CRASH TALK

Asbury Park Press, NJ - Five bodies and the cremated remains of 22 people were evicted from a suburban Detroit funeral home after the building went into foreclosure. The House of Burns Memorial Chapel in Pontiac, Mich., was closed and contents of the building were removed, including empty caskets. The bodies were delivered to the Oakland County medical examiner's office for storage after the evictions. Some of the cremated remains dated back to the 1990s. The bodies will be sent to another funeral home when family members make a claim.

Washington Post - The Treasury Department is dramatically expanding the scope of its bailout of the financial system with a plan to take ownership stakes in the nation's insurance companies, signaling new concerns about a sector of the economy whose troubles until now have been overshadowed by the banking industry, government and industry sources said. Insurers, including The Hartford, Prudential and MetLife, have pushed the Bush administration to include them in the plan. Many firms have taken losses from mortgage-related securities and other investments and are struggling to replenish their coffers. Government officials worry that the collapse of a major insurer could further destabilize the financial system because of the crucial role the companies play in backstopping a wide range of financial transactions, although the direct impact on holders of car, life and other insurance policies would be modest, industry officials said.

The new initiative underscores the growing range of problems that Treasury is scrambling to address with the $700 billion allocated by Congress this month. The shape of the plan has changed repeatedly since Treasury Secretary Henry M. Paulson Jr. introduced it last month as an effort to rescue banks by buying their troubled mortgage-related assets. That original mandate has now been pushed aside by a plan to take equity stakes in banks and insurance companies, and other businesses are lobbying to be included.

The government has been forced to expand the plan partly because the federal guarantees previously given some institutions, such as banks, have put other companies and financial sectors at a disadvantage, making them less attractive to uneasy investors.

The government's power to choose winners and losers in the crisis was illustrated yesterday when the Cleveland-based bank National City was forced to sell itself when regulators turned down its request for a Treasury investment after deciding the firm was too weak to save, according to people familiar with the matter. Instead, the Treasury gave $7.7 billion to PNC Financial Services Group to help buy National City. It did not require that the money be used for new lending, the stated purpose of the government plan. PNC, which has a major presence in the Washington region, would become the fifth-largest bank in the country by deposits.

Howard Zinn, The Real News - To me the solution's obvious, and that is instead of giving $700 billion to the financial institutions, you take that money and you give it directly to the people who need it. In other words, the government, instead of dispensing this money, takes hold of this money it was going to give to financial institutions. It's interesting that it suddenly finds this $700 billion when it was, you know, complaining, "We don't have any money for this or that." Take the $700 billion, and the government should give that in direct aid to people who are going to lose their homes, not allow anybody to lose their homes, and the government should create millions of jobs for people who need jobs. This was done in the '30s.

Seumas Milne, Guardian, UK - It's certainly true that the events of the past few weeks have exposed deregulated capitalism as bankrupt and its ruling elites as greedy and inept. But it is the free-market model, not capitalism, that is dying. That is reflected in public opinion: a Financial Times-Harris poll conducted across the advanced capitalist world this month found large majorities believe the financial crisis has been caused by "abuses of capitalism", rather than the "failure of capitalism itself" - only in Germany did the proportion blaming capitalism as a system rise to 30%.

As Sarkozy has pronounced: "Laissez-faire is finished." It is not Marx who has really been rehabilitated in short order, but John Maynard Keynes, out of dire necessity. In the wake of the largest-scale acts of state economic intervention in capitalist history, politicians are now having to make a virtue of it. "Much of what Keynes wrote still makes sense," the chancellor Alistair Darling declared at the weekend, as he announced plans to bring forward large capital projects and the prime minister defended higher borrowing to counter falling demand.

The symbolic significance of this official return to Keynesianism shouldn't be underestimated. It's 32 years since the then Labor prime minister Jim Callaghan bowed the knee to monetarism, nearly three years before Margaret Thatcher came to power, and announced to his party conference: "We used to believe that we could spend our way out of a crisis, but I tell you . . . it is no longer possible." Faced with financial collapse and the threat of a full-scale economic depression, such fancies have now had to be consigned to the dustbin of history.

Reuters - Sales of previously owned U.S. homes rose 5.5 percent last month, the biggest gain since July 2003, and the inventory of unsold homes fell, a hopeful sign for a housing market mired in a long slump. . . The surprisingly large jump in sales pushed the inventory of unsold homes down by 1.6 percent to 4.27 million, or a 9.9 months' supply at the current pace, the lowest since February. ". . . Home prices, however, showed no signs of escaping their long, deep slide and economists said the number of homes on the market would likely have to fall further before they do. The median national home price declined 9 percent from a year ago to $191,600, the lowest level since April 2004.

LA Times - The number of people losing their homes in California hit a record high of nearly 80,000 in the last three months, but a new state law appears to be dramatically slowing the foreclosure process -- at least for now. Loan default notices, the first step toward foreclosure, fell to 94,240 for the three months that ended Sept. 30. That's down sharply from the record 121,673 for the previous quarter, according to research firm MDA DataQuick.

The big drop came in September, when a new state law took effect that blocks lenders from initiating foreclosure proceedings until 30 days after contacting the borrower or making "due diligence" efforts to do so.

Default notices sank to 14,995 in September, after averaging more than 40,000 for each of the five preceding months.

"That new law virtually slammed the brakes on mortgage default filings," said Andrew LePage, a DataQuick analyst. "We don't know yet how many of those loans will get worked out versus just shifted to late this year or early next year."

State Senate President Pro Tem Don Perata (D-Oakland) introduced the bill after hearing numerous complaints from homeowners who said they had been unable to make contact with their lenders, or the firms servicing their loans, to avert foreclosure.

"Once all this stuff exploded and you realized how these mortgages were sold, packaged and resold, it was no wonder that the homeowner was confused," he said. "There wasn't anybody to talk to about their condition."

Denver Post - [Ralph] Nader placed much of the economic meltdown at the feet of a greedy Wall Street intent on making money at the expense of people worldwide.

"It is corporate greed tied to the ability to dominate the same corporate power," said Nader. "These guys knew exactly what they were doing. They were stretching the rubber band. . . to get another million and another $5 million, another $10 million." It was a spree, and they got caught - their thumb in the trap. They went over the brink. It's massive greed"

Nader said that Wall Street bundled together new financial instruments that were "risky, pretty worthless and abstract" and using the brand names of Merrill Lynch, Citibank, Bear Stearns and Lehman Brothers "sold them to towns in northern Norway and China when they were really bets on bets on bets."

Nader said that the one thing that the corporate speculators did was a create a "high velocity in expansion of the money, which means they are perfect objects for transaction tax," which he advocates. "Credit-default swaps alone are about $80 trillion in these computer trades. So the beauty of it is a tiny tax - one-tenth of one percent - of $500 trillion is $500 billion a year," said Nader.

He said that President Franklin Roosevelt had a transaction tax, and the United States helped finance the Civil War and Spanish American War with transaction taxes. He said the United States abandoned transaction taxes after World War II but now has a chance to reinstate the tax.

"That is how you get money to build real things from the paper economy to the public works," said the five-time presidential candidate.

He said that he and others will push Congress when it is back in session to make the speculators pay for their own bailout.

And it will be up to the enhanced Democratic-controlled Congress and President Obama to make it work, he said. "They finally have no excuses," said Nader. "This is the final test of the Democratic Party. They can't blame the Republicans in the Congress. They can't blame the White House."

Dirt Diggers Digest - It's now clear that Treasury Secretary Henry Paulson is seeking to use the Big Bailout not only to resolve the credit crunch but also to remake the banking sector of the U.S. economy. Going on the dubious theory that bigger means better and stronger, Paulson is encouraging giant banks to use federal money to take over their smaller counterparts. In an interview with Charlie Rose last night, Paulson said: "There will be some situations where it's best for the economy and for the banking system for there to be a consolidation."

The big players are getting the message. The Wall Street Journal and the Washington Post have pointed out that executives at major banks such as J.P. Morgan Chase and BB&T are openly considering using capital infusions from the feds not to make more loans but to purchase competitors.

It's odd there is not more of an uproar over this development, the way there has been in response to reports that the big banks have been stepping up their federal lobbying activities at the same time they are taking public money.

USA Today - More families with children are becoming homeless as they face mounting economic pressures, including mortgage foreclosures, according to a USA Today survey of a dozen of the largest cities in the nation. Local authorities say the number of families seeking help has risen in Atlanta, Boston, Denver, Minneapolis, New York, Phoenix, Portland, Seattle and Washington. "Everywhere I go, I hear there is an increase" in the need for housing aid, especially for families, says Philip Mangano, executive director of the U.S. Interagency Council on Homelessness, which coordinates federal programs. He says the main causes are job losses and foreclosures. USA Today found: In New York City, 2,747 families applied for shelter in September 2008, up from 2,087 in September 2007. . . In Hennepin County, including Minneapolis, 880 families were in shelters from January through August 2008, up from 698 in that period last year.

NY Times - Facing a firing line of questions from Washington lawmakers, Alan Greenspan, the former Federal Reserve chairman once considered the infallible maestro of the financial system, admitted on Thursday that he "made a mistake" in trusting that free markets could regulate themselves without government oversight. A fervent proponent of deregulation during his 18- year tenure at the Fed's helm, Mr. Greenspan has faced mounting criticism this year for having refused to consider cracking down on credit derivatives, an unchecked market whose excesses partly led to the current financial crisis. Although he defended the use of derivatives in general, Mr. Greenspan, who left office in 2006, told members of the House Committee of Government Oversight and Reform that he was "partially" wrong in not having tried to regulate the market for credit-default swaps. . . Referring to his free-market ideology, Mr. Greenspan added: "I have found a flaw. I don't know how significant or permanent it is. But I have been very distressed by that fact."

Washington Post - The federal government may start guaranteeing home mortgages to persuade lenders to ease the monthly financial burden on struggling homeowners, Federal Deposit Insurance Corp. Chairman Sheila C. Bair said. The proposal, presented to the Senate Banking Committee, represents the most detailed idea yet on how the $700 billion federal rescue package might directly address the blight of foreclosures sweeping the nation. While the federal government has adopted a series of unprecedented measures in recent months to guarantee the investments and transactions of financial firms, the FDIC's proposal would vastly expand the role of the Treasury in standing behind the mortgages of struggling borrowers.

The plan, which won a warm reception from some senators, comes as demands grow on Capitol Hill for an ambitious initiative to help distressed homeowners, whose ailing mortgages are at the root of the financial crisis. The committee hearing yesterday continued a long-standing debate between lawmakers and the administration over how much to aid these borrowers. Citing the mortgage troubles of their constituents, some members of the Senate committee repeatedly complained that the administration has overlooked homeowners while placing emphasis on helping banks.