Lawson for Congress

The proposed $700 million bailout is unlikely to increase trust between banks, will threaten our sovereign credit rating, and may even collapse our currency.

It only attempts to protect favored banks, and ignores the reality that trillions of dollars in bad debt must be liquidated before we can recover from this crisis. For every lender there is a borrower, and our borrowers have simply assumed too much debt relative to their income.

Objections from a variety of perspectives are expressed by others:

• Dallas Federal Reserve Governor Richard Fisher - Bank Rescue Plan Would Worsen Fiscal Chasm
• Former Treasury Secretary Paul O’Neill - Bush Doesn’t Get Financial Crisis
• Former FDIC Chair William Isaac - A Better Way to Aid Banks
• BB&T CEO John Allison - Paulson Plan Aimed at Helping “Poorly Run” Banks
• NYU economist Nouriel Roubini - Why the Treasury TARP Bailout is flawed
• New IMF Study Contradicts Bailout Bill Premise and Details
• Over 150 economists - Hundreds of Economists Urge Congress Not to Rush on Rescue Plan

Of particular interest are comments in the last article about the game theory implications of vastly increased central bank lending as well as expectations of a bailout. In short, we’re making the problem worse:

Advocates for a rescue plan this week point to a seizing up of credit markets, reflected in elevated inter-bank lending rates, as reason for action. Some economists are unconvinced.

“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.

Makes sense, doesn’t it? As also stated by Yves Smith:

Now consider the bailout version of this problem. Yes, the market for bad bank assets wasn’t so hot, but the big reason is not lack of buyers, but unwillingness of banks to accept the lousy realistic prices on offer.

But the government is now moving towards a plan to buy that paper for something closer, maybe a heck of a lot closer, to your price. You now have no incentive to try to unload those assets, so what little trading there was in them has probably gone into a deep freeze.

In other words, “We need a bailout, or else lending is going to freeze up and the financial system is going to collapse” becomes “We expect a bailout, so we’re going to just sit here until we get one.” It’s a self-fulfilling prophecy. Depending on your level of cynicism, one might also consider it a hostage crisis with our economy as the hostage.

Most importantly, also at stake is trust in our nation’s financial system and capital markets. Karl Denninger eloquently makes that point here:

The government cannot simply keep changing the rules to benefit a privileged few.

Focusing on the banks, the current crisis has four related ingredients: liquidity, solvency, capital, and trust. There is plenty of central bank liquidity available for threatened institutions, and due to lack of trust and transparency, banks will not lend to each other — each prefers to go to the central bank for relief. This tendency to look to the central bank for relief appears to be finally threatening the balance sheet at the Fed itself, according to Brad Setser:

In the last two weeks — if I am reading the Federal Reserves’ balance sheet data correctly — the Fed has:

Increased “other loans” to the financial system by around $230 billion (from $23.56b to $262.34b);

Increased its “other assets” by about $80b (from $98.67b to $183.89b);

Increased the securities it lends out to dealers by $60b (from $117.3b to $190.5b);

That works out to the provision of something like $370b of credit to the financial system in a two week period. That may be a bit too high: the outstanding stock of repos felll by $40b (from $126b to $ 86b), leaving a $330b net change in these line items. But that is still enormous.

The most that the IMF ever lent out to cash strapped emerging economies in a year?

$30b, in the four quarters through September 1998 (i.e. the peak of the 97-98 crisis).

The most the IMF ever lend out over two years?

$40b, in the eight quarters through June 2003 (this covered crises in Argentina, Brazil, Uruguay and Turkey)

This is a very real crisis. The Fed’s balance tells a story of extraordinary stress. I never would have expected to see the Fed lend out these kinds of sums over such a short-period.

For another look at the Fed’s balance sheet, see this visual map provided by Cumberland Advisers.

Solvency is a problem as threatened institutions are finding it difficult to access additional financing and service their debt. Capital is a problem because creative accounting and assets of unknown value have led to balance sheets (and off-balance-sheet vehicles) that encouraged wishful thinking and reduced trust.

The administration’s proposal to buy toxic assets doesn’t address all of these problems, may make solvency issues worse, and most importantly, it does not address the lack of trust between market participants:

Non-financial private debt is $32.4 trillion dollars as of 2Q 2008. Household debt is $14.0 trillion. Households lost 400 billion dollars last quarter. You wish to add $700 billion more in losses (via government obligations that taxpayers must cover) this quarter; this package is insignificant against the total bad credit outstanding. Federal capacity to “bail the system out” is insufficient.

It will not and cannot work because the issue is trust, not money. There is lots of money (and credit) but it is being hoarded throughout the system. Consumer savings have gone from nothing to the highest rate ever in American history – in the space of a few months. Money is flying into Treasuries because of lack of trust, not lack of money. You must fix the cause of the problem, not apply band-aids.

Despite all this evidence to the contrary, this evening’s New York Times article shows to what lengths our elected representatives will go to do the wrong thing. Allow me to translate:

Officials said there were still more than a dozen points of disagreement, though the centerpiece of the rescue effort remained intact: a plan for the government to purchase up to $700 billion in troubled assets from financial firms as a way to free their balance sheets of bad debts and to help restore a healthy flow of credit through the economy. It could become the largest government bailout in the nation’s history.

We’ve been pretending to object to the administration’s plan, and we’re making a lot of noise, but we’re not really changing anything. We’re still going to pistol-whip the American taxpayer to bail out poorly-run banks, and we hope credit starts flowing again even though this bailout does nothing to support property markets, improve the ability of borrowers to service their debt, or increase trust in the integrity of the capital markets. But hey, we’re all about hope.

Republicans, under pressure from Democrats to deliver 70 to 100 votes from their side, were scouring the ranks and focusing on the two dozen Republicans who were retiring this year.

Both parties were also scouring the political map to identify lawmakers who face little or no opposition for re-election in November, knowing they would be more willing to vote yes.

We’re looking for representatives who can afford to blow off their constituents.

Democratic officials said that despite having control of both chambers in Congress, they were far from having a majority sufficient to pass the measure just from their ranks. And they also warned that Democrats in potentially tough races could not be counted on to provide the votes to put the package over the top when, and if, it reaches the floor.

If David Price ends up voting against this bailout, it will be because he’s getting the message that 4th District voters are ready for principled representation that serves the people instead of corporate interests.

The ultimate cost of the rescue plan to taxpayers is virtually impossible to know. Because the government would be buying assets of value — potentially worth much more than the government will pay for them — there is even a chance the rescue effort would eventually return a profit.

We’re calling it a “rescue plan” because folks don’t like the word “bailout”. There’s no chance this rescue will return a profit, since banks are only going to dump the most toxic of their assets — they’ll hold on to the good stuff. Furthermore, if there was a reasonable chance of a profitable investment, Warren Buffett would be all over the deal himself.

The administration had initially requested nearly unfettered authority to run the rescue program. But in negotiations over the last week, the White House agreed to accept strict oversight of the program by an independent board, as well as a requirement that the government increase its efforts to prevent home foreclosures.

We’ll give the impression of resisting tyranny with empty gestures of “oversight” and some empty pandering about bailing out borrowers. But we allocated the big money to bail out lenders.

I should mention that I tried to visit David Price’s Chapel Hill office on Thursday to express my sentiments as a constituent, not even as a candidate. But when I arrived, the office was closed:

I received word from folks calling his Durham office that there was no one available to answer the phone, and no way to leave a message.

The behavior of so-called Congressional leaders, our deeply-conflicted administration, and my opponent demonstrate supreme arrogance and disrespect for the rule of law.

Washington, you’re fired.

I have tried to maintain a sense of decorum and respect for the August Institutions that comprise Our Nation’s Government. I have tried valiantly to speak respectfully of My Opponent, who has Served His Country as a Public Servant for twenty of the past twenty-two years.

But the cognitive dissonance required to maintain that respect is rapidly eroding.

Yesterday, my opponent was interviewed by Bill LuMaye, a popular talk show host on AM 680 WPTF. You can tell my opponent is running for re-election — he has been on Mr. LuMaye’s show about four times in the past two months. My opponent was asked to talk about the financial crisis, and the Paulson/Bernanke bailout plan.

Here’s where I have a problem: all my opponent was able to accomplish in thirty minutes was wringing his hands in sober tones about how terrible the current crisis is, stating how we need to do some kind of bailout, and then blaming The Administration for putting this questionable bailout plan in front of him.

I have one question for my opponent: Are you a Lawmaker, or a Lawpasser?

Do we hire you to watch out for our interests by authoring legislation, or to complain about the quality of legislation that you are provided by the Executive branch?

Why do you wring your hands and bloviate about legislation WRITTEN BY THE EXECUTIVE BRANCH, when the Constitution clearly states that Congress should be writing legislation?

If you don’t know enough to actually write legislation yourself concerning this topic, why should we value your opinions, and what gives you the right to complain?

Why are we paying you anything just so you can sit up in Washington and collect over $40,000 (since 2000) in PAC donations from banks and the American Banker Association?

Why are you echoing The Administration’s Sense of Panic and Urgency, when it is now being reported that this bailout plan has been in the works for a long time?

The White House today is drumming up extraordinary pressure on Congress to approve its plan to enact a $700 billion mortgage bailout fund, suggesting the markets cannot wait much longer and dispatching Vice President Cheney and other top officials up Pennsylvania Avenue to jawbone lawmakers.

But Bush himself continues to do little to explain his plan, and he has refused to be questioned about it.

Asked during a telephone briefing for reporters today whether Bush was speaking with lawmakers, White House Deputy Press Secretary Tony Fratto said the president is aware of their concerns but that Paulson is the salesman.

“It shouldn’t take much analysis to remember what happened last week, which was a very serious freeze-up in our credit markets,” Fratto said. “Our financial markets right now do not need uncertainty, they need increased certainty as to how this rescue plan is going to go forward — and that they can be sure that there is a plan to go forward — and that will begin the correction in our financial markets.”

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.

In October of 2001, in an environment of fear and coercion by the Executive Branch, you voted for The Administration’s last-minute substitute version of the PATRIOT Act and shredded our Bill of Rights.

Now, as a consequence of your fear and ignorance, you are threatening to vote for The Administration’s bailout bill, known as “Cash for Trash” or “No Banker Left Behind” — thus shredding working Americans, feet first.

David, you’re fired.

The Republican National Convention concluded in St. Paul this week. While I wasn’t a participant in the RNC, I did receive an invitation to attend and help out at the Campaign for Liberty’s Rally for the Republic in neighboring Minneapolis. This rally was funded by Ron Paul’s Campaign for Liberty, an organization that grew out of Dr. Paul’s grassroots Presidential campaign.

I had an excellent time serving as M.C. for the Ron Paul Nation Celebration, a four hour outdoor concert and rally on Monday night…

Aimee Allen

Rockie Lynne

… and had a great time talking with supporters, donors, and conservative luminaries from across the country at Tuesday’s Rally.

I credit Dr. Paul and his principled stands on economics, foreign policy, civil liberties, and Constitutional government for cutting through my decade of personal cynicism. Grassroots organizing for his Presidential campaign inspired and grew into our Congressional campaign in North Carolina’s 4th District, and it is exciting  to see a groundswell of thoughtful Americans who are deeply concerned about our future.

I must admit, though, I was initially skeptical of the Campaign for Liberty’s plan to host a rally in Minneapolis. I’ve been so focused on my district Congressional campaign that the idea of spending significant money on a two-day party across the river from the GOP seemed a bit frivolous — especially since money is so precious for grassroots campaigns.

But having seen how these two events played out, I stand corrected. The rationale for holding the Rally for the Republic was based upon the RNC’s unwillingness to admit that there are deep divisions within the party and its base, and its unwillingness to embrace Ron Paul and his diverse group of supporters.

I had a number of friends and fellow Ron Paul supporters who attended as alternate delegates, and experienced firsthand the surveillance of “Black Hat” McCain operatives, as reported in the Washington Times.

One friend in particular was followed by a “Red Hat” each time he arrived or left the floor. Frankly, that’s both pathetic and disturbing. It’s pathetic that party leadership is so punch-drunk with power that they mimic Communist China in suppressing dissent. How can we claim to be a free country, when the very essence of political expression is censored through a totalitarian party filter?

It’s disturbing, and vaguely fascist, because the GOP convention is an inherently public event. Based upon the fact that the GOP and Democratic conventions are largely funded by the U.S. taxpayer — the two “major parties” received $17 million from the FEC for their media extravaganzas — these nominating spectacles are literally public property. Financially speaking, there is no justification for the convention floor being off limits to anyone.

Don’t misunderstand me — I’ve been a Republican my entire life. But when the party of fiscal responsibility and limited government accepts $17 million of corporate welfare funded by American taxpayers, we’ve got to cry foul. If we Republicans want to treat our event like private property, we need to pay our own way.

So given the many reasons to dislike the Democratic and Republican establishments’ publicly-funded made-for-TV media spectaculars, the Rally for the Republic was a stark and refreshing contrast. Not only was it completely funded by grassroots donations, but the passion and level of dialog for the challenges facing our country far exceeded the partisan rhetoric and scripted platitudes brought forth from Denver and St. Paul.

What did McCain and Obama have to say about $57 trillion in unfunded entitlement liabilities, a foreign policy of pre-emptive war and isolation, declining civil liberties, a federal government that ignores its Constitutional role, or a year-long credit crisis that is crippling our economy and benefiting sophisticated investors while Americans lose their jobs and homes? Crickets.

Interestingly, the GOP’s downsizing the Monday convention worked to the Rally’s advantage. I had a number of media interviews with folks who were originally attending the GOP convention, and confided that they were both surprised and impressed with the turnout, passion, and enthusiasm at Rally. As an outreach event, it was an unqualified success:

As I said in several interviews, the most important result of the Campaign for Liberty’s launch has nothing to do with Dr. Paul’s presidential campaign, nor any one individual office or issue. Instead, the most important result will be when 12,000 passionate individuals committed to Constitutional government that serves the people instead of corporate interests go back to their communities to get, and stay, active.

Based upon demographics alone, the Republican party cannot survive without broadening its ranks. The GOP may have won the battle to host a convention with a united facade. But it will lose the war for long-term relevance if it does not confront the serious issues facing our nation, and engage in open, honest, and thoughtful dialog with the millions of concerned Americans who are tired of politics as usual.

Please help us end politics as usual in North Carolina’s 4th District. Make a donation today!

We had a great gathering tonight at the campaign HQ, with just over 100 attendees stopping by between 5 and 9pm.

I had thought we’d be able to broadcast the event via our Ustream channel, but unfortunately discovered that AT&T’s “DSL Lite” doesn’t provide enough upstream bandwidth for smooth streaming — upload throughput in the office is a paltry 15kb/sec according to iStat, which is frankly embarrassing. As much as we’d like faster service, I’ve just not been able to justify the (greatly increased) cost — so we’re settling for quick turnaround on our taped footage:

Thanks to our tremendous volunteers who showed up early to set up, and stayed late to clean up.

We’ll be in touch with everyone about our next volunteer night at the office — we have another batch of yard signs and pocket Constitutions en route, so the fun is just beginning!

Our campaign is flourishing across a broad base of people, all of whom share the desire for good government. Advancing a federal government that lives within its means and respects its Constitutional limitations is not a partisan message, nor a message that discriminates.

It’s been reported that our campaign has attracted the attention of some bloggers associated with fringe hate groups. Let me make this perfectly clear: there is no room in our campaign, or our message, for hatred or bigotry.

The essence of our Constitutional republic is government that protects the rights and liberties of the ultimate minority, the individual. Furthermore, our country’s challenges transcend gender, race, ethnicity, and sexual orientation. We’re all on the same boat. To live up to our nation’s promise for our children, it’s imperative that we work together.

It’s no secret that Washington is broken. We must reject our legislators’ fondness for voting on bills based upon catchy titles and vapid summaries. As our current Rep. David Price reveals, there is a difference between reading legislation and “considering” it:

A further example of Congress’ madness is its tendency to not even write laws anymore. Instead, Congress passes unread legislation that authorizes unelected bureaucrats and other “interested” yet unaccountable parties to write regulations. What results is the worst of both worlds — regulations far too complex to implement or understand, laden with conflicts of interest from those who wrote the regulations, and often missing the intent of the original legislation.

Campaign finance reform is one area where Congress’ regulatory attempts have backfired spectacularly:

A federal appeals court overturned four campaign regulations Friday that remain incomplete six years after Congress approved a landmark election-law overhaul.

The Circuit Court of Appeals for the District of Columbia agreed with a lower court that Federal Election Commission regulations dealing with coordination between campaigns and outside advocates must be rewritten.

The appeals court also agreed with Rep. Christopher Shays , R-Conn., a chief sponsor of the law (PL 107-155), that a regulation dealing with fundraising at state-level events that the District Court upheld should instead be overturned.

Judge David S. Tatel, writing for the three-judge panel, found the regulations either contrary to the law or arbitrary. The court sent the FEC back to the drawing board “in the hope that, as the nation enters the thick of the fourth election cycle since [the law’s] passage, the commission will issue regulations consistent with the act’s text and purpose.”

Here’s the funny part, worthy of Heller himself:

But the results are unclear. The flawed regulations will remain in effect until they are rewritten. But the commission has been unable to function this year for lack of a quorum, although nominations to fill the panel are pending in the Senate.

“We’ve just gotten the opinion and are reviewing it, so we don’t really have any comment now,” said Bob Biersack, an FEC spokesman. “It will be up to the commission to decide how to proceed.

North Carolina’s 4th District deserves representation that will read the bills before voting. We must not let our elected representatives unconstitutionally delegate their legislative power. As your Congressman, I will support the Read the Bills Act, and the Write the Laws Act.

It’s late, we’re just getting in, and neither JoLynn nor I have slept much in the past 48 hours. So this will be short.

Thank you to all of the donors, volunteers, and supporters who have built our campaign over the past four months. Our resounding victory tonight is not about me — it’s about a message that will transform American government, and the future for our nation. Our victory is also a powerful statement that we Americans are ready for change. We’re tired of negative soundbite politics that divides us against each other, and we’re tired of agendas being forced upon us by party elites who are increasingly disconnected from reality, and the challenges we face.

We are ready to embrace a federal government that focuses on its Constitutional responsibilities, and stops being a suffocating burden that will haunt our children and grandchildren.

During our victory celebration this evening, I had a number of people ask me the same question, “So how are you going to take the message to beat David Price?” While we have much planning and work ahead, one part of the answer is easy: “Order more Constitutions!”

We distributed ten thousand copies for this primary. Here’s to distributing 100,000 for the general election!

Unfortunately, we didn’t get any video at the event tonight. But I found this video amazingly impressive:

If you haven’t voted yet, this is the day!

An informal survey of mostly-Republican polling places suggests that turnout is light - one precinct in Raleigh that’s about equally matched between Democrats and Republicans had 600 voters by lunchtime, as opposed to a more typical 1,200. How much of that is low turnout versus early voting? We will see. Just make sure your vote is counted!

Also, I was informed that a supporter has created a grassroots Web site, with a fantastic introductory video:

… see you tonight at the Chop House Grille!

This weekend was a blur. Saturday we gave away our last 200 Constitutions at Apex Peak Fest, and spread the word for our conservative judicial candidates at the Western Wake Republican Club booth. Special thanks to John Harvila, whose heroic efforts provided a great forum for educating Republican voters about the importance of voting in tomorrow’s election.

There is a lot more at stake than just a presidential primary, or even a Congressional race. We also need to support Judge John Tyson, Marty Miller, and Dean Poirier or Jewel Ann Farlow. Specifically, Judge Tyson has been involved in an expensive primary election, and TODAY is the last chance to provide needed financial support to drive his campaign through November.

At this point, it’s all about turnout. Yes, we have radio and television spots running today, signs are beginning to appear at polling places, and we have a fantastic network of friends who have volunteered to help staff the polls. I am also excited to report that I was endorsed by the national Republican Liberty Caucus over the weekend. But advertisements and endorsements won’t win the election — for those investments to pay off, we need voters!

Here’s where you come in. Today, please call five friends, and send an email to your contacts reminding, imploring, and cajoling them to get out and vote tomorrow. Even better, to save gas, call your friends and in the neighborhood and carpool to the polls! One car, five voters.

Ultimately, that’s how we win. Please help us get our voters to the polls, and we’ll have a lot to celebrate on Tuesday night as we prepare to take on David Price and the big-government elitists who have been ignoring our Constitution for far too long in Washington.

After you’ve voted, please join us tomorrow night at the Chop House Grille at the northwest corner of High House Road and Davis Drive in Cary. If we all do our part, there will be much to celebrate.