Lesson's Not Learned -- FDR had the solution. Can our Congress Remember?

Remember the great credit crunch of the 1980's? That was when we in the farm states got a really bad taste of our own Depression. It was called the Farm Crisis. The scars of that crisis still remain on our land ... on people's faces and along the roadsides where the empty barns and empty farmsteads still tell the story.

You may also remember the Great Depression? That was an even bigger credit crunch. Whether the depression or the 1980's credit crunch, both bear great lessons for Congress, the President and Treasury Secretary Paulson.

The lesson we were supposed to have learned as Franklin Delano Roosevelt (FDR) pulled our country out of the Great Depression has been described in detail by South Carolina candidate for Congress (1st CD) Linda Ketner on her website. Here's how she explains the problem ... a problem that is also happening now:

"To understand the cause of this problem, we have to go back to the years leading up to the Great Depression of 1929, when: There were no walls between banks and the stock market. Credit was cheap and people were allowed to borrow money from the banks and then risk it in the stock market – and they did. Everyday people were playing the stock market and even banks were doing it with depositors’ money. It was the roaring 20’s and people were getting rich right and left. Stocks began to fall in October ‘29, banks began to call in loans because the value of the stocks dropped and no longer covered the loan amount. People couldn’t make payments so they defaulted on the loans. Because banks had been borrowing money to invest as well, their portfolio plummeted. When people came to get their money out of the banks (i.e., when there was a run on the banks), they didn’t have the cash and closed. Does any of this sound familiar?

"In 1933, when Franklin Roosevelt was elected President, he said that in order to protect ourselves “against money lenders and unchecked and unregulated Wall Street gamblers” – and to prevent the possibility of another depression, we needed to supervise and separate:

1. Banks
2. Securities
   
3. Companies and Insurance Companies.

"The Glass Stegall Act was the response and there was a clear separation of: BANKS, which were to be the guardians of public money. Low risk. Low reward. Safe. Federally insured with taxpayers dollars. And banks could not risk other people’s money in the stock market.SECURITIES for those who wanted to speculate in the market, but could not do so with other people’s money. Glass Stegall said they needed transparency, anti-trust laws, and accounting standards so that a Depression would never happen again.INSURANCE companies were the third arm that Glass Stegall separated to make sure a bank failure, or stock drop, would never risk the public’s health and property.

"Does any of this sound familiar?

"Through Democrat and Republican administrations, these protections endured (despite chipping away which started in the 80’s), until 1999 when the walls, boundaries, and safeguards came down with the Gramm, Leach, Blilly or Banking Modernization Act. "Soon these institutions became self-regulating.

"Citibank bought Travelers Insurance and Smith Barney and became Citigroup. J.P. Morgan bought Chase Manhattan. BOA bought Merrill Lynch just recently and, because they were deregulated and self-regulated, there was no supervision of what they were doing. What they were doing was making wild loans to people who had no business getting credit - with depositors’ money. Subprime loans. All the time shielding from view the transaction trail by bundling loans and selling them off in pieces and parts to speculators.

"When the first round of subprime loans and mortgages – the high risk mortgages – adjusted, the trouble began. Defaults began. Some people didn’t understand the loan agreements they signed in the first place. Some people were borrowing cheap money and flipping houses as they watched the housing bubble grow bigger and bigger. Credit card companies were hiding extraordinary charges from view that made predatory lenders look like pikers."

"But the bubble burst, as bubbles always do, and the banks didn’t get paid on their loans, their investments have gone south, and they are filing for bankruptcy.This is obviously very serious. Just as in 1929, there is nothing really to stop the spiral downward except the response time and creative problem-solving of the government now."

Ketner continues, laying out a series of solutions -- some long term and some short term -- on her blog which can be found at Economy --- Linda Ketner for Congress.

Well, Roosevelt isn't here. We wish he were, but we are where we are with our leaders working hard to "stop the spiral downward" as they try to move fast and be creative to solve the problems we've got now. See our next blog for more on this continuing story. It seems that some members of Congress, lead by Rep. Eric Cantor (R VA7), are playing political games.

Tax Cuts -- Who Really Gets the Breaks

Everybody is worried about taxes so today, we feature a series of "just the facts" items about taxes -- see column on right side of this blog which gives detail on John's McCain's original verbatim answer regarding his commitment to keep the Bush Tax Cuts, which are set to expire in 2010.

The Congressional Budget Office (CBO) study was done when the Majority was held by the Republicans. Other conservative sources agree, e.g.,

• The Wall Street Journal (reporter Martin Vaughan) wrote that “an apt description” for McCain’s tax proposals would be to say “that the wealthy would benefit most.”
• The Cato Institute’s Chris Edwards, director of tax policy studies points out, McCain’s proposals are aimed at the wealthy “even more so than Bush’s'.".... “McCain’s proposals this year are consistently pretty supply-side, even more so than Bush’s were.”
• Earlier this year, the non-partisan Tax Policy Center found that McCain’s economic plan “would primarily benefit those with very high incomes.” In fact, under McCain’s plan, John and Cindy McCain would get a $300,000 tax break while middle class Americans would save only $319. The McCains save $60,016 more under McCain’s tax plan than under Bush’s.

In their more candid moments, McCain’s supporters admit that he is doubling down on Bush’s tax policies. In May, House Minority Whip Roy Blunt (R-MO) said that McCain’s “tax policies” would “be in effect a third Bush term.” Sen. Lindsey Graham (R-SC) told ABC News in June that McCain’s policies would “absolutely” be an “extension” and “enhancement” of Bush’s.

McCain Will Show Up

Breaking News ... at noon today, McCain announced he would debate tonight at Ol' Miss. And soon afterwards, McCain staff also admitted McCain spent hours in debate prep last night.

So ... we're glad that Mississippi gets its debate, and after all the preparations ... and all the theatrics about McCain closing down his campaign, we can hardly wait to watch both McCain and Obama.

The "Wall Street Journal" Calls McCain Actions "Mystifying"

"Mystifying" ... reckless ... irresponsible ... undependable ... so many adjectives ... so little time! In our book, any of these words will do to describe John's McCain's diversionary tactic. The Wall Street Journal's 9/25/08 coverage said this:

"Last we checked, the President of the United States was still George W. Bush, the Secretary of the Treasury was still Henry Paulson, the Chairman of the Federal Reserve was still Ben Bernanke, and Congress still had 533 members not running for President who are at least nominally competent to debate and pass legislation.

"So count us as mystified by Senator John McCain's decision yesterday to suspend his campaign and call for a postponement in Friday's first Presidential debate so that he and Barack Obama can work out a consensus bill to stabilize the financial system. This is supposed to be evidence of leadership?"

Just like The Wall Street Journal, we checked too ... and surprise ... surprise (evidently to Mr. McCain), George W. Bush is still President, Nancy Pelosi is still speaker ... all the leadership remains the same. Committee's haven't changed and although not happy about having to fix the problem, our Congressional leadership, i.e., our governing system, was working just like it is supposed to, with leaders both diligently and responsibly working together to fix the Wall Street "melt-down" that bears the risk of drying up credit for everyone.

In short and very simple because space and time is limited here, Secretary of the Treasury Paulson's original plan was three pages ... very simple. It basically said Treasury needs cash to shore up big bank/big investment companies who are failing. $700 Billion, more than the Iraq War & occupation together has cost to date has cost, was the ask.

• Paulson was clear and straightforward about the need and Congress realized it had to act.
• What was missing from the Paulson proposal was protections for the taxpayers.
• Barack Obama called for protections as did Democrats ... pay back to the taxpayers once the companies get stabilized; offer specific assistance to help home owners get their mortgages under control; eliminate the huge golden parachutes Wall Street "big boys" were going to get as their companies went down, and; lock in oversight to make sure all this money is used carefully and legally.
  
• The Congress -- it's leadership and key committee members -- acted. Democrats lead the way to make sure that the money wouldn't be used lightly to line the wrong people's pockets and Republicans were carefully agreeing.

At this point, according to McCain's own statements, he didn't know as as much about the economy as he should, but he thought the economy was strong, later explaining what he meant by strong, i.e., "fundamentals" but not jobs (????) which made no sense at all. Two days ago he admitted that he had not even read the Paulson proposal, and yesterday, there he was mucking things up in Washington.

Readers will remember the farm credit crisis of the 1980's, a crisis that no one in Washington acted responsibly on and for those of us who come from, or remain in, production agriculture, many of us still bear the scars from plunging land values, creditors working to call loans on all too often people that still had equity but were struggling to pay ... and people losing their land.

I think we can agree that our leadership -- Bush is still president and the leaders in Congress really are working diligently to make sure can't let that our country doesn't fail -- either in farm country or worse yet, all across this land -- again.

So what's really going on? The Wall Street Journal also said this,

"... We also understand Mr. McCain's desire to further dress his campaign in "Country First" gilding, as if patriotism and consensus are one and the same, or that getting something done is more important than getting it right."

All this "dancing around" of McCain's is more proof that McCain's judgement is less than solid ... scary, actually.

1. McCain picks Sarah Palin as VP when he barely knows her and even Laura Bush has called her without experience in foreign policy ... no foreign policy experience, can barely pronounce the names of international allies and enemies .. when we are in two wars, and the odds say that McCain himself with his four cancers and his aging issues will likely die in office.
2. McCain admits he doesn't understand the economy ... plays a whole series of political tricks at this very risky time for our whole country.
3. ?????? too many to name here, but skipping the debate surely makes the list.
   

?? This week's nomination for "mystifying" for #3 ... he's afraid to debate Obama and doing all this play-acting about being in charge to avoid having to debate international policy and how these policies are affecting our national economy.

Hello??? McCain is NOT "in charge" ... and NOT "elected" ... and may never be. We the American people deserve to hear what both Barack Obama and John McCain have to say in detail about this mess.

Wondering Why Home Owners with Dicey Mortgages Should Get Some Assistance, Too?

In short, here's the deal. First, skip over the home owner who is losing his/her house and whether they made a bad business decision. Instead, put your mind on the bigger picture, i.e., ask youself what happens to the values of your own house and other supposedly non-affected owners?

Now, you're pointed in the right direction because the danger in not bailing out troubled home owners has a direct effect on all their neighbor's values. The bottom line -- a surplus of homes coming on the market all at once drags down everyone's values. Worse yet, should some of these emergency "for sales" not get sold, the homes sit empty. No one mows the yard ... sometimes someone even breaks in ... and the end result is that values go down further. Buyers get nervous and don't want to choose a neighborhood where things look like they're on the down-hill.

Of course, it wouldn't be fair to just give a tax-payer supported break to either the in-trouble home owner or his crappy lender, so we hope you'll support things that can protect tax-payers across the board, e.g.,

1. For home owners in trouble, support for a lower interest rate but also a commitment to pay back the assistance when the home is sold some years later.
2. For the big firms that made the bad business decisions, (1) taking federal assistance should equally require a promise for pay-back, just like we would support for the homeowners caught in the rising interest rate trap, and (2) for the executives that already have been paid the big bucks, let's make sure those golden parachutes are prohibited ... or failing that, taxed at 90%.
   

Bailout Proposal Meets Bipartisan Outrage

Turmoil in the markets combined with the Bush Administration's panicked request for $700 Billion -- more than the war in Iraq has cost to date, is having an effect on voter opinion. Our lead story in our "changing every day" news service sheds the spotlight on The Washington Post's 9/24 story "Economic Fears Give Obama Clear Lead Over McCain in Poll."

We recommend additional reading:

• "Bailout Proposal Meets Bipartisan Outrage", by Lori Montgomery, Paul Kane and Neil Irwin, Washington Post
• "Alternative Solutions Diverge From Administration's Approach", by Anthony Faila and David Cho, Washington Post
• "The Words Left Unspoken in the Bailout Debate," by Steve Pearlstein, Washington Post

When you look at "Alternative Solutions ... ", pay close attention to whether home owners are going to get assistance ... or whether the big bucks will only go to the big gambling mortage investment companies, and also ask yourself whether tax papers need to guarantee the golden parachutes of failing company executives. In some cases, those parachutes are worth as much as $2.5 billion ... which seems quite a bit to us ... especially when in the words of Steve Pearlstein, none of these high rollers have let the words "I'm sorry" cross their lips.

"Once Elected, Palin Hired Friends and Fired Foes"

The real Sarah Palin is unveiled in the 9/13/08 issue of the New York Times. Written by Jo Becker, Peter S. Goodman and Michael Powell, we challenge you to read this story.

If in fact, you read only one thing today, read this one.

"Once Elected, Palin Hired Friends and Fired Foes"

Notice how she embraces secrecy.

Didn't eight years of secrecy from W and Cheney do enough damage?

Weren't Cheney's secret "oil & gas" meetings? ... and the selling of the Iraq war (when they knew their were NO weapons of mass distruction? ... and the politization of the Justice Department? ... and _________(fill in the blanks) enough?

Oooooo! Ugly Question

Lots of people have great expectations for this election, but one central question that is most difficult for the pundants to predict is, "Could Obama's inability to pull away from John McCain really come down to his skin color?"

For the record ... here at My Rural America, we believe rural citizens should make their decisions on facts that benefit rural America and ALL of America's economy, national security and individual freedoms. Oh yes!! ... and add health care and educational opportunity to that list, too.

But the question that is asked in, "What Small Town America is Saying About Obama" is whether this election is only going to be about race. The story, written by Dan Hoyle for Salon.com, is a complicated one and we urge you to read it. Overall, the way Hoyle describes the dilemna is,

"Beyond Obama's race, what I found was a more complicated set of concerns -- whether accurately informed or not -- about his religious faith, values and cultural and educational background. That is, many of these white rural voters expressed a discomfort that may have more to do with unfamiliarity about the type of person Barack Obama is, rather than with direct concerns about his race." Read more here.

Does Being Able to Dress a Moose Mean You're a Populist? Hightower Says NO!

Jim Hightower, former Texas Rail Commissioner, prolific author and consistent radio commentator writes,

"Living in a small town and being able to field dress a moose does not make Palin a populist, no matter how much pundits want to pretend it does."

Read more of Hightower's wisdom on Alternet at "Sarah Palin's Faux Populism."

It's a fact that faux populism is certainly Sarah's signature identity. What also a fact is how Sarah's been talking down to those of us who live, treasure or work for rural America. It's also outrageous -- What's turned out to be her assumption that we'll just all sit back and believe her no matter what she says. Does she think rural Americans can't read? or just that we're really, really gullible?

Over time, we'll share more examples of her less than factual nonsense, but for today, we're limiting ourselves to just one example, i.e., she started bragging in St.Paul and has not quit that she was "against that bridge to nowhere" when the reality is she was for the "bridge to nowhere" before she was against it.

"AG Leaders Pan GOP Ethanol Stance"

Months ago in Iowa, it was John McCain who said NO to the Farm Bill, adding his voice to Bush's Farm Bill VETO. Their's was a big NO to the hope that our country could become energy independent.

Now the Republican Platform has confirmed McCain's big NO to ethanol. This platform rejection is a really BIG NO since once again it confirms McCain's opposition to our country's hopes of becoming energy independent.

Then, to add insult to injury, McCain anointed Sarah Palin, new Governor of Alaska, as his VP choice, and Sarah immediately proclaimed herself expert on energy policy, but this self-proclaimed expertise can only be considered true if "energy" is defined as "oil and gas" ... and even then, there's little evidence that her expertise is actually backed by legitimate science. Forget ethanol. Forget solar. Forget wind. Forget polar bears. Forget global warming. Just plain forget, since essentially everything we know must be forgotten except for VP Dick Cheney's early-in-the-Bush-Administration secret meeting with the oil industry. I'm not sure we know yet the names of all the oil and gas industry folks who planned and plotted, but we certainly know the results, i.e., oil industry profits were the name of the game, with the result that every time we fill up our car's gas tank or get the bill for home heating, we pay more ... and more ... and more.

Of course, Sarah has proclaimed herself a budget expert, too ... since Alaska is about the only state whose budget has gotten stronger in these days of escalating energy prices.

Jerry Hagstrom, DTN's political correspondent has written a very thoughtful piece about how even the most dedicated farm leaders who have been traditionally Republican are taking the news that once again, the conservative back door has slammed shut on the hopes of Americans who previously were still loyal to the conservatives. See Hagstrom's story at "Leaders Weigh Changes in Republican Ethanol Platform".