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Nigerian con letter? No, it is the US bailout plan

This is simply brilliant:

Dear American:

I need to ask you to support an urgent secret business relationship with a transfer of funds of great magnitude. I am Ministry of the Treasury of the Republic of America. My country has had crisis that has caused the need for large transfer of funds of 800 billion dollars US. If you would assist me in this transfer, it would be most profitable to you.

I am working with Mr. Phil Gram, lobbyist for UBS, who will be my replacement as Ministry of the Treasury in January. As a Senator, you may know him as the leader of the American banking deregulation movement in the 1990s. This transaction is 100% safe.

This is a matter of great urgency. We need a blank check. We need the funds as quickly as possible. We cannot directly transfer these funds in the names of our close friends because we are constantly under surveillance. My family lawyer advised me that I should look for a reliable and trustworthy person who will act as a next of kin so the funds can be transferred.

Please reply with all of your bank account, IRA and college fund account numbers and those of your children and grandchildren to wallstreetbailout@treasury.gov so that we may transfer your commission for this transaction. After I receive that information, I will respond with detailed information about safeguards that will be used to protect the funds.

Yours Faithfully Minister of Treasury
Henry Paulson

The serious point here, of course is that Americans are being asked to bail themselves out, or their more feckless citizens, many of whom are far richer than they. And this is meant to save “unregulated capitalism”, apparently.

Thanks to Bob Bidinotto for the link. Bob has been on fire recently.
Update: here is an excellent summary of how the crisis has erupted, at Reason.

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9 comments to Nigerian con letter? No, it is the US bailout plan

  • Actually I think it first appeared at Lew Rockwell all capitalized and with misspellings.

  • Biggest delaying strategy in history?

    Nice stuff, must link to it.

  • Carol Kalescky

    Over last weekend, I requested that the Samizdatans write a little more about the economic crisis here in the US because I was getting confused. Many thanks for the link to the Reason article. It has made things very clear.

    The Nigerian banking letter was very funny, too!

    [editors note: Carol, we are Samizdatistas not Samizdatans 🙂 ]

  • llamas

    Second that – that’s the best, most clear-headed and reasonable analysis of this mess that I’ve read so far.

    One thing that I think has been under-discussed – even in this article – is the way in which MBS’s were reduced to toxic waste by the indiscriminate way in which brokers were able to bundle them – just enough sub-prime cr*p in the mix to juice the returns. We should bear in mind that the number of actually-bad mortages is actually surprisingly-small, and many people are servicing the less-extreme varieties of subprime loans just fine. It’s only the truly silly s**t that’s gone sideways.

    But because of the complexities of these MBS structures, you can’t isolate the sound loans from the cr*p – and so a whole shed-load of more-or-less prudent and performing mortgages have been marked-to-market down to zero, dragged there by their entirely-artificial ties to the small number of loans that actually are valueless. I wish someone with more financial smarts than I could crunch some numbers on this – it might well help to alleviate a lot of the concern, and maybe make people think of ways to separate the (majority) wheat from the (minority) chaff. That might also be one place where sensible, limited regulation might be in order, to prevent this sort of poisoning in the future. I don’t see any problem with bundling per se – it’s a sensible way to market loans into a larger market. But you’re not allowed to mix rotten aples with good ones and pass them all off as good.

    Heard another story this morning. Husband and wife built their own home 15 years ago, started with a 15-year fixed mortgage of $160K at about 6%.

    Now in foreclosure, owing $470K on a home worth about $350K. They’ve extracted $310K in phantom equity out of the home, and instead of owning the home free-and-clear, they’re now $120K in the hole.

    A lot of the money went on tuition at a fine local university. One kid is waiting tables, the other is currently the guest of a local sheriff, courtesy of his heroin-dealing habits (that’s how the story comes to me). The rest went on a succession of fancy cars and boats. They own a small business (outdoor advertizing) that’s a little slow right now, and the whole house of cards just fell in on them.

    Now – why do you and I have to bail these folks out?



  • RRS

    Given the experience and specialization of J P, one should be reluctant to counterpose the current perceptions. But, here goes:

    What goes in to the legislative process is not what comes out. Given the task of building an “outhouse” (latrine) they will by nature set up a Christmas Tree, fully ornamented.

    However, the concept originally presented by Paulson, et al. was not a “bailout,” but the creation of a potentially ancilliary “market” (actually an additional exchange with specifically limited conditions on transactions). The intended effect would have been to create reference points for valuations on assets and credits exchanged. That would replace the “no-market” estimations that currently are not (can not be?) correlated to assets underlying financial instruments.

    Once in the political arena, with the addition of “media hype,” the objectives were shifted, and those shifts were given “cover” by the “media,” resulting in a public misperception of the original concept.

    While imperfect, an anology might be a flood wiping out the farmers’ market drastically reducing needed food supplies. kowledgable people suggest that the town set up a new market outside the flooded area, and fund qualified dealers to buy the food stuffs (including staples and canned goods, etc.) that can be salvaged from the flooded areas.

    With trading recommenced, the farmers can set up again as the flood recedes. And, many of the goods brought in and purchased for resale in the ancilliary market will find their way back to normal trading.

    Of course, there will be unintended consequences.
    Of course the pending legislation is not geared to, nor limited by, the original concept.

    That is the price of plebiscitory representative government. Next, marches in the streets of Paris (which calls for 300B Euros to back its sectors); and super-blooging in the U s.

  • Kevin B

    Not being an economist*, I found the Reason exposition very interesting.

    One thing that did strike me was the timing issue. The article says that the ‘bailout deal’ was already factored in and that it was when the Crazy Eddies in Congress rejected the deal that the market plunged.

    My own recollection of events is slightly different. As I recall the market was sinking, but when the deal was sent to Congress, that was when it plunged. Then, when crazy Nancy did her impersonation of bipartisan politics and the bill failed, the next day the market shot up.

    Since then, the maket has wobbled along until last night when the Senate passed their version of Bailout Bill, and today the market plunged again.

    Now, as I say, IANAE so I may be misinterpreting cause and effect here, (like how CO2 causes global warming even though the rise in CO2 lags the rise in temperature), or the correlations may not be what they seem, so perhaps one of you experts could put me right. Thanks.

    *The only thing I know about economics is that money is the circulatory medium. Or, as my dear old mum used to put it when I scrounged a tanner for an ice cream: “Och well, it’s made round to go round.” When I pointed out the existence of the threepenny bit she would explain, often with the aid of a clip round the ear, that cheekiness is not always endearing.

  • tdh

    Last night Ifill hung a fastball over the plate, and Palin whiffed on her first swing, blaming Wall Street and barely touching even on the nature of FM/FM and the attempt to rein them in. A perfect opportunity for explaining to the American public who is to blame, and, more importantly, in what way, was lost.

    While the Reason article doesn’t go into all of the regulatory requirements that led to the current mess, at least the market mechanisms are broadly laid out. The bailouts so far thus prove to have been scams.

    That comical Nigerioid letter is all the better for being on the mark. Kudos to Bidonotto, Peter Viles, and especially the author.

  • tdh

    Er, Bidinotto. Sorry.

  • Paul Marks

    The Republicans have a arguement to make (although, sadly, John McCain is not making it).

    It was Democrat controlled Fannie Mae that pushed banks into lending money to people who could not pay it back – and to take those debts and turn them into securities traded round the world. And it was far left ACORN (supported by leading Democrats) that also pushed banks – but “direct action” when just threats to sue under the Community Reinvestment Act would not do the job.

    And Barack Obama was near the top of Fannie Mae’s slush fund list. In spite of only being a Senator for a couple of years he was only beaten by Senator Christopher Dodd – Senate Banking Committee Chairman, and controller of the Committee even when the Democrats were not in the formal majoroity, and a man who is remarkable for his corruption – even by the standards Washington D.C.

    Barack Obama was also the leading light of ACORN – their lawyer, their trainer, and a politician who got them lots of taxpayer money (and who they are now repaying with vote rigging – long an ACORN speciality).

    However, for all his warning about Fannie Mae – Alan Greenspan (a Republican) was still the Fed Chairman who produced the credit money that was so misused.

    This is the tragic context of “deregulation”.

    I doubt that Phil Gramm has ever heard the 19th century saying “free trade in banking is free trade in swiddleing”, but it applies in a context that has been twisted.

    If a bank was just a money lender taking the coins of its depositers and lending them out at interest to people it judged would pay them back – well then “deregulation” would be fine.

    But banks do a lot more than that – they create credit (they lend out money that does not physically exist) and that is always going to be a shell game.

    And having a Federal Reserve system pumping out credit money is always going to push banks even further.

    In such a context “deregulation” ends of with things like the S&L mess – or, much worse, what we have now.

    If banks were just allowed to go bankrupt (with the depositors being wiped out) their might be some common sense in their activities (because depositers would demand it) but even that pressure is destroyed by deposit “insurance”.

    So bank lending becomes political – because government decides it has to pay the bill.

    “But central banks could buy up all the securities in sight (no matter how many times it happens), and reduce interest rates to zero, and save any bank – all without getting involved in who a bank lends money to and how much it lends”.

    Sorry Tim Congdon – that is absurd.