So where does the Godfather and The Slow Bleed stand on all of this? 

Well, neither party is specifically to blame. That is not to say neither are guilty, frankly, we all are. Some of us saw it coming and people that could have acted to avoid it didn’t. 
Here is my top 5 list of what went wrong… 

1. Bush administration failed to provide needed oversight. Argue as much as you want about who controlled the House or the Senate, the buck stops at the Presidency. We want to hold all CEO’s accountable for their companies? It starts at the top here as well. 

2. Mark-to-Market accounting. An obscure accounting rule allowing companies to book revenue that has not been realized assuming it will be taken to market at a given price. That works great unless the market changes by the time you get there. 

3. Home buyers who purchased homes they could not afford. Buyers that relied on the hopes the market would go up and they could sell for a profit. If you couldn’t afford the normal payments (amortized) an interest-only loan was not the answer. 

4. Wall Street Companies. They know better than anyone the market will go up and down. CEO’s acted like kids in candy store and forgot the basic rules of gravity. Personal greed outweighed good business judgment. 

5. The aggressive lowering of rates. After the dot-com crash the Federal Reserve aggressively lowered rates. Too aggressively and for too long. At some point the market got to control the rate drop instead of the Federal Reserve. 

I could go on and on but wanted to limit it to my top five. Anything you want to add to the list?

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If you remember, the government agreed in September to give $85 billion to faltering AIG to avoid a collapse in the economy (mmmm, how did that work out for you?).

AIG was so happy with the bailout that saved their company and their jobs they continued on with a $440,000 posh California retreat just days after the bailout. 

But wait, there is more. Buried in the news… 

AIG is saying they need more money. And the government, in such a giving mood right now, gave it to them. How much you ask? 

$37.8 billion. 

Yes, that is on top of the $85 billion in September. 

“The bottom line is, they need more liquidity than they thought,” said Mark Lane, an analyst for William Balir & Co. 

You just can’t make this S#%@ up! When will the government learn their lesson? When will someone make some solid decisions? Just say “no!” – even a four-year-old knows that! 

Don’t get me wrong; I don’t blame the government – exclusively – for the economic downturn. Frankly, we are all to blame. We, as a country, have been living in excess and mixed up priorities for some time. 

What we do going forward is key to our future and I have yet to see a fundamentally sound decision being made in the last month. I mentioned in my first AIG post that they would most likely need more money and here we are. Matter of fact, I am going to say it again; I highly suspect this STILL will not be the end of it. Companies like this seem to always keep coming back to the government trough (I hope I am wrong). 

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The Times Square sign was originally put up by Manhattan developer Seymour Durst in 1989 to draw attention to the growing debt. The amount then? $2.7 trillion.

As we have now surpassed $10 trillion, the “$” had to be changed to a “1.” They plan on updating the sign next year to add two more digits.

At the rate we are going, are you sure we only need to add two more digits?

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www.youtube.com/watch?v=-DJIVQIRIHs

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It failed in the House on Monday so today the Senate plans to try and rescue the $700 billion dollar bailout. Why don’t you try and rescue Scott Baio’s career while you are at it – it just isn’t gonna happen. 

The bailout is getting messier by the minute. The Senate thinks by throwing in a few “sweeteners” the Republicans and Democrats who were against the plan will now throw all in. 

So what $@&! is getting thrown in? 

Increase the FDIC insurance cap from $100,000 to $250,000. Forgive me if I don’t bother scouring documents to verify this…but I am going to guess that most people don’t have $10,000 cash in the bank let alone over the current $100,000 FDIC insurance level. So who would that help…wait a minute…maybe some fat cat lobbyists or political officials worried about the economy?! 

Additionally in the “sweeteners” is relief from the Alternative Minimum Tax and Renewable Energy Incentives. 

Here is my favorite part… 

Also included? The “Mental Health Parity” provision, which would require health insurance companies to cover mental illness. Yea, I guess some high level executives are a little depressed right now. 

The vote won’t happen until “Sundown” in observance of Rash Hashanah – I have to say, I hope this is the second knockout of the week. It needs to be done right…and without all this other crud thrown in. 

Update: Well, it passed. Want to see it before it goes back to the House? And you have got to check out the “Pork Additives!” 

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Taking inspiration from Renaissance Guy I decided to make my own list of things the government can buy from me. Obviously they are in a big spending mood lately, with the bailout and the new fiscal year budget, so some of my stuff must be in high demand. 

Here is what I am willing to sell to the Government during this bailout… 

• Two broken PC Computers 

• One-half box of Lucky Charms 

• 210 Data CD’s (don’t know what is on them) 

• 43 VHS Tapes (including Howard the Duck) 

• Original Sony Walkman (broken) 

• One-half bar of Toblerone 

• One Franklin Mint Plate (faded) 

• 3 Dozen Golf Balls 

• One-Half Box of Lego’s 

• One Black Jump Suit (please don’t ask) 

• 2 packs of gum(?) 

• One Scooby Do Lunch Box (should get a good price for this) 

• Something in the Tupperware in the Fridge 

• Two Puzzles (pieces missing) 

• Two Dilbert Calendars 

• One Paintball Gun 

• Six Old Cell Phones 

• Three “Idiots Guide to…” Books (you might need these in Washington).

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You may have missed it and that was probably intentional – it was buried in most newspapers on Sunday. Late Saturday the Senate passed (78-12) a $634 billion dollar measure to keep the government going through the next budget year (which begins on Wednesday). 

Everyone is so distracted by the $700 billion bailout proposal (expected to pass today) no one really noticed the government was out of money (so much in fact that we had to borrow $500 billion from China). So where does some of this newly printed (and approved) money go? 

$25 billion will go to automakers in taxpayer-subsidized loans. 

$488 billion will go to the department of defense (on top of the $70 billion already approved for operations in Iraq and Afghanistan). 

$23 billion in emergency aid for victims of recent hurricanes and floods. 

$6.6 billion for “pet projects” in numerous states. 

The White House spokesperson said this “puts the United States on step closer to ending our dependence on foreign sources of energy.” 

Excuse me? 

Yes the Senate is lifting a ban on offshore drilling and opening up a huge reserve of shale oil in the west, but that is not where any of the $634B goes. 

As if that was not enough…the big weekend did not end there…

The House also approved a pact that would allow the U.S. to provide nuclear materials to India.

I should never check the news on the weekend…

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Yesterdays meeting over the proposed bailout turned into a playground brawl. Macaroni was thrown in the lunchroom and some politicians were given swirlies in the restroom. Ok, maybe not to that extent but it is how I picture it in my mind. 

The Democrats say they reached bipartisan agreement, the Republicans are not so sure. Obama and McCain were present and I don’t think anybody on the road missed them. 

Far from solved, some of the issues are far reaching and cross the line to new ground. 

For starters, I am very interested in the draft that would require limits on compensation for the executives participating in the bailout. Yes, you heard right, they are considering limiting excessive “golden parachutes” for the executives that ran the failing companies. I hope it did not take “America’s Best” to figure that one out – unless of course some of the politicians are on payroll. 

Why on earth would you not limit the compensation? How about you limit it to say…ZERO. If the companies go under (without the help of taxpayer money) I suspect their current golden parachutes would fail to open under any circumstance – so why should the taxpayers fund any of it? 

Another point is whether, going forward, bankruptcy judges will be able to modify mortgage terms. Although perhaps seeming good for the consumer on the surface, these newly structured loans go back to pay…well, us. Good luck finding any lender in the future if the courts can go in and change the terms at any time. 

The upside? 

It appears they are not looking at dropping $700 billion all at once. The draft calls for Congress to make $250 billion available with another $100 billion on standby. 

Why the delay? 

Well, I would like to think it is because some people in DC are coming to their senses; that taxpayers bailing out private companies might not be a good thing. In reality I am going to guess the Treasury just can’t print money that quick without jamming up the machine. 

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When I was six I thought I had the worlds financial situation figured out. If we were short on money; simply print more. Just hand out newly minted $100’s to the people and countries who need it. 

Of course as I got older I realized it was a really stupid plan. You can’t just print more money like a bad game of Monopoly. 

The problem is apparently my six-year-old inner child got a job in politics and he has lots of friends that share the “print more” mentality. Forget about the bad economy for a moment. Printing more money will never work. It is debt plain and simple and it is the taxpayers that will have to pay it back. 

Should we incur more debt by literally printing more money and handing it to the people that lost it in the fist place? Sure, why not?! Heck, lets go buy a recovering alcoholic a couple beers while we are at it. 

Bail out private companies and have the government take over? Sure, as long as you like Socialism. 

Oh, and since we are in such a gift giving mood with our newfound wealth…Fire the old board members but be sure to give them great severance packages in the process! Why not?! I mean if there company had gone under (which was the natural order of things) they wouldn’t have millions in their personal bank accounts [insert shallow tear here]. 

Perhaps I need to tap into my inner child for some other great ideas that will better mankind…apparently their time has come. Foot Long Pop Tarts. Check. Two-headed Cats. Check. Print a Trillion dollars of what will soon become play money. Check. 

Godfather Added: An actual up-to-date explanation about why we can’t print more money can be found here. 

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Well, here is a surprise. Our government is overspending again…by a lot!

The U.S.’s long-term financial obligations grew by another $2.5 trillion from last year. That means, if you factor in all the obligations such as Social Security, Medicare and other government programs, the debt is about $531,472 per household. (and you thought your Visa bill was high didn’t you?!) 

The big liabilities from 2007… 

Civil Servant Retirement: $106 billion

Social Security: $900 billion

Medicare: $1.2 trillion 

The numbers are actually much worse when you get into accounting methods. 

Corporations and states are required to count new financial obligations, even if the payments will be made later. Spoiler alert: Our government will not follow those accounting rules. 

What does this mean? Medicare, for example, has an unfunded liability of $30.4 trillion. I guess the government better start looking under seat cushions in a real hurry. 

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