"Tantamount to Treason"; Bailout of Fannie and Freddie

The following brief reports from Lyndon LaRouche and the EIR intelligence staff on the insane actions of US Treasury Secretary Paulson in committing the US government to bailing out trillions of dollars of useless speculative junk in the US banking system through the takeover of Fannie Mae and Freddie Mac, will be compiled into an emergency pamphlet within the next 24 hours, for circulation worldwide. Without emergency action to repeal the Congressional authorization for this lunacy, the world financial system will not survive the coming months. Please circulate this report widely. Mike Billington

"Tantamount to Treason"; Bailout of Fannie and Freddie

September 6, 2008 (LPAC)--The Bush Administration and the Federal Reserve are moving to put mortgage-lending giants Fannie Mae and Freddie Mac under Federal control this weekend, in a move economist Lyndon LaRouche bluntly described as “tantamount to treason.” The government's claim that this is being done to protect housing is a fraud--this is bailout of the banking system, pure and simple.

Fannie Mae was created by Franklin Roosevelt in 1938, as a government agency to buy mortgages from lenders, as a way of funding the purchase of homes in the Great Depression. In more recent years, Fannie Mae and its sibling Freddie Mac, were taken over by what FDR attacked as the “economic royalists” and turned into vehicles for derivatives speculation. Under the great Greenspan bubble, Fannie and Freddie were turned into money machines to feed the run-up in real estate values to provide assets--in the form of mortgage debt--as fuel to the derivatives markets. This scheme was bound to fail, as it spectacularly has, leaving Fannie and Freddie, and the U.S. banking system, bankrupt.

However, Fannie and Freddie are at the heart of Treasury Secretary Henry Paulson's and Federal Reserve Chairman Ben Bernanke's insane scheme to bail out the banks by dumping all their bad mortgage paper into the two government-sponsored enterprises, effectively transferring the banks' losses to the government, and ultimately to the taxpayer. The government is not really bailing out Fannie and Freddie, but merely funding their conversion into the largest toxic waste dumps in history. Far from being saved, Fannie and Freddie are being destroyed.

The government has already spent trillions of dollars in the attempt to save the banks, in schemes ranging from the economic stimulus program to the ongoing and accelerating loan programs to the banks from the Fed. None of this has worked, but rather than realize the folly of their ways, the idiots in Washington and Wall Street are cranking the spigots wide open. Some estimate that the bailout will cost $20-$30 billion, but these estimates are meaningless, since the government is effectively committing itself to an unlimited bailout. Essentially, the government is bailing out the debt by doubling it, creating a even bigger pile of debt that will have to be bailed out, doubling again in a geometric progression. Since there isn't enough money in the world to make this scheme work, it cannot succeed, and the attempt to do it will trigger a hyperinflationary explosion reminiscent of Weimar Germany, such that the very value of the dollar itself will vaporize.

Not only is this scheme insane, LaRouche stressed, but it is “tantamount to treason” in that it puts an attempt to save the parasitic financial system ahead of the welfare of the nation and its people. What is required, instead, is the immediate passage of LaRouche's economic national-defense package, beginning with a hike in the U.S. discount interest rate to 4 percent to halt the outflow of capital from the country, followed by the enactment of the Homeowners and Bank Protection Act, to protect the population while we put the financial system through bankruptcy, and begin the process of rebuilding what these parasites have destroyed. This process will be financed through a two-tiered credit system, in which government credit is issued at low interest rates of 1-2 percent to fund specific classes of development projects, and other borrowing occurs at the higher-tier rate. Having taken these steps, we could then work with other nations, notably Russia, China, India, Brazil and others, to implement such a system worldwide, defeating the Anglo-Dutch Liberal system parasites, and leading the world into a new era of freedom and prosperity.

We cannot bail out the dead system, and we should not try. What we must do instead, is build our way out of this mess by returning to the principles of the American System. To do otherwise is not only insane, it is fatal.

LaRouche Demands Immediate Repeal Of Dodd-Frank
September 8, 2008 (LPAC)--Lyndon LaRouche today responded to the Hank Paulson illegal trillion-dollar taxpayers' bailout of the speculators holding Fannie Mae and Freddie Mac paper, by demanding the immediate repeal of the Dodd-Frank bill, which gave the Bush Administration ostensible Congressional approval to pull off this biggest swindle in Federal government history.

``This bill must be immediately ripped up,'' LaRouche demanded. ``It flagrantly violates the U.S. Federal Constitution, which specifically defines the general welfare as the law of the land. This bailout of speculators, at the expense of current and future taxpayers, is illegal. As I have warned for more than a year,'' LaRouche continued, ``this entire global dollar-based financial system is hopelessly bankrupt. The system cannot be saved. It entered its final collapse phase in July 2007, just as I identified at the time.''

LaRouche also warned that, ``once the American people figure out what Paulson, Dodd, Felix Rohatyn, `Bailout Barney' Frank and Pelosi have done, they will be out for blood. I wouldn't want to be in the shoes of any member of Congress who signed their name onto the Dodd-Frank bill, which had nothing to do with relief for homeowners facing foreclosure. It was all about the bailout that Paulson just announced. Nobody knows how big an illegal, unauthorized tax is going to be imposed on American families to bail out these swindlers and speculators, but I do know that it can very likely run into the tens of trillions of dollars.''

LaRouche concluded: ``I have spelled out the solution to this crisis, in my Homeowners and Bank Protection Act (HBPA) and my three-step solution. A Constitutionally viable solution is known, and available. Therefore, the authors of this swindle are not only violating the Constitution. They have committed an act that is tantamount to treason.''

Lyndon LaRouche will be delivering an international webcast, "Now, More Than Ever, The Big Four", on Oct. 1, 2008, at 1 PM EDT. It will be broadcast live at www.larouchepac.com.



Now Comes The Chain-Reaction: Blowing Up The World
by Lyndon H. LaRouche, Jr.

September 10, 2008

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So far, the world's press had considered only some of the relatively less significant effects of what have become the treasonous implications of the actions of Senator Chris Dodd, Congressman Barney Frank, and Treasury Secretary Paulson. Now, those in the British Empire who may have been gloating, momentarily, should also recognize that the U.S. bomb over which they have gloated, was the bomb on which they have been already sitting at that time.
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Senator Chris Dodd and Congressman Barney Frank showed nothing as much as both stupidity and cupidity in setting up the situation for the implicitly treasonous implications of Secretary Paulson's blowing out the U.S. dollar on the eve of the Autumn Presidential election-campaign. The dollar which Secretary Paulson has just blown up, by detonating the explosive charge created by Felix Rohatyn dupe Dodd's initiative, is also that U.S. dollar on which the present world market depends absolutely, still today.

One needs only to consider what only a damned fool would overlook, as the exemplary case of China's relationship to the valuation of the dollar, to see that connection. China's economy depends, both financially and materially, on the valuation of the U.S. dollar. That is typical of the effects of so-called "globalization" and the WTO lunacy on the world as a whole. So, much of the rest of the world, such as Germany and other nations of western and central Europe, for example, depend, directly or indirectly, upon the condition of the physical economy of China. The entire system of so-called "globalization," has been a financial-economic time-bomb, which Secretary Paulson has just detonated.

The many of you out there who had thought I was either unfair, or exaggerating about the Baby-Boomer problem, had better rethink their opinions, if they expect to continue to be viewed kindly among those who they had hoped to consider as being their friends and neighbors. To say that typical products of the systemic political impact of the Baby-Boomer era, Dodd, Barney Frank, Paulson, and President George W. Bush, Jr., are public menaces, is to give them, and most of the complicit Baby Boomers and Buppies generally, a monstrously large benefit of the doubt.

To you, the dim-wits who authored this national tragedy, I say, "You could not have pulled off anything as wildly stupid and corrupt as you have done, while my generation was still dominating the leading positions in our government. Turn government over to the next generation coming up now, while popular opinion of the coming weeks might still regard you merely as fools, rather than as treasonous monsters."

A little more than a year ago, in my July 25, 2007 international webcast, I had warned that the present world system had entered a phase-shift into an implicitly hyperinflationary breakdown-crisis. On that occasion, I had proposed a measure, the Homeowners and Bankers Protection Act of 2007, which would have been the first step to bringing the presently skyrocketing world-crisis under control. Shortly after that, I presented two additional measures of reform of both the Federal Reserve System and international treaty-arrangements for a New Bretton Woods system. Through those three measures, we could have brought the present crisis under control.

Many of you supported some important parts of my proposals, but through the actions of such people as Senator Christopher Dodd, a publicly avowed dupe of financial predator Felix Rohatyn, who acted in concert with frankly silly Congressman Barney Frank, the way was cleared for a frankly unconstitutional, virtually treasonous piece of Federal legislation which has now been used by Secretary Paulson and a lame-brained President George W. Bush, Jr., to blow out both the U.S. dollar and also, in effect, to detonate that bomb which is the entire world's present monetary-financial system, into something worse than the kind of hyperinflationary breakdown-crisis which hit 1923 Weimar Germany, into a breakdown-crisis comparable to that which plunged Fourteenth-Century Europe into a prolonged, genocidal "new dark age."

Many citizens, including elected officials, on the level of state and local government, supported my proposed emergency action on the housing and banking crisis. Therefore, if those among you on the Federal level, who acted to sabotage my proposed emergency actions, such as Dodd and Frank, among others, must now repudiate your actions in sabotaging my proposals. Otherwise, if you are moral individuals, you will resign your present offices.

We must also take note of the fact, that both Senators Barack Obama and John McCain have reacting as consenting adults to the national perversions launched by Christopher Dodd, Barney Frank, Secretary Paulson, and President George W. Bush, Jr. Clearly, as an immediate first step, some of those named persons should begin the chain-reaction of simply resigning (ritual suicide is not recommended). The editors of the shameful New York Times, by the way, should also utter their own mea culpas (on the way out of their present positions) for their part in the related virtual crimes against humanity which they have perpetrated in their shameless corruption of attempting, fraudulently, to bully Rep. Charles Rangel, the Chairman of the Ways and Means Committee, into caving in to what is in fact the treasonous actions of Dodd. Frank, Paulson, Bush, et al.

Senators Obama and McCain, should reconsider their toleration of an implicitly treasonous action, or prepare to enjoy the rising public wrath of those who come to recognize the nature of the swindle, against them, which you have condoned. Obama, by the way, is likely to suffer much more than McCain, from associating himself with the actions of Dodd, Frank, Paulson, and Bush. (Senator Obama need merely address relevant experts who can explain this to him, blow by blow.)

Meanwhile, those who care will join me in the urgently needed actions to save civilization from the monstrous, virtually treasonous action which Dodd, Frank, Paulson, President Bush, and others have perpetrated in promoting this betrayal of our republic to a foreign financier power, the enemy of, in fact, all present and future humanity.

To ordinary concerned citizens who have just been looted beyond belief by the swindlers I have pointed out here, I say: "You know whose doorbell to ring on this matter."

LPAC Fact Sheet: Who Sold You Out?
09 Sep 2008

Hank Paulson's Trillion Dollar Taxpayer Bailout of Speculators

1. What Is It?

What Hank Paulson announced over the weekend is an unlimited, Federal Treasury, taxpayer-funded credit line, to guarantee banks and financial funds all over the world 100% of the value of their mortgage-backed securities. It is a Federal bailout promise which will completely dwarf the $30 billion Federal Reserve bailout of the mortgage-backed securities of Bear Stearns in May. It will steal from American citizens and taxpayers on a scale they have never seen before, to the benefit of financial firms. This makes the bailout unconstitutional, a direct violation of the leading "General Welfare" clause of the U.S. Constitution.

This taxpayer bailout of banks and hedge funds, is called by Paulson's Treasury the "Secured Credit Lending Facility." It has been publicly presented as a takeover and rescue of Fannie Mae and Freddie Mac, the huge government-sponsored mortgage companies. But the bailout credit will pass through Fannie and Freddie to the holders of the mortgage-backed securities (MBS) they've issued--that is, to international banks, investment banks, hedge funds, foreign central banks, etc.

A clear tipoff that this bailout is not actually a rescue of Fannie and Freddie? The Treasury's "Secured Credit Lending Facility" will also go through the 12 Federal Home Loan Banks. Nobody's claiming the Home Loan Banks are being "rescued"; but they've been doling out big loans to bail out bankrupt subprime mortgage lenders like Countrywide Financial.

2. How Big Is It?

"Unlimited"--the Treasury Department insisted on that. The only limitation on the size of this bailout, temporarily, is the U.S. Federal debt ceiling. And at the Treasury's frantic demand in July, the Congress raised the Federal debt ceiling, for this purpose, from $9.6 trillion to $10.4 trillion. So this bailout could rapidly use $800 billion of Federal borrowing, raising Treasury interest rates (it's already doing that) and piling on you, the taxpayer, another $40-60 billion a year in Federal debt interest charges. To give one indication of how big it could get, a memo has been recently circulating among economists at the Federal Reserve, according to one source, that warns that the Federal debt could reach $23 trillion by mid-2010, if the unchecked bailout goes forward. That is one warning of how big it could get, but no one can actually place a limit on how big this bailout could be.

There are $7 trillion in mortgage-backed securities (MBS) held by banks, hedge funds, "investors," etc. They are the means by which these investors bought collection rights on risky mortgage by the millions. They could and should be frozen and written off for the duration of the financial crisis; instead, Paulson's Treasury is guaranteeing them at 100% face value. Fannie Mae and Freddie Mac, between them, issued about $2 trillion of these, and bought another $1 trillion from other financial firms.

3. Who Authorized This Bailout?

The answer is The Housing and Economic Recovery Act of 2008, or HR 3221, passed into law in July, and known as the Dodd-Frank bill--for Rep. "Bailout Barney" Frank of Massachusetts, and Sen. Christopher Dodd of Connecticut, who was the chosen Presidential candidate of fascist New York banker Felix Rohatyn.

The bill was a Federal bailout of mortgage lenders to begin with. But in July, just before Congress was going to pass it, Treasury Secretary Hank Paulson insisted that the Congress add to this bill, the `unlimited' authority to bail out Fannie Mae's and Freddie Mac's mortgage-backed securities. Hank Paulson "delivered" the end of President Bush's threat to veto the Dodd-Frank bill, in exchange for adding this unlimited bailout. The Housing and Economic Recovery Act of 2008 doesn't even go into effect until October 1; but this part went into effect immediately when the bill was signed into law in July.

Here are the primary sponsors:

* Rep. "Bailout Barney" Frank (D-MA)
* Rep. Nancy Pelosi, Speaker of the House--her economic policies are set by Felix Rohatyn, fascist New York banker, speculator and drug legalizer George Soros, and Al Gore.
* Rep. Steny Hoyer, House Majority Leader
* Rep. Rahm Emanuel, (D-Ill.)
* Sen. Christopher Dodd (D-CT)--head of the Banking Committee, "Senator from Wall Street," his Presidential campaign was pushed by Felix Rohatyn, fascist New York banker.
* Sen. Charles Schumer (D-NY) also participated, along with
* Sen. Richard Shelby (R-Ala.)

4. Who Designed and Backed This Bailout?

The idea for the Dodd-Frank bill was put in circulation by British-linked anti-FDR economists at the New York Council on Foreign Relations: "world currency" promoter Ben Steil, neo-Conservative Amity Schlaes, former Federal Reserve governor Thomas DeLilio.

The bill was specifically designed by Wall Street and London financiers--by Credit Suisse Bank in particular--working with the staffs of Barney Frank and Chris Dodd, and with Paulson's Treasury. It was also pushed by Fannie Mae CEO Daniel Mudd--he lost his job in the big bailout push this weekend, but will probably leave with a very "golden parachute."

The direct bailout of mortgage-backed securities by the Federal government was also pushed by Morgan Stanley investment bank, and it's CEO John Mack. Morgan Stanley became the Treasury Department's adviser in the bailout. And it was pushed on the Congress by chief economist Mark Zandi of Moody's Economy.com, run by Moody's Investors Service--the rating agency which helped trigger the mortgage bubble blowout by over-rating many billions in mortgage-backed securities.

Paulson's Sept. 7 bailout announcement was backed completely by Presidential candidates Barack Obama and John McCain. Obama probably didn't know when he voted for the Dodd-Frank bill in July, that it would lead to an `unlimited' bailout--now he does, and he says, "It had to be done." McCain wasn't present in the Senate when the Dodd-Frank bill was voted. Now he says of Paulson's mega-bailout, "It had to be done."