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Wall Street Socialists
The financial crisis gripping the U.S. has the largest banks and insurance companies begging for massive government bailouts. The banking, investment, finance and insurance industries, long the foes of taxation, now need money from working-class taxpayers to stay alive. Taxpayers should be in the driver's seat now. Instead, decisions that will cost people for decades are being made behind closed doors, by the wealthy, by the regulators and by those they have failed to regulate.
Tuesday, the Federal Reserve and the U.S. Treasury Department agreed to a massive, $85-billion bailout of AIG, the insurance giant. This follows the abrupt bankruptcy of Lehman Brothers, the 158-year-old investment bank; the distressed sale of Merrill Lynch to Bank of America; the bailout of both Fannie Mae and Freddie Mac; the collapse of retail bank IndyMac; and the federally guaranteed buyout of Bear Stearns by JPMorgan Chase. AIG was deemed "too big to fail," with 103,000 employees and more than $1 trillion in assets. According to regulators, an unruly collapse could cause global financial turmoil. U.S. taxpayers now own close to 80 percent of AIG, so the orderly sale of AIG will allow the taxpayers to recoup their money, the theory goes.
It's not so easy.
The financial crisis will most likely deepen. More banks and giant financial institutions could collapse. Millions of people bought houses with shady subprime mortgages and have already lost or will soon lose their homes. The financiers packaged these mortgages into complex "mortgage-backed securities" and other derivative investment schemes. Investors went hog-wild, buying these derivatives with more and more borrowed money.
Nomi Prins used to run the European analytics group at Bear Stearns and also worked at Lehman Brothers. "AIG was acting not simply as an insurance company," she told me. "It was acting as a speculative investment bank/hedge fund, as was Bear Stearns, as was Lehman Brothers, as is what will become Bank of America/Merrill Lynch. So you have a situation where it's [the U.S. government] ... taking on the risk of items it cannot even begin to understand."
She went on: "It's about taking on too much leverage and borrowing to take on the risk and borrowing again and borrowing again, 25 to 30 times the amount of capital. ... They had to basically back the borrowing that they were doing. ... There was no transparency to the Fed, to the SEC, to the Treasury, to anyone who would have even bothered to look as to how much of a catastrophe was being created, so that when anything fell, whether it was the subprime mortgage or whether it was a credit complex security, it was all below a pile of immense interlocked, incestuous borrowing, and that's what is bringing down the entire banking system."
As these high-rolling gamblers are losing all their banks' money, it comes to the taxpayer to bail them out. A better use of the money, says Michael Hudson, professor of economics at the University of Missouri, Kansas City, and an economic adviser to Rep. Dennis Kucinich, would be to "save these 4 million homeowners from defaulting and being kicked out of their houses. Now they're going to be kicked out of the houses. The houses will be vacant. The cities are going to [lose] property taxes, they're going to have to cut back local expenditures, local infrastructure. The economy is being sacrificed to pay the gamblers."
Prins elaborated: "You're nationalizing the worst portion of the banking system. ... You're taking on risk you won't be able to understand. So it's even more dangerous." I asked Prins, in light of all this nationalization, to comment on the prospect of nationalizing health care into a single-payer system. She responded, "You could actually put some money into something that pre-empts a problem happening and helps people get health care."
The meltdown is a bipartisan affair. Presidential contenders John McCain and Barack Obama each have received millions of dollars from these very companies that are collapsing and are receiving the corporate welfare. President Clinton and his treasury secretary, Robert Rubin (now an Obama economic adviser), presided over the repeal in 1999 of the Glass-Steagall Act, passed after the 1929 start of the Great Depression to curb speculation that caused that calamity. The repeal was pushed through by former Republican Sen. Phil Gramm, one of McCain's former top advisers. Politicians are too dependent on Wall Street to do anything. The people who vote for them, and whose taxes are being handed over to these failed financiers, need to show their outrage and demand that their leaders truly put "country first" and bring about "change."
Denis Moynihan contributed to this column.
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156 Comments so far
Show AllSocialism for the rich, capitalism for the poor. You can be guaranteed that if you speculated with money the way these firms did, you would not be bailed out. You wouldn't even be allowed to deduct the losses from your income in your income tax return.
Didn't these guys just get done paying themselves obscenely large annual bonuses last December?
ANNOUNCEMENT: THE 'FEDERAL RESERVE' IS NOT 'FEDERAL', NOT UNDER THE JURISDICTION OF, OR FORMALLY PART OF, THE US GOVERNMENT. IT IS A PRIVATE BANK IN CHARGE OF OUR MONEY SUPPLY. CONGRESS DOES NOT HAVE JURISDICTION OVER THE 'FED'!
LEARN ABOUT THE FEDERAL RESERVE.
AIG, the World’s largest player in the $45 Trillion derivatives market, during the past two weeks had bet heavily on the World Markets against the damage from Hurricane Ike exceeding $2 billion in property damage, lost oil and gasoline production, lost wages and payments to companies forced to close, etc., it is obligated to pay, but which the actual damages are now being estimated will exceed $1 Trillion as the damages throughout the United States are finally tallied.
Well, they ought to show their outrage, but when regimes arrest journalists on the basis of suspicion, and such an arrest goes uncommented upon by the leader of either national political faction, clearly the poles of what inspires outrage are somewhat malleable when it comes to the prerogatives of those who simply seek state power, which is the case with both Mr. McCain and Mr. Obama.
I think it is very said that Amy Goodman, even after her experience at the Republican convention, apparently believes that the owners of both political factions are about "democracy now". Even if we accept the fact that Ms. Goodman was arrested at the behest of the "republicans", the silence of the "democrats" betrays their own complicity with such a state of affairs, as always.
All the nay sayers who blast the efforts to build third parties in both major election years and off years are part of the problem. We either build an independent political faction rooted in the interests of the working class majority in this country, or we're toast. An independent political faction, rooted in the interests of the working class majority, is of the order of the day. All other "practical" accomodations to this generation of political gangsters is a bunch of utopian horse manure. We build an independent political faction, rooted in the interests of the working class majority in this country, or there is no future for democracy, now or any other time.
Well said Fiddler! Vote third party.
I have seen no one ". . . blast the efforts to build third parties . . . ."
In the current climate, third party movements have two major obstacles to overcome.
First is media access. The corporate media - at the behest of the two major parties - has virtually erased the concept of third parties from mainstream media coverage. Anyone who hopes to see an alternative movement grow needs to figure out how to get the message moving.
Second, third parties tend to form around one or at most two issues. Alternative movements need to identify themselves with people and not concepts. Also, they need to learn to simplify their message(s) so that most people in the US can understand it. The first problem with Libertarianism is that very few people understand it; the second problem is that it's bullshit.
A successful alternative movement must grow from the ground up. A third party needs to start locally, winning seats on city councils, county commissions, and school boards. It takes time and patience.
q
Anybody have any idea how many Americans who are registered to vote, are registered as either a democrat, a republican, an Independent a Green, a Libertarian etc?
I guess if the American people favor one party or another en masse, it kinda diminishes with the theory that you can run under another ticket and have any hope on Sams Hill to win.
I was just thinking the other day that politics has gained a certain pseudo marriage with religion. They both seem to represent a system of belief that should be separated from administration. It seems that today we have the catholics(Republicans) and the (protestants) Democrats of old battling it out for representation of a totally corrupted church(government)
People should not be voting on such personal and biased beliefs. They should vote on which candidate can serve all of America.
When are we the small people of America going to rise up with our pitchforks and sacrifice these wealthy fools at the altar of good sense. They need to be stripped of their wealth and kicked out like the dogs they are. They need to be homeless and hungry. We listened for the longest time about how poor people are the beggars and welfare queens while these thieves looted the treasury and stole our tax money. We don't need to pay them money. They need to learn to compete in the market that they touted for so long, and if they can't compete they need to sink into the sea and starve. When are we going to take our country back from billionaires?
"pitchforks"? You get labelled "devil...something". Re your last line: our country has always had rich folks calling most of the tunes. Any idea how to?
Some time in the mid 1990’s, the Repimplicans and Democrats joined forces to become the PFL (the Party of Filthy Lucre). While Democrats were not completely inexperienced at ripping off average Americans, they were Cub Scouts compared to the Repimplicans' Eagle Scouts. Bill Clinton disguised himself as a cross between Napoleon Hill and Anthony Robbins, with a little Joel Osteen thrown in, and told his lodge mates to start learning how to grab as much as they could as fast as possible. Democrats started watching old game show videos of contestants running through supermarkets on 10 minute shopping sprees to get an idea how it was done.
Now we are all staring into the financial abyss, wondering if our life savings are about to disappear, knowing that even though they are federally insured, the PFL can take 100 years to pay you back. Of course, we’ll all have shuffled off out of this life by then. That is the PFL plan. Get out into the streets to protest this financial bloodletting and you’ll either get your skull cracked or drilled by bullets.
And the Party of Filthy Lucre will elect the next president and the congress.
I'm no fan of Bill Clinton either but he does not bear the primary responsibility for the looting that has taken place on Bush and Cheney's watch.
q
Sorry QS: NAFTA.
Alan MacDonald
Quickstepper, you're so not right.
This ruling elite 'corporatist Empire', which fully controls our former nation-state behind the facade of its 'Vichy' American government, has been increasingly successful in running a giant global Ponzi scheme since the death of any democratic, progressive, or populist political alternative in 1968.
Increasingly from the Reagan regime both elite-controlled parties have been totally subsumed by the elites' 'corporatist Empire' form of charade government --- where financial and economic power and deceit overwhelm and pervert any chance of the original dream of political/economic democracy, upon which our country was founded. The corporatist Empire's economic tyranny has shut down political democracy as well as any chance of economic democracy.
The political finger pointing and blame entirely misses the real blame ---- that our entire political economic system is that of a disguised Empire, not democracy.
The Republican Party, which is more visibly the pawn of this corporatist Empire, as well as the Democratic Party, which servers the elite corporatist Empire more subtly, have both been fully treasonous in selling out public democracy to private/corporate Empire.
It must be remembered that Phil 'NASCAR announcer' Gramm and Bill 'slick' Clinton conspired to eliminate the depression era regulations, such as the Glass Steagall Act preventing combination and collusion of banks, brokerage, and insurance well before Bush facilitated the looting of the American 'commonwealth' of which Nobel laureate in economics, George Akerlof, warned, “What we have here is a form of looting.”
Only a continuation of the American Revolution to its intended conclusion against Empire will finally establish a fully democratic political AND economic system based on equality of democracy for all people.
Thanks for saving me some typing...
Thanks for the facts. These democrats believe in their mythos, you betcha!
We see things, not as they are, but as we are.
Anais Nin
If the US Gov. was serious about extinguishing the fire they would not let Bank of America buy Merrill Lynch. That acquisition will create another entity that is "too big to fail". FDR's New Deal effectively kept financial organization size contained to a manageable level, such that no single entity could threaten the financial system. Ronny Raygun started a quarter century of deregulation that has effectively created many entities that will bring down the system if one fails. When a few more dominos fall and Bank of America collapses under the weight of Countrywide and Merrill Lynch, you will witness an even larger bailout that will include a deadly hit on FDIC.
I work for BoA. My brother works for Merrill Lynch.
We both agree with you.
q
FDR did exactly the same thing that is being done today under the National Recovery Act by loaning money to banks and other troubled industries and even buying their stock.
This is terrible. This sort of thing could distract America from the really import stuff, like who put lipstick on which pig.
America's had enough culture war shit for now. As for the PIG that is Wall $treet, well John Mccain's doing a hell of a job putting lipstick on it and Palin.
Excellent comments so far- the message is clear:
If you dont play the games with the big boys and the powerful, they will fuck with you and you will be told that you are being fucked as we take more of your meager abilities.
Love
Zero
I am so happy that Congress buckled to corporatist demands to virtually eliminate personal bankruptcy.... these blood-sucking corporations are so much more in need... and there are so fewer potential human victims left to feed upon.
Thank You Greed Enabling Deregulators!!!
Washington Mutual is next in line at the taxpayer teat... am hoping that there will be enough backlash to instead force liquidation or bankruptcy... drained my account yesterday.
Don't worry, the recession will be short-lived... it's the world-wide depression that will quickly follow for which we should all be concerned.
Socialization of loss, privatization of profit.
That's the American Way!
Remember the lender ads promising credit to people with no credit. PREDATOR LENDING!
They probably spent billions advertising these loans not caring if they would be paid back.
They knew! The profit was in indebtedness!
They needed your signature on a piece of paper so they could sell it. CREATING THEIR OWN MONEY JUST LIKE THEY HAD A PRINTING PRESS!!!
I disagree with the anti-alternative party folks on CD - most of the parties do have major comprehensive plans laid out; the problem is that the only way to find it out is to visit their websites, since the corporate media isn't going to report it. Have you noticed that the populist rhetoric from both Repubs and Dems do not ever say that we shouldn't be bailing out these failed companies nor actually changing the deregulation that has caused it all? And of course this will be more taxes for the poor and middle class and more protection for the super wealthy. It's time for a revolution!!
This won't change unless some of these reckless gamblers end up in jail and all their assets are seized. As I keep saying, it all eerily feels like France in 1788, a year before the French Revolution.
Except that the present privileged class of spongers who gambled away OTHER people's money and livelihoods while being awarded millions, wasn't the result of a feudal system and hereditary wealth as was the case in France in 1788; no, but were able to do so while being aided and abetted by the government of the self-acclaimed "greatest democracy on earth".
THEY are not the ones who will suffer, the rest of us all over the world will, without ever having been asked whether we like the lack of financial regulations in the US which led to this disaster.
It's a well-known fact that the neocons' slogan has always been "Privatize the profits but socialize the losses!"
Good Job Amy Goodman!
In one article you have shown the hypocrisy of the suppossed faithful in free market capitalism, the complicity of both major poitical parties in the creatioin of this mess, and the complete ignorance of the Fed and Treasurery Secretary in understanding the potential complications of what they have set in motion.
John McCain's latest bellowing is that if elected he'd fire the head of the SEC. As if this one hapless stooge was responsible for everything. About all Barack Obama can say is, "I didn't cause the mess, lemme check with Bob Rubin my chief econoomic advisor (who played a chief role in revoking the regulatory protections to prevent such a mess)and I'll gwet back to you".
Only when we finally have politicians who hate Wall Street as much as they hate Washington will we be able to deal with this mess. That won't happen till the electorate demands such by refusing to vote for those candidate whores who are being pimped by the very same Wall Street financiers who are stealing us blind.
Nader/Gonzalez 08
Poet
But it's not "free market capitalism". Nader says good stuff, but he only gets publicity every four years. He was a smart guy: I heard him in 1968 in Boulder, CO in a lecture that Volks beatles were "like Japanese paper lanterns", so we got rid of the car. Third party candidates push the party/parties for change, but it does not appear that the way it does so is by having folks vote for them. It didn't in 2000, did it? It's bringing up the issues and winning in local elections for local elective offices by having local parties. (Poets are good for a society.)
US taxpayers now own 80% of AIG? Excuse me? Isn't there an SEC regulation that prohibits any broker from buying a financial product on your behalf without your permission? A guy named Gino from Prudential did that to me once, and I called his boss and threatened to report them if they didn't back me out of that purchase. They did. I don't remember any phone call about AIG. It's a really good buy, Mr. Moore. What do you say?
Being of a Buddhistic mind set, the past two weeks have been more interesting to me than frightening. Of all the "things" we take for real, money is the least substantial. When you go looking for the materia prima underlying all the clever and variegated shapes and flavors of money, the bewildering smorgasbord of financial products we call "securities," you eventually come to the middle of the onion which is nothing at all. It's made of thought, of wishful thinking. Those of us who ridicule religion as a bundle of unsubstantiated beliefs would do well to consider the unreality of money, now that it is beginning to vanish. That mythical pile of gold bars in the basement of Fort Knox to guarantee the whole insane edifice of wealth might as well be plastic poker chips.
So AIG is "too big to fail?" So was the Soviet Union, which disappeared overnight for want of credibility. Lehman Brothers is not the only fat bank to lie about its assets. Big or small, illusions tend to shrink back to zero, not, like the Wicked Witch of the West, because they are evil, but because they never existed to begin with. Is the US Treasury too big to fail? That sound you hear might be the stage crew starting to pack up the scrims.
Well said.
One more priceless Ralph Nader saying goes, "Capitalism will never fail because Socialism will always be there to bail it out."
"Millions of people bought houses with shady subprime mortgages"
Millions of people bought homes they couldn't afford. Millions of people banked on real estate as a sound financial investment. Millions of people gambled on real estate market and lost. We should not bail out the gamblers.
The difference being that some were victims who were preyed upon and easily lured into or lied to by con men with the promise that they too could achieve the American dream. Yet we bail out the con men and punish the victims.
My suspicion is the part that you object to the most in religion is the notion of compassion. Athiests for the most part are just as doctrinaire as true belivers.
"The difference being that some were victims who were preyed upon "
But some were greedy too, do you agree?
Well, I am sure, but surely you aren't celebrating homeless American families?
Of course not, just trying not to let anyone of the hook who may be culpable. Some of the defaults are house flipppers. I know a few.
Yes, probably a few were the "flippers"... but frankly, this hits the average working-class "homeowner" much more severely.
I'd like to see a breakdown ! I'll bet that 99% of the foreclosures were due to people 1) buying too much house, 2) buying real estate purely for financial gain, 3) lying about their income and assets, etc.
I've said it before and I will say it again ... I bought a condo in 2004, it was well within my means, I started out with a 5 year ARM thinking I would not be there longer than 5 years, even before the 4 year mark I realized I would be staying, I saw the rates drop and pounced, I was able to secure a good rate without requiring an inordinately steep appreciation of my property, I now have a very low interest 10 year ARM.
I am somewhat of a financial dummy, and yet I managed to get through this "crisis" without much problem.
You can bet on anything you like, but you will lose your dough. The mortgage market is trillions of dollars, yet, according to you, a majority of those homeowners ruined were scoundrels or unwise. Had you been in the market for a new home during the bubble years, or even a second or third home you might have encountered the mortgage broker who cared nothing for your personal finances, lied to you about the terms of the mortgage and pushed you towards a home that would discomfit you down the road when the (unmentioned) balloon payments kicked in.
The average home buyer trusted his broker, the average American cannot understand the legaleze involved. Your comments are unwise and more than a bit arrogant. Billions in bonusses, paid to these unscrupulous brokers, make your placing of the blame on the poor homeowner tacit support for the crooks and liars who run our financial institutions for their benefit and not for ours. Is that what you intended to do?
"Millions of people bought homes they couldn't afford. Millions of people banked on real estate as a sound financial investment. Millions of people gambled on real estate market and lost. We should not bail out the gamblers."
You have GOT to be playing devil's advocate! No one but a corporatist troll would make a statement like that and expect anyone to believe it. I'm beginning to think you chose your handle just as a mask to slide crap like this through unchallenged.
My bank (until I drained my account yesterday) was Washington Mutual... one of the biggest sub-prime hucksters in the country. Immediately upon deregulation, they completely change from nice-guy hometown bank to used-car wheelin' and dealin' on a huge scale. Walk into one of their branches and you would be deluged by all the propaganda on how easy it was to get into a home and ALLLLL the reasons that decision was the RIGHT one to make if you were a real American.
Why?
Because the profit moved from a long term community oriented business practice, to one that focused on the processing of the loan and how to piggyback that process onto other deregulated products they could now offer.
The sub-prime marketeers lied every way they could, just to induce good people into believing that they were fools if they did not invest in the housing market. Yeah, there were two dancing to that tune, but in your scenario, it's a solo... and you didn't point out that the band was bribed to play that "special song".
This crisis was engineered by disaster capitalists, who have been timing this for years. The prosperity was designed mainly to maintain a compliant nation at war, while trough feeding those few insiders who were positioned to make obscene profits.
The current disaster is designed to deflect the message of "change" and redirect it towards "survival", while reaping insane profits off of those Americans most affected... middle-class taxpayers... and meanwhile eliminating "war" as an election issue.
"The Party" election tactics at work.
"Yeah, there were two dancing to that tune,"
Best to admit it as you do. Good.
but in your scenario, it's a solo... "
I don't think he meant that.
"and you didn't point out that the band was bribed to play that "special song"."
Plenty of others already did.
troll tool
Let me know where I'm wrong.
It's not that you are wrong... it's just that you twist your tongue.... and when you are at my backside, I'm not enamored of your presence.
Two things I enjoy tossing...
1. Lovely garden salads.
2. Ugly sniffing trolls.
Which are you? No... no... don't give me a clue... let me guess.
"It's not that you are wrong"
Because I wasn't, and you seem to agree.
"it's just that you twist your tongue.... and when you are at my backside, I'm not enamored of your presence."
Pure incoherence. Reminds me of those weird spam letters that look like they are written by random word generators.
I'll wait to see if you reply with anything the least bit intelligent.
We're barraged with all sorts of offers of too-good-to-be-true deals ! It's up to us as consumers to do the right thing. Haven't we learned this lesson already ? Nobody forced the consumers into securing loans they couldn't afford. Where is the personal responsibility here ???
The more I think about it, the more I see this foreclosure mess as being similar to the loss of jobs due to Wal Mart. We've got a bunch of selfish greedy a-holes in this country whose only concern is trying to make a buck, regardless of how it impacts society as a whole.
Maybe we should teach school kids about the economy before other make the same mistake. NAW!
Keep them stupid and ignorant and teach them to be good consumers.
Personal Finance should be mandatory in public schools.
Corporate socialism? I suppose. These screwups are the same rich spoiled college kids I once knew who blew dope up their noses, partied on daddy's yacht, and when they ran out of money, wrote home for a bailout from mommy and daddy. Old habits die hard.