Treasury Secretary Paulson's Three-Part Plan:

Panic; Change Pants; Rinse And Repeat

July 14, 2008 (LPAC)--The ever-growing bailout of the bankrupt
global financial system took a giant leap toward the
hyperinflationary abyss over the weekend, with the announcement
that the U.S. government will provide open-ended funding to
bankrupt mortgage giants Fannie Mae and Freddie Mac. In an
announcement on Sunday, July 13, Treasury Secretary Henry Paulson
announced "a three-part plan for immediate action." First, as a
"liquidity backstop," the line of credit the two firms have at
the Treasury will be increased. Second, the plan would give
Treasury the authority to purchase equity in the firms as
necessary, and third, the plan would give the Fed a role in
overseeing the two firms. Paulson said he consulted the Fed, the
Office of Federal Housing Enterprise Oversight (OFHEO, which
regulates Fannie and Freddie), the SEC, Congressional leaders of
both parties, and Fannie and Freddie. The same day, the Fed
announced that it has instructed the New York Fed to provide
loans to Fannie and Freddie "should such lending prove
necessary." The heads of the Senate and House banking committees,
Chris Dodd and Barney Frank, respectively, have indicated support
for the proposals and will try to have legislation on the
President's desk by the end of this week.

Several crucial points must be made about this plan:

* This is not a bailout of Fannie Mae and Freddie Mac, but a
part of the continuing effort to protect the artificial
valuations of trillions of dollars of speculative securities and
quadrillions of dollars of derivatives bets, as a way of staving
off the complete collapse of the global banking system. Fannie
and Freddie are vehicles for this bailout, which would
essentially protect the banks by shifting their losses to Fannie
and Freddie, and thus to the government and the taxpayers. Far
from saving Fannie Mae and Freddie Mac, this plan will destroy

* To fund this monstrosity, the U.S. Government, and thus
the U.S. economy, will take on a huge amount of debt, which it
does not have the ability to repay. The Government is already
broke, and the economy has already collapsed under the weight of
the huge debts it has incurred over the past four decades of
de-industrial, pro-speculation economy policy. The Ding-a-ling
Brothers can say whatever they want, but we're still broke, and
taking on more debt to try to bail your way out of a debt crisis
is completely nuts.

* The Fed has already pumped $1.2 trillion into the banking
system through the emergency bailout facilities it set up over
the past half-year, and has nothing to show for it except failed
banks and soaring prices for oil and food. Now it wants to expand
that bailout further. The bailouts, the Bush stimulus program,
the regulatory forbearance and fantasy bookkeeping, have all
failed, and now the plan is for an even bigger debt-recycling
plan. All this is doing is accelerating hyperinflation in the
financial markets, and causing soaring prices which are killing
the American people.

* The financial system is dead and cannot be revived. The
only rational solution is to admit the truth, put the system
through bankruptcy, and implement a new system based upon
restoring the productivity of the American economy. It's either
that, or a hyperinflationary blowout of the dollar and a new Dark
Age. [jph]