TARP has Coerced Participation

As I have stated here, here, here, here, here, and here, the bailout, now known as TARP, is not about money, mortgages, or market stabilization it is about power.

One of the dangers I mentioned BEFORE this became law is that participation in TARP prevents any court review even if the participation is not voluntary.

Yesterday, on the Glen Beck show, the ex-director of the St. Louis Federal Reserve admitted that forced confiscation of assets is the power exercised under TARP.

See for yourself.


The naiveté of the Mr. Poole is stunning. At the end of the segment he mentions that one of the 9 banks refusing to participate in the hostile takeover should take the matter to court. The courts will save the day.

Clearly, Mr. Poole has not read the TARP legislation and Section 119 in particular. Section 119 (a)(3) reads

• No action or claims may be brought against the Secretary by any person that divests its assets with respect to its participation in a program under this Act, except as provided in paragraph (1), other than as expressly provided in a written contract with the Secretary.

The effect of section 119 is that anyone accepting or, more importantly, forced to exchange assets for money on such terms as the Secretary determines has no standing in court to bring suit. No Standing equals No judicial Review.

If a bank were to pursue Mr. Poole's recommendation and go to court here is what will happen:

• In Federal district court, he Emperor of the Treasury will file a motion for summary dismissal based on section 119
• Regardless of the ruling on the motion to dismiss, the bank will file a motion for injunctive relief to block the Emperor of the Treasury from confiscating the bank's assets or confiscating ownership in the bank. Section 119 also prevents such the district judge from issuing such an injunction.
• Regardless of the ruling by the federal district judge on both motions (the motion to dismiss and the motion for injunctive relief), both rulings will be appealed to Federal circuit court
• Regardless of the how the appellate judge rules on the two matters, again, both matters will be appealed to US Supreme Court
• If the SCOTUS grants the writ of certiorari, then and only then will the matter finally be before a court not bound by the Congressional portion of the establishment clause in Article III section 1.
• Even then the US Supreme Court may rule in favor of Power instead of Justice as the court did in both Kelo v New London and Gonzales V. Raich.

The American justice system(sic) has an uneven record of rendering Justice.

During all of this time, the bank will have its arm caught in the gear works of the American federal court system. Regardless of whether the injunctive relief is granted or denied (Treasury is denied the confiscation or not), the damage to the business interests of the bank while caught in the gear works will be substantial.

The proper expletive for the bank is TANJ

What the Federal Government CAN Do

I stated in an earlier post there is little the federal government can do except get out of the way, enforce contracts, and prosecute fraud.

In that spirit here is my suggestions for unfreezing the credit markets

1. Suspend the withholding and collection of income taxes for 300 days. This is only 650 Billion (649,645,995,893 @ 2,165,486,653/day * 300 days) dollars not confiscated by the treasury and leaves the treasury with 1.7 trillion in revenues from other taxes. I know it is less than 700 billion, but if the Treasury Department can pull 700 billion out of its ass, I can pull 300 days out of mine. I selected 300 because it is a round number which creates a bailout figure of about 700 billion at current tax collection rates.Source: Heritage Foundation with income tax receipts comprising 30.8% of gross tax revenues.
   If you are going to loot the treasury at least give the money to the people who earned it. [principle employed: Get out of the way]
2. Repeal taxes on interest earned. [principle employed: Encourage saving (increase supply of credit capital) by getting out of the way]
3. Repeal taxes on dividends paid to shareholders. [principle employed: Encourage corporate and shareholder savings (increase supply of credit capital) by getting out of the way]
4. Repeal deductions for interested paid. [principle employed: Discourage borrowing (decrease demand on credit capital) by getting out of the way]
5. Amend RICO so as to include GSE's such as Freddie Mac and Fannie Mea [principle employed: prosecute fraud]
6. Do not permit re-writing mortgage terms by the Emperor of the Treasury. (see section 109(c) of the Paulson plan). [principle employed: enforce contracts]

I guarantee the business and individual savings rate of America will go up under this plan. With an increased pool of saved capital looking for returns, the capital markets will thaw.

The reason why this plan will not be adopted is that it does not create an Emperor of the Treasury which is the core, non-negotiable part of the Paulson/Bernanke/Bush plan.

The "bailout" proposed by the Paulson/Bernanke/Bush team is not about money or a mortgage such as the plan above is. The Paulson/Bernanke/Bush plan is about power. The design goal for the Puulson Plan is the stated goal of dictatorship.

The Paulson Plan: Take 3

The plan by the Bush/Paulson/Bernanke team to create the post: Emperor of the Treasury, is now up to 451 pages. The Paulson Plan: Take 1 was 3 pages; Six if you count the 3-page battle plan. Then Wisconsin Congressman Paul Ryan wrote the 110-page Paulson Plan: Take 2.

As I predicted earlier this morning, the current Senate bill, Paulson Plan: Take 3, has the three, core, non-negotiable points:

• The Secretary of the Treasury can acquire anything even Microsoft with no check or balance on this power by any authority except the limits of his whimsy.
• The Secretary of the Treasury gets to set the "price" with "such terms and conditions as determined by the Secretary".
• No Judicial review or very limited Judicial review

The Secretary of the Treasury can acquire anything

• Section 3(9)(B) reads:
  • The term "troubled assets" means any other financial instrument that the Secretary, after consultation with the Chairman of the Board of Governors of the Federal Reserve System, determines the purchase of which is necessary to promote financial market stability, but only upon transmittal of such determination, in writing, to the appropriate committees of Congress.
• Section 101 (c)(5) reads:
  • The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation ... Issuing such regulations and other guidance as may be necessary or appropriate to define terms or carry out the authorities or purposes of this Act.
  • Terms such as "troubled asset" and "financial institution".

The Secretary of the Treasury gets to set the price

• section 101 (a)(1) reads:
  • The Secretary is authorized to establish the Troubled Asset Relief Program (or "TARP") to purchase, and to make and fund commitments to purchase, troubled assets from any financial institution, on such terms and conditions as are determined by the Secretary, and in accordance with this Act and the policies and procedures developed and published by the Secretary.

Limited, if any, Judicial Review

• Section 119 (a)(2)(A) reads:
  • No injunction or other form of equitable relief shall be issued against the Secretary for actions pursuant to section 101, 102, 106, and 109, other than to remedy a violation of the Constitution.
  • Sec. 101. Purchases of troubled assets. [Good, Bad, or Rapacious]
  • Sec. 102. Insurance of troubled assets. [Prudent or Foolish
  • Sec. 106. Rights; management; sale of troubled assets; revenues and sale proceeds. [Sales of, by, or to financial cronies]
  • Sec. 109. Foreclosure mitigation efforts. [Judges re-write Mortgages]
• Section 119 (a)(3) reads
  • No action or claims may be brought against the Secretary by any person that divests its assets with respect to its participation in a program under this Act, except as provided in paragraph (1), other than as expressly provided in a written contract with the Secretary.
  • Even if that participation was not consensual.
  • Since the Secretary gets to define such terms as participation. The is Section 8 of the Paulson Plan: Take 1, but with more words. The effect is that anyone accepting or, more importantly, forced to exchange assets for money on such terms as the Secretary determines has no standing in court to bring suit. No Standing equals No judicial Review

As I have stated here, here, here, here, here, and here, this bill is not about money, mortgages, or market stabilization. It is about power; naked, unfettered power. It is about creating a financial dictator in the aftermath of an economic 9/11 event. It is about herding and driving American Taxpayers over an economic buffalo jump

A Second Drive for the Buffalo Jump

"The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary." H.L. Menken

As predicted, they’re back!! This time the Senate proposal is much better, but we have to trust them on that because the proposed Senate legislation is on double secret probation.

From the International Herald Tribune

• The senators issued no details of their proposal and said none would be available until Wednesday.

I guess the Bush/Paulson/Benanke team doesn't want us plebes reading the bill ahead of time and making truthful points in opposition by citing actual provisions of the proposed bail out rescue legislation. Keeping the legislation secret is a reasonable gambit because it's gotta work better than the truth.

According to Bloomberg, the Plunge Protection Team changed the incoming calls to the Congress from opposition to support:

• After a week-long torrent of calls and e-mails from angry voters opposing the rescue package, the tide turned after markets plunged on Sept. 29 in response to the House vote.
  
  "Over $1 trillion worth of market value was wiped off the books by the stock market drop," said Senator Robert Bennett, a Utah Republican. "It is ordinary people looking at ordinary pensions, with their ordinary Main Street kind of 401(k) plans, who lost that $1 trillion. And they lost it in a matter of minutes."

Interesting the Plunge Protection Team did not work to prevent that plunge. But, then as I noted earlier, perhaps the PPT achieved its mission for September 29, 2008. Perhaps the shock doctrine will work tomorrow now that some of the American Herd has been channeled down the driving lanes in a full gallop toward the buffalo jump.

I predict the three key elements of the original Paulson plan for creating the post of Emperor of the Treasury still exists in the Senate version. These three points are non-negotiable to the Paulson/Bush/Bernanke team. This is not about money. It is about power. So the three elements in the final bill will be:

• The Secretary of the Treasury can acquire anything; Mortgage related or not; Troubled or not; US headquartered or not. Either the legislation will do this explicitly or grant the Secretary the power, without limitation, to define terms.
• The Secretary of the Treasury can set the price at "such terms and conditions as are determined by the Secretary"
• No judicial review or very limited judicial review

With those provisions intact the rest of the Senate bill is probably irrelevant. The post of Emperor of the Treasury will have been created and it will be time to "consecrate the bond of obedience and assume the position".