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Thursday, September 25, 2008

Bush Bailout Plan is Unconstitutional debt servitude

The Thirteenth Amendment to the United States Constitution prohibits "debt servitude." The 13th Amendment prohibits the use of "fear" and "intimidation" to coerce payment of debts. The prohibition of debt servitude includes peonage. For a primer, read this wiki on it:

13th Amendment Wiki

The Bush plan violates the 13th Amendment, because it is a plan to socialize the debts of wealthy onto the backs of the taxpayers using fear tactics. On the one hand, the President argues a bailout is needed to prevent "financial panic", but what does that mean? Bush, in his address to the nation, defined "financial panic" as a "recession."

And ultimately, our country could experience a long and painful recession.

Text of Bush' speech

A recession is a normal part of the economic business cycle. America has gone through many recessions. The normal recession last about 6-9 months, the longest recession since 1953 lasted 18 months.

On average, the market peaks about six months prior to the start of a contraction and begins to decline more aggressively as the contraction begins. Based on the 9 previous recessions since 1953, the market bottomed an average of 6 to 7 months into the recession (the average recession has lasted 11 months). But this average masks a lot of variability. There have been important bear markets that lasted longer. The market bottomed 18 months after the beginning of the 2001 recession and 10 months after the start of the 1973 recession.

A recession, even a severe recession, doesn't justify pushing capitalism aside and socializing debt of the wealthy and forcing taxpayers to pay for it long after the recession is over.

This bailout is not in the best interest of the taxpayers and is not intended to help them. The fear mongering isn't justified. For example, last night Bush tried to scare the taxpayer by saying if the bailout wasn't approved immediately, their local banks might close. Here's what Bush said:

The government's top economic experts warn that without immediate action by Congress, America could slip into a financial panic, and a distressing scenario would unfold:

More banks could fail, including some in your community.

Text of Bush' speech

This isn't true. The bailout won't prevent community banks from failing. The problem is, the subtle lie is, the bailout is not intended to help the local banks and won't help the local banks. In fact, for over a year now, the FDIC has said that in 2009 they expect numerous regional bank failures, and the causes of these failures will not be alleviated by this bailout plan. In fact, as Bush is asking for $700 billion bailout, the FDIC, which insures the banks, is asking for a $150 billion in insurance based on an its estimate that 100 banks that are going to fail next year.


Further, this banking expert says the banks can weather this storm just fine, that the bailouts aren't necessary.

So you oppose the idea of the government putting preferred equity into solvent but troubled banks that cannot raise capital on reasonable terms?

Ely: Yes, it is not necessary, even now. There is absolutely no need for the Treasury to have the authority, as you suggested, to "inject capital into solvent banks that are temporarily unable to raise new capital." If a bank truly is solvent, it can raise additional capital or sell itself, if its present owners are realistic about what their bank is worth. The reason solvent banks have a problem raising capital, or selling themselves to a stronger bank, is that they set their price too high, as did AIG. As an aside, I am glad to see AIG's shareholders getting whacked by the warrants associated with the Fed's taxpayer's loan to AIG. There is absolutely no need for the taxpayer to subsidize banks so they can stay independent, provided no barriers are erected to prevent new entrants into bank or specific banking markets.

This bankinNaked Capitalism

So, Bush is full of crap. He is fear mongering. He is using unjustified fear of calamity to coerce the American people to pay the debts of the wealthy, which is classic indentured servitude prohibited by the Constitution.

1 comment:


The Sam Azar Bailout plan for America

They say 700 billion dollars will keep America from falling into the grips of a great depression. They say greedy wall street investors did it. maybe all people were a little too greedy these past years,maybe we are all a little to blame for this financial crisis.

maybe there is some truth to the atheistic and animalistic ways man must struggle for life and dominance for his survival, maybe a little too much dog eat dog and may the better men win at any cost, maybe like a backyard squirrel many of us horded and collected so much money during boom times we stuffed so much away for ourselves-our family-our descendants for many years,maybe a little too much me me me.

or maybe there is some truth to we are all the children of god-somehow placed on this magical and wondrous planet earth with a chance at free will and exploration to be better than before-to grow with enlightenment and prosperity for all our brothers and sisters on this ship we call earth-maybe we are all our brothers keeper- maybe there is some truth to one of the greatest of mans compassion towards one another- the Christ-the man called jesus- the entity many cherish as the symbol of a life lived and devoted for all of us in purity and love in the eyes of heaven-that in which he declared to the rich man ” GIVE IT ALL AWAY”. surely this statement is hard to believe and exercise-it seems to go against the grain of instinctive animal behavior- yet- there is logic and peace in such a statement as we are all the same family in times of need. soldiers know no color or creeds in battle-man feels the love he has with his own children-and sometimes in life we know inside this is the feeling the heavens have upon us as they watch uis during our growth upon earth- maybe there is some truth to this.

I say the American taxpayer is now asked to shoulder the burden- i guess we will and have no say- but i say to all who are rich -whether a person or corporation with an excess- give as much as you can away- match the 700 billion like a 401k- double it- triple it- let the children of the earth know we are one together- struggling at this life with food-health care-survival-and love for our children to prosper and build a better life-

give and match the 700 billion- maybe even a tax credit from uncle sam as a donation;)

sincerely yours
solomon azar-aka uncle sam to my nephews and nieces

god bless us,everyone