Saturday, September 22, 2007

Bush's "Final Solution" or Why Bush Will Nuke Iran

by Len Hart, The Existentialist Cowboy

Bush's plan for a "Final Solution" were revealed by Bush himself in off the cuff remarks that he made to former French President Jacques Chirac. Bush's speeches have always been "apocalyptic". It's not surprising that Bush would find in biblical "prophecy" a role that in his delusional state, he sees himself playing out. Unlike Hitler's Final Solution, the Bush version is lifted right out of the Old and the New Testaments. It's an apocalyptic vision of a final battle, a "final solution" in the Middle East.

Of course it's all psychotic but tell that to Bush and his religious minions who accept it as "the" Gospel. Don't forget --Bush has threatened the hard rain of nukes to trigger it all.
Added: Sep 19th, 2007 6:30 AM

In 2003, University of Lausanne theology professor Thomas Römer received a telephone call from the Elysée. Jacques Chirac's advisers wanted to know more about Gog and Magog ... two mysterious names pronounced by George W. Bush while he was attempting to convince France to enter the war in Iraq at his side. In its September edition, the University of Lausanne's review, Allez savoir, reveals this story that could seem fantastic did it not, as Allez savoir's Editor-in-Chief Jocelyn Rochat emphasizes, reveal the religious underpinnings of Bush's policy.

Apocalyptic prophecy: Bush would have declared to Chirac that Gog and Magog were at work in the Middle East and that the Biblical prophecies were in the process of being fulfilled. That was several weeks before the intervention in Iraq. The French president, to whom the names of Gog and Magog meant nothing, was stupefied.

In Allez savoir, Thomas Römer details: Gog and Magog are two creatures who appear in Genesis, and especially in the most arcane chapters of the Old Testament Book of Ezekiel. An apocalyptic prophecy of a global army giving final battle in Israel.

"This confrontation is willed by God, who wants to use this conflict to erase his people's enemies before a New Age begins," continues Thomas Römer.

According to him, George W. Bush is not the first to look for an incarnation of Gog and Magog on earth. Ronald Reagan had deemed that the cold war and the atomic bomb's existence made Ezekiel's prophecy realizable....

If today the University of Lausanne reveals these explanations Thomas Römer supplied to Jacques Chirac, it's because the latter has left the Elysée. For Jocelyn Rochat, this little international policy professional secret raises a vast question: our lack of religious education, our ignorance of Scriptures at a time when religious foundations are far more crucial than we'd like to believe in political and military decisions. Religion is not confined to the private sphere, Jocelyn Rochat concludes. A parameter to take into account "at the risk of no longer understanding the way the world works today."

A Little Scoop on Bush, Chirac, Gog, Magog, and the End of the World

--A Little Scoop on Bush, Chirac, God, Gog and Magog, Jacques Sterchi, Rue89 in partnership with La Liberté, Fribourg
What does all this mean? Bush either fancies himself the Messiah or, possibly, Satan Incarnate whose mission is to deceive all the nations of the world to begin the last war --Armageddon, a Final Solution.

It is not unusual for those suffering profound psychosis to cast themselves in "biblical" roles. Bush will play out a script in which he uses the peoples of the world as pawns. Based upon his remarks to Chirac, we may reasonably conclude that his script is found in Revelation 20:1-10
And I saw an angel coming down out of heaven, having the key to the Abyss and holding in his hand a great chain. He seized the dragon, that ancient serpent, who is the devil, or Satan, and bound him for a thousand years.

He threw him into the Abyss, and locked and sealed it over him, to keep him from deceiving the nations anymore until the thousand years were ended. After that, he must be set free for a short time. I saw thrones on which were seated those who had been given authority to judge. And I saw the souls of those who had been beheaded because of their testimony for Jesus and because of the word of God. They had not worshiped the beast or his image and had not received his mark on their foreheads or their hands. They came to life and reigned with Christ a thousand years. (The rest of the dead did not come to life until the thousand years were ended.) This is the first resurrection.

Blessed and holy are those who have part in the first resurrection. The second death has no power over them, but they will be priests of God and of Christ and will reign with him for a thousand years.

When the thousand years are over, Satan will be released from his prison and will go out to deceive the nations in the four corners of the earth--Gog and Magog--to gather them for battle. In number they are like the sand on the seashore. They marched across the breadth of the earth and surrounded the camp of God's people, the city he loves. But fire came down from heaven and devoured them.

And the devil, who deceived them, was thrown into the lake of burning sulfur, where the beast and the false prophet had been thrown. They will be tormented day and night for ever and ever.

--Revelation 20:1-10
Bush has said that he will not be "cowed" by international pressures and opinions denouncing his plans to wage pre-emptive, nuclear war on Iran. Certainly Bush has made the bald faced lie his modus operandi. Nevertheless, when Bush often tells the truth inadvertently, it always lays bare a murderous cretin, contemptuous of intelligence, desirous of absolute power for the ego strokes it gets him. Such moments include the ridicule he heaped upon Karla Faye Tucker, awaiting death by injection in a cell on death row deep inside the gulag state of Texas. Such moments include his revelatory quip: "I just won the trifecta!" Equally repugnant his "plans" for America: "This would be a whole lot easier if this was a dictatorship...jest as long as I'm the dictator!"
I am quite certain that what is denied in public is discussed in private. What is obvious to anyone certainly cannot be a mystery to the elites. Now we might imagine it's Nero all over again, at least the Nero of popular myth who "fiddled while Rome burned". But these grey-faced, grey-suited, somber, soured souls are not hedonists nor are they acting like Hitler's cronies in the Berlin bunker. They aren't looking to solutions and they aren't going out with one last party. To my mind that leaves only one possible scenario.

They know what's coming and they don't care because they don't intend for most of us to survive. Reduce the population by 90-95% and none of this makes any difference. There's plenty of oil, plenty of places on the planet to move to, even if the coastlines of the continents are under water. Things start to look much different if you imagine a world of at most a few hundred million. Quite honestly, as far as I can see, that's the only future in which what's going down right now can end well for anyone.

In that context the aggregation of wealth and power become paramount. It's like the back end of a poker tournament. Wars become very useful in a variety of ways. They help the population reduction. They distract the masses. They provide tangible "enemies" while masking the common enemy. They inure people to all sorts of cruelty and inhumanity. And they garner chips so that the winners have more clout in the competition between elites after the die-off begins.

If I were a member of the elites, and possessed that sense of innate superiority and lack of compassion and morality that mark those who are visible members, it's what I'd do. It just makes sense. And it's already begun in Africa and elsewhere.

Of course, it's totally unnecessary, but the alternatives are as unthinkable to the elites as this idea is to most of us. There is a path to a sustainable economy but it involves massive decentralization and localization. It collapses the corporations, destroys the elites, and creates a world in which there are neither rich nor poor. It's what some of us call the better world, Possible. But it's anathema to fat cats and the power brokers. ...

--Len Harrison

It's easy enough to believe its true. It's in Bush's make up. Bush does tell the truth inadvertently and when he does so, it reveals hideous truths about the dark soul he sold long, long ago. About, Iran, we may believe the indications that have now put the leaders of Europe on quiet alert. Bush plans a nuclear strike on Iran.

Everything in its place. Bush, upon his whim and order, may simply drop the nukes on Iran. We may awaken one day to the aftermath of nuclear holocaust. We might brace ourselves for yet another holocaust as a result.

Bush may seem incomprehensible to sane people but that's because Bush is insane. If you suspend normal modes of thought and, for a moment, indulge the psychotic fantasies that obviously rule Bush's life, his modus operandi all begins to make sense.

Friday, September 21, 2007

George W. Bush Tries to Avoid the Death Penalty

by Len Hart, The Existentialist Cowboy

Bush is trying to pardon himself of horrible war crimes --a desperate attempt to escape the death penalty for which he is subject under US Criminal Codes.

Bush is trying to ram through Congress legislation that will pardon him and his criminal gang of thugs for the felonies that they have already committed ---torture and murder! His action to pardon himself is proof of his guilt.
§ 2441. War crimes

(a) Offense.— Whoever, whether inside or outside the United States, commits a war crime, in any of the circumstances described in subsection (b), shall be fined under this title or imprisoned for life or any term of years, or both, and if death results to the victim, shall also be subject to the penalty of death.

It is not only the civilian dead --well over a million in Iraq alone --for which Bush may be held to account. It is also the campaign of torture carried out in a gulag Archipelago from Iraq to Eastern Europe. There is no evidence that these heinous acts by the US have resulted in any reliable information about a war of terrorism in which most of the terror is perpetrated by Bush.

The US "President" is a pervert, whose administration has made terrorism worse as did the horrific administration of Ronald Reagan. [See: Terrorism is Always Worse Under GOP Regimes]

The American people simply must face a horrible reality. George W. Bush rules by decree and eschews the very rule of law. Bush has undermined every democratic principle. He has waged a campaign of war crimes, state sponsored murder, and torture not seen since the Third Reich. The lessons of history are found in the transcripts of the Nuremberg Trials. Justice Robert Jackson, depicted above, had hoped that the Nuremberg would make future war crimes impossible within the framework of international law. He could not have imagined that his own country would one day be among the worst offenders.

If the rule of law means anything in the US, then this legislation must not be allowed to pass. But given Congress' cowardly denunciation of for practicing nothing more than Constitutionally guaranteed free speech, I am not optimistic. Rather, Congress, Democrats including, will kiss Bush sorry ass and it, in a cowardly act of betrayal, it will tell the American people that Bush is above the law while everyone else is expected to pay him obeisance.

This legislation will consign "the rule of law" to oblivion. Bush will have consolidated his dictatorial power. He will never be held to account for some of the most heinous crimes ever committed on this planet. He will have joined a rogue's gallery of war criminals in the hall of infamy. America R.I.P.

History Will Not Absolve Us: Leaked Red Cross report sets up Bush team for international war-crimes trial

Nat Hentoff

Global Research, September 20, 2007
Village Voice - 2007-08-28

If and when there's the equivalent of an international Nuremberg trial for the American perpetrators of crimes against humanity in Guantánamo, Iraq, Afghanistan, and the CIA's secret prisons, there will be mounds of evidence available from documented international reports by human-rights organizations, including an arm of the European parliament-as well as such deeply footnoted books as Stephen Grey's Ghost Plane: The True Story of the CIA Torture Program (St. Martin's Press) and Charlie Savage's just-published Takeover: The Return of the Imperial Presidency and the Subversion of American Democracy (Little, Brown).

While the Democratic Congress has yet to begin a serious investigation into what many European legislators already know about American war crimes, a particularly telling report by the International Committee of the Red Cross has been leaked that would surely figure prominently in such a potential Nuremberg trial. The Red Cross itself is bound to public silence concerning the results of its human-rights probes of prisons around the world-or else governments wouldn't let them in. ...

I urge the creation of a broad based coalition consisting of the American Civil Liberties Union,, the 911 truth movement and other groups independent of both major political parties. It's goal should be nothing less than bringing to justice George W. Bush, Dick Cheney, Donald Rumsfeld and the other architects of Bush's war crimes in Afghanistan and Iraq.

I am beginning to feel guilty for having tipped Bush off. As I recall, I wrote about his culpability for capital crimes shortly after the "Shock and Awe" campaign in which some 30,000 civilians died. Bush's order thus makes his culpable for the civilian deaths resulting.

Try Bush for war crimes, urges US combat veteran

Mark Dodd | September 05, 2007

GEORGE W. Bush should be tried as a war criminal for his role in launching the 2003 invasion of Iraq, and the Howard Government is culpable for supporting him, a US anti-war activist claims.

The US President and John Howard were committed to a failing war that was being waged for oil and economic motives, former US marine and two-time combat tour veteran Matt Howard said in Sydney yesterday.

The anti-war movement was growing in the US, and veterans had a responsibility to tell the truth about what was happening in Iraq, Mr Howard, 26, told a news conference at the Alternative APEC Centre in Sydney's Trades Hall.

The Prime Minister's support for the war provided "political cover" to Mr Bush's "dangerous political agenda", said Matt Howard.

His message on behalf of the Iraq Veterans Against the War was timed to coincide with the arrival in Sydney of Mr Bush for the APEC summit.

Tactically, Australia's 900-strong military contribution in Iraq was so small it made no difference compared with the 160,000 US troops there, but politically it was indispensable for the Bush White House, Matt Howard said.

"We've destroyed Iraq and it's been done in our name, and the Australian Government is involved," he said.

"In 2003, I illegally invaded Iraq. We left a swath of destruction all the way from Basra to Baghdad."

Mr Bush should be tried for crimes against humanity over the killing of the tens of thousands of Iraqi men, women and children who were victims of the war, Mr Howard said.

Meanwhile, Foreign Minister Alexander Downer said the Government was "entirely comfortable" with Britain's decision to withdraw its troops from their base in the southern city of Basra and redeploy them in the nearby airport.
We might also recall Bush's callous reaction to the impending execution of Karla Faye Tucker.
In pondering the relationship between governors and the prisoners over whom they have power of life and death, I find myself remembering the single worst thing I ever heard about President Bush. It was something Bush, then governor of Texas, said to a reporter during his first presidential campaign. The reporter in question was Tucker Carlson—hardly a hostile figure—and Carlson reported it in Talk magazine in 1999. It was about Karla Faye Tucker, a convicted murderer whose execution Bush, as governor, had refused to stay. Here is what Carlson wrote (as quoted in National Review, another source hardly known to be hostile toward Republicans):

In the week before [Karla Faye Tucker's] execution, Bush says, Bianca Jagger and a number of other protesters came to Austin to demand clemency for Tucker. "Did you meet with any of them?" I ask.

Bush whips around and stares at me. "No, I didn't meet with any of them," he snaps, as though I've just asked the dumbest, most offensive question ever posed. "I didn't meet with Larry King either when he came down for it. I watched his interview with [Tucker], though. He asked her real difficult questions, like 'What would you say to Governor Bush?' "

"What was her answer?" I wonder.

"Please," Bush whimpers, his lips pursed in mock desperation, "don't kill me."

The ugliness of a sitting governor mocking a prisoner's plea to spare her life horrified Carlson, especially after he looked up the transcript of Karla Faye Tucker's appearance on Larry King Live and discovered that nowhere did it show the prisoner asking Bush to stay the execution. It horrified a lot of other conservative journalists, too, including George Will, Richard Brookhiser, and the editorial page of the Manchester Union Leader in New Hampshire.

--Slate, Bush's Tookie

Everything We've Been Told Is a Lie!

The US Senate has gone on record against free speech, condemning the citizen's organization for criticizing Gen. Petraeus who has assumed PR duties for the White House. Petraeus' mission has more to do with papering over both Bush's failed policies and war crimes than providing Congress a clear and unbiased assessment. When a General ceases to be a general to become an errand boy for a war criminal, he deserves what he gets. It was not long ago that I wrote that America's future depends upon whether or not the general is an honest man. That issue has been decided!
As Eleanor Clift points out, the GOP has pulled out and dusted off a typical GOP strategem, a tired tactic that has, nevertheless, worked miracles for them in the past. Bush, says Clift, will keep just enough troops in Iraq " provide a surface illusion of progress." Bush will leave it to the Democrats to pull out and cut off support for whatever regime is in place. It will not matter to the GOP that it will fall because it will never have been legitimate. The GOP will blame "weak-kneed, weak on defense" Democrats for the inevitable fall of an illegitimate puppet regime.

--America's Fate Depends Upon Whether Gen. Petraeus is an Honest Man

How dare the US Senate condemn the for stating an opinion to which its members have a right. It's called freedom of speech. Moveon has a right to be wrong --but they also have a right to be right and they most certainly are on this issue. It is the US Senate --Democrats included --who are wrong and dead wrong. The Democratic betrayal on this issue is the unkindest cut!

Everyone voting for this un-American resolution should resign along with the war criminal that dares to occupy the Oval Office. He is the very worst "President" in American history and not worthy of the title. How dare the general enter the halls of Congress for the purpose of supporting Bush's commission of a war crime!!

How dare the Senate impugn the wishes of a grass roots organization which, at least, listens to its constituency --something the US Senate should try for a change.

What the US Senate ought to learn is that freedom of speech is not granted by government. We have it! Governments serve at our pleasure. At the moment some 80 percent of us are sorely pissed!

Governments are legitimate only to the extent that they recognize our freedom. Instead of passing this stupid, un-American resolution, the Congress should have taken a strong stand against the usurper on PA avenue!

Our elected leaders have but one job --and they consistently blow it. That job is the preservation of our freedoms, our Constitutional rights. Our elected leaders consistently behave as if we are a subject people who should kowtow to them and put up with their rest room antics, their stupidity, their utter failure to represent the needs of this nation. The Democrats in Congress should have filibustered his war and every spending bill that enables it. Our "elected" leaders have failed us. They have kowtowed and kissed up to a would be dictator at every step of the way.

This Congress sucks! The bankrupt government of the US sucks! The Washington Bureaucracy is a fraud! The Military/Industrial Complex is a scam! The lobbyists who bought and paid for our government are fascist traitors.

This Congress has enabled Bush's every crime, his every lie, his every fraud.

If the Congress, indeed, this government, will not serve the people, if they will not do their ONLY Constitutional duty, then its time for them to go. Every Senator voting for this un-American resolution should resign.
The Senate on Thursday overwhelmingly passed a measure condemning for a newspaper ad it ran last week attacking Gen. David Petraeus. The move came as President Bush accused Democrats of cowering to the liberal political action group.

The measure passed in a 72-25 vote, with none of the Democratic presidential candidates supporting it. Sponsored by Texas Republican Sen. John Cornyn, never one to shy away from forcing Democrats to go on record on politically sticky issues, the amendment to the defense authorization bill did win the backing of 23 Democrats.
It is correctly pointed out that Congress has proven itself impotent to pass a resolution condemning our ongoing and heinous war crime in Iraq but had no problem attacking the very freedoms that we are supposed to be defending.

General Petraeus is not above the vicissitudes of public opinion. His is a public job whether he likes it or not. It was Harry Truman who said, "if you can't stand the heat, get out of the Kitchen!" Those would betrayus, those will not tell the truth for political reasons should consider finding another line of work. I suggest he and the members of Congress --Democrats included --who voted for this cowardly cop out hit the road. So long and don't let the door hit you in your sorry asses on your way out.

The Grand Ol' Party of Liars and Perverts
There was a war man named Petraeus
Whose named rhymed well with Betrayus
When he lied to the people
He fell off the steeple
Of esteem reserved by some for ol' Zeus

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Wednesday, September 19, 2007

Unable to 'win', Bush Re-names the Enemy

Don Rumsfeld said that you go to war with the army you have --not the army you might want. Bush, losing his war against an enemy he didn't want simply re-named it. As a National Intelligence Estimate revealed that terrorism had gotten worse since 911, Bush renames an insurgency (against which it was losing) "al Qaeda in Iraq" against which he hopes to win. Re-naming is easier than winning. The GOP rationale goes like this: if the GOP can change the terminology, a war lost on the ground might yet be won in the focus group. It's the GOP way.
When people hear "al-Qaeda," it's natural that they think of Osama bin Laden and the Sept. 11 attacks. The insurgency, sectarian violence and opposition to the US occupation in Iraq are not about fighting al-Qaeda, but that's how Bush's fiasco there is being branded.

McClatchy Newspapers' Baghdad correspondent Mike Drummond exposed the sinister rhetorical shift, noting in a recent report, "US forces continue to battle Shiite militia in the south, as well as Shiite militia and Sunni insurgents in Baghdad. Yet America's most wanted enemy at the moment is Sunni al-Qaeda in Iraq. The Bush administration's recent shift toward calling the enemy in Iraq 'al-Qaeda' rather than an insurgency may reflect the difficulty in maintaining support for the war at home more than it does the nature of the enemy in Iraq."

--Al-Qaeda In Iraq Bush's Creation, Niagra Fall Reporter

"Al Qaeda in Iraq" might have been brilliant had it not been so transparent. In three little words, Bush wraps up a complicated lie of several hundred words. The man who "read three Shakespeares" and a Camus in a single weekend would have problems with that many words. Bush's consultants hope that just three little words might make the people forget that al Qaeda had not been in Iraq until the US attacked and invaded. It's the US in Iraq that is the problem, that has done the most damage, taken the most innocent lives. It is the US in Iraq which is a terrorist recruitment poster. Does it really matter what Bush chooses to call his victims?

Bush's response to criticism and opposition is typically GOP: blame the critics. About our nation's own intelligence agencies White House spokesman Peter Watkins is quoted in the Nation as having said "their hatred for freedom and liberty did not develop overnight. Those seeds were planted decades ago." This position is outrageous and incompetent. This utterly failed administration obviously lashes out blindly, stupidly at any criticism of his utterly failed and incompetent policies.

Though Bush has never been right, he is, like "big brother", never wrong. He's not "resolute", he's stubborn, stupid and pig headed. What are the odds that a man so lacking in talent or intelligence is so otherwise infallible and wise? Bush is wrong about terrorism. Bush's own criminal administration is the cause of it. He's not winning in Iraq, he's lost it. Winning implies an exit strategy that Bush doesn't have. Re-naming an "enemy" is not the same as defeating one.

For all those reasons, Bush's homestretch is no time to relax. Bush's zeal with respect to Islam consolidated radical theocratic zealots at home but inflamed and radicalized theocratic zealots abroad. Shakespeare was more eloquent. A plague o' both your houses.

His failure in Iraq and his sabre rattling toward Iran make this period the most dangerous in his occupancy. Despite having been thoroughly discredited --not by critics but by facts --Bush persists in waging a messianic campaign. Until a new GOP focus group had done its work, Bush called our enemies "evil doers". I always found it interesting that Bush targeted only those "evil doers" who were oil rich. Poorer "evil doers" get a pass. The lesson the world learned from Bush is simply this: if you wish to do evil, liquidate your oil assets.

If we can avoid a nuclear holocaust --despite Bush's best efforts to effect a nuclear armageddon -- it will be a relief to see the end of Dick "Darth" Cheney, a goulish, snarling specter of no humanity and less good will. The list of those already departed this evil administration include John Ashcroft, a baritone whose tones we could bear no more easily than his contempt for the rules of evidence, due process, and or freedom of speech. Also gone is Al Gonzales who got the job because Bush wished to appear friendly to the fastest growing population segment in the US. Gonzales was Ashcroft with a tan and just as much antipathy to the principles of our founding --the Constitution, the Bill of Rights, the presumption of innocence.

It would seem that all Bushies have problems with the Fourth Amendment, about which the Bush line was that "reasonable suspicion" not "probable cause" was the standard upon which investigations and/or arrests were made. Not surprisingly, the Bushies are dead wrong. All one need do to end this stupid debate is to simply read the Fourth Amendment for one's self.
The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no warrants shall issue, but upon probable cause, supported by oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.

Amendment IV, Bill of Rights, US Constitution

Given the record of this administration, this Orwellian nightmare, it is surprising that the actual text of the Bill of Rights is still available. Perhaps, the de-centralized nature of information is the only thing not anticipated by Orwell, who foresaw, it seems, every other outrage to civilization, Democracy, and the spirit of free inquiry and truth.

Bush who cannot pronounce "Machiavellian" ought not indulge Machiavellian machinations. That Bush thinks himself smart proves he's not. Bush labels "terrorist" anyone who disagrees with his stupid policies, his incompetent regime, his illegal war and occupation. Author E.L. Doctorow got it right when he called Bush the "unfeeling President". The lack of "feelings", the utter lack of empathy describes evil itself. And that's what he have soiling the White House with venom.

Doctorow might have added that Bush is also lazy and incurious. His arrogance is inversely proportional to his intelligence. Many world leaders have been liars but none so transparent. I want to play poker with Bush and then retire. Bush will leave a legacy of state-approved torture, illegal wiretapping and domestic surveillance, concentration camps, kidnappings, the coddling of corporate polluters.

The Creation of Doctorow's "Ragtime"

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Hamden Rice: Housing Bubble Lessons from 'It's a Wonderful Life'

by Hamden Rice

You can understand a lot about the current financial crisis surrounding the sub-prime mortgage market if you understand a premise of the movie, "It's a Wonderful Life."

And no, I'm not talking about the run on the bank scene, but it's a starting point on understanding what is going on. In one of my career guises, I used to draft mortgage backed security and credit card receivable security trust instruments for Wall Street investment banks.

In IAWL, you may recall, George Baily ran a small savings and loan, a kind of bank. George took in deposits from small depositors and lent the money to new homeowners as mortgage loans. There were two distinct banking sectors -- the thrift institutions (savings and loans associations, and savings banks) and commercial banks. Evil Mr. Potter ran the local commercial bank. Commercial banks dealt almost exclusively with business organizations, not with consumers. Many thrifts were so small, that, as in IAWL, they themselves deposited their money in commercial banks.

George Baily's problem was that he could only loan out as much money as he took in as deposits in his local community (actually, only a percentage of the deposits). So, during the New Deal, the Roosevelt administration created the Federal National Mortgage Association (affectionately known as Fannie Mae). The original system was designed to help George Baily if he found himself in this situation: that he had a bunch of homeowners paying their mortgages, but also had potential new borrowers, but had run out of deposits with which to make new loans.

Fannie Mae allowed George to sell his existing mortgages. In finance, this "paper" has value -- it is a promise by some homeowner to continue to make his monthly mortgage payments, and is backed by the right of the lender to seize the house if the payments stop, auction it off and use the sale to recoup his loan (that's foreclosure). It is easily valued using "discount to present value" calculations. The only thing that's hard to value is the risk that the homeowner will default and go into foreclosure. (There is also pre-payment risk -- banks don't like it when you pay off a loan early -- but that's a different and complicated story, and irrelevant to the crisis.) To eliminate this uncertainty, Fannie Mae guaranteed the mortgages.

So, Fannie Mae came up with this system. George would bundle his mortgages in convenient units, and send them to Fannie Mae. Fannie Mae would slap a guarantee on them (backed up by the credit of the US of A), and send them back to George. George could now sell the mortgages, and receive the money to make new loans. The homeowner wouldn't know the difference because George remained the "servicer" (ie collector) of the loan.

Fannie Mae was wildly successful. It financed a great deal of the explosive housing growth of the post war era. It helped little S&L's like George Baily's grow into very big banks, so that the difference between thrifts and commercial banks virtually disappeared.

Because of it's success, the government did two things: it created other similar organizations, while pushing them off the federal government's books. In other words, Fannie Mae became semi-private and although it continued to guarantee home loans, it did so by charging a fee, to originators, kind of like an insurance company.

By the 80s and 90s, some entrepreneurs realized that you didn't have to be a bank to act like a banker. You could really just skip the whole deposit side of the business. Developers were early alternative mortgage originators, for example. They would package their mortgages, get the guarantee and instead of selling them to banks, they would sell them to a trust or special purpose corporation that they themselves had created. This trust or spc would then sell trust certificates or shares that represented the right to receive a portion of the flow of mortgage payments from thousands of homeowners.

This was the birth of the "asset backed security" or "mortgage backed security" market. It was a process called "dis-intermediation," because it took banks out of the role of "mediation" between depositors (investors) and borrowers (homeowners).

The market for asset backed securities was vast -- almost unimaginable to the layman. A single tranche of asset backed securities was usually in the $500 million range in the 90s when I was doing this stuff.

All sorts of investors bought asset backed securities -- individuals, pension funds, insurance companies, commercial banks, thrift institutions, hedge funds, investment banks -- everyone and anyone.

Another thing that happened in the 90s is that mbs creators realized that they could reach new markets for home loan borrowers through "over-collateralization" and the use of derivatives. This was the "sub prime" market. In other words, keep in mind that whether it is a little George Baily operation or a billion dollar mbs trust, what makes the investment safe is that ultimately, behind every loan is a house. If the homeowner stops making payment, the bank (or mortgage holder) seizes the house, sells it and recoups the face value of the loan. There are delays and costs from foreclosure, but these are manageable. If it is a Fannie Mae guaranteed loan, there is also the guarantee, but the sub-prime market is largely un-guaranteed.

But if the borrowers are poor or have sketchy credit histories, the creators could allay their fears by putting more stuff into the trust than was being lent out ("overcollateralization" -- ie too much collateral, backing up the loan). (When the loans were all paid off, some lucky uber investor, usually the creator or an institutional investor, got all the extra stuff, and the trust bursted open with goodies like a Mexican pinata!)

The techniques of overcollateralization allowed banks and mbs creators to make loans to poorer people and people with poor credit histories, and allowed them to turn them into mortgage backed securities that investors felt comfortable buying.

Now, here is why there is a crisis.

Whether we are talking about George Baily, or a five billion dollar mbs trust, the thing that makes it work is that the value of the underlying property (someone's house) is always enough to recoup the loan if the homeowner defaults and goes into foreclosure.

But what if the value of the house is not enough? That sounds impossible and usually is, because real estate always goes up in price.

Until now.

When real estate prices decline, this puts banks (or mbs trust) "under water" -- that is, if they have to foreclose on a homeowner, and auction the homeowner's house, the value of the house will not be enough to cover the loan.

As more and more homeowners default, are foreclosed, and have their houses auctioned off, the price of houses in the area collapses even faster.

When this happens to banks, it causes bank failures -- eg during Bush I's S&L crisis.

When it happens to the fairly new, gigantic asset backed securities market, it causes something more grave. All those institutional investors may lose money. The uber investors who bought the "something extra" from the over-collateralizations are looking at being wiped out (no pinata goodies for you, my friend!).

This leads to an overall liquidity crisis. Institutions that thought they had money in the bank in the form of asset backed securities may have nothing, which causes them to sell other assets to get their balance sheets in order.

So, that's what's going on. So I guess in the end, it is a little like the run on George Baily's little savings and loan, except multiplied by a billion or so, and there is no beloved, trustworthy Jimmy Stewart character to explain that people can't get their money because it's in their neighbor's house, and there isn't a Clarence the angel making sure of a happy ending for all.

--Hamden Rice via Democratic Underground

It's a wonderful life

Often referred to as one of the best films ever made, this holiday classic is out of copyright and is available for everyone to enjoy again and again. Plot: George Bailey spends his entire life giving up his big dreams for the good of his town, Bedford Falls, as we see in flashback. But in the present, on Christmas Eve, he is broken and suicidal over the misplacing of a loan and the machinations of the evil millionaire, Mr. Potter. His guardian angel, Clarence, falls to Earth, literally, and shows him how his town, family, and friends would turn out if he had never been born. ~Tommy Peter(IMDB)

The Ballad of the Existentialist

Why Conservatives Hate America

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