Banking On a Bailout by Ralph Nader

Dandelion Salad

by Ralph Nader
Friday, August 17. 2007

The corporate capitalists’ knees are shaking a bit. Their manipulation of the sub-prime housing market has led to a spreading credit crunch and liquidity crisis. So it is time for them to call on Uncle Sam – the all purpose bailout man.

Only don’t call it a bailout yet. It is just an injection of over $200 billion in the past week to stabilize the heaving financial markets by the European Central Bank and our Federal Reserve. Governments to the rescue – again.

My father many years ago asked his children during dinner table conversation: “Why will capitalism always survive?” His answer: “Because socialism will always be used to save it.” As a small businessman himself (a restaurateur), he was not referring to the little guys on Main Street. He was talking about the Big Boys. Today, we call these self-paying CEOs “corporate capitalists.”

Central Banks are government regulators after all. Among other impacts, they regulate interest rates. But they are so saturated with banking executives or former banking officials on their Boards, Committees and at the helms, that they see themselves as part and parcel saviors of their banking brethren.

Brother Henry M. Paulson, formerly with the Goldman-Sachs investment giant and now U.S. Treasury Secretary just said: “The markets are resilient. They can absorb those losses. We’ve gone through challenging times in the markets, and we will rise to the challenge.”

We? Paulson is a government official who is supposed to be worrying about the people first – such as the millions of homeowners who are slated to lose their homes in the next 18 months.

How to help these “borrowers, not the wheeler-dealers,” as columnist Paul Krugman described his “workouts, not bailouts” plan in The New York Times (August 17, 2007) should be Paulson’s chief concern.

Secretary Paulson did tell The New York Times that federal regulators should try to eliminate fraud and market manipulation and that there needs to be more disclosure of the holdings and actions of hedge funds and other private pools of capital.

Well, that’s talk. Where is the action? Krugman, an economist, believes that the current real-estate bubble was “both caused and was fed by widespread malfeasance. Rating agencies like Moody’s Investors Service, which get paid a lot of money for rating mortgage-backed securities,” seemed to be performing much like the major accounting firms that rubber-stamped the inflated, deceptive financial statements of the Enrons and the Worldcoms.

Passing on the risks of these mortgage loans through more and more complicated financial transactions, which are in turn bet on by the huge derivatives markets, allows wider transmission of these risk viruses throughout the national and the global financial markets.

A kind of dominoes effect sets in and induces panic selling and panic inability to obtain daily commercial loans in the stiffening credit markets.

The European Central Bank recently has poured tens of billions of Euros into the global financial system after the giant French bank BNP Paribas SA froze three of its investment funds.

If matters get worse, the Central Banks will inject more money into the system. If financial markets start collapsing along with investor confidence, then Uncle Sam will certainly adopt additional direct bailout options.

One man – Mervyn King, the Governor of the Bank of England, is the lone central banker who resists intervening in the markets. “Interest rates,” he asserts, “aren’t a policy instrument to protect unwise lenders from the consequences of their unwise decisions.”

Bailing out investors and their risky investments would just induce them to take on bigger risks next time, expecting another bailout, he believes.

More and more, corporate capitalists in side and beyond the financial markets do not want to behave as capitalists—willing to take the losses along with the profits. They want Washington, D.C., meaning you the taxpayers, to pay for their facilities (as with big time sports stadiums) or take on their losses because they believe that they are too big to be allowed to fail (as with large banks or industrial companies).

These corporate capitalists should be exposed when they always say that government is the problem whenever it moves to help the little guys with health and safety regulations, for example, but government is wonderful when the bureaucrats are summoned to perform missions to rescue them from their own greed and folly.

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2 thoughts on “Banking On a Bailout by Ralph Nader

  1. OOooopppss, isn’t it funny how they scream free markets until they WANT mommy to come in and clean up their messes…….these corporate narcissists need to pay for this garbage that they dump on the american people…….thanks again DS…………t

  2. Namiste,

    It is a real travesty against the American peoples what the big company’s and our government has done to the American hard working citizen. With NAFTA and WTO where are the jobs that pay for the nice homes and big mortgages and the high credit for all the money the big company’s need printed? How much more Americans the two classes the rich and the poor … The poor have to bail out with corporate welfare that the poor ultimately pay for with pumping into the economy billions of dollars to try and help the market and stabilize it only to make our money worth even less here and abroad. How is this helping I ask you?

    Notice we never see oit in our news or news papers about the huge subsidies that our government pays out to these companies like they saved Chrysler way back when we heard about that, but we never hear of the other thousands that are saved by screwing over the US citizen!!!!

    I think it is the Company’s that sell here and have a stake here that should get the tax breaks not the ones that leave and screw over the American workers and leave and pay workers some where else maybe cents of the dollar and then charge us for the products like as if Americans had made them some where here in the USA…

    We are a lost generation unless something is done. It can’t be the military builders of manufacturing weapons are the only corporations who are in the black and the rest all fall into the red, well the companies that actually still do produce and have a working group here in America!!!

    Oh our great Congress and Senate of the US defenders of the Constitution…Where have you been? OH yeah off on a month long Vacation!!!

    Due to our Majority led Congress who decided right before they left on vacation to sign away our bill of rights and the US Constitution which they swore to uphold we no longer have the rights we used to have. We no longer have the checks and balances to the fear of propaganda of the evil terrorist regime. Yes we can Trust our Congress and we can also trust Roberto Gonzalez with our freedom of speech and the head of the CIA they make good judgments I am sure as a court or judge might make in any civil matter or might that be considered under national security? I feel so violated!!!!

    Sorry we no longer have our civil liberties as they were given away recently,

    Vote for Kucinich is the only one who has a plan to end WTO and NAFTA and ending the war, universal health care for everyone!!!

    No More Nukes, No More Nukes, No More Nukes, No More Nukes, No More Nukes, No More Nukes,

    Namiste and peace,

    NOTICE: Due to ( U.S.) Presidential Executive Orders, the National
    Security Agency may have read this email without warning, warrant, or
    Notice, is in violation of the Fourth Amendment to the U.S. Constitution.
    In case you can’t tell I am very angry and disappointed with our congress!!!!

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