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RUSH: I have a question. Was the media this excited, were they this thrilled, were they this riled up when the stock market was scorching hot, climbing through the 14,000 barrier, and all the way up? When it hit 14,000 it was twice what it was in five-and-a-half years, 2002. They can’t get enough of this plunge, and I’m going to tell you what’s happening here, folks. They are stoking the flames of economic trouble, and they’re focusing repeatedly on the mortgage market, the subprime market, as they call it, and the housing starts. ‘Ten-year low, major lender has to borrow billions from 40 different banks.’ Real estate is cyclical like most things are cyclical. You have people taking some profits here. Sure, there’s some panic going on, but it’s a sell-off, it happens. But, boy, they’re stoking the flames of this, and they’re doing it in an irresponsible fashion, but it’s typical for the Drive-Bys. Their whole purpose is keep everybody riled up, keep ’em filled with angst and chaos and panic. I don’t know how long it’s going to be, but I guarantee you we’ll see some pictures from 1929 of people jumping out their office windows. That’s where this is headed. They’re driving down the stock market at the same time they did nothing to help drive it up. They ignored it, ‘Ah, well, even that’s just Wall Street. That’s not helping mainstream.’ Of course, the people on Main Street, ‘Yeah, yeah, punish those people on Wall Street!’

Now you’ve got people out there feeling good that this is happening, while at the same time getting involved in this panic. They’re trying to widen the impact of the market plunge here to the whole real estate market. I think they wouldn’t mind killing the economy, damaging the economy before the ’08 election in order help Democrats. You remember the last time this happened, the dot-com sell-off, Gephardt was smiling. He went out there on TV, rubbed his hands in glee and said, ‘Every hundred-point loss, we pick up a seat in the House.’ I’m not making this up, and I am not exaggerating. There are people that are happy about this. This is the thing about modern liberalism and the Democrat Party. What’s good for America ends up being disastrous for them: victory in Iraq, victory in a war on terror. What’s bad for America is good for them. I would not want to be that in a political party that had set itself up to win or to gain power in such a way.

BREAK TRANSCRIPT

RUSH: Back to the Drive-Bys and the economy and what’s happening. I had this thing in the stack from yesterday, and I didn’t get to it, but it’s a column from the Denver Post. ‘Guest Commentary,’ by Julian Friedland. Julian Friedland teaches philosophy and business ethics at the University of Colorado at Boulder, and if you are concerned about what is being taught to your young skulls full of mush in higher academia, then you have a genuine concern. It’s titled, ‘Journalism’s New Economics.’ Let me just give you a couple of excerpts here because I’m going to build on this point that I think they’re purposely, the Drive-Bys, doing what they can to create as much panic in your mind for the effect of harming the economy so as to help Democrats.

‘Last week, the New York Times reduced the width of its pages by an inch and a half,’ which, by the way, presented a challenge for people with birdcages, ‘joining a trend that has reduced both the space devoted to news and commentary and the staff sizes of many daily newspapers throughout the country. And, recently, Rupert Murdoch’s News Corporation won its fight to buy The Wall Street Journal. As the First Amendment to our Constitution reminds us, the success of this form of government requires an educated citizenry reliant on a free press. And the News Corporation, just like every other news company, is free to print whatever it desires. The problem is that it’s funded primarily by advertising. And advertisers in the major media tend to be large corporations intent on preserving their interests.’ Do you get an idea where this is going? No, I’m not kidding. This is just flat-out amazing.

‘Why a sufficient number of these family members finally decided to sell after initially rejecting Murdoch’s offer out of hand is a complex matter. But the upshot is that only two national newspapers are left in this country that are still held by such family trusts: The New York Times and the Washington Post. And these are widely considered to be the very best news sources in the country. This is no coincidence,’ by this guy, and, of course the elite effete snobs. Most family media’s been sold to pay for taxes on the inheritance. At any rate, here’s more, ‘As it stands, this public mission is being forsaken in the name of private profit. It thus stands starkly before us as a modern market failure. But there is a solution. Media represent an essential service like education and infrastructure. As such, media need to be protected from the corrupting influence of private interest, which has finally grown so massive as to exert a crushing grip on journalistic independence.’ Who the hell is exerting a crushing grip on journalistic independence?

Dan Rather got this started. When Larry Tisch bought CBS he looked at the books and said the news division is losing 200 million a year, we’re going to have layoffs. Rather went out to the street, ‘He can’t do that. The news division needs to be immune from the bottom line.’ Hey, Dan, give back some of your then $6 million salary if you want to get these people back working. This piece is all about how journalism is being corrupted by advertising; it’s being corrupted by corporate ownership pressures; it’s being corrupted by the need to make a profit and as such its independence has gone down the drain. ‘If we look to Europe we can see media independence there is protected by public funds,’ and then he cites the BBC. So the point of sharing this with you is that — and this is a college professor, University of Colorado at Boulder — the reason I mentioned this to you is because when I was running my theory by a friend prior to the program, that the media wants to destroy the economy or damage it enough to help the Democrats, the friend said, ‘Even if it means damaging themselves?’ Hell, they’ve been doing that for a long time anyway. But they don’t care. The actual practicing journalists don’t care about the financial health of their companies, and they don’t care about the falling circulation of their papers. Obviously they don’t because the content is not changing. The one business where the customer is always wrong and is stupid to boot, and when the customer complains about something, the elite snobs in the Drive-By Media say, ‘You don’t like it? Well, here’s more of it,’ and they cram even more bias and inaccuracy in what they do, as a sort of a knee-jerk reaction.

So, yeah, the bottom line is it wouldn’t surprise me a bit. They’re going to keep on with this, doing everything they can to get the consumer confidence numbers down. They want people being worried about their next paycheck. We’re going to get stories about, ‘We may be facing one of the most serious market falloffs in recent memory, and it may trigger for the first time in American history the fact that this generation will not do as well as its parents. The Bush administration is the leading cause of all this.’ Just see how this is all going to happen. So you have been warned.

BREAK TRANSCRIPT

RUSH: Here’s another little trick from the Drive-By Media. In markets like this, when the market’s down, only ‘the little people’ are losing money, of course. The Warren Buffetts and the Bill Gateses and the Henry Kravises, no, they’re not having any problems, but the little people are getting creamed. When the market’s up, only the rich make money. (Laughing.) The poor, the middle class, women and minorities are always hardest hit even during successful times!

BREAK TRANSCRIPT

RUSH: (Panting). Folks, it’s happened! The Drive-Bys got what they want. Breaking news! ABCnews.com: ‘Dow Jones Industrial Average falls below 12, 600 during afternoon trading, marking a 10% loss from the most recent high.’ (Panting) This is the first time since late 2002 the market’s seen a correction. Yes! It’s working. They’re beside themselves out there. The correction is a 10% drop. So it’s happened, and there’s excitement all over the place. Matt in Columbus, Georgia. In fact, they’re more excited about this than they are a hurricane. Yes, Matt?

CALLER: Rush, I have I guess more of a question than a comment, but I’m wondering if you think that the housing market slowdown has anything to do with people like Jesse Jackson years ago with the big affirmative action, you know, saying that certain quotas had to be met, that kind of thing, and if that has anything to do with people borrowing way too much money then they can afford, people going in, minorities going in, getting loans that on — I guess more on affirmative action, they’re looking at their credit ratings —

RUSH: Let me take a stab at this. Let me see if I understand what you’re saying is. What you’re saying is, what you’re asking me is, do I think one of the reasons this is happening is because a bunch of people who had no business getting loans were given loans because there was civil rights pressure put on lenders because there’s bias in the lending market?

CALLER: Yeah. That’s my question.

RUSH: See, this is an example why I’m a host and not a caller. Brevity is the soul of wit. Basically you think the lending banks were intimidated, scared into giving loans to people that they really had no business giving loans to?

CALLER: Yes.

RUSH: Yeah. Well, it’s risky to say that because I don’t think the only people that are in the subprime market here are minorities. I don’t think it extended to just that. Who knows what lobbying pressure existed on this, but here’s the way to look at this intelligently and maturely, is that people take risks with their money all the time, and we don’t make a habit of bailing them out. You take a risk, and if it goes south — sorry, Mississippi — it goes south. The other day I met with one of my many financial advisors. He came down here to see me from New York. He was just busting my chops to put some money in a hedge fund. I said, ‘Why?’ He said, ‘Well, they don’t go up as high in a great market, but they have a lot of protection in a down market. You won’t lose as much.’ I said, ‘But isn’t it true that if you put your money in a hedge fund and the market does start going down, you can’t get your money out of it for a year, particularly if it’s market related?’ He said, ‘Yeah, yeah.’ I said, ‘I’m not interested.’ This was when we were at 14,000. This was just my instincts. I don’t know anything about this. I don’t manage this stuff daily and so forth, but people take risks all the time. If I’d accepted the advice, put the money in there, I’d just have to be patient, wait for the market to rebound, which is what a lot of people don’t want to do. They’re taking their profits and selling off thinking it’s going to go even further down. But we’ll be talking about bailing out all these people before it’s all over and we will pay for it.

BREAK TRANSCRIPT

RUSH: Casey in Aikin, South Carolina. Glad you waited, sir. Welcome to the EIB Network.

CALLER: Hey, Rush. Mega dittos from South Carolina.

RUSH: Thank you.

CALLER: Yeah, I wanted to make a comment. You had a caller earlier that was referring to the mortgage flop here recently, and I spent a lot of years with some large banks, and just wanted to let you know, there are, with every bank that I’ve worked with had what they called ’emerging markets’ where they actually had subsidized funding for even down to ZIP Codes in certain city areas —

RUSH: Yeah.

CALLER: — and would attract low-income borrowers and so on, but one thing you gotta understand is that those loans are all insured. And it’s the subprime loans that are not insured and that’s all you really hear about. The subprime stuff is determined by Wall Street, basically.

RUSH: All right. Tell people, in a layman’s way, what the subprime market is.

CALLER: The subprime market is basically anything that’s not a Fannie Mae or a Freddie Mac-type loan. The rates are determined by different risk factors.

RUSH: Okay. Who has ’em? What kind of person has a subprime loan?

CALLER: Somebody that either makes a lot of money and can’t prove it, or has less-than-perfect credit or pay history.

RUSH: Well, now, this is (laughing). That’s a pretty broad category. Makes a lot of money and can’t prove it, or has less-than-perfect credit or pay history.

CALLER: They can’t document it.

RUSH: What?

CALLER: You can’t document it.

RUSH: They can’t document it. Well, we all know why.

CALLER: Absolutely.

RUSH: He’s in a cash business, right?

CALLER: That’s right. Well, the thing is those types of loans are attractive to guys that can do that, and it might be a short-term thing. If you get a subprime loan that may have an attractive rate, especially these ARMs that people are scared to death of.

RUSH: The subprime market attracts people who are really, really big credit risks.

CALLER: In a lot of cases, but not necessarily all the time.

RUSH: All right. So what’s gone wrong in this case?

CALLER: Well, I think what’s gone wrong is that there’s a bad skew on the mortgage industry because people, consumers, are thinking they can borrow this amount of money because they have an attractive rate.

RUSH: Isn’t what’s happening here, in part, that these people, a lot of them, have variable-rate mortgages and the rate’s going up —

CALLER: Yeah.

RUSH: — and when the rate goes up, the payment goes up to a point where they can’t afford it?

CALLER: But here’s the thing, Rush. Here’s the thing. An educated borrower knows that his rate’s going to adjust, therefore he’s going to make arrangements way before that happens.

RUSH: Well, now, wait a minute. We’re obviously not talking about educated borrowers here.

CALLER: Hmm. Well, in that case —

RUSH: By definition we can’t be if the subprime market’s collapsing.

CALLER: That’s a good point.

RUSH: Yeah!

CALLER: That’s a good point.

RUSH: That’s why I’m host. (Laughing.)

CALLER: Well, I think the banking industry — the finance industry in general — caters. They’ve made it easier for folks to borrow money. I mean, 15 years ago, you couldn’t get a seven-year car note. Same thing with houses. They’ve got 40- and 50-year loans out there.

RUSH: Yeah, but fifteen years ago cars didn’t cost fifty or sixty thousand dollars, either.

CALLER: Good point.

RUSH: Some of them did. Some of these big monster SUVs and so forth did. Well, look, Casey, I’m glad you called. I appreciate your time.

BREAK TRANSCRIPT

RUSH: Pat in Navarre, Florida. Nice to have you with us.

CALLER: (silence)

RUSH: Pat?

CALLER: Rush.

RUSH: Yes. Pat, hi.

CALLER: Hi. I wanted to tell you, I don’t have much compassion for these people who hold subprime mortgages. One of the reasons is, these mortgage brokers who handle their loans or the mortgage companies who gave them the loans, they knew well and good some of these homes were not worth what they were loaning on them. Not only that, these people had lots of credit card debt, and in order to qualify they had to get rid of that debt, so they would loan them in excess of what the house was worth so they could get into it. Well, now they can’t pay the mortgage payments because the interest is going up. Everybody knew what was going on. They all just kind of pushed it under the table and ignored it.

RUSH: Hence the ‘credit crunch.’ They’re calling it, ‘Wall Street going south on credit worries.’

CALLER: Mmm-hmm.

RUSH: That’s defined as: people can’t pay the loans back.

CALLER: Well, sure they can’t pay ’em back because the homes were not worth what they were borrowing on them. This happened, wasn’t it back in the eighties, when the same thing happened when I lived in Dallas, and you had that big fiasco with the savings and loan associations. You know, the properties were changing hands five, six, seven times a day, and every time it did the value went up on paper, but the property wasn’t worth it.

RUSH: Yeah, well, it’s interesting about the savings and loan crisis, because there was a lot of irresponsibility in that. One of the things that happened to some of the people in that incident was, we had tax reform in ’86, and we basically came down to three rates: 31, 28, and 15. As part of that reform, deductibility rules for certain types of real estate investments were changed, and people had ordered their lives according to the age-old tax code, and they changed it right in the middle of some people’s financing real estate projects and so forth, and it just exposed the S&Ls and the lenders to these new rules, and that was a contributing factor to it, too, and it was a tradeoff because it was lower the rates and then get rid of the deductions. I remember taking calls on this program. People were livid that their credit card interest rate was no longer going to be deductible. I said, ‘Don’t you understand, you don’t want to be paying the minimum payment on these credit cards, even if you can deduct it?’ But they thought that they were playing games and getting away with cheating the government by deducting their interest. Well, all that went away, and it happened in real estate, too, leading to a portion of the S&L crisis. Okay, so you don’t think these subprime people should be bailed out?

CALLER: No! I mean, just like you say, it’s a risk. Any time you buy anything, it’s a risk, and when you buy something that’s actually worth more —

RUSH: But, Pat? Pat?

CALLER: What?

RUSH (sentimentally): There are children in those homes.

CALLER: I know. Isn’t it too bad? Well, they gotta go out and rent a house just like everybody else does when they lose their property.

RUSH: Amen.

CALLER: Go out and rent a home! Rush, I need to ask you a question.

RUSH: Yeah?

CALLER: I can’t get an answer from anyone on checks. How does the American public, or a group of American people go around Congress to get a law enacted that will, number one reduce — make term limits on all of our congressmen that they cannot run again, and number two, how do you get any kind of a bill passed that says, ‘Each bill has to stand on its own; you can’t tack all this crap on the end of it?’ How can we do that as a — as the public?

RUSH: It’s not possible the way —

CALLER: Oh, gawd!

RUSH: — the Constitution is set up. Unless you want to be… Maybe you join the Pat Buchanan brigades and grab the pitchforks. No, I’m just kidding. That’s not possible. The only way you’re going to get that is to get a bunch people elected who want to do that kind of thing, and then enact it. Look, I’m not being rude here. I wish I had more time to delve into this answer for you but I’ve got a ‘hard break’ here, as we call it in big-time broadcasting.

BREAK TRANSCRIPT

RUSH: Matt in Redlands, California, you’re next. It’s great to have you here with us.

CALLER: Hello, Rush.

RUSH: Hi.

CALLER: Rush, do you think that one of the main reasons why the liberal media is trying to undermine consumer confidence in the US economy is that maybe the liberal media has finally realized that all of their efforts to force the United States to declare defeat in Iraq, cut-and-run, they’ve just completely failed, and that now you have even leading Democrat candidates for president saying that the US will probably have to stay in Iraq for many years to come.

RUSH: There’s no question about that. There’s absolutely no question about it. The Democrats haven’t given up on Iraq yet, though. They are prepared to say that… Let me find this stuff in the stack here. One of the things that they’re getting ready to say is that the whole Petraeus report is going to be a lie, that it can’t be counted on. ‘An Early Clash Over Iraq Report.’ This is in the Washington Post. ‘Senior congressional aides said yesterday that the White House has proposed limiting the much-anticipated appearance on Capitol Hill next month of Gen. David H. Petraeus … to a private congressional briefing, suggesting instead that the Bush administration’s progress report on the Iraq war should be delivered to Congress by the secretaries of state and defense.’ Rahm Emanuel said these guys ‘need to testify.’ Testify? I thought they were issuing a report. Anyway, there are other stories in here in the stack. There’s still a little internal battle going on in the Democratic Party over how to deal with this. But whoever is behind the effort here to reposition the Democrats on this, is having some success. They’re going to have to try to do something because they’ve gone over the cliff on this. I know what Petraeus is going to report. It’s already out.

He’s going to say he doesn’t need as many troops. He’s going to say we can start pulling some troops out of where we’ve been, and Democrats are going to say, ‘Well, that’s crazy. If the surge is working, why not leave them there?’ They’re going to do anything they can to say that this was a prewritten report not based on actions. So some Democrats up on Capitol Hill, the ones running for election, they’re going to have to pander to the kook base on this, but there’s an overall effort — I think it’s being led by the Drive-Bys, actually — to reposition the Democrats on this all through the end of the year, because there’s no electoral future in defeat. There’s no electoral future in the United States Military being humiliated and proclaiming it and standing for it and being happy about it. As to the economy, they would have done that anyway. You have to understand that they don’t pick and choose issues. Whatever they can make the big issue of the day, they will, in order to drive as much angst and anger at Republicans to help the Democrats get elected. The media is more activist than they’ve ever been. They’ve always been activists, but now they’re up front and out front about it. Not doing it under the guise of objectivity and that’s because they don’t have their monopoly anymore and there’s actually competition. So the news business is actually becoming more advocacy than it’s ever been.

It’s just they still don’t admit that they’re doing it but it’s clear to everybody watching that they are — and they’re desperate. They’re desperate to get one of their people back in the White House for a host of reasons, and so they’re going to be actively doing whatever they can, and that includes trying to trash the economy. But that’s a risky thing, too, because by the time the election comes up, it could pop right back up — the stock market, I’m talking about — and it will. This is how desperate they are. These are not the actions of a people who are confident about things. They take any little thing, like this 10% market correction, seize on it, or like another hurricane, seize on it, and do anything they can to disrupt normalcy, to disrupt harmony, to disrupt contentment and just cause tension and static throughout the population. They do this to keep everything destabilized because they think it’s going to lead to successful election results for Democrats. See, the dirty little secret that you have to understand, folks, about the Drive-By Media and the Democrats, is they don’t trust the electorate. They already look at the electorate with contempt anyway, derision, condescension. They don’t trust them. That’s why they want judges running the country. If they could put judges in charge of every decision in this country, they would do it. That’s why they’re trying to co-opt the judiciary, because that’s immune from election results in many ways.

BREAK TRANSCRIPT

RUSH: Deborah in Grand Junction, Colorado, welcome. Nice to have you with us.

CALLER: Thank you, sir.

RUSH: You bet.

CALLER: I have a question for you. If I’m listening to you correctly for the past three years, I understand that most problems that we’re having in any states or our economy is mainly based on either the Democrats are the Republicans. Am I understanding that correctly?

RUSH: Well, in the last three years, you’re asking me if I say that most problems we’re having in the states or our economy are mainly based on either the Democrats or the Republicans?

CALLER: Yes. Isn’t that the government that’s always pushing things on the people?

RUSH: Government, depending on who’s running it, yes, can be the engine that you need to get out of the way of or oppose.

CALLER: Okay, so I have a question for you.

RUSH: Okay.

CALLER: I was born and raised in Michigan and, you know, Michigan was mainly all Democrats because of the auto industry.

RUSH: Right.

CALLER: And that’s what kept the auto industry going. I’m really curious what your opinion is about what’s happening over there and the hundreds of thousands of people that are losing work. The majority of my family still lives there, and they’re just having to leave the state because of what’s happening. I really want your perspective and what your thoughts are.

RUSH: Well, in the first place, are you talking specifically about the auto industry, or just the state economy in general?

CALLER: Well, aren’t they connected?

RUSH: Not entirely. There’s lots of other stuff that goes on in Michigan besides the auto industry. It’s a huge, huge part of the economy.

CALLER: Right.

RUSH: But there have been trends in Michigan to show the economic direction the states been headed for a long time, but you’ve had Governor Jennifer Granholm, who is a Democrat, who’s responded by raising taxes. The last thing you do in an economic slowdown is take even more money out of people’s pockets, because there’s no way they can refuel an economic engine with less disposable income.

CALLER: So do you see it continuing to go down?

RUSH: No, because someday somebody’s going to realize what’s happening and fix it. But your point about people leaving the state, it’s happening to a lot of blue states. A lot of people are leaving New York, particularly Long Island, because they just can’t afford the property taxes and the real estate anymore. You know how many people are moving to Florida a day?

CALLER: No.

RUSH: Eight hundred. Despite the hurricanes, 800 are moving to Florida, largely from Orlando north, and over on the West Coast. If this keeps up, in a very short number of years Florida is going to have more electoral votes than New York does. It’s where you have these local and state governments that know no discipline whatsoever, that continue to tax, continue to spend, and it gets to the point where people don’t have a choice. They have to move in order to be able to afford a house that’s cheaper or maybe even a smaller salary after they move. Now, the auto industry problem, we’ve discussed that on this program a bunch of times. It’s a classic case of the golden goose being exposed. There’s a very simple economic rule, and that is, if any business is going to accept the obligation to pay people in perpetuity until they die, after they’ve retired and are not productive, they are not going to survive.

Productivity of workers is tied directly to company performance, and when you’ve got a large payroll that’s not working anymore, and you’ve got competition from other auto manufacturers who don’t have the built-in health care costs in their cars that General Motors does, for example, Ford and Chrysler, then at some point you gotta break. Now, people say, ‘But, Rush, they made the deal. They made the deal with the union.’ Yes, they did. They might have made the deal, but if there’s no money, who’s going to get paid regardless whether the contract’s been signed here? So they’re trying to lay off some of the pensions on the federal government or reduce them and so forth, while at the same time trying to revitalize the industry. Some of them are having some success doing it. Of course it’s going to get fixed, this is the United States of America. In the meantime, there’s going to be some bad policies that are going to affect a lot of people, it’s going to be painful.

CALLER: If the government wants to stick their nose in everything like they are right now, why haven’t they stuck their nose in here to help these —

RUSH: Well, that’s a different —

CALLER: Okay.

RUSH: You remember Chrysler. They bailed Chrysler out, but Iacocca paid the money back.

CALLER: Right.

RUSH: It depends. If we had a Democrat administration, you never know, they might do something like that. The Bush administration may accept — and there’s a government agency that assumes failed pension responsibilities, corporate pension responsibilities. The recipients don’t get it all, but they get a portion of it. There are government insurance programs and things like this, but a total 100 percent bailout is beyond the realm of possibility right now. There are too many other problems government has to go bailing out a full industry.

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