when informing the American people that Saddam Hussein had weapons of mass destruction and going to war with Iraq.

“My fellow citizens. At this hour, American and Coalition forces are in the early stages of military operations to disarm Iraq, to free its people and to defend the world from great danger…” —President Bush Address to the Nation² (March 19, 2003)

And also, not too different than Clinton’s speech to the nation about Iraq:

“..Saddam Hussein must not be allowed to threaten his neighbors or the world with nuclear arms, poisonous gas or biological weapons…” -President Clinton’s Address to the Nation³ (December 16, 1998)

JPMorganChase is credited as saving both Bear Stearns and the more recent Washington Mutual, both firms which it recent bought out. And although many credit JPMorganChase for taking these companies at a possible loss to itself, in reality it has grown its own company with two predominant and well known brands as well as accumulating all their accounts both good and bad.

During the 1920s, J.P. Morgan himself was a ruthless businessman whose stake in the banking industry was so large that mere rumors of the insolvency of competing banks in New York sent the market into a tumble. Morgan knew this would cause panic and lead the people to withdraw funds causing other banks to call in their loans, which in turn caused people to sell their stocks and property, sending the market into a downward spiral⁴.

“Oakly Thorne, the president of that particular trust company, testified later before a congressional committee that his bank had been subjected to only moderate withdrawals…that he had not applied for help and that it was the (Morgan) ‘sore point’ statement alone that had caused the run on his bank. From this evidence, plus other fragments of other supposedly pertinent evidence, certain chroniclers have come to the ingenious conclusion that the Morgan interests took advantage of the unsettled conditions during the autumn of 1907 to preciitate the panic, guiding it slowly as it progressed so that it would kill off rival banks and consolidate the pre-eminence of the banks within the Morgan orbit⁵.” -Frederick Lewis Allen. Life Magazine. 1949.

Today J.P. Morgan is no more the savior of the banking industry than it was in the 1920s. It has essentially used its influence to buy up massive competitors and earn a place as a massive megabank. The two remaining large investment banks Goldman Sachs and Morgan Stanley have sought to make the transition to becoming holding companies restricting them from riskier ventures and placing them under more congressional oversight⁶.

“I believe that banking institutions are more dangerous to our liberties than standing armies. 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 [the banks] 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

Turning to the campaign trail, McCain decided to suspend his campaign in order to deal with the economic crisis and called on Obama to do the same. This is of course only days before the first presidential debate with an election looming just over a month away. Not only was the notion of suspending his campaign ridiculous, as if McCain’s full attention could defuse the economic situation, but the suggestion also seemed to indicate that McCain also wanted to avoid the upcoming debate; possibly out of fear.

“…This is exactly the time when the American people need to hear from the person who in approximately 40 days will be responsible for dealing with this mess…[7]” -Barack Obama

I look forward to the debates, and all though I’m sure a focus will be on the current economic conditions, I do not think they will address the real issues with our current financial system. The economic problems are not due to the failure of individual banking CEOs and board members to anticipate future economic conditions and to temper their risks. It is a deeper problem with the Federal Reserve system itself that is responsible for the predatory lending to banking entities that pushed the market into housing credit that was over saturated and unsustainable.

It is important to note that these bad debts are not being bought directly by the Federal Government but the Federal Reserve Bank. The Federal Reserve is not a public entity but a private one with officials appointed by the President. It is about as Federal as Federal Express. The total federal tax revenue from 2006 including both corporate and individual tax was $2.4 trillion⁸. By giving the Federal Reserve authority over $700 billion, we are giving nearly 30% of US tax revenue to a fully private yet government appointed entity; a decision that will put the Federal Reserve in oversight over several trillions of dollars in assets it has bought from Freddy Mac, Fannie May and AIG and assets it will buy from other failing banks.

“Permit me to issue and control the money of a nation, and I care not who makes its laws…” -Mayer Anselm Rothschild

It is important to note that the future of the economy will not be built on whether or not the industries the American people are familiar with will survive or the easy and difficulty in acquiring credit, but it will be in the value of the dollar in the context of a global economy. The dollar is a currency like so many others around the world that is not backed by anything except the trust in the senate and the believe that the dollar has worth. It is not back by gold or silver and in essence it has no real value.

If the world ever fails its trust in the US dollar, if the western world abandons faith in their individual countries’ currencies and if the Federal Reserve holds the financial assets of major corporate entities which are paid for by the debt of the American taxpayer, we will essentially be on the path to communism. And with that communism comes a slavery to debt and to fascism.

“Fascism should more properly be called corporatism because it is the merger of state and corporate power.” — Benito Mussolini

¹ Bush: US in Crisis CNN. September 24, 2008

² President Bush Address to the Nation March 19, 2003

³ President Clinton’s Address to the Nation December 16, 1998

⁴ Zeitgeist (Film 2007)

⁵ None Dare Call it Conspiracy Allen. Concord Press. 1971

⁶ Goldman, Morgan to become holding companies Schroeder. Marker Watch. September 21, 2008.

⁷ Obama rejects McCain call to delay debate MSNBC. September 24, 2008.

⁸ Memo to the Congressional Budget Office Orszag. May 18, 2007.