The chart above shows that the Dow Jones Industrial Average stood at 9489.64 on the eve of George W. Bush’s inauguration, January 19, 2001. Today, the Dow closed at 9447.11 – a net loss of 42.53 points since Bush’s inauguration.

But while the broader economy has suffered during Bush’s reign, the pain – as the cynical might expect – hasn’t been evenly distributed. The Perpetual War Portfolio was created in December of 2002 by a fellow cynic, who describes it as

an evenly weighted basket of five stocks poised to succeed in the age of perpetual war. The stocks were selected on the basis of popular product lines, strong political connections and lobbying efforts, and paid-for access to key Congressional decision-makers.

Since its inception, the Perpetual War Portfolio has shot up by over 50%, while the Dow is up only 6% across the same nearly-six-year span. The five stocks in the PWP are Boeing (NYSE:BA), Northrop Grumman (NYSE:NOC), Raytheon (NYSE:RTN), Lockheed Martin (NYSE:LMT), and Alliant Techsystems (NYSE:ATK).

Just some more food for thought, as you watch the crisis unfold…

I’ve been thinking more about the US Treasury Department’s new Office of Financial Stability (the entity created last week to “bail out Wall Street”).

The Office will be headed by Undersecretary of the Treasury Neel Cash’n’Carry Kashkari, a former investment banker and Goldman Sachs Vice President. Kashkari was appointed by his boss, Treasury Secretary Henry Paulson, a former investment banker and Goldman Sachs Chairman.

An article in Tuesday’s Independent (UK) sums it up with much more, erm, pluck:

A little-known 35-year-old engineering graduate, who spent just four years working in finance, was yesterday entrusted with saving the global banking industry from implosion – and handed $700bn (£400bn) of US taxpayer money to play with.

But don’t worry! Bloomberg news tells us that the “Treasury has said it plans to hire about two dozen staff to manage the program, along with five to 10 asset management firms.” So, you know he’ll be very well-supervised!

I’m sure Goldman Sachs’s whole operation was managed by only ten or fifteen people!

Good times!

The headline is a quote from former Treasury Secretary Paul O’Neill. It was his 2004 book with Ron Suskind, The Price of Loyalty, that gave us that and many other illuminating insights into the Bush White House. Obviously, O’Neill is no leftist – he was a Republican Treasury Secretary, the head of Alcoa (the giant aluminum company), and a budget director under President Ford.

Today, he’s making news again with comments on the proposed $700 Billion bailout:

“If they pass this thing, it’s awful what the consequences are going to be in terms of an ongoing federal relationship that doesn’t need to exist with the institutions,” O’Neill said. “Are we going to insist on having a federal representative on boards of directors to protect our investment?”

[…]

“We have no capacity in the federal government – and it’s not possible to create a capacity – to manage a $700 billion property portfolio… It’s crazy. It’s like we’ve lost our moorings.”

So apparently the financial system is becoming unraveled because too many institutions loaned too much money to too many other institutions without proper oversight, accountability, or capital reserves.

Remind me again – how is the US paying for the Global War on Terra?

Joshua Holland has a nice piece up on AlterNet looking at the financial meltdown (it’s from a week ago, so some of it is already “inoperative,” but – as John McCain might say – the fundamentals are sound). He summarizes the so-called “bailout” plan like this:

We’re splitting an oil well with the Big Boys on Wall Street: They get the oil, we get the shaft.

He gives a good analysis, and it’s worth reading. I found this section to be particularly apt:

The proximate cause of the financial system’s meltdown is not all that hard to grasp. The decades-long supremacy of the ideology euphemistically called “free trade” resulted in capital being unmoored from national economies and freed to move around the world with few limitations (under the imperative of government not “intervening” in markets). Unconstrained by borders and investment rules, those dollars, yen, euros and what have you roamed the planet seeking a better rate of return. Investors moved in packs, rushing lemming-like to whatever hot up-and-coming market the Economist was writing about in a given month, and a series of bubbles resulted.

Those bubbles made some people incredibly rich, and hurt others badly.

[…]

Here in the United States, the trend of deregulation culminated in 1999 with the death of the Glass-Steagall Act, the New Deal-era legislation that had forced financial institutions to choose between investment banking and commercial lending.

Of course, if you read Artifacts (the collection I produced for Christmas of 1999), you would have learned all about this at the time, starting on Page 70 in “Senate Clears Financial-Services Overhal; Late Requests for Favors, Fixes Precede 90-8 Vote on Landmark Measure,” by Michael Schroeder, from the Wall Street Journal:

By stripping away restrictions in the Glass-Steagall financial-services law — which prohibited the mixing of banking, securities and insurance activities — the overhaul is a windfall for financial industries, paving the way for a new world of financial supermarkets offering one-stop shopping for services ranging from checking to credit cards, foreign exchange, insurance, mutual funds, mortgages and auto loans.

Of course, “no one could have predicted” that the house of cards would fall down, right? Hm.

Perhaps you’d have found further illumination from another selection in Artifacts, this one from Kurt Vonnegut’s Breakfast of Champions:

Here is how the pirates were able to take whatever they wanted from anybody else: they had the best boats in the world, and they were meaner than anybody else, and they had gunpowder, which was a mixture of potassium nitrate, charcoal, and sulphur. They touched this seemingly listless powder with fire, and it turned violently into gas. This gas blew projectiles out of metal tubes at terrific velocities. The projectiles cut through meat and bone very easily, so the pirates could wreck the wiring or the bellows or the plumbing of a stubborn human being, even when he was far, far away.

The chief weapon of the sea pirates, however, was their capacity to astonish. Nobody else could believe, until it was much too late, how heartless and greedy they were.

So it goes.

From Hank’s Wikipedia entry:

In Spring 2007, Secretaty Paulson told an audience at the Shanghai Futures Exchange that “An open, competitive, and liberalized financial market can effectively allocate scarce resources in a manner that promotes stability and prosperity far better than governmental intervention.” [Bloomberg News]

In August 2007, Secretary Paulson explained that U.S. subprime mortgage fallout remained largely contained due to the strongest global economy in decades. [Boston Globe]

On July 20, 2008, after the failure of Indymac Bank, Paulson reassured the public by saying, “it’s a safe banking system, a sound banking system. Our regulators are on top of it. This is a very manageable situation.” [CBS News]

On August 10, 2008, Secretary Paulson told NBC’s Meet the Press that he had no plans to inject any capital into Fannie Mae or Freddie Mac.[Bloomberg News] On September 7, 2008, both Fannie Mae and Freddie Mac went into conservatorship.

So, we’re supposed to trust Hank Pauslon with $700,000,000,000 because he’s a smart guy, right? I mean, as the former head of Goldman Sachs, with a net personal worth of over $700,000,000, he can certainly handle these big sums!

But… I wonder… isn’t this the same Hank Paulson who helped get us into this mess? The same Hank Paulson who’s been declaring all through the spring that “our economy is sound” and that we’ve “reached the bottom of the housing market?” He was the head of the Investment Banking unit at Goldman before he became the chief executive!

He knows exactly what he’s doing: bailing out his buddies and partners from the mess they themselves created, with OUR money.

How about asking an actual expert, one who wasn’t compensated to the tune of $30,000,000 per year by the very company he’s now proposing, as a “public servant,” to “help” with taxpayer funds?

Nourel Roubini – unlike Hank Paulson, Ben Bernanke, George Bush, Nancy Pelosi, Chris Dodd, Barney Frank, John McCain, or Barack Obama – has been accurately predicting the contours of our current financial crisis going back several years. In February, he predicted that a major US investment bank would collapse; after Bear Stearns went down, he predicted that there would be no independent investment banks in the US (and this has already come to pass). He’s been right as often as Paulson, Bernanke, et al. have been wrong.

Here’s what Dr. Roubini has to say about the “bailout” plan that went down to defeat in the House today:

Thus the claim by the Fed and Treasury that spending $700 billion of public money is the best way to recapitalize banks has absolutely no factual basis or justification. This way of recapitalizing financial institutions is a total rip-off that will mostly benefit – at a huge expense for the US taxpayer – the common and preferred shareholders and even unsecured creditors of the banks. Even the late addition of some warrants that the government will get in exchange of this massive injection of public money is only a cosmetic fig leaf of dubious value as the form and size of such warrants is totally vague and fuzzy.

So this rescue plan is a huge and massive bailout of the shareholders and the unsecured creditors of the financial firms (not just banks but also other non bank financial institutions); with $700 billion of taxpayer money the pockets of reckless bankers and investors have been made fatter under the fake argument that bailing out Wall Street was necessary to rescue Main Street from a severe recession. Instead, the restoration of the financial health of distressed financial firms could have been achieved with a cheaper and better use of public money.

It’s worth reading his other essays, wherein he lays out, in great detail, exactly what sort of plan he believes would most benefit the US and the world economy at large. He relies for support not just on his gut instinct, or on what his golfing buddies told him, but on actual historical data from more than thirty other credit crisis in large economies over the last fifty years. He shows that the course currently being proposed by the wonder twins of Bernanke and Paulson is, in fact, the most expensive and least likely to achieve its stated aims.

It will, however, line the pockets of Goldman Hank’s buddies on Wall Street, and it will ensure that the Federal treasury is completely empty, so that – regardless of what he’s ready to do on Day One – the next President will find himself searching in vain for a dollar to spend.

Maybe that’s why Barack Obama keeps asking for “change”!

Do you also want to write a nice papers? Use help of Speedy Paper!

“If money isn’t loosened up, this sucker could go down,” President Bush declared Thursday as he watched the $700 billion bailout package fall apart before his eyes, according to one person in the room.

The entire New York Times article about Thursday night’s collapse of the bailout plan is really worth a read, if only for the Bush quote (above) and for this gem:

Thursday, in the Roosevelt Room after the session, the Treasury secretary, Henry M. Paulson Jr., literally bent down on one knee as he pleaded with Nancy Pelosi, the House Speaker, not to “blow it up” by withdrawing her party’s support for the package over what Ms. Pelosi derided as a Republican betrayal.

“I didn’t know you were Catholic,” Ms. Pelosi said, a wry reference to Mr. Paulson’s kneeling, according to someone who observed the exchange. She went on: “It’s not me blowing this up, it’s the Republicans.”

Mr. Paulson sighed. “I know. I know.”

Good times.

Ahhh, how I love the politcal mashup….

The photo above commemorates President Bush’s signing of the USA PATRIOT Act just weeks after the terrorist attacks of September 11, 2001. That scene – the President signing a gargantuan piece of legislation that fundamentally alters the landscape of our society, with the support of legislators who haven’t even read the bill – is likely to be repeated sometime next week when President Bush signs sweeping legislation that gives away the entire contents of the US Treasury to select financial institutions in the form of a “bailout.”

One interesting tidbit leaked out today. Federal Reserve chairman Bernanke and Treasury Secretary Paulson are on record as saying that this legislation must be passed immediately – this is a crisis, and the markets demand action now!

But apparently the bailout bill has been in the works – secretly – for months, without any input from members of Congress (never mind from representatives of labor unions, consumer groups, or other such rabble):

[White House spokesman Tony] Fratto insisted that the plan was not slapped together and had been drawn up as a contingency over previous months and weeks by administration officials. He acknowledged lawmakers were getting only days to peruse it, but he said this should be enough.

That little gem comes from an inside-Washington newspaper called Roll Call.

Keep it in mind, folks, as the days progress: the Bush administration has been working on their final plan to loot the Federal treasury and reward their friends for months. They did all that hard work in complete secrecy, so that, when the moment of maximum crisis was upon us, they could drop the package in the Congress’s lap, and demand “act now!”

Sound familiar?

Ian Welsh painted the scene nicely over at Firedoglake:

So there was “Goldman” Hank, holding a gun on the economy and staring Congress down. “Give me the 700 billion, or the economy gets it!” he threatened.

(Above, Sheriff Bart (played by Cleavon Little) takes himself hostage in Mel Brooks’s 1974 Blazing Saddles. With Paulson himself a former Chairman of Goldman Sachs, the image of Paulson holding a gun on the economy might, in fact, look something like this.)