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Banks Reap Whirlwind of Govt Spending
BOSTON - The George W. Bush administration handed 125 billion dollars to nine of Wall Street's richest banks, but this will do little to help the economy that is crumbling around ordinary U.S. citizens, independent experts and activists say.
Laughing it up. Federal Reserve Board Chairman Ben Bernanke, right, and Treasury Secretary Henry Paulson, laugh during their testimony before the House Financial Services Committee on Capitol Hill, Wednesday, Sept. 24,2008, in Washington. (AP Photo/Manuel Balce Ceneta) "There is no way a modern economy can function without good roads, telecommunication, rail transport and an educated labour force," Allan Mendelowitz, a member and former chairman of the Federal Housing Finance Board, told IPS.
Bush's new Office of Financial Stability, led by Neel Kashkari, sealed a deal Tuesday to provide the billions, plus 125 billion dollars more for small banks, to encourage them to start lending to each other and the world's biggest businesses again.
A freeze in lending, related to the banks' risky trading ventures, has slowed the global economy, rocked stock markets around the world, and tightened lending throughout the U.S. economy.
"We're not proud of all the mistakes that were made by many different people, different parties, failures of our regulatory system, failures of market discipline that got us here," said Treasury Secretary Henry Paulson Thursday in an interview on Fox Business Network.
Earlier Wednesday, Federal Reserve Chairman Ben Bernanke painted a grim picture of the months ahead, but tried to sound confident of the government's ability to fix the economy.
"We will not stand down until we have achieved our goals of repairing and reforming our financial system," Bernanke said, echoing a statement by leaders of the G8 richest nations.
But markets around the world were reeling again on Thursday, and declined significantly in Asia, Britain, Germany and France.
The stock market in the U.S. has been erratic, gaining or losing hundreds of points nearly every day. It ran up 936 points Monday, was down 733 points Wednesday and on Thursday by closing time was up 400 points.
Lewis Pitts, a public interest lawyer in North Carolina, said, "Look at the whirlwind of activity that's focused on a select few, the wealthiest. Meanwhile, it's a mess out there. There is real pain among the working poor," he said.
"Just think if we used those billions directly on jobs," Pitts said.
The U.S. funds for the banks are being drawn from 700 billion dollars approved by Congress Oct. 3 under an emergency request by Treasury Secretary Henry Paulson. The nine big banks that received the 125 billion dollars hold 50 percent of all deposits in the U.S.
"The American people must understand that this carefully structured plan is aimed at helping you," Bush said earlier in the week.
Bush and Paulson, a former CEO of Goldman Sachs, originally proposed using the funds to buy up bad mortgage assets from the Wall Street firms, a controversial idea opposed by many economists as ineffective and objected to by much of the public.
But with markets sliding, lending at a standstill and pressure from some European nations, the Bush administration changed course last week and announced the bank buyout programme, which runs counter to its hard-line, free-market ideology.
"I frankly don't want the government being involved with businesses, owning businesses. I don't think it's good for the country. It was necessary that the stock be purchased to help us through this financial crisis, but in the long run it's not good for the country," Bush said Wednesday.
"They've handled this very poorly. They have a strong ideology that markets are perfect and are self-correcting. It's not true," Mendolowitz said. "This administration sat on its hands until the situation on the ground became so severe and the facts trumped their ideology and dogma."
"At this point what they are doing is trying to prevent another great depression. It's too late to prevent a recession, we're in the midst of it," he said.
The Bush administration should have acted sooner, he said, adding that its misguided policies "have weakened our economy and society".
"In the developed world we have the worst income distribution of any country. A smaller and smaller portion of our population has a larger claim on wealth. This manifests in that the working poor have less and less income and have a harder time making ends meet," Mendelowitz said.
Focusing on infrastructure and education would be a good start, Mendelowitz said. "Infrastructure projects create real jobs."
Still, turning the nation around, if the next president wishes to, will not be easy.
"Look at all the damage that's been caused in two presidential terms," he said.
Democratic congressional leaders have announced a plan for 150 billion dollars in spending on roads and social support programmes, to be considered by the lame-duck Congress after elections in November.
"The whole concept of bailing out these institutions is dubious," said Phil Mattera, director of the corporate research project of Good Jobs First, an independent non-profit.
"Buying a stake in them might be sensible but there must be safeguards against conflicts of interest, and as long as the federal government is not being ripped off," Mattera said.
The U.S. seems to have negotiated a soft deal with the banks, he said.
Under the Paulson plan, the U.S. will receive 5 percent interest on the bank shares it purchases for three years and nine percent thereafter.
The British negotiated 12 percent interest in a similar arrangement with banks and investor Warren Buffet will receive 10 percent interest on the stock he purchased from General Electric.
"There are a lot of problems. In all the panic about a market collapse it shouldn't be that these issues are going to be put aside until it's too late," Mattera said.
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Show All"The American people must understand that this carefully structured plan is aimed at helping you," Bush said earlier in the week.
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As father and son drove through the country, the boy noticed a bull breeding and said, hey dad-check it out.
Dad caught off guard said; well, that bull hurt his foot and the cow is helping him to the barn.
Gee Dad! that's just like the bush administration... you try to help 'em and they fuck you!
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Edited to make the dad dumber and the kid smarter and the joke better. 10/19/08-01:00 pm
"The U.S. announced late Tuesday that it had hired global giant Bank of New York Mellon as the lead agency to help manage the spending, lending and accounting of the 700 billion dollars approved by Congress Oct. 3 for re-starting the ailing U.S. banking system."
So now the United States has Mellonoma on top of all the other financial diseases that are currently in the process of reducing us to Second World status. We can go fight it out with Turkey or Argentina for supremacy of the Second World.
This struggle over bailouts is going to continue, and grow sharper and more bitter. It is at the heart of the struggle for the future of our country and the answer to the question “whose country is it?” And it is becoming a matter of survival. For this is an economic crisis unlike any this country has ever seen.
Back in '67 my fellow economics students and I worked out that the underlying factors - the declining rate of profits on productive assets and the increasing debt-to-national income ratio, would reach levels of 1929 by 1970. We speculated on how long all the mechanisms that had been put in place for regulating and stabilizing the economy could postpone it, how far the underlying pressures could build up and how it would finally fail. None of us guessed that it could hold together for 40 more years, or how high the pile of paper claims on the real economy would get!
What we are staring into is not just a depression, but the Mother of All Depressions, the consequence of a 40-year interruption of the economy's normal depression/capital-liquidation cycle. It is going to present us with a survival challenge. Waiting until the economy hits bottom and then starting the cycle over - as happened in every previous depression - will not be an option for the people. Our very survival will require setting up new forms of ownership and control, now, even as the old ones are still collapsing, and withholding assets from the effort to stop the financial collapse will involve accepting the liquidation of most of the wealth of the ruling class.
Needless to say, the political struggle will be intense, as is already foreshadowed in the fight over "the bailout". The slogan already is "bail out the people, not the bankers," and surprising new allies appeared, determined to stop it!
The bankers won this round, with a sop to the people, but the collapsing financial house of cards is so huge - tens of trillions of dollars of un-repayable loans topped by scores of trillions of dollars of what amount to nothing more than betting slips - that shoring it up and rescuing its owners will soon leave nothing for anything else - and in the end this will fail anyway. The government would quickly exhaust its power to borrow to absorb bad debts, and would have to resort to printing money. The resulting hyper-inflation would wipe out the value of all bonds and bank deposits - and debts. The "above-ground" economy would grind to a complete halt, and what production remained would be for barter.
Eventually, freed from old debts, the economy could restart, The winners would be those who had held onto ownership of land and productive assets.
The people cannot and will not allow the system to go through this collapse unchallenged. The consequences would be widespread misery, starvation, disease and despair. Our demand must be - indeed already is - for the power and resources of the government to be devoted *now* to keeping the real economy working and meeting the peoples' needs. Already Kucinich and others are calling for the government to start issuing a new currency, now, before the old one has collapsed, and to start constructing a new structure for financing the real economy now.
This program, the only way open for the people, poses a direct and mortal threat to the wealth and power of the top ranks of the ruling class. It is however a program that nearly all the rest of society can agree on, to the extent that they are not swept up by fascist and racist obscurantism. In the end there will be no room for compromise between these two paths. The rulers’ only alternatives will be to accept the liquidation of most of their wealth or to try to overthrow the government and rule by decree.
Defending our government and program from this will require a full mobilization of the people. Every trick, tool and tactic the "overlords" have learned as rulers of the Empire will be employed against us, while we, the most naive people on earth, will have to learn “on the job” how to resist and defeat them, how to think strategically and how to "think different"!
If the upper ruling class were united in seeing what's coming they would undoubtedly try to strike first. Should their coup succeed, the people would then face the same survival struggle but under much more adverse conditions.
Perhaps the reason they haven't struck yet - with a substantial block of the super-rich supporting Obama - is that they are not united in understanding the existential nature of the threat they face. And then there may be some who have looked into the abyss but who can't accept the awful implications for what they have to try to do and recoil from it. They are after all our fellow humans, and will share with us the fate of the planet.
In any case, this split in the ruling class, with part of it backing Obama, may be short-lived, but may be key to our survival, to our getting the time to learn how to organize, unite around a program of reconstruction and claim our government as our own.
Beyond this my crystal ball grows cloudy, but I live in the hope and dream that my son will survive and raise his children in a sustainable society in a peaceful world.
Chris Horton
I read this on another site!! READ it , its GOOD!!
Thanks
I've been expecting a recession for a couple of years. I expected one to begin the latter part of 2006, but with smoke and mirrors it has apparently been delayed until now. But now I'm expecting a depression, or worse.
We have systematically dismantled our wealth-creating ability, in particular, our industrial base. We've depleted our resources, in particular, oil. And compared to 1930, when we had 123 million people in this country, today we have 305 million - and the same or less resources with which to support them!
There is zero possibility that the recent "bailouts" will "fix" the economy because its foundation is broken. The bailouts are intended to bail out the connected insiders, allowing them to liquidate their exposure before the whole friggin' thing collapses.
I hate to be so negative. I'm normally pretty conservative about predicting dire eventualities, but the future looks mighty grim.
Dave
http://daveeriqat.wordpress.com/
Sorry Chris, but I fail to see how part of the upper ruling class supporting Obama indicates a "split" in the class. To me it is only a difference of opinion as to what color the Rolls should be.
You think they are laughing now, wait until Obama gets elected.
Yeah, they'll be grinning from ear to ear then, and dancing up and down wall street.
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"To know, and not to do, is not to know"
www.samsonsworld.blogspot.com
Each of you do realize what 750 billion dollars worth of newly minted money is going to do to the system right?
The FDIC has 42 Billion (with a B)of capital reserves against 4.2 Trillion (with a T) worth of deposits. That means it has backing of 1.2CENTS of every dollar for you for what you have in your acoount.
Mine.......other than what I use to pay bills stays in the mattress.
And you wonder why they are smiling?
where do you live?????.............
.Fuggetaboutit, anyone silly enough to keep his money under his mattress doesnt have enough to steal. Now I keep mine buried in
the backyard! Thats solid cash....
.
We see things, not as they are, but as we are.
Anais Nin
Coco,
West Palm Beach Fl.......ground zero for the first election that was stolen for George Bush under the tutelage of Teresa LePore at the election office on Gun Club Rd in 2000. Same area the pig Rush Limbaugh lives at 1495 North County Rd. on Palm Beach about another three miles away. This little spot in the world is a real hotbed.
i have friends in crestview fl...........but i'll be round with my matress cutting tools in a few days.............i know diddly squat about murrikan 'poli ticks'...............but 'under a green sky' is proving very intersting.
"President Bush warned on Friday that paralyzed credit markets would “take awhile” to return to normal..."
Depending on one's definition of "awhile," seeing as how "we" have handed over more than $1 trillion since MARCH and "normal" has yet to show up as promised...
"Bush said the government intervened only as a “last resort..."
Hmmm...
"And, as a last resort, we must be willing to use military force against Saddam Hussein..."
Is this not the classic bullshit line of all bullshit lines?
"The American people must understand that this carefully structured plan is aimed at helping you," Bush said.
Surprisingly, no one stood up and screamed, "Will you shut the f**k up and go back to your Crawford hole already, you lying piece of shit!"
Good one NMBill
I bet the repercussions from this bail out will lead to significant anti-government activities and not of the Waco kind. Maybe a bomb on Wall Street?
this is all just preparation for the new world order.
-you are not a person
Until the RICH go shopping, the system WILL TANK! And I love it! I want more of it! I can not get enough of it!
Cause AmeriKa will fall, and there will be 300 MILLION AMERICANS with ropes in their hands.
Coffeelover,,,,,,,
Where are you from, mommie's little revolutionary?
.You might understand, K, that this may very well be the only way to make the necesary changes to our governence and our financial institutions....With the obvious complacency of our electorate, with their unbelievable willingness to be led by the nose with the flimsiest of promises, with the way noone but a few have noticed that neither party speaks to or for anyone with a working persons income it just might have ot get really, really bad before we the people awaken..
We see things, not as they are, but as we are.
Anais Nin
I agree, but constantly wishing disaster on people who ,most of them, had little control over their situations (they will be the ones hurt--Bush et al wil go to their "undisclosed locations")seems very unfair. I see this fro coffeelover al the time. It is like "Let everything and everybody blow up". I just think that is very selfish. And, I am willing to bet that, when things go really south, that they wil not be one of the people who will suffer/
300 million people did not want and/or plan any of this. Most people arent even in the stock mkt, dont vote GOP, etc.
But they all deserve the same thing? I dont buy it.
.I am certain that you are familiar with the Jefferson quote about" maybe revolutions are necesary every so often"?
.
We see things, not as they are, but as we are.
Anais Nin
Yes I am, and I agree. I just have some family members who are not at all rich, but, who will lose their ass if this all collapses. I have nothing to lose, personally. But, maybe I am not objective about it .
.Please understand that I am not advocating a revolution, not a violent one at any rate. I am simply observing that our electorate seems unwilling or unable to make decisions outside the box and are being herded into third world status precisely because of that inability.
This website seems a microcosm of the political world. A Progressive website in which we should have much in common, yet we fight like cats and dogs over whether the democratic party represents us, we cannot agree even on the words and meanings of their candidate, we cannot take Ralph Nader at face value, we look for solutions by doing the same things over and over.
It seems that we are entering a world wide depression ( a perfect occasion for revolutionary change ). I agree that many are going to suffer, some greatly, and that is very sad to say the least. Yet when it is observed that the very people who brought us this great tragedy are living very well indeed while the vast majority are not then maybe out of the box thinking becomes de rigeur and we actually change our governance for the better. Sad it has to be that way, if indeed it does.
Sorry to be so depressing, but I am now off to Lake Oroville for some Spotted Bass fishing.....see, those damn spoiled Americans and their outrageous lifestyles.....
.
We see things, not as they are, but as we are.
Anais Nin
Just one happy bunch of thieves.
With brain damaged zombies like Joe the Plumber happily shooting his feet and handing more money to Wall $treet, this will be easy !
The young lady that heads the FDIC had this right. Not such a good idea.
Federal tax revenues are roughly 2.5 trillion dollars a year. Interest on the national debt was already 400 billion a year before the hundreds of billions of handouts began this year. The 700 billion came in addition to several hundred billion handed out since the beginning of 2008, a trillion or so this year alone. This means the interest alone is approaching 500 billion, or half a trillion a year. I don't see any way out without either a default on the national debt or allowing or engineering a period of hyperinflation so that the debt can be repaid. Either option will piss off the creditors (Communist Red China, Japan, Saudi Arabia and various filthy rich people and private institutions) in a major way. There will be no easy way out. It will probably be rather difficult to avoid major violence along the way. Although I do not advocate violence of any kind, and will not participate in violence of any kind, I envision a few well-placed assassinations at the very least. I hope people keep their heads and do not resort to this kind of violence.
-- EKATON --
In the case of the third world indebted countries, the point has been made that the debts were incurred by rulers who were corrupt and did not represent the interests of the people. They borrowed the money, then used it on the military, the police state and their own personal corruption and that of their cronies.
As such, there is an argument precisely for saying that the people to not have an obligation to pay that money back. They didn't borrow it, and it was spent more to oppress them than to give them any benefit. If the banks should go after anyone to repay those debts, it should be going after the corupt leaders instead.
The same seems to be very true in this country. There should be a real case, once we take power back into the hands of the people in this country, to say that if the banks want to collect on all that US debt, they should go down to the ranch in Crawford, TX. That's who borrowed this money. That's who spent this money. That's who benefitted from this money. We didn't, so don't ask for our money in the future.
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"To know, and not to do, is not to know"
www.samsonsworld.blogspot.com
But of course the IRS steals money out of every paycheck. A mass taxpayer revolt would help but impossible to organize. No one wants to be among the first thousands to be jailed for failure to pay taxes.
-- EKATON --
Ekaton,
You have encapsulated in your remark the only weapon we have in our arsenal and the one that no one has the balls to use.
B-b-b-ut...Bush threatened to call for martial laaw! There wouldve been blood in the streets! And they wouldnt have just been nice and hit people mildly and locked them up and stuff like they did in Denver...
We HAVE to give rich people our money! Its our own gawddamn fault that we dont make enough...I hate poor people.
They only want to live in the "style to which they have become accoustomed"!
I'm not sure if Democratic Rep. Brad Sherman's comments about bailout proponents threatening martial law was further investigated or substantiated.
And I'm also not sure whether people raising this point are sympathetically defending legislators who may have voted for the bailout because of this threat. Common sense suggests that politicans who wilt in the face of blatant fearmongering are more to be censured than pitied.
I wondered the same thing when the anthrax story was back in the news after Bruce Ivins' death. I read several comments explaining the legislative support for the abominable Patriot Act resulting from legislators being scared to death that they would be targeted with death-- in the form of anthrax, or otherwise.
The odd thing is that one couldn't really tell from the comments whether the commenters were excusing the politicians, or deriding them for crumbling under the threat. I hoped it was the latter, but it was impossible to tell.
Don't worry, Bush can always call for Martial Law after he "postpones" the election and the unemployment rate hits 15% or more, Then all his cronies can take their hard earned profits from the stock market and invest in privatized prisons.
Crime is the new sub prime opportunity!
Not plausible. If Bush were strong enough to declare martial law, force down a nation-wide rebellion, keep the generals -- including the retired ones -- in line, then he'd certainly be strong enough to do something far safer (and simpler) politically: co-opt the Democratic Party. Give us non-elections, theatrical amusements for our benefit, to show that democracy has been served.
But I don't think the Democratic Party was co-opted by Bush. Rather, a common M.I.C. + banking interests + corporate media has co-opted them both. No cancellation of elections necessary. Indeed, the elections are good money for the corporate media.
The Democratic Party is definitely co-opted. But anyone who thinks of Bush as the culprit, then they are missing the fundamentals behind American politics.
Look at the fundraising of the 2000, 2004 and 2008 campaigns. Its clear that the big corporate money has shifted in this time from behind Bush and the Republicans to being behind the Democrats. That's the real power in this country. That corporate money and the corporate media that determine who is going to win elections.
That's why Bush can't cancel the elections. The people who put him in power now want Obama and the Democrats in power. Bush and the Republicans would be stepped on quickly if they tried to do something that this money didn't want to occur.
Of course, the reason they want Obama in the Democrats in power is that they are fully co-opted and owned by corporate money. Their role is to protect corporate amerika's gains from the Republican years, and also to pass some additional gains in corporate power that the Republicans couldn't give them. That was the role of the Clinton Administration, and that's the role of today's Democrats.
The big money is smart enough to realize that if the Republicans constantly push their interests, then at times the public will get fed up with this and want to rebel. They know a true rebellion that put someone like Nader in charge would be very hazardous to their interests. So, the Democrats serve the role of corporate America's B-team, ready to step in and hold down the fort when the people get sick and tired of the Republicans.
----------------------------
"To know, and not to do, is not to know"
www.samsonsworld.blogspot.com
But Obama is a "poor guy" who went to Harvard on food stamps! He cares alot about the common person. He just cant say so or he wont get elected.
I know it in my heart of hearts. I can see it in his eyes. I can read his mind--it says, "Vote for me. i'm just acting like a conservative putz to get elected.Just give me time. I wil make your broad progressive coalition dream come true".
I know it I!
Samson: "the Democrats serve the role of corporate America's B-team, ready to step in and hold down the fort when the people get sick and tired of the Republicans"
That's worth repeating.
But the Congrses only did the bailout because they were concerned for US!! Cant you see that??
.
I’ll say it again…
We needed Ralph Nader as President in 2000.
We needed Ralph Nader as President in 2004.
We NEED Ralph Nader as President in 2008.
Never before as we do now
http://www.votenader.org/index.html
.
.
"I'm angrier than I sound "...Ralph Nader
http://www.nader.org/
Rolling the Dice on Derivatives
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How come Ralph Nader never raises his head except at election time? I have the utmost regard for him, but when I was young he was actively involved on a daily basis, doing--always making a difference by doing, rather than speaking about what we should do. He is, in that sense running the same foot race as the Democrats who used to do, but now have a talking game
Ralph Nader raises his head all the time. You just have to pay attention. I was reading his articles and following his action from 2000-2008, he hasn't stopped. He's not just around when it's time for an election. Nader works 24/7 to improve this country and its democracy, for the people.
My only complaint with Nader is that he hasn't replicated himself, taken on proteges. It would be great to have law school scholarships available every year to progressives with a similar degree of piss and vinegar -- and aptitude.
We're out here, Ralph. But we can't afford law school. If someone could give us a stab at law school without going into $80K debt, there would be Naderites all over the place. We better get to work now. His shoes will be hard to fill.
Nader wants ALL education FREE to Students.
but you knew that didn't you?
http://www.nader.org/
An archive of articles Nader writes once a week.
Also a search for any topic he speaks about.
Very informative of all his beliefs.
.
Nader needs to speak up on these issues even more of he'll be lucky to get 1% at this rate. The only way Nader will ever be allowed to win is if we get ourselves and our friends, family, relatives, and neighbors to ditch the corporate media altogether. At this point, only the Internet seems useful these days. Nobody would otherwise know that Nader is even running or that there are even 3rd parties out there.
.
We can beat the MSM by using the INTERNET...
Spread the word.Go to all the blogs.
Nader for President.
What say you America ?????
VOTE NADER/GONZALEZ 2008… You’ll be glad you did and so will I…
http://www.votenader.org/blog/
http://www.votenader.org/index.html
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I would no more vote for Nader than cut off my little finger, because he has no chance of winning and I wouldn't want him as president anyway. He's an egotistical, control freak who can't begin to think about sharing in the sand box, or anywhere else.
His articles are mostly good, interesting, and often very informative. The man has some very real qualities, no doubt. After Katrina, I remember a classic Nader article that proposed alternatives to organizing and financing for people who had lost their homes. He outlined how to use cooperative financing, and he even included links, phone #s, email addresses, etc. Excellent research and communication, something at which he is obviously a master.
But confusing the writing of articles with ORGANIZING just shows how confused and naive are most Naderites. He doesn't know how to organize and doesn't care. Writing articles and his gadfly egotistical run for president every 4 years is easy, hugely ego-reinforcing, but totally pointless in terms of moving towards the real change he describes so well.
He's way too weird, egotistical, and control obsessed to do really good organizing. And...he has a really shaky streak.
During the Terry Shivo debacle, he came out completely on the wrong side with a demagogic piece of trash claiming the courts' decisions about pulling the plug were based on hearsay evidence (not true) and that she should be kept alive. He was obviously making a pitch to the religious bunch and willing to twist words and facts to get there. He has his strenghts, but his negative side screams out that he's the last person you want as president.
Ah yes, perhaps, if you say, but even 'twere that so, he would still be the lesser of 3 evils, and, apparently, for that reason alone, worthy of our vote.
.Tweck's response above is an excellent one. I would only add that perhaps this poster only pays attention to the political world around election time. This is not meant as a slur, well not individually anyway.
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We see things, not as they are, but as we are.
Anais Nin
.
http://www.pbs.org/newshour/bb/politics/july-dec08/nader_10-14.html
Ralph Nader PBS Interview:
If you make the speculators pay for their own bailout, then there's a relief throughout America that there's some fairness coming out of Washington.
A 0.1 percent tax on security derivative transactions in one year -- it's going to be $500 trillion of transactions in one year -- is $500 billion. So that alone would make a sense of equity. And you wouldn't put it on the backs of the taxpayer.
England has that kind of tax, by the way, for years. FDR had it. We helped finance the Civil War with it. But after World War II, it was scrapped.
So people go into a store in all your areas where your show shows, and they buy necessities of life, and they pay 6 percent or 7 percent sales tax. Tomorrow, someone in Wall Street can buy a billion dollars of Exxon derivatives, pay no sales tax. That's where the fairness has to go.
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