Washblog

I have been in favor of the bailouts up until now. Secretary Paulson initially resisted every bailout move that he has made, because of course he is a right-wing, laissez-faire lunatic like the rest of them. But when the manure hit the rotating ventilation device, Paulson instinctively acted like America's Investment Banker. When his client - America - extended huge amounts of credit to save these vital institutions that were failing, he rightly insisted America get large equity stake in return.

But there's something else investment banker's do: it's called "jamming bonds" and it was introduced to the public in the book "Liar's Poker" by Michael Lewis. Investment banks have clients and they have "customers". They raise money FOR clients FROM customers. "Jamming bonds" is the practice of "jamming" the bonds of clients onto the balance sheets of customers using hard-sell tactics.

In the investment banking world, there is no lower form of life than a "customer". "Customer" means "idiot I can take advantage of". Henry Paulson WAS treating America like a client. Now he is treating America like a "customer". He knows that these fraudulent mortgage securities - based on inflated appraisals and inflated borrower income - have to go somewhere.

And he thinks he's found a "customer" in the American taxpayer.

With her power as Washington state's chief law enforcement officer, Governor Gregoire can force Washington Mutual to crack open its books and reveal the extent of the fraud BEFORE America is duped into getting bad debts jammed onto us.

Here's what's at stake, and I'm not kidding: the bad debt out there is an existential threat to the American financial system. He wants to move that bad debt onto the government's books, thus creating an existential threat to the American government's credit rating and thus the entire financial structure of our government.

We have to do something about the toxic debt. That something is the well-established practice of taking whole institutions into conservatorship so that America gets both the good assets and bad of these criminally mismanaged institutions instead of just getting "jammed" with the bad.