EMAIL SIGN UP!
Most Popular This Week
- One American Who Isn't For Sale
- Edward Snowden: Saving Us from the United Stasi of America
- Major Loss to Organic Farmers as Court Rules in Favor of Monsanto
- The Judicial Lynching of Bradley Manning
- Remembering Satyajit Ray’s Hirok Rajar Deshe: On Edward Snowden, Resistance and Inverted Totalitarianism
Popular content
Today's Top News
TARP This: Paulson's Bailout Plan Riddled With Deception
How a Program To Save The Economy Ended Up Enriching Big Banks
Talk about crazy making. How do we believe anything Hank Paulson says?
First, he needed $700 Billion, and fast, to buy up troubled assets or the skies would fall and we would be pressed to impose martial law. He found an appropriate acronym, TARP, to manage the money with a skeletal staff of 28 headed up by one of his former protégés at Goldman Sachs.
So Far, So Good,
But then he had himself a rethink, realizing that no one has a clue about how to price troubled assets considered practically worthless. So he had to a make a shift, "in the light of new facts," even though Congress never authorized the shift.
So Far, So Good.
He claimed this showed flexibility and a willingness to respond to new information. Never mind that that information was not new and kind of obvious to anyone paying close attention to the subprime fiasco.
So Far, So Good
Then Congress pumped a three-page proposal into a four hundred-page package. Once it was 'enhanced' will all kinds of pork and earmarks it was passed. Legislators screamed about the absolute necessity of oversight and transparency; after all, this is taxpayer's money. But then, they took a break to run for re-election without naming anyone to oversee Hank's new TARP or the taxpayer money. There seems to have been an oversight of oversight?
So far, Less Good
Paulson, then changed the playbook and started pumping a few billion here, and a few billion there into the coffers of financial institutions, many with lots of money already to recapitalize banks. The goal, we were told was to get them lending again.
There was a problem, though. Most banks didn't start lending because of fears of the risks to their own survival in the current economic free fall.
Partly that was because the government was not requiring any concessions except NON-Voting stock which gives it little leverage. The auto industry was expected to outline a reorganization plan to get the money. The banks had no such requirement.
A New York Times report from London explained:
"Some analysts said the idea that recapitalizing banks would repair the lending market was flawed from the beginning because it was contradictory. On the one hand, the policy was meant to make banks reduce risk. On the other, it pressured them to lend more which meant taking more risks."
So instead they diverted some of the money to satisfy their internal needs. An Associated Press investigation found: "Banks that are getting taxpayer bailouts awarded their top executives nearly $1.6 billion in salaries, bonuses, and other benefits last year." Many other banks would not disclose what they did with the money. Many of them have tightened credit, rather than loosened it.
Oops, not so good
"Treasury has bought preferred stock with no control rights," writes former Fed governor Alan Blinder. "...There are no public-purpose quid pro quos, such as a minimal lending requirement. So banks can just sit on the capital, which is what most of them have done, or use it to make acquisitions, as a few have....
So here we are, looking at an all-too-familiar story. The administration that brought you the Iraq war and the Katrina response is locking in another disaster before it leaves town."
Yikes...
"TAMING WILD BEASTS"
Historian Howard James goes further indicting the measures governments have been taking which he calls a "crescendo of ad hoc measures that several governments took throughout the fall: injecting liquidity, purchasing toxic assets, capitalizing banks, and, finally, nationalizing entire banking systems." He's skeptical that they will work.
"The $700 billion bailout announced by the U.S. Department of the Treasury in late September was designed to remove from banks' balance sheets mortgages and other securities that in some way corresponded to real houses. But it is still unclear today how these assets are to be valued or how that valuation might wind up benefiting or hurting their new owners. In the United States and in Europe, the hope is that governments will assume many of the risks inherent in this uncertain valuation -- and tame the wild beasts of the financial jungle through state-backed and state-run banking systems. To some, this is profoundly ironic.
As Russian President Dmitry Medvedev put it in September, the experience shows that "the move from self-regulating capitalism to financial socialism is only one step." American free-market capitalism was not supposed to look like this.
Recently, I met Princeton Professor James, who was speaking at an elite forum on the economy at the Council of Foreign Relations. I asked if he shared my belief that our financial system is permeated with crime, and that the financial crisis was engineered by banksters and white collar criminals. (This was before the Bernard Madoff revelations.) I expected the panel to be dismissive of such a "crude" suggestion in a room full of finance professionals, but he wasn't, and agreed publically that the problem is fraud problem is serious but that in times of prosperity, exposes are rarely pursued.
He now sees the US now emulating China-which is having a hard time too-with more state intervention. He thinks this is the direction we will be forced to move in and sees Beijing more than Washington as key to solving what is now a global mess.
This thought upsets guardians of the free market like finance expert Peter Schiff, Ron Paul's economic advisor and the man who was laughed at on TV when he warned of the current collapse. I spoke to him recently for the film I am making on the economic crisis based on my book, Plunder. He thinks the government has to stay out of markets even if that means businesses will collapse.
SCHIFF: What is happening right now, the credit crunch, the collapse of the real estate stocks, all these companies going bankrupt, this is not the problem. This is actually the solution. This is the consequence of the problem. The problem was that for years we ran this funny economy where we borrowed money to consume.
SCHECHTER: How could that be the solution? So many people are out of work, people are losing homes?
SCHIFF: Well, we have to rebalance our economy
The clash over macro-economic policy is mirrored in a debate over specific policies. Congress finally found an oversight person in Elizabeth Warren, the Harvard Professor and critic of consumer rip-offs. She says Paulson is not disclosing enough and just published a report with tough questions about Paulson's TARP.
Already the banking industry is fighting back, questioning her judgment and implying she is some kind of commie. Hedge Funder Tom Clark derides her concerns but doesn't refute them:
"The Professor doesn't just quibble with this lending practice or that one. She thinks the entire industry is diabolical. Warren apparently believes consumer lenders have some mystical, systematic advantage over consumers, which they see as their duty to exploit at every turn. Or, as she puts it, ‘Credit products aimed at both middle class and poor families are designed to trick them, trap them, and otherwise pick their pockets.'"
And so, as the Obama Administration is poised to take over, we have radically conflicting ideas of what to do. Should we help people or banks, Main Street or Wall Street, take new initiatives or recycle old ones, use interventionist government power or put all our eggs in ‘the market rules' basket?
The President-Elect's centrist appointments suggest he is buying into the prevailing Washington-Wall Street consensus that tilts towards the private sector with Wall Streeters as key advisors.
To be fair, the Obama Plan has yet to be spelled out. The Washington Post reports he has expanded it with a massive federal stimulus package and now hopes to create or preserve 3 million jobs over the next two years. He also has said Wall Street needs "adult supervision." Great phrase, but they will need more than that. Many banks are basically bankrupt; any recovery seems far off.
The only good news in this bleak picture is that Paulson, the Goldman Sachs miracle worker turned Donald Rumsfeld of the economy, is leaving soon, stage right. Despit his feverish initial demands, however, he just announced that he doesn't need another $350 Billion... at least for now. That was yesterday. Maybe he changed his mind.
That ball has been kicked into Barack's court.
Have the Bush-Paulson-Bernanke policies worked? Did the economy turn around on their watch or through the trillions spent by the Fed?
Not even close and maybe its time to TARP them all.
So far, Not good at all.
- Posted in
Comments
Note: Disqus 2012 is best viewed on an up to date browser. Click here for information. Instructions for how to sign up to comment can be viewed here. Our Comment Policy can be viewed here. Please follow the guidelines. Note to Readers: Spam Filter May Capture Legitimate Comments...
63 Comments so far
Show AllThe next shoe has just Dropped..I think it was Liz Warren on C Span talking about the tricks and traps of all financial products like including credit cards...Today half of all or 50 million households are months behind on Credit card payments because they are broke and living on Credit cards.
The mortgage bust is being used as the scapegoat of the whole system from top to bottom being a giant Ponzi fraud.
I think Central governments and Central banking will fail soon if a miracle doesn't happen, Local communities will have to find ways to prevent crime and survive in the chaos that is coming.
Obama is going to be expected to get us out of this mess but God would have the same problems even with Nader's help too.. How do we as individuals and nations borrow our way out of Debt?
Borrowing and injecting money into jobs is about the only option left, but wasting it on the banks is digging the whole deeper.
Paulson is a crook. Special thanks go to Nancy Pelosi and Harry Reid for pushing this package thru the house and senate.
Hopefully the new administration will put an end to these handouts, even though i really doubt it.
"Special thanks go to Nancy Pelosi and Harry Reid for pushing this package thru the house and senate."
And kudos to Barack Obama who also helped pushed this package through the Senate.
-- ekaton aka d.k.shaw
Would you have rather they let the economy collapse?
This is a tough situation. The greatest mistake would have been to do nothing.
"The greatest mistake would have been to do nothing."
That's the point of this article - it would have been better to do nothing. The only people who have been "saved" are the elites (at the expense of everyone else).
Screw'em. I'm not paying taxes next year. Not for no wars, not for no bailouts.
Note that one of the demands made on the Auto Companies is that the workers take a wage cut that will be substantial.
They will have to make do with much less . Meaning they will very likely need more CREDIT.
It is the inequality in wealth that led to this wherein the worker must make do with less and less while the elite have more and more. The worker is punished for his or her labor with higher taxes, health care costs and the like while those who got GET simply by manipulating the wealth and assets they already have.
The worker is too small to save thus is expected to make do while those that got are too big to feel thus need even more.
Capitalism in its purest form.
The fix of trying to prop up a fundamentally flawed stucture with ever more debt is not a fix at all.
Each mid-level Wall Street pirate's annual income for the past two decades has exceeded the lifetime income of each auto worker, while each Wall Street top dog's monthly income has exceeded the lifetime income of each auto worker.
It is criminal for politicians and academics to call for auto workers to take pay cuts after promoting the unconditional bailout of Wall Street. The hypothetical taxpaying Indiana waitress (that the politicians allege will be harmed if auto workers are spared foreclosure on their 3 bedroom midwest homes), will be harmed far more by the Wall Street pirate bailout. Perhaps the politicians want to make sure that the Wall Street pirates don't lose any of the yachts and luxury homes they own in choice venues around the globe.
"Note that one of the demands made on the Auto Companies is that the workers take a wage cut that will be substantial."
Though this is reality, your basic point is sound. Sacrafice is demanded of these workers while none is demanded from the Banks and Insurance companies that were handed Billions with no strings or requirements.
"The worker is punished for his or her labor with higher taxes, health care costs and the like"
Exactly. Why is there a cutoff on the social security taxes? There shouldn't be. Why does a corporation get to deduct health care costs but a worker doesn't? Inflation helps the rich, not workers. Our tax system favors the high earner or the existing wealthy which is inherently unfair.
There is nothing fundamentally flawed in a capitalist system. It can have flaws as it does now because it lacks the oversight and regulations that are required to protect the economy and its citizens.
Capitalism without these controls becomes much like any other system and the elites skim the cream and accumulate the majority of the wealth.
actually that is why capitalism IS fundamentally flawed.
it is designed, with or without regulation -- to "create wealth" BY denying wealth and value to others who are the majority and true "value" creators - people.
capitalism is a system that sacrifices PEOPLE , ALWAYS with an impetus to create structures to LOWEr the labor values and exchange ability of people - against "capital" that was created BY the surplus created BY the labor of PEOPLE who are the REAL capital. -- NOT money which is only a means of transaction.
capitalism ENSURES that money TAKES OVER the "value system" rather than the actual value of each and every person on the planet.
that is why - capitalism IS a flaw -- the greatest flaw ever perpetrated on human kind, with a face promoted as "the way to prosperity".,
in fact -- what it DOES is DEFORM the true balance between people and societies through the ideals of what humanity OUGHT to be ABLE to achieve -- a HIGHER level of existence by means of COOPERATION rather than COMPETITION for "scarcity" which capitalism ARTIFICIALLY induces in order to create its
"wealth".
if people really understand this very SIMPLE logic - they will understand that capitalism should NEVER have seen the light of day- or at its birth as a "codified" concept -- been - if there was a "higher being" - INSTANTLY annihilated for it has done NOTHING but promote DESTRUCTION and GREED .
Capitalism is exactly the opposite of what you say I believe.
Certainly it allows you to create wealth, anyone, anyone at all. But it must have regulations and oversight to level the playing field.
If you believe every person produces the same value, that every person should have an equal share no matter their contribution....there is nothing left to say. That system has failed every time and in every form its been tried.
Money is no more evil than any other system of value in any society that we have records for. Called by other names it's still money.
"the labor of PEOPLE is the REAL capital. -- NOT money which is only a means of transaction."
This is correct. People are the real capital of any enterprise and money is only the means of transaction."
Capitalism as practised in the US has given the most wealth and freedom to the greatest number of people by any measurement you'd care to use, any at all. But it is flawed at the moment. It cannot function properly without rules to stop what has just happened. Without rules it produces somewhat the same results socialist societies do.
People or labor, the terms may be used interchangably for this discussion are most definitely NOT capital. Capital is bricks and mortar, machinery, raw materials extracted or grown, infrastructure and the like. Capital is produced by labor. Labor is not capital, although the "capitalists" seem to regard labor as capital, as just one more machine, one more resource, hence the term "human resources" which I find to be just a horrid description of labor. Without labor there is no capital. The distribution of the fruits of labor is another issue entirely. Capital does not, cannot exist without labor.
-- ekaton aka d.k.shaw
I really have to disagree. People and their brains are more valuable than bricks and mortar.....plus they are indeed capital in the idea that if a person goes from one employer or business to the other he takes his skills and talents..."his capital" with him.
I understand your point, "Without labor there is no capital." and while this is true, consider labor without capital is useless. Capital has many different meanings in my view. None are detrimental, just designations.
There is also a great deal of difference between skilled labor and unskilled labor as to its value.
There is no capital without labor, period. People are not capital, ever. People may have desired skills that assist in producing capital or using capital to produce goods and services. Capital is a thing. A person is a person. A person can never be capital. It does not matter one whit what your view of capital may be. Labor without capital? That is pure nonsense. Labor produces capital. Discussion of "human resources" or "human capital" simply skews reality. Are YOU nothing more than a piece of capital? Because that is what a "capitalist" would like you to think. Use your mind. Never forget, the capitalist needs YOU more than you need the capitalist. And the capitalist would do well to remember that when he is doing everything he can to reduce wages.
-- EKATON --
Perhaps I should say thought rather than person as capital. We may be on the same wave length using different meanings.
Could be. Wishing you a joyous Christmas and happy and New Year.
-- ekaton aka d.k.shaw
" Wishing you a joyous Christmas and happy and New Year."
And the same to you mr. Shaw.
Thomas M.
There never should have been a bailout for wall street, or the auto companies. The only ones who'll benefit are at the top. Bailout or no, the workers, the middle class?? and the poor will just get screwed again.
Paulson is a crook.
Meanwhile, the push to screw the UAW workers reduces their capacity to make purchases which reduces demand for goods and services. If you thought Michigan is a basket case today, wait another year.
Congressional lemmings...
-30-
"She thinks the entire industry is diabolical."
She ain't the only one.
Congressman Kucinich, last Monday: "They (the banks) never had the money they said they had as they constructed their debt-based monetary system which now lies in ruins."
Which is just another version of a pyramid scheme - Madoff never had the money he claimed, either.
U.S. Comptroller General Gene Dodaro, yesterday: "There's not yet a systematic process in place... a monitoring and reporting system back on how the money was used, to ensure it was used consistent with the purposes of the act, and that also that requirements, such as limits on executive compensation and payment of dividends, were being complied with."
The Reign of the Plutocrat Ponzies
Waves of money is for nothing
were lapping on the shores of debt
with entitled continents still to let
as plucky plutocrats planned the next big bet
for Ponzi schemes were growing mold
with real assets rare and left untold
Windfalls based on bubbles
like the fog of plenty
were misting on the bounty of intrigue
while the soot of debt merged with the fog
for a truly earthy smog
The debt precipitated and grew to a gigantic ball
and overran the money bubbles all
A little bait will draw fishes.
A lot of bait draws sharks.
TRAP is a feeding frenzy.
Well nobody can fix anything this big until everybody knows it is broken... at least now everybody knows.
Maybe we can export financial poetry.... some good ones created on this thread already.
i agree with Schiff in his basic insight that a system will self correct if we allow it to. and also agree that the current situation is not the problem. but i would say also that the real problem is capitalism and that the real system -- the higher system of common sense and nature -- is struggling to correct itself by replacing capitalism with something better. and forget the pablum which the ruling class has been feeding us about socialism.
I feel like the author was attacking Schiff. Although he could have more of a heart in terms of extending unemployment benefits, he is against all the bailouts. If all the banks totally crashed like the banksters threatened, at least the causes of the problem would be hurting as much as the victims. Also if the banks who owned all the assets went bankrupt, the people might have been able to keep the houses. Perhaps a program that enables the government to buy the houses and refinance.
But the people in the mainstream are bashing this guy. But he may be right, if we bailout all these people we could end up with hyperinflation. That'd turn the entire country into detroit. At least if detroit goes we're not losing any part of the country that's actually nice.
Plus, just a note too all these people defending the UAW... why don't you ask them about their role in all the exposes of planned obsolescence at the auto companies. For all those out there that has owned a terrible american car that broke down and forced you to buy a toyota, think about whether they are indeed so innocent.
> i agree with Schiff in his basic insight that a system will self correct if we allow it to.
That was what Mellon thought in 1929-1932. "Liquidate everything" was they way he put it. The result was not good.
The hypocrisy expressed by Washington insiders when they jumped at the finance-sector bailout (in order to protect their own investments), yet shunned the auto-industry bailout (likely because most own imported cars, and anyway, domestic cars are for poor people) is appalling.
Rebooting the finance-sector with $700B+ is like mainlining more drugs to a sick junkie.
The finance sector produces nothing but paper. At the end of the day, it is worth nothing. A paper tiger.
The auto industry is manufacturing, meaning real jobs, real products, real work satisfaction, and real trickle-down economies. I'm not saying that the US auto industry is world class, but it is one of the few products that the US manufactures (other than military hardware), and deserves help to reorganize itself.
We need to kickstart manufacturing again. This will take 5-10 years. So yes, let the economy tank. Let us not be able to afford to import goods. Let American ingenuity start manufacturing to make up for the loss of imports. We need a New New Deal.
"We need to kickstart manufacturing again. This will take 5-10 years. So yes, let the economy tank. Let us not be able to afford to import goods. Let American ingenuity start manufacturing to make up for the loss of imports. We need a New New Deal."
Great comment. The economy is tanking anyway. If we don't manufacture we die or become "consumer's in the new "Globalist" business Baronies.
What should have happened with the money is to start some new well regulated banks to make sensible loans to people and businesses at reasonable rates.
The banks could be made with a charter that returns all capital to the government if any operating practices are changed (like the Green Bay Packers) As the crisis eases stock in these banks could be sold to recover the capital.
We need more banks that are not affiliated with each other not fewer bigger banks.
All businesses deemed 'too big to fail' should be controlled by the government directly or broken up. Period.
I find the section on Peter Schiff very interesting.
The libertarians are completely right about economic policy. That is eliminating the federal reserve and putting the power to coin a currency into the hands of the legislative branch of government... like it says to in the constitution.
I don't like to see people end up unemployed, foreclosed on, and losing their savings. They were scammed, but does helping them hurt more than it helps? Their houses (values overvalued by real estate bubble) and retirement accounts (a stock bubble because of the ERISA) are bad policy of the federal reserve and the federal government. It sucks and we should have some REAL CHANGE, no BS campaign slogans.
But does printing money out of thin air at astronomical rates help? It creates inflation and too much inflation can destroy a country. I'm talking Weimar Republic hyper-inflation. Check out Zimbawe's currency and you can see what's going on. That's possible if you print too much money.
The government should regulate the money supply like it says in the constitution. A common misperception has been about free-market arguements. Telling them their argument is dead is disingenous because our current system isn't close to a free market, its a debt-based monetary system, one in which a handful of connected banks determine how money is distributed, and one in which industry can buy legislation and regulation that HELPS the corps, is not free-market capitalism, its crony capitalism, an incompitent and ineffect form of fascism.
I don't think free-market fundamentalists are right all the time. WTO, world bank, and IMF have used their arguments to pillage the world... most of the time to the liking of these free-market fundamentalists. A single-payer national health care system is much more efficient than the BS system we have now and we need public schools. But taking a note from Schiff and others fromthe Austrian school of economic though, on reforming monetary policy.
The libertarians are also against our imperial foreign policy and the agricultural policy that benefits big farms of smaller//natural/healthier farms. We have alot in common with these people in terms of key policy areas.
You might want to look a little closer at the Libertarians' Economic policies. Eliminating Corporate taxes completely, along with eliminating regulation. No Capital Gains, or transaction taxes, no income tax. Government supported entirely by user fees, that is every road is a toll road and not 50c per booth and forget going to a National Park. Actually, scratch that because without State and Federal Highway maintenance there won't be much driving anyway.
Certainly pulling back our Military from the 770 bases in 135 countries around the world, that's all good. Legalize all drugs, fine, but no FDA to keep people from selling you bunk or poison?
The Libertarian model, economicaly, is basicly CorporateFeudalism and guess who plays the Serfs.
Libertarians? I think they are but one arm -=- the more EXTREME arm of capitalism itself.
they love to talk - whether its ANTIWAR.com editor Justin Raimondo (who CORRECTLY speaks up against WAR economy but is libertarian economy wise) - or those like Patrick Buchanan in American Conservative - etc...abotu libertarianism and "small government" == but only in terms of "freeing capitalism" from government regulation or intervention to benefit a society as a whole.
their entire reasoning is based on MERELY a western point of view of hyper-individualism -- which ITSELF led to capatlism as the VEHICLE through which GREED is glorified....and that is why there is to be "no regulation"..."let the markets prevail" -- FORGETTING, conveniently enough, that "markets" whether in actual goods traded or finance or derivative values are MERELY a SUBSECTION of "economy" which is also itself just a PART of "society".
I don't trust their views by a mile. they are like the "PURISTS" of the "free market" idolators. and rail against bad capitalism ONLY because it is "not pure enough". but they NEVER question capitalism ITSELF. , which is really an aberration in history for its glorification of greed and selfishness as the "guiding principle" of human society.
Sioux Rose
TEDDY: Well said. It's the Mars-rules orientation applied to economics, and/or the marriage of Mars with Mammon. Woe to nature and human rights... if you don't have the pay to play.
Sioux Rose
CV: Thanks. That about nails it, and quite succinctly.
They are also against corporate welfare, so at least they are intellectually honest. I don't agree with cutting out progressive taxation but I do think the federal reserve does distort the value of our money to the favor of the rich.
The idea wasn't turning everyone at common dreams into a libertarian. I was pointing out that we share similar interests with those on, what i call the intellecually honest right, and should use those similarities to our advantage.. and so should they. The fed and the imperial foreign policy are two major problems and contribute to many others. Forgive me for finally realizing that republicans and democrats will not fix anything.
> That is eliminating the federal reserve and putting the power to coin a currency into the hands of the legislative branch of government... like it says to in the constitution.
That was the first thing they tried, the old Bank Of The United States. It went corrupt and was worse than the Fed. The politically well-connected got loans they never paid back.
Then they tried private bankers in the old JP Morgan days. No thanks.
The Fed is the best of a bad lot. Don't blame the Fed for the big deficits, which are the real problem.
You are wrong. The Fed and the FDIC enable bankers to legally screw us. We could push oversight and transparency standards on the politicians. The fed does not give us anything. We cannot look and see what they are doing. That has to happen. We can have a monetary system that helps keep people out of debt and only creating productive debt by changing the way money is created.
The Fed is not the best of a bad bunch of eggs. And if it is, we need to get our eggs from a new fuckin chicken.
Libertarians are people who think Republican policies aren't selfish enough.
This is the culmination of a ConJob. The Cons, Neo and Otherwise, have performed a hostile takover on the Treasury, due to be emptied on or about January 20th. They've been working toward this for forty plus years and have finally succeeded in starving the beast.
Happy New Year.
The Bailout Ponzi Scheme
The housing bubble was in full gear, houses appreciating twenty percent a year median home price $325 000---------STOP, DANGER
Any amateur twelve year old real estate investor could see that the demographics of family income would tell you that there were not enough families whose income could support the mortgage requirement for a $325 000 home.
The regulatory agencies should have jumped all over this, some who worked at these agencies did ring the fire alarm, but the bush appointed heads of these agencies looked the other way.
So the companies who wrote these loans committed massive fraud on the loan application. The individuals writing these loans,( recruited off the street) made lavish salaries.
The mortgage companies sold these mortgages to investment banks, who could not buy them fast enough. The interest rates these mortgages were paying were to good to be true. Did the investment banks do, due diligence, to verify the integrity of these loans? --------NO----
So the banks are criminally negligent to their shareholders and investors.
The banks ,in their free market deregulated genius of invention, created a way to combine these mortgage instruments into a bundle of loans, and market this new entity as an investment bond. Investors fell over themselves to buy them, because of the too good to be real return.
Investment banks were giving out billion dollar bonuses to their employees, year after year. No one asked, where did this money come from, they just assumed the management of these banks were geniuses.
Now as the demand for these bonds became insatiable, state ,city, school pension funds were being offered these bond investments. For some of these institutions to invest in these bonds they had to have a ,tripleAAA rating.
So these institutions went to where they have been going for seventy years ,and where all of WALL STREET goes for a valuation of bonds, for every company in the country. The whole trillion dollar bond market is dependant on three rating companies, to define a bonds creditworthiness.
All three of the rating companies rated these investment, triple AAA,the highest rating a bond can have.
So are not these companies libel for negligence ??????????
As the defaults on these mortgages started to materialize, Paulson and Bernake,maintained that everything was fine ,the banks had the capital to back up the defaults. For three months these borderline criminally incompetent imbeciles were telling the American public not to worry everything was fine ,they talked to the banks and were assured the banks were capitalized
Then panic, suddenly the traitor to the citizens of the United States, Henry Paulson, says he needs eight hundred billion dollars, or the world economy will be in ruins .And he needs it tomorrow no questions asked. Its caused by the failing housing market ,its caused by the falling stock market, its caused by the loss of confidence of the consumer. He came up with so many reasons in a ten day period of why he was going to take, that’s right, remember, appropriate eight hundred billion dollars in emergency funding, he almost did it ,until congress woke up and got involved.
Congress should had let these banks fail, there were hundreds of other banks ,in financial order, that could have been given the funds as needed to satisfy all loan demands.
Congress could have frozen foreclosures, and very quickly analyzed the needs region by region and stopped the downward spiral, until a rational solution was found.
No doubt there would have been some chaos, the stock market would have tanked, and other minor inconvenience would have emerged. But congress would have been able to direct emergency funding on a need to need basis,
States,cities,towns would receive emergency funding, society would function while a solution was found to deal with this new reality.
The reality being that our economy could no longer function as it had .there are no more consumers to consume. The country is in debt the citizens are in maximum debt, no way of creating new wealth, fewer jobs paying less money, the polarized distribution of wealth.
What we are doing in this current bailout is covering the losses incurred by various investors and stock holders, we are redistributing the wealth from the U S citizens, to people who already have tremendous wealth.
We have to stop this monumental theft from our citizens.and hold accountable those who must be held accountable,we must open our eyes ,demand of our congressmen and senators to stop the out flow of capital,today.
I hope we stop this in time and that we get to rebuild society and the world with an enlightened point of view.
Sioux Rose
DONDINI: Excellent analysis of what fueled this engineered bubble...the popping of which is being heard (and felt) 'round the world.
Take heed, people, and mark oNdini's words. This is an individual who understands what has happened. Whatever happened to the stockholders bearing the losses? Why is the taxpayer held liable to cover the capitalist's fraudulent dealings?
-- ekaton aka d.k.shaw
CAPITALISM -- it's capitalism, "free market" NONSENSE which doesn't really exist -
IT IS CAPITALISM = THEFT - PERIOD!
and frankly . when i consider , at least within my limited understanding -- that whether one calls is "free market", "laissez-faire", "small government" , "let the markets prevail" (but supposedly with more accountability after all these exposures), "libertarian", or any such thing -- it is FUNDAMENATLLY the capitalist system , give or take one school of thought as to HOW it should be run - from ron paul to the big government ones - that is the real culprit.
with that - since i think that it will eventually implode (while going through the expansions FIRST of more corporatist predatory methods to create even larger disasters before it's REALLY all over for capitalism) -
I almost want to say - that from a personal standpoint , opinion-wise , even if I , like anyone, is affected by these disastrous things - that I REALLY couldn't care LESS anymore about how the USA "manages" its own capitalist implosion eventually...so long as it doesn't SPREAD it OUTWARDS some more...where i hope countries learn -- and regain their sovereignties from what is , i think the ROOT cause of this "dominance" of what is really "finance" capitalism:
DOLLAR HEGEMONY --
rigth now the usa is about to FLOOD the rest of the world with more "liquidity" starting with teh bailouts and 2 trillion dollars of projected "debt " and "borrowing" "payable" by more PRINTING...to force the rest of the world to HOLD US treasuries that are worhtless and keep them subject to US debt holding at NO EXPENSE FROM THE USA side .
my hope is -- cHINA for example , eventually removes itself from being beholden to the dollar financial regime. although HOPEFULLY - with concentrating in building its economy from teh INSIDE (full employment and immediate or accelerated HIGH WAGES policies - INDEPENDENT of export and dollar holdings commitments -- they can afford it since THEY hold savings for programs ) - china doesn't exactly DEMAND the USA to pay back its debt - IN YUAN denominations .
for THAT will surely spell the total collapse of the US economy .
I went to work this evening at the copy shop where I work in a university city.
Not one customer in 6 hours. No wonder! There was an ice storm and walking was hazardous as hell, esp. if you're old.
So a couple of additional thoughts on Schechter's article and a couple of observations in re the likes of CV and tPotts (taken from Alice in Wonderland or the Teapot Dome scandal under Harding, discovered after he left office...?).
A major perspective is missing from the article, and it is that this financial crisis is GLOBAL, with some exceptions. It seems that most major nations "financialized" their economies in ways similar to the United States, thus other billions of individuals and families are now similarly situated, which suggests that what Henry CK Liu at atimes.com and now others call "dollar hegemony" may survive thus changing the, er, import of the national debt and deficit. Put another way, almost as a concomitant, is that if we have "hyperinflation" it is likely to infect the world. If this happens, the relative value of the dollar would not fall into disequilibrium with other world currencies as radically as suggested by those who address this crisis at a mere national level.
In at least one thread above someone mentioned the hyperinflation under the Weimar Republic (which my maternal grandmother experienced first hand...). People seem to forget a similar phenomenon just two decades ago when the Soviet Union imploded, their currency inflated, their living standards plummeted, and then the guvment recalled the currency, exchanging it for a new currency of fractional value. People who had been "saving" suddenly found their money nearly worthless, but not entirely worthless. People who had not been saving got nothing. Early mortality rose.
In a sense, this all started when Nixon abandoned Bretton Woods in 1971 and took the dollar off Monetarism while retaining "dollar hegemony."
In any case we are in for a really bumpy ride. It seems fair to ask, How much gold actually exists at Fort Knox? If not the dollar as the international fiat currency, then what? The Yuan? The Euro? Seems a bit premature.
Hyperinflation can be relative. Just a thought.
-30-
NOW -- you're talking, by mentioning Henry CK Liu-- whom i have suggested as extremely erudite and complex reading here several times.
i simply will state -- HE is a person who Greenspan, Merkel, Obaman, Paulson, whatever -- whomever
WILL NOT want on the stage with them in a debate for he will EASILY DESTROY ALL the tenets of this "capitalist" paradise they are talking about -- RIGHT DOWN to the very essence of what
IS "wealth" -- what IS "value"
what IS money
WHY did banks come around.
I HOPE chinese leaders REALLY have been alerted to HIS writings and suggestions TO them - and invite him to help them guide their economy -- especially as they are trying to KEEP china from being fully affected by this explosion which BEGAN from the CENTER of CAPITALISM -- wall street and washington....
with ALL of its historic anomalies and contradictions for all to see, in not only ECONOMIC terms but meta-physical terms...which Henry Liu COMPLETELY understands in its historic terms through all the societies in human history.
the guy is a genius, as far as I am concerned.
I HOPE china adopts HIS suggestions - DETACH themselves from the 'export dependence based on low wages' dictated by "markets" DICTATED BY the US capitalist regime -- and REALIZE they DON"T HAVE TO BE AFRAID - but actually BECOME a prosperous nation, STABLE all across the board WITHOUT having to PLAY the US western "free market enterprise game".
IF they did that -- the USA and CAPITALIST imperialism, dollar hegemony , is FINISHED!
this henry ck liu BETTER watch HIS back ....there's No knowing what the capitalists will do ...now that their backs are against the wall trying to EXPLAIN how THIS came to be!!!
and that SOME people Like Liu ACTUALLY CAN explain WHY and HOW to get OUT of it! and is suggesting it ,in VERY CLEAR, no nonsense terms - TO the chinese . for HE udnerstand what they are all about as well as what the western capitalist money imperialism has BEEN all about.
Some very good thoughts, especially the fact that the US wasn't the only one engaging in financial chicanery. Most of the global financial elites were doing pretty much the same thing we were. The problem is Global and our problems aren't even the worst.
Sioux Rose
OLEMAN RIVER: So, the Scrooge disease gets to spread the misery around. Should we be glad that our economy is not the only one going down? My studies of the corelation between planetary bodies and events on our plane suggests a number of years of "tribulation." The eventual result will be a global proletariat of sorts with far more representative power than is now the case. That's the good news. The bad news, I don't see this materialized into law until 2020, and if we are alive by 2025, a very different kind of governance FOR the people looks to be the case.
Do you really see a "Global" anything? And 2020/2025 is a heartbeat in time for something that significant to happen. Are you seeing war?
Sioux Rose
THOMAS: As many know, I study planetary cycles. I see HARSH times, that will eventuate in a "rise of the global proletariat" because the understanding that we are all people, precious human beings that deserve some rudimentary basics, will no longer be cloaked by the rhetoric, theories, and practices run by global elites. THAT "arrival" could be 2020 (I see international law at the time articulating this type of value system), and its full implementation by 2025. At that time Pluto, the planet that over the course of 15-20 years ultimately brings Renaissance, a breaking down that leads to a new evolutiohn, will enter Aquarius. THAT is the true beginning of the Aquarian Age, we are "on the cusp" at the very confusing transition phase now.
Not one comment regarding the Federal Reserve which has already given out 2 TRILLION $$$ (5 times as much as the Treasury) and has pledged to give out 6 TRILLION $$$ MORE!
And the Fed REFUSES to say which banks they lent the $$$ to and what they put up as collateral.
Ron Paul was right, we must ABOLISH the Fed, before they steal every last dollar.
http://www.bloomberg.com/apps/news?pid=20601109&sid=apx7XNLnZZlc&refer=home
The basic problem is that accounting was deregulated. The books became a fiction? Don't believe it? I could write pages of names and dates, take my word for it. Bottom lines became works of fiction.
Banks started their own private markets where a security was worth whatever they said it was worth. You could buy something and sell it the same day for ten times as much and no one would know.
Why should anyone in the business world trust anybody else any more? You have no way of knowing whether anyone is solvent. They want to borrow money, the books look good, but so what? The books mean nothing. Who wants to lend in such circumstances?
And nothing is being done about it.