Some financial crisis links (9.23.2008)

Federal Reserve Board Chairman Bernanke testified today (9.23.2008) before the Senate Committee on Banking, Housing, and Urban Affairs. One highlight of his talk:

Despite the efforts of the Federal Reserve, the Treasury, and other agencies, global financial markets remain under extraordinary stress. Action by the Congress is urgently required to stabilize the situation and avert what otherwise could be very serious consequences for our financial markets and for our economy. In this regard, the Federal Reserve supports the Treasury's proposal to buy illiquid assets from financial institutions. Purchasing impaired assets will create liquidity and promote price discovery in the markets for these assets, while reducing investor uncertainty about the current value and prospects of financial institutions. More generally, removing these assets from institutions' balance sheets will help to restore confidence in our financial markets and enable banks and other institutions to raise capital and to expand credit to support economic growth.

But I thought this was an insolvency crisis? Is there not too much liquidity in the system, as Michael Hudson argues?

Naked Capitalism believes Chairman Bernanke to be deluded (or dishonest if he is not deluded).

Daniel Nicolas believes Bernanke "…has played us all as fools," thus taking the dishonest option.

Jesse Jackson, Sr. believes the Plan is a "breathtaking insult to the Constitution" and that Wall Street, along with its governmental enablers, wishes to extort the bailout money from American taxpayers and others (by threatening to generate a world economic collapse.

David Lindorff tells us that the Plan is

…not about saving Main Street, as Paulson claims. Main Street, under the bailout, is toast. It's about helping the banks and investment banks and insurance companies that brought on this crisis to ride it out in style, their astronomical losses bankrolled or absorbed by the American public, so that they can shift their operations overseas and continue with their rape and pillage of the global economy.

In other words, for most Americans, the political contest now in progress approximates a zero-sum game: Civil society and the subordinate classes v. American finance capital. It might even be a negative sum game for America with the political gains made and profits pocketed by Wall Street failing to equal the loss of well-being most Americans will experience in the near future!

James Galbraith and William Black briefly list the conditions under which any reasonable bailout will proceed. They intend their conditions to protect the greater and diverse public and the general good.

Thomas Ferguson and Robert Johnson also identify conditions which any bailout will need to meet if the play is to protect the public interest. They also urge Congress to seize the initiative and to stand firm when defending Main Street against Wall Street's assaults.

Otto Spengler believes "Paulson's dreadful scheme will become law…" Why? "…because Americans love their bankers." He adds further insult to America's collective injury with his lament: "Where, oh where, is America's Vladimir Putin, who will drive out the oligarchs who have stolen the country's treasure and debased its currency?"

And David Brooks, the New York Times columnist, welcomes what he believes to be the emerging Wall Street Washington junta! (via Greenwald)