“The Big Takeover” by Matt Taibbi is probably the best article written to date explaining the financial crisis and how we got to where we are now. Taibbi’s necessarily lengthy article explains the problems, names the “poipetrators”, and exposes all of the conflicts of interest— absolutely a must read.

AIG, Goldman Sachs, and J. P. Morgan turn out to be the major players causing perhaps the greatest financial crisis in modern history— even if the pain is unlikely to get near Great Depression proportions, the dollar losses to individual investors have certainly gone as far.

JPM was the brewmeister of the CDO, a vat full of various kinds of income securities, determined to be less risky because the income on most would almost certainly keep flowing— kind of like the once popular junk bond fund that Wall Street insisted was not risky …

Make no mistake: we are in uncharted territory. Hank Paulson wants $700 billion of taxpayer’s money to buy up bad debt and ‘rescue’ the markets.Some lawmakers strongly opposed to the plan.

“The free market for all intents and purposes is dead in America,” said Senator Jim Bunning, Republican of Kentucky, on Friday.

Justice Litle says the plan is a minefield for investors. He says there are five things you need to know about the government bailout and what it means for your portfolio.

This from Taipan Publishing:

1) The bailout is one of staggeringly massive proportions.

As I write to you in the wee hours of Monday morning, prior to my transatlantic flight, the number being bandied about for the size of the bailout is $700 billion. Keep in mind, too, that this is an opening number. It doesn’t necessarily include relief for upside-down homeowners, strapped consumers, foreign banks or many other potential “extras” that …

Ben Bernanke and Hank Paulson are planning the biggest bailout of financial markets in history. It could cost the taxpayer somewhere in the region of $1 trillion. But the market will triumph over the interventionists, says Bill Bonner.

The biggest credit bubble in history is due a correction, and there is little the Fed or Treasury can do to stop it. The more they try, the more money they have to print.

This makes the outlook for the dollar and US Treasury bonds ever more perilous… and the outlook for gold ever more attractive.

This from The Daily Reckoning:

There’s a war going on…a battle between a natural market correction…and an artificial attempt to avoid it. On the one hand, Mr. Market wants to correct the excesses of the boom/bubble period that began in 1982. On the other, Misters Bernanke and Paulson want to prevent him. Mr. Market takes down asset prices. Mr. Market …

The headlines are dramatic. Short selling banned for 799 financial institutions. $50bn injected into money markets. Plans for a massive bailout fund to clear the system of bad debt and stabilize the housing market.

The Unholy trinity – the Federal Reserve, SEC and Treasury – has pulled out all the stops this time. But while US stocks soar, Justice Litle says the government’s bailouts are a death blow for the dollar.

This makes real, tangible assets highly attractive. Justice says the most profitable investments going forward will be energy, infrastructure, hard assets and non-US growth plays.

More from Taipan Daily:

In the short run, it’s not clear how things will play out – the markets are an absolute circus right now. (As if you needed someone to tell you that.) In the long run, though, we are seeing the reality of the Austrian Endgame unfold, here and now, right before our eyes.

I’ve been pounding …

WASHINGTON (AP) -- Federal Reserve Chairman Ben Bernanke told Congress Wednesday that troubled mortgage giants Fannie Mae and Freddie Mac are in "no danger of failing." The Fed chief made his remarks to the House Financial Services Committee, his second day on Capitol Hill where he briefed lawmakers on the problems plaguing the economy. Bernanke appeared amid a backdrop of fading confidence in the U.S. financial system and in the national economy. The Fed and the Treasury Department on Sunday came to the rescue of mortgage giants Fannie Mae and Freddie Mac, offering to throw them a financial lifeline. The two companies hold or guarantee more than $5 trillion in mortgages - almost half of the nation's total- and are major sources of financing for the mortgage market. The Bush administration is asking Congress to temporarily increase lines of credit to Fannie and Freddie and ...

Article Source I see much to like about this. From the New York Times: the Bush administration will ask Congress to approve a rescue package that would give the government the authority to buy billions of dollars in stock in Fannie Mae and Freddie Mac and also lend to the companies to meet their short-term funding needs.... Separately, the Federal Reserve voted on Sunday to also open a lending facility for Fannie Mae and Freddie Mac, if they need emergency capital. The two companies would be able to post their own securities as collateral. The plan calls on Congress to give the government the authority over the next two years to buy an unspecified amount of stock in the two companies. Over the same period of time, it would permit the companies to have greater access to the Treasury, by expanding the credit line that each company has from the Treasury. Each ...

By Keith Fitz-Gerald Investment Director Money Morning/The Money Map Report Every market cycle has its genius. Even a market cycle as wild and volatile as this one has been. And the latest genius might be just what the U.S. Federal Reserve needs to restore order around here: She might even be able to bring credibility back to the global financial markets. Elizabeth Duke goes by "Patsy." And while the nickname may be soft, the person behind the moniker isn’t soft. In fact, we believe that Patsy Duke - a career commercial banker - is the only Federal Reserve insider that understands how the global money markets actually work. As such, she might just be the next central bank chairman. We say that because, unlike current Fed Chairman Ben S. Bernanke and the rest of the Beltway Boys - all of them academic theoreticians, data experts, or ...

By Martin Hutchinson Contributing Editor U.S. Federal Reserve Chairman Ben S. Bernanke ignored the warnings of most economists last week, and kept the benchmark Federal Funds rate at 2%, far below the actual rate of inflation. As a result of this non-move, investors can probably look forward to having global commodities boom to continue for at least a while longer. Here’s why. Genesis of a Commodities Boom Although the overall commodities boom has been under way for a number of years, prices didn’t just move up in a straight line: There have been long stretches during which prices advanced sharply, followed by short stretches of volatile prices reversals. The latest advance - and certainly one of the most intense - was ignited Sept. 18, which is when the U.S. central bank embarked upon one of the most aggressive rate-cutting campaigns in its history, slashing short-term rates from ...

By Peter D. Schiff Guest Columnist Last week the U.S. Federal Reserve moved one step closer to acknowledging reality. Unfortunately, it didn’t let that admission move it from a policy course firmly guided by fantasy - meaning the central bank opted to stand pat on interest rates, despite the clear escalation of inflationary pressures. In the policy statement that accompanied that decision last week, Fed Chairman Ben S. Bernanke and the other members of the interest-rate-setting Federal Open Market Committee (FOMC) took an important step in noting that inflationary concerns had taken hold in the country at large. But as it asserted that it expects inflation to moderate this year and next, the Fed gave no indication that these heightened expectations are gaining traction within the FOMC itself. As a result - with Richard Fisher, president of the Federal Reserve Bank of Dallas, ...

Boy, did Federal Reserve Chairman Ben Bernanke blow it this week! Investors were looking for a strong Fed statement because they believed it would support the dollar and snuff out the recent surge in commodities prices. But instead of reassuring Wall Street and giving investors an excuse to drive stocks through the roof, Bernanke blinked. Investors expressed their disapproval by responding with a strong statement of their own. The Dow's 358 point collapse yesterday can be directly traced back to ... The Fed is TALKING tough about inflation, but making it clear it isn't going to DO anything about it. Officials talked quite a bit about elevated inflation in their post-meeting statement. They said: "The Committee expects inflation to moderate later this year and next year. ...