My apologies to Paul, but this is so crystal clear that it cannot be summarized or partially quoted:

[Quote:]

Daniel Davies, in one of the great blog posts of this era, laid down a key principle:

Good ideas do not need lots of lies told about them in order to gain public acceptance.

He was talking about the selling of the Iraq war, but it applies more generally.

So, this morning Hank Paulson told a whopper:

We gave you a simple, three-page legislative outline and I thought it would have been presumptuous for us on that outline to come up with an oversight mechanism. That’s the role of Congress, that’s something we’re going to work on together. So if any of you felt that I didn’t believe that we needed oversight: I believe we need oversight. We need oversight.

What the proposal actually did, of course, was explicitly rule out any oversight, plus grant immunity from future review:

Sec. 8. Review.

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

I’m not playing gotcha here. This is telling: if Paulson can’t be honest about what he himself sent to Congress — if he not only made an incredible power grab, but is now engaged in black-is-white claims that he didn’t — there is no reason to trust him on anything related to his bailout plan.

[Quote:]

Today, in essence, the central bank lends money to a federal bank, which loans it to a regional bank, and so on, each bank paying interest to the bank above, and charging more to the one below. By the time the person or business who needs the money gets it, they’re paying an awful lot of interest – so much, that it amounts to a drag on their ability to do business. The speculative economy, rather than fueling the real economy, drags it down.

The only way for banks – who run such an economy – to make more money is to lend more out. So they looked for more borrowers, as well as more places to park their cash. As a result, the things you and I depend on in the real world became investment vehicles. Homes, oil, resources…you name it. So the costs of all these things went up not because of any real laws of supply and demand, but because they had become new classes of investment.

As for finding new borrowers, well, that’s why Bush kept talking about “home ownership” as the right of every American, why lending standards were lowered and, of course, why bankruptcy for individuals was made so much harder. They wanted to lend more money, but didn’t have any more qualified borrowers. By changing bankruptcy laws, they meant to make it impossible for borrowers to cry uncle. (This was a 150-million-dollar lobbying effort by the credit industry, over the course of an entire decade.)

Eventually, the tension between the speculative economy and the real economy simply had to become too great. Lending money, in itself, doesn’t actually produce anything. On the contrary, it strains those few who are still attempting to produce things. It’s what turned so many companies into balance-sheet-driven outsourcing operations. Only so many bankers and investors can be supported by industry and homeownership.

We’re not really watching an entire economy fail. We’re watching a particular program fail. Only because it’s not sandboxed like a bad plug-in in Google’s Chrome browser, the resource leak sucks money from everywhere.

[Quote:]

Judged by the amount of money directly dependent on it, the British Bankers’ Association’s London Interbank Offered Rate matters more than any other set of numbers in the world. Libor anchors contracts amounting to some $300 trillion, the equivalent of $45,000 for every human being on the planet. It’s a critical part of the infrastructure of financial markets but, like plumbing, doesn’t usually get noticed. Only a handful of economists, and no other academics, have ever looked in any detail at Libor, and even the financial press didn’t show much interest in how Libor is calculated until this spring, when there was sharp controversy over whether these crucial numbers could be trusted.

The calculation of Libor is co-ordinated by just two people, who work in an unremarkable open-plan office in London’s Docklands. I watched the process, which seemed utterly routine, a couple of years ago. Just after 11 a.m. on every weekday that’s not a bank holiday, traders at leading banks send in their estimates of the interest rates at which their banks could borrow money. They do this electronically, but sometimes the co-ordinators make a phone call to a bank that hasn’t sent in its estimates, and if the latter seem implausible – typos, for example, are fairly common – they’re checked, also with a quick call: ‘Hi there, is the Kiwi chap [provider of the estimates for borrowing New Zealand dollars] about? . . . Bit of a spread on the two month. Everyone else is coming in a good bit under that.’

Reading all that makes me wonder. How come this is legal, and smoking pot is not?

[Quote:]

The US space agency is to send its Mars rover Opportunity on a two-year trek to try to reach a crater called Endeavour.

The robot will have to move about 11km to get to its new target – a distance that would double what it has already achieved on the planet.

Endeavour is much bigger than anything investigated to date, and will allow a broader range of rocks to be studied.

Opportunity arrived on Mars in January 2004 on a mission scheduled initially to last just three months.

The performance of the rover – like that of its twin, Spirit – has greatly exceeded what anyone had dared hope. The US space agency (Nasa) concedes, however, that the Endeavour assignment will be an extremely tough one.

“We may not get there, but it is scientifically the right direction to go anyway,” said Steve Squyres of Cornell University, principal investigator for the science instruments on Opportunity and Spirit.

[Quote:]

I say to you, this morning, that if you have never found something so dear and precious to you that you will die for it, then you aren’t fit to live.

You may be 38 years old, as I happen to be, and one day, some great opportunity stands before you and calls upon you to stand for some great principle, some great issue, some great cause. And you refuse to do it because you are afraid.

You refuse to do it because you want to live longer. You’re afraid that you will lose your job, or you are afraid that you will be criticized or that you will lose your popularity, or you’re afraid that somebody will stab or shoot or bomb your house. So you refuse to take a stand.

Well, you may go on and live until you are ninety, but you are just as dead at 38 as you would be at ninety.

And the cessation of breathing in your life is but the belated announcement of an earlier death of the spirit.

You died when you refused to stand up for right.

You died when you refused to stand up for truth.

You died when you refused to stand up for justice.”

McCain’s Economic Plan For Nation: “Everyone Marry A Beer Heiress”

[Quote:]

“Here’s the thing about Americans. You can send their kids off by the thousands to get their balls blown off in foreign lands for no reason at all, saddle them with billions in debt year after congressional year while they spend their winters cheerfully watching game shows and football, pull the rug out from under their mortgages, and leave them living off their credit cards and their Wal-Mart salaries while you move their jobs to China and Bangalore.

“And none of it matters, so long as you remember a few months before Election Day to offer them a two-bit caricature culled from some cutting-room-floor episode of Roseanne as part of your presidential ticket. And if she’s a good enough likeness of a loudmouthed Middle American archetype, as Sarah Palin is, John Q. Public will drop his giant sized bag of Doritos in gratitude, wipe the sizzlin’ picante dust from his lips and rush to the booth to vote for her. Not because it makes sense, or because it has a chance of improving his life or anyone else’s, but simply because it appeals to the low-humming narcissism that substitutes for his personality, because that image on TV reminds him of the mean brainless slob he sees in the mirror every morning.

[Quote:]

The biggest Wall Street story most Americans haven’t yet heard of is the $62 trillion unregulated credit default swaps market.

Here is one scenario: A hedge fund buys insurance in case a company defaults on its bonds — a so-called credit default swap — when the hedge fund doesn’t necessarily own the bonds. Then it immediately shorts the stock, driving down the company’s share price, leading to a downgrade, and eventually triggering a default. It is the ultimate moral hazard, like taking out fire insurance for a home you don’t own: There is an obvious motivation to set the house on fire and collect the insurance.

Meanwhile, that same hedge fund may also be issuing its own credit default swaps, where it promises to cover a company’s bonds if it defaults, in exchange for the buyer of the swap paying out a premium. The premium is paid out in regular intervals, much like an insurance premium, and is a simple means for the hedge fund to generate additional income. This is especially true because the hedge fund does not have to put aside any capital to cover the swaps it is writing. Riskier still, no bond has to actually be delivered to settle the swap in case of a default.

“The credit default swap market is the ultimate bubble, and it is about to collapse,” the managing director of Institutional Risk Analytics, Christopher Whalen, said. “It is a Ponzi scheme, and is basically the same method as a bookie uses.”

[..]

In the past, if credit default swaps were triggered by a default, a hedge fund would just write more swaps to cover it. But now the credit default swap market is largely frozen following the collapse of Lehman Brothers Holdings, which was an important player in the market. Making matters worse, the hedge funds that wrote these swaps never put aside any capital to cover them, so they are unable to pay and are liquidating their positions and closing.

[Quote:]

Sen. John McCain’s top campaign aides convened a conference call today to complain of being called “liars.” They pressed the media to scrutinize specific elements of Sen. Barack Obama’s record.

But the call was so rife with simple, often inexplicable misstatements of fact that it may have had the opposite effect: to deepen the perception, dangerous to McCain, that he and his aides have little regard for factual accuracy.

[..]

“Any time the Obama campaign is criticized at any level, the critics are immediately derided as liars,” Schmidt told reporters.

But as he went on to list a series of stories he thought reporters should be writing about Obama and Biden, in almost every instance he got the details wrong.

Schmidt criticized the press for the relatively sparse coverage of the fact that one of Biden’s sons, Hunter, is a registered federal lobbyist.

“His son is a lobbyist for the credit card and banking industry,” Schmidt said.

But Hunter Biden’s lobbying clients don’t include any banks or credit card companies. He did work, as a vice president and then as a consultant, for MBNA, a Delaware-based bank and credit card giant to which Biden had close ties. But he does not appear to have lobbied for the firm.

“Steve Schmidt lied — or just got it flat wrong,” said Biden spokesman David Wade. “Hunter Biden has never — never — been a lobbyist for the credit card or banking industry.”

[..]

Asked about the series of errors, McCain aides could not provide evidence to back up Schmidt’s assertions.

One McCain aide, Michael Goldfarb, said Politico was “quibbling with ridiculously small details when the basic things are completely right.”

[Quote:]

But my main concern—I’ve only got a few minutes here—my main concern is twofold. I mean, for the longest period of time, up to literally a few weeks ago, we had our friends in the Bush administration telling us that the fundamentals of the economy are strong, everything is just fine. And now they tell us we’re on the verge of a major economic meltdown. We’ve got to give Wall Street a $700 billion bailout. And, by the way, of course, it is not going to be the people who have benefited, the people at the very, very top who have benefited financially from Bush’s reckless economic policies who are going to pick up the bailout; it is going to be the middle class, which has been suffering for the last eight years.

[..]

For years now, they’ve told us that we can’t afford—that the government providing healthcare to all people is just unimaginable; it can’t be done. We don’t have the money to rebuild our infrastructure. We don’t have the money to wipe out poverty. We can’t do it. But all of a sudden, yeah, we do have $700 billion for a bailout of Wall Street.

[Quote:]

“It’s not like that in the magical world, ‘Arry,” Hagrid said, voice
lowered in concern. “Y’see, when Vol… well, when You-Know-Who
set up a trust deposit insurance scheme, ‘e didn’t account for rising
interest rates. And ‘e didn’t give codflakes about whether it would
influence currency issues abroad, or take into account nominal
seasonal fluctuations in the GNP as accounted for in Dumbledore’s
rules. See, that’s what makes him so evil, Harry; by doin’ this he
unpinned meaningful values from real estate an’ just left ‘em
floatin’, an’ so the loss in equity was inevitable…”

* * *

Harry’s capitalization pool was starting to roll over. He knew there
was fallout risk. With a quick glance at Ron and Hermione he added a
short hedge of soft dollars and stirred in some FASB No. 8. But this
was a mistake; the market began churning, and his small-issues
exemption began to smoke. He started trying to write down the value
when he felt, rather than heard, Snape gliding up from behind. His
variance was harsher, less ironic, than usual. “So, Potter,” he
sneered. “_That’s_ your solution? When someone takes a poison pill,
you can’t always just shove a BARRA analysis down their throat, you
know. If this had been a volatile market you’d be in Azkaban for
having violated Glass-Steagall.” Snape looked down his nose at him,
his equity balanced. “You’re just like your father: arrogant, always
at unsystematic risk, overextended, overbought and underfinanced.”

This was too much. “My father was not overextended!” Harry shouted,
jumping from his stool, portfolio in hand…

* * *

“_Accio Jensen index!_” Harry cried, pointing his wand at the
maintenance margin requirement. If he could just prevent Voldemort
from off-balance-sheeting a little longer, he knew Hermione would come
through with the EAMS differential disclosure. But Voldemort’s equity
was powerful, even with Dumbledore’s setting value date on the
Eurodollar; his random-walk didn’t seem so random, and Harry was sure
that even with translation exposure he could paper over his losses.
“_Autoregressive kedavra!_” Voldemort snarled with a sudden fiduciary.
Harry leaped aside, nearly forced to sell at a dirty price. If he
hadn’t set his global bonds to Market-if-touched he would have been
forced into liquidity…