How the Feds are Blowing Through 7.8 Trillion Dollars

The New York Times has an article up on its website that is accompanied by the picture to the left. It shows how the Federal Reserve Board and the Treasury are distributing up to 7.8 trillion dollars to the financial services industry.

Although they are plowing money into the system, this money won't help with the wave of foreclosures that are spreading across America. This paragraph from the article explains why:

But analysts said the program would do little to reduce the tidal wave of foreclosures. That is because most of the foreclosures are on subprime mortgages and other high-risk loans that were not bought or guaranteed by government-sponsored finance companies like Fannie Mae

What's interesting is the fact that while there was a lot of debate and public anguish over the 700 billion dollars in bailout funds approved by Congress, the amount of loans, according to the Times, is 1.7 trillion. So under what authority is this money being lent out? If the authority was already there, why did the Congress have to act? Under what terms and conditions is this money being lent out? Who is receiving it and how much are they receiving?

It would seem that those questions would interest someone in the media, let alone Congress, yet people don't seem to be asking them. Maybe everyone just assumes that the same geniuses who got us into this mess will get us out. If so, their faith may be sadly misplaced.

"Bush Economy" Heading for a Recession?

The economy is heading toward a recession. New home sales are down 8.5% since July. Prices of new homes have fallen 7.5% from a year ago. Credit is increasingly hard to get for consumers and businesses. All of these are signs that the economy is heading towards a recession.

Ever since Bush's reckless, radical tax cuts, we have heard from his supporters and apologists about how they have helped the economy. Actually, and this is something that presidents of both parties don't want to talk about, but the Federal Reserve Board has more control over the economy than any president. If the Fed makes more money available, it helps both consumers and businesses get loans. They use these loans to buy goods and services, thereby creating more jobs for Americans.

Under Greenspan the Fed basically allowed homeowners to turn their homes into ATM units. Americans borrowed on their equity to finance everything from home remodeling to a new vacation for the grandkids.

Naturally, since Greenspan is a Republican and since Bush is an idiotic Republican, no one thought about overseeing the financial institutions making these loans. As a result, we now have a wave of losses in the billions of dollars from risky loans. Consequently, we see financial institutions, who are apparently led by people who are not real bright given their past history, sharply cutting back on new loans.

If there is a recession, look for three things to happen. One is that Republicans like Bush will push for even more tax cuts under the rationale that we need to "pump" up the economy. Two, Democrats will do even better next year than anticipated. Three, illegal immigration will become even more potent as an issue because of economic insecurity among working class Americans.