[QUOTE=Fusion_power;143825]Washington Mutual bit the dust tonight and J.P. Morgan just got bigger by swallowing the debris. Politicians are doing what politicians do best, arguing.

Get ready for the big one folks, this looks really BAD.

DarJones[/QUOTE]I agree. This week I listened to Senate and House sessions on C-SPAN. While not that enamored with the Treasury Secretary Paulson, I listened as He and FRB Chairman Bernake fielded tough questions. I was much more impressed listening to Congressional Budget Office Director Peter R. Orszag talking in session with the Senate and his careful, clear answers, varying from simple to complex as needed with straight responses and no squirming or evading. Basically the suggested compromise [URL="http://blogs.wsj.com/economics/2008/09/25/text-of-lawmakers-agreement-on-principles/"]Agreement on Principals[/URL] that emerged was possibly workable. My greatest remaining concern was the determination of prices to be paid for the toxic securities. There appeared to be commendable bipartisan effort despite all the pressures of time-line and upcoming campaigns.

Then all the work seemed to fall apart. I hope Friday looks better.

[QUOTE=ewmayer;143810][url=http://online.wsj.com/article/SB122238415586576687.html?mod=yahoo_hs&ru=yahoo]J.P. Morgan to Take Over Faltering WaMu[/url]: [i]U.S. Government Helps Broker a Deal to Dispose of Huge Thrift; Banking Giant Expected to Get Deposits, Branches[/i][/QUOTE][URL="http://www.nytimes.com/2008/09/26/business/26wamu.html?em"]Government Seizes WaMu and Sells Some Assets[/URL][QUOTE]But the seizure and the deal with JPMorgan came as a shock to Washington Mutual’s board, which was kept completely in the dark: the company’s new chief executive, Alan H. Fishman, was in midair, flying from New York to Seattle at the time the deal was finally brokered, according to people briefed on the situation. Mr. Fishman, who has been on the job for less than three weeks, is eligible for $11.6 million in cash severance and will get to keep his $7.5 million signing bonus, according to an analysis by James F. Reda and Associates.[/QUOTE]

[QUOTE=R.D. Silverman;143819]This discussion has turned silly. While it might make people feel good
to point the finger of blame at the party they dislike the most: i.e.
republitards or demotwits , it does nothing to solve the problem.

There is plenty of blame for everyone: both parties, several presidents,
greedy banks, fed chairmen, homeowners who took loans they could
not pay, the SEC, policies that allowed one company to take an
unreasonable risk, then sell it off to another, banks that were forced
by law to sell to bad risk customers, (i.e. no redlining), laws that
allowed UNEMPLOYMENT COMPENSATION to count as "income" for
loan purposes, etc. etc. etc.

The blame game does not solve the problem. I don't like what has
happened to the value of my IRA.... Let's fix the problem instead
of trying to afix blame.[/QUOTE]Hear hear!

Paul

Given that they're liquidating institutions which are too big to fail by consolidating them into larger institutions, I don't see how this does more than push the day of reckoning back a few months.

If several major brokers in treasuries seize up, and it really threatens the auctions, then that's grave. Beyond the obvious threat to further government borrowing, it might cramp the Fed's ability to create money by purchasing treasuries.

The press is pushing this: from both local and national news outlets, there's no discussion of whether or not something should be done, but only pressing questions from every interviewer and anchor as to when something will be done. The media have assumed that doing nothing is out of the question.

WaMu: Connect the dots, see a vulture
 

Forgot to post this yesterday morning [things were really quite busy here around SMMM Headquarters]:

[url=http://yellowroad.wallstreetexaminer.com/blogs/2008/09/24/221/]The Yellow Brick Road | Connect the dots, see a vulture[/url] [Click on original article to see inline story links]
[quote]I want to play a kids game of connecting the dots on the list about the future of some of the troubled banks. The dots are:

* GS and MS getting a banking license. I suppose if they planned to buy a bank they don’t need a license, as it will come automatically. You need a license if you plan to build a new bank from pieces
* GS is raising $10, potentially $15 billion in a rush deal with Buffett and on the secondary market
* GS is indicating that it plans to buy some banking assets at the open market
* Both S&P and Fitch downgraded WaMu tonight
* There is a bank run on the Bank of East Asia
* Congress is voting to give Paulson $700 billion to purchase distressed financial assets and Buffett supports the plan

What do I see from here is that there is an immediate plan to feed stronger banks with meat of failing banks and unload remaining assets to the new treasury fund.

If I am right, nobody plans to bail-out WaMu. WaMu will be taken over by FDIC very soon, could be as soon as this weekend. The potential buyers of branches and deposits are most likely already negotiating with FDIC. The branches and deposits will be taken over by Monday, the rest of the assets will go to Treasury. If it plays nice, the whole procedure will be repeated 100 times. We have a lot of distressed banks.[/quote]

And a similar "though this is madness, yet there be method in’t" sentiment is expressed by a [url=http://globaleconomicanalysis.blogspot.com/2008/09/take-back-america.html]leading economist[/url]:
[quote]"I suspect that part of what we're seeing in the freezing up of lending markets is strategic behavior on the part of big financial players who stand to benefit from the bailout," said David K. Levine, an economist at Washington University in St. Louis, who studies liquidity constraints and game theory.[/quote]
The Fed has also been actively draining huge amounts of liquidity from the banking system [by way of reverse repos] for most of this week. Which begs the question: If, as Bernanke so often claims, this is a crisis of liquidity, why would he drastically be reducing the Fed`s now-routine liquidity injections into the banking system?

As Mish Shedlock notes in his commentary in the above article:
[quote]Tonight Washington Mutual went under. There have been 7 bank failures announce this year, all of them on a Friday. This one is on a Thursday. Game playing to create a sense of urgency? You tell me. What I will tell you is there is no need to rush into a $700 billion package when 190 economists, a current Fed governor, and a former Fed Governor all perceive the bailout for what it is: A bailout of Wall Street that will cost at a bare minimum $2,000 for every man woman and child in the United States.[/quote]


And [i]The Wall Street Examiner[/i]`s Russ Winter likes to use the analogy of the La Brea Tar Pits [La Brea is Spanish for "The tar", so the name "The La Brea Tar Pits" really amounts to "The the tar tar pits", which seems to suffer from a slight echo ... but I digress]:

[url=http://wallstreetexaminer.com/blogs/winter/?p=1933]Tar Pit Operation at Work[/url]
[quote]Friday, September 26th, 2008 at 7:38 AM

"Teker kirilinca yol gosteren cok olur" - "Many will point the right way after the wheel is broken" - Turkish Proverb

The JPM takeout of WAMU is significant and once again illustrates the “Tar Pit Operation”. Here are the details, and indicate (on its face) that no FDIC funds were involved.

1. Carrion is stuck in the Pit.

2. Saber Tooth (Friend of Hankenstein-FOH ) takes the Carrion in a government orchestrated “rescue” or “hand off”. Carrion shareholders and debt holders are completely wiped out. The FDIC gets brownie points for not taking a hit (or a small one), and can then point to the anti moral hazard lesson “to be learned”.

3. The assets and trashed securities of the Carrion are taken for a song.

4. A portion of the low cost basis trashed securities FOH (JPM in this instance) has taken are then marked up and profitably sold to the US Treasury’s deal making Leviathan.

The next step to look for is the Leviathan arrangement with Congress to emerge. They may now need a Black Friday or Monday demonstration to act, but act they will. A few more big banks will likely fail over the weekend providing the political cover. As part of the “compromise” Hankenstein’s Leviathan will come as a tranche deal (say $200 billion at first) whereby Hankenstein initially gets a “trial stash” to work with. Once Hankenstein gets the first tranche he works a smoke and mirrors razzle dazzle whereby fixed “prices” are established.

Since Fannie Mae and Freddie Mac have been seized as well, look for those and failed banks to be the center of the action. Securities Leviathan buys will also be flipped for small profits, and within weeks this will be revealed to the Public as part of a new found transparency propaganda machine. Leviathan will win brownie points for its early “wins” for the Taxpayers.

Unfortunately more “failures” will emerge as the Tar Pit fills up. Hankenstein will ask for and receive more tranches from Congress, and his role as middle man (wholesaler) to facilitate the monster asset handoff to FOHs will accelerate as will the hidden cost to the taxpayer. Hundreds of billions of assets are wholesaled in back door razzle dazzle transactions before January 20, 2009. Then Hank’s Boyz rip up and take the bathroom toilets off the walls, and a steaming sack of turds is left at the front door of the White House as a welcome present to the next President.[/quote]

[quote=R.D. Silverman;143819]While it might make people feel good to point the finger of blame at the party they dislike the most: i.e. republitards or demotwits , it does nothing to solve the problem.[/quote]You are correct, sir, in your response.

I apologize for intruding those unhelpful comments into this thread.

"Name the Bailout" Contest | Strange Scenes in DC
 

Suggest a "name the bailout" contest - we can take a poll late next week to pick a winner. Pet names with amusing acronyms are of course de riguer.

Saw this one on a Yahoo message board:
[i]
"Federal Interventionary Acquisition of Subprime Certificates Organization"
[/i]
Admittedly not my best effort [very busy @work today], but I submit
[i]
"Federal Regulation to Acquire Undervalued Debt Securities"
[/i]


Submitted: Among recent independent presidential candidates, Ron Paul is to Ross Perot as Maria Sharapova is to Anna Kournikova among female tennis players [i.e. perhaps less memorable, but much more competent] - Discuss!
[quote]Congressman Ron Paul

Statement before the Joint Economic Committee

“The Economic Outlook”

September 24, 2008

Mr. Chairman, I believe that our economy faces a bleak future, particularly if the latest $700 billion bailout plan ends up passing. We risk committing the same errors that prolonged the misery of the Great Depression, namely keeping prices from falling. Instead of allowing overvalued financial assets to take a hit and trade on the market at a more realistic value, the government seeks to purchase overvalued or worthless assets and hold them in the unrealistic hope that at some point in the next few decades, someone might be willing to purchase them.

One of the perverse effects of this bailout proposal is that the worst-performing firms, and those who interjected themselves most deeply into mortgage-backed securities, credit default swaps, and special investment vehicles will be those who benefit the most from this bailout. As with the bailout of airlines in the aftermath of 9/11, those businesses who were the least efficient, least productive, and least concerned with serving consumers are those who will be rewarded for their mismanagement with a government handout, rather than the failure of their company that is proper to the market. This creates a dangerous moral hazard, as the precedent of bailing out reckless lending will lead to even more reckless lending and irresponsible behavior on the part of financial firms in the future.

This bailout is a slipshod proposal, slapped together haphazardly and forced on an unwilling Congress with the threat that not passing it will lead to the collapse of the financial system. Some of the proposed alternatives are no better, for instance those which propose a government equity share in bailed-out companies. That we have come to a point where outright purchases of private sector companies is not only proposed but accepted by many who claim to be defenders of free markets bodes ill for the future of American society.

As with many other government proposals, the opportunity cost of this bailout goes unmentioned. $700 billion tied up in illiquid assets is $700 billion that is not put to productive use. That amount of money in the private sector could be used to research new technologies, start small business that create thousands of jobs, or upgrade vital infrastructure. Instead, that money will be siphoned off into unproductive assets which may burden the government for years to come.
The great French economist Frederic Bastiat is famous for explaining the difference between what is seen and what is unseen. In this case the bailout's proponents see the alleged benefits, while they fail to see the jobs, businesses, and technologies not created due to this utter waste of money.

The housing bubble has burst, unemployment is on the rise, and the dollar weakens every day. Unfortunately our leaders have failed to learn from the mistakes of previous generations and continue to lead us down the road toward economic ruin.[/quote]


Apparently some interesting scenes were witnessed in the last 24 hours on capitol hill: Wonder why Paulson was asking Pelosi for a knighthood - seems a tad premature...

[url=http://www.marketwatch.com/news/story/all-not-usual-washington-works/story.aspx?guid={79633BBC-9AB5-491A-B42B-BB4C95694ADB}]Marketwatch | All not as usual as Washington works on rescue[/url]
[quote]WASHINGTON (MarketWatch) -- The Secretary of the Treasury on bended knee before the Speaker of the House. A shouting match at a White House meeting -- which included the two presidential candidates -- while the president looked on. All was not normal in Washington as lawmakers tried to hammer out the most expensive financial rescue package in American history. [/quote]

[quote=ewmayer;143900]
Apparently some interesting scenes were witnessed in the last 24 hours on capitol hill: Wonder why Paulson was asking Pelosi for a knighthood - seems a tad premature...[/quote]

That's a great analogy ewmayer. But, a Knighting may be preferable to a Coronation at this point. Who will replace Paulson in JAN?

IMO, it's a damn[B] [U]Ponzi scheme[/U][/B] coming to it's end, except the promoters are the regulators!: The federal government, both parties, both branches, over the last 15 years have paved the way to where we are now.

I have no answers, only questions at this point. But, I do have an extra BAG to hold if anyone is in need.

Paulson ties taint bailout plan / Fortis Failing?
 

[url=http://www.guardian.co.uk/business/feedarticle/7831153]Paulson's banking ties taint Wall St bailout plan[/url]
[quote]Henry Paulson spent his life amassing a fortune on Wall Street. Now, as Treasury secretary, he is demanding unprecedented authority -- and $700 billion in cash -- to bail out the teetering U.S. banking sector.[/quote]


[url=http://www.weeklystandard.com/Content/Public/Articles/000/000/015/636zbhel.asp]Fortis About To Fail?[/url]
[quote]I've received phone calls in the last hour from two economists I respect, one of them Larry Lindsey, the other in a position where he'd prefer not to be named. Both have government experience, neither is alarmist by nature, and they say this:

The huge European bank Fortis is apparently about to fail. The ripple effect on the American banking system could be disastrous, with bank runs, liquidity crises, and stock sell offs possible Monday. Wachovia may well fail next week. As Larry put it, this really will be 1933 soon if we don't move rapidly to stabilize the banking system.

And here's the bad news: the current bailout bill, whatever its merits and likelihood of passage, does nothing to address this.[/quote]


[url=http://www.nytimes.com/2008/09/27/business/27sec.html?_r=1&oref=slogin]S.E.C. Concedes Oversight Flaws Fueled Collapse[/url]
[quote]WASHINGTON — The chairman of the Securities and Exchange Commission, a longtime proponent of deregulation, acknowledged on Friday that failures in a voluntary supervision program for Wall Street’s largest investment banks had contributed to the global financial crisis, and he abruptly shut the program down.

The S.E.C.’s oversight responsibilities will largely shift to the Federal Reserve, though the commission will continue to oversee the brokerage units of investment banks.

Also Friday, the S.E.C.’s inspector general released a report strongly criticizing the agency’s performance in monitoring Bear Stearns before it collapsed in March. Christopher Cox, the commission chairman, said he agreed that the oversight program was “fundamentally flawed from the beginning.”

“The last six months have made it abundantly clear that voluntary regulation does not work,” he said in a statement. The program “was fundamentally flawed from the beginning, because investment banks could opt in or out of supervision voluntarily. The fact that investment bank holding companies could withdraw from this voluntary supervision at their discretion diminished the perceived mandate” of the program, and “weakened its effectiveness,” he added.

Mr. Cox and other regulators, including Ben S. Bernanke, the Federal Reserve chairman, and Henry M. Paulson Jr., the Treasury secretary, have acknowledged general regulatory failures over the last year. Mr. Cox’s statement on Friday, however, went beyond that by blaming a specific program for the financial crisis — and then ending it.

...

The program Mr. Cox abolished was unanimously approved in 2004 by the commission under his predecessor, William H. Donaldson. Known by the clumsy title of “consolidated supervised entities,” the program allowed the S.E.C. to monitor the parent companies of major Wall Street firms, even though technically the agency had authority over only the firms’ brokerage firm components.
[b]
The commission created the program after heavy lobbying for the plan from all five big investment banks. At the time, Mr. Paulson was the head of Goldman Sachs. He left two years later to become the Treasury secretary and has been the architect of the administration’s bailout plan.
[/b]
The investment banks favored the S.E.C. as their umbrella regulator because that let them avoid regulation of their fast-growing European operations by the European Union. [/quote]


[url=http://online.wsj.com/article/SB122238812195977243.html?mod=googlenews_wsj]Short-Sale Ban Wallops Convertible-Bond Market[/url]
[quote]The Securities and Exchange Commission's ban on short selling of financial stocks has effectively shut down much of the convertible-bond market, a crucial area of financing for struggling companies.

...

"At least 75% of investors" in convertible securities hedge their positions, Elliot Bossen, chief investment officer of Chapel Hill, N.C., Silverback Asset Management, wrote in a letter to the SEC and lawmakers Wednesday. "This important source of capital will disappear entirely," if the rules remain in effect, he wrote, adding that the SEC's move "contributed to the seizing up of liquidity in the market for convertible securities."[/quote]

Rumors are flying this evening.

I've heard one that Wachovia is desperately seeking a buyer, another that a major European bank is on the ropes, and a third that an english bank is to be taken over tonight.

I'd rather have facts than rumors.

Giant Fortis partially nationalized / The Bailout
 

[QUOTE=Fusion_power;144015]Rumors are flying this evening.

I've heard one that Wachovia is desperately seeking a buyer, another that a major European bank is on the ropes, and a third that an english bank is to be taken over tonight.

I'd rather have facts than rumors.[/QUOTE]

[url=http://money.cnn.com/2008/09/28/news/international/fortis_nationalized.ap/index.htm]Huge European bank fails[/url] - [i]European financial giant Fortis partially nationalized. Three governments to pour 11.2 billion euro ($16.4 billion) into the bank.[/i]
[quote]BRUSSELS, Belgium (AP) -- Dutch-Belgian bank and insurance giant Fortis NV was given a 11.2 billion euro ($16.4 billion) lifeline to avert insolvency as part of a wider bailout plan agreed to by Belgium, the Netherlands and Luxembourg, officials said Sunday.

Belgium's Prime Minister Yves Leterme said the bailout shows account holders and investors that Fortis will not be allowed to fall victim to the global credit crisis.

Leterme announced the deal after weekend talks between the three countries, European Union and national banking officials.

The deal will force the bank -- which has headquarters in both Brussels and the Dutch city of Utrecht -- to sell its stake in Dutch bank ABN Amro, which it partially took over last year. Fortis paid 24 billion euros for its share of ABN.

Fortis Chairman Maurice Lippens will be forced to resign and will be replaced by a candidate from outside the company, Leterme said.[/quote]


Perhaps the "British Bank" you referred to is just-nationalized UK Mortgage giant [url=http://www.guardian.co.uk/business/2008/sep/29/bradfordbingley.banking]Bradford & Bingley[/url]?

============================

[url=http://www.nakedcapitalism.com/2008/09/aig-bailout-saved-goldman.html]AIG Bailout Saved Goldman From Major Loss[/url]
[quote]Gretchen Morgenson in the New York Times reports that Goldman and no other Wall Street firm was involved in the AIG rescue talks and an AIG failure would have created a hole as big as $20 billion in Goldman's balance sheet.

This is special dealing, pure and simple. Even if AIG needed to be salvaged (there was considerable agreement on this point), having Goldman deeply involved in the process is cronyism. But that's been a staple of this Administration.[/quote]


[url=http://money.cnn.com/2008/09/28/news/economy/Sunday_talks_bailout/index.htm]Rescue bill released[/url] - [i]Lawmakers unveil plan to enact historic bailout of nation's financial system.[/i]
[quote]NEW YORK (CNNMoney.com) -- The federal government would provide as much as $700 billion in a far-reaching plan to rescue the nation's troubled financial system, according to a bill posted online by leading Democratic lawmakers on Sunday.

House Speaker Nancy Pelosi said she hopes the House will take up the bill on Monday. Sen. Majority Leader Harry Reid, D-Nev., said he believes the Senate can move on the legislation as early as Wednesday.

Pelosi said the provisions added by Democrats will protect taxpayers from having to pay for the bailout.

"We sent a message to Wall Street - the party is over," she said at a press conference with Reid and other Democratic leaders from the House and Senate.

The core of the bill is based on Treasury Secretary Henry Paulson's request for authority to purchase troubled assets from financial institutions so banks can resume lending and so the credit markets, now virtually frozen, can begin to operate more normally.

But Democrats and Republicans - concerned about the potential taxpayer cost - have added several conditions and restrictions. Key negotiators for the financial rescue plan will be busy trying to line up votes on Capitol Hill on Sunday to support the accord they reached soon after midnight.

Among the provisions of the draft bill:

* The $700 billion would be disbursed in stages, with $250 billion made available immediately for the Treasury's use.
* Curbs will be placed on the compensation of executives at companies that sell mortgage assets to Treasury. Among them, companies that participate will not be able to deduct the salary they pay to executives above $500,000.
* An oversight board will be created. The board will include the Federal Reserve chairman, the Securities and Exchange Commission chairman, the Federal Home Finance Agency director and the Housing and Urban Development secretary.
* Treasury is allowed the option to take ownership stakes in participating companies under certain circumstances.
* Treasury may establish an insurance program - with risk-based premiums paid by the industry - to guarantee companies' troubled assets, including mortgage-backed securities, purchased before March 14, 2008.
* One provision requires the president to propose legislation to recoup losses from the financial industry if the rescue plan results in net losses to taxpayers five years after the plan is enacted.[/quote]
[b]My Comments:[/b]
- I see a huge amount of taxpayer money thrown at a problem, with very uncertain prospects of anywhere close to a full return - the talk about "we may very well make money" is based on extremely optimistic economic-recovery and housing-market-bottom predictions.
- "companies that participate will not be able to deduct the salary they pay to executives above $500,000" is meaningless if it does not include non-salary compensation.
- The proposed oversight board sounds like the Fox guarding the Henhouse.
- "Treasury is allowed the option to take ownership stakes in participating companies under certain circumstances" ... could you possibly put that even more vaguely?
- "Treasury may establish an insurance program" ... maybe AIG could provide the insurance - after all they are now a division of the U.S. Treasury.
- "propose legislation to recoup losses from the financial industry if the rescue plan results in net losses" ... again, this is oh-so deliciously vague. Even if it came to pass, the companies could just pull the "punishing still-fragile financial firms could send the economy back into recession" card.


[url=http://money.cnn.com/2008/09/25/news/economy/sloan_crash.fortune/index.htm]Fortune - Beltway medicine men[/url] - [i]Don't be surprised if the cure conjured up by Washington fails to solve the market's woes.[/i]
[quote]What I find especially disturbing is that the Fed's post-Bear-Stearns-collapse program to lend to investment banks didn't forestall runs on investment banks, and Paulson's guarantee of Fannie Mae and Freddie Mac debt didn't settle those markets, forcing the Treasury to take the companies over. I thought both those programs would work.

It's going to take quite a while to see whether the debt markets' depression is lifted by the bailout - I wouldn't place much faith in early reports.

And let's not forget that there's a long-term psychological cost to this fix: It has enraged ordinary taxpayers-and rightly so. Don't be surprised if they lose faith in the supposed miracle of free markets, and in the financial system, and in the Fed and Treasury, which - unlike Washington pols - have been generally revered. That loss, in fact, may be the bailout's biggest cost of all.[/quote]


[url=http://money.cnn.com/2008/09/26/news/economy/easton_backlash.fortune/index.htm?postversion=2008092811]Main Street turns against Wall Street[/url]- [i]A populist backlash is changing America's political climate. And it could haunt business leaders for years to come.[/i]
[quote]Despite the dire warnings of financial calamity from the White House and a few high-profile business leaders, much of Middle America wasn't buying the story that their own livelihoods were linked to the fate of the rescue package. Instead, average workers read the plan as the "big guys bailing out their friends," says former House Speaker Newt Gingrich, who commissioned a bipartisan survey on the subject. Gingrich's poll - conducted by Schoen and Republican Kellyanne Conway - found that a majority of Americans don't want Congress to use taxpayer dollars to bail out financial institutions, even if their collapse means a rocky ride for investors in the stock market.

The White House was knocked off-balance by potent blowback over the plan - not from the expected (read: liberal) quarters but from shopping-mall America. Morning talk-show hosts like Regis and Kelly shook their heads in disgust. Constituents in rural southern Illinois - a Republican district - phoned in their opposition to Congressman John Shimkus in a ratio of 200 to 1.

...

Gingrich argues that the rise in American populism is not a revolt against business alone but a revolt against all elites, including government and media elites. In his mind this is the age of the populist Andrew Jackson, not the socialist Eugene V. Debs. "We have a national establishment that talks to itself," he says, "an elite that is dramatically out of touch with the people in a way that is not sustainable." By this thinking, Wall Street veteran Paulson touched off a populist revolt not only in the substance of what he proposed, but also in the style in which he proposed it - massive Treasury spending with minimal congressional control and no judicial oversight, which critics condemned as a "power grab."

There's much evidence to support the contention that Americans are disgusted with government officials as much as they are with business leaders. And, indeed, despite the tarnished reputation of corporate America, most people still tell pollsters they credit American business with being the backbone of the economy. So the American left shouldn't be lulled into thinking this is a revolt in favor of much bigger government. Still, the first fallout will be new laws to increase financial regulation. For the time being the bailouts have undermined the GOP argument that markets work best when left alone. Only last November, Dick Cheney told Fortune his main concern about the mortgage crisis was an overreaction by the government. "The fact is, the markets work, and they are working," he said. "We have to be careful not to have this set of developments lead us to significantly expand the role of government in ways that may do damage long-term for the economy." Ten months later the Vice President was forced to peddle the biggest government bailout in history to conservative friends on Capitol Hill. (The result was described by one participant as an "unmitigated disaster.") It will also be impossible - in the foreseeable future - for a Republican president to sell Congress any version of private accounts to augment Social Security.[/quote]