President Obama has pretty much put everyone on notice that: "Your payment is due." So, I thought it was time to ask what I believe is...

The most important bailout question(s).

A great deal of focus in Washington, and within the MSM, is somewhat rightfully being placed upon ongoing excesses within the banking and investment banking industries. But, at what point do we turn our attention to--by far and way--the most excessive industry bonus of all: allowing the financial services sector to cash in their trillions of dollars in toxic debt at make-believe valuations which saddle our country with liabilities upon which our children and our children's children will be paying the price for years to come?

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I consider myself to be somewhat of a diehard Democrat but, lately, Senator Chuck Schumer (D-NY), one of my senators here in New York, is starting to irritate the hell out of me when it comes to our nation's financial mess.   At the very least, it sure looks to me--and many others--like Chuck really needs to get out more often. Apparently, others in the financial services industry are shaking their heads about this, too.

For starters, maybe he should read-up a little more on what's caused our nation to get into the nightmare it's in now. Concurrently, perhaps, he should stop talking out of both sides of his mouth as far as Wall Street's concerned, because while the New York Times takes notice of this in today's edition, even the little people--like me--are beginning to take notice that there's a bit of a disconnect  going on now as far as our reality versus Schumer's public comments about all things Wall Street, too.

I know enough about Schumer to realize that--more than many other members of the Senate--my Senator is right on most of the issues most of the time. But, Chuck, it looks like you've missed a few memos in the past year, for sure!

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by Zach Carter, MediaWire Blogger

President-elect Barack Obama announced his economic transition team yesterday--and we'll get to that--but first let's take a look at the top economic stories from the week that you might not have heard--but need to know.

With so many recent headlines detailing the government's policy position on some of the nation's largest corporations, it's important to remember that economic policy ought to include people living at the other end of the economic spectrum.

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Dean Baker asks the key question about the latest Citibank bailout, which of course nobody in fat cat media is also asking. Damn they went nuts when the automakers came to town, didn't they? The contrast, the silence, is instructive, if anyone wants to learn. Here's Baker:

What Will Robert Rubin Earn?

The Washington Post, which ((like the NYTimes)) is obsessed with cutting the pay of autoworkers earning $57,000 a year, did not even bother to tell readers what pay cuts Robert Rubin and other top executives at Citibank will receive as a result of conditions in its latest government bailout.

Baker also has more to say about new Treasury secretary Tim Geithner:

Geithner may do a fine job at Treasury, and we should all hope that he does, but let's not forget that he was in the middle of the policy team that gave us this economic mess. He was a top official in the design of the East Asian bailout that set us up on the over-valued dollar, bubble-driven growth course. He also thought that one-sided financial deregulation was just fine.

Well, at least Geithner's not an economist, that's reassuring. And, easy on the eye, ainee?

You want more not reassuring, go to a Barron's chart actually intended to reassure:

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While the above is a better predictor than what politicians say, note that once again C is on the left and O is on the right in economic substance words. This time, The Wall Street Journal summarizes the Clinton vs. Obama approaches to the mortgage crisis:

. . . Sen. Clinton's plan will resonate with homeowners facing foreclosure . . .

If her proposal regarding the FHA went forward, the agency would buy, restructure and resell loans in which the borrower owes more than the home is worth. That would likely require moving risky loans onto the federal government's balance sheet.

"We're shifting risk from people who bought things they couldn't afford to taxpayers that weren't involved," says Alan Reynolds, a senior fellow at the Cato Institute, a libertarian think thank.

Sen. Clinton's plan would expand on legislation envisioned by Rep. Frank [fairleft: the WSG is wrong, he's a senator] and Sen. Dodd that would give the FHA the power to insure up to $400 billion in refinanced home mortgages.

Sen. Obama was an early sponsor of the Dodd-Frank proposal to expand the FHA's role in the housing crisis but has warned against moving too rapidly beyond that proposal. "It's premature to start talking about taxpayer-funded bailouts," Sen. Obama said last week while campaigning in Pennsylvania.

Note how both the WSJ writer and the Cato guy rail against Clinton's $30 Billion for (sort of) bailing out irresponsible borrowers, but somehow overlook that the Dodd-Frank proposal has the libertarians' evil government bailing out irresponsible lender banks (that's what 'insuring' their loans would do) to the tune of $300-400 Billion! Clearing things up is (the essential) Dean Baker, in a comment on the pro-banker bias of the Dodd-Frank plan and similar proposals entitled If the Plan Helps Homeowners, Why Do the Checks Go to Banks?

The proposals discussed would use government money or government guarantees to buy up bad mortgages at prices that are almost certainly much higher than what they would command on the market. The plans would allow homeowners to renegotiate their mortgages and pay less than they do today. However, in bubble inflated markets (which have still only partially deflated) they would still pay far more in housing costs than they would to rent a comparable unit. Since prices are still falling, they would also have almost no chance of ever accumulating equity.

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