Are You Going to Believe Me...
Or Your Lyin Eyes?
Research for Online Investors

by John Dalt

12/29/09

In the last week we have witnessed the Senate approve a bill to extend and control health care, under the guise of controlling costs.  It was done on a party line vote on Christmas Eve.  After the vote, the Senate also approved raising the debt limit, so Timmy would not run out of money.  Later that day, the Treasury removed all limits on Fannie Mae and Freddie Mac bad debt the government would cover.  By this time, reporters were drinking egg-nog and Senators were all snug in someone’s bed.

While the media fell over themselves with the historic passage of the Senate bill, very little was mentioned about approval of another $290 billion in debt.  This increased the national debt ceiling to $12.39 trillion.  According to the U.S. Census the population was 305,529,237 on Jan. 1, 2009  Each of us, our children included, now owe almost $41,000  The increase is enough to continue funding the government through the mailing of Social Security checks at the end of January.  Treasury is auctioning $118 billion in two, five, and seven-year bonds this week!

Why did the Treasury extend ‘unlimited’ coverage to Fannie Mae and Freddie Mac on Christmas Eve? Earlier legislation allowed the treasury to cover up to $200 billion at each institution. Fannie Mae has gone through $60 billion and Freddie has tapped $51 billion. There was still a lot of authorized funds left to cover losses. Does this signal that the administration is worried the housing crises is going to get worse? I don’t know, but according to the Los Angeles Times, this opens the back door to using the agencies to restructure mortgages next year without going through congress. The last thing the democrats want is another vote on a bailout with elections 10 months away. A mortgage-restructuring program is a good vote-buying program, and it was important to bury the funding on a night when it would not be widely reported.

The histrionics surrounding the passage of the Senate health bill were widely reported and criticized by some.  Nothing new, but the results of such actions is not new either.  A majority of world-improvers working to run over the opposition inevitably leads to problems.  Witness the report on The Incredible Timeline that created the Federal Reserve in 1913, 96 years ago.

“The Federal Reserve Act was scheduled during the unlikely hours of 1.30 am to 4.30 am…on Monday 22 December 1913, at which 20 to 40 substantial differences in the House and Senate versions were supposedly described, deliberated upon, debated, reconciled and voted upon in a near-miraculous four-and-a-half to nine minutes per item…

At 4.30 am, a prepared report of this Committee was handed to the printers. Senator Bristow of Kansas, the Republican leader, stated on the Congressional Record that the Conference Committee had met without notifying them (Republicans), and that Republicans were not present and were given no opportunity either to read or sign the Conference Committee report. The Conference report is normally read on the Senate floor. The Republicans did not even see the report. Some senators stated on the floor of the Senate that they had no knowledge of the contents of the Bill.

At 6.02 PM on 23 December, when many members had already left the Capital for the Christmas holiday, the very same day that the Bill was hurried through the House and Senate, President Woodrow Wilson signed the Federal Reserve Act of 1913 into law.”

Headlines the next day screamed, “Wilson Declares It the First of Series of Constructive Acts to Aid Business” and “Banks All Over the Country Hasten to Enter the Federal Reserve System.”

Why is it that actions so destructive have to be done late at night?   I am reminded of advice from my mother, “Don’t do anything you don’t want me to hear about, because sooner or later I will.”  We should not be surprised that the majority pushed through a program they believe will cement the voter’s dependence on them.  We are disappointed that dueling has fallen out of favor.

If you haven’t seen the drunken Max Baucus (D-Mont.) on the Senate Floor, you will want to watch.

Which leads us to our quote of the day:
"Are you going to believe me, or your lyin' Eyes?"
Groucho Marx

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The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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