By Luke Thomas
http://www.fogcityjournal.com
October 1, 2008
see
Behind The Deregulatory Curtain by Ralph Nader
Open the Debates Rally Speech Uncut + Paul Press Conference featuring Ralph Nader
Day: October 1, 2008
Behind The Deregulatory Curtain by Ralph Nader
by Ralph Nader
Oct 1, 2008
Behind The Deregulatory Curtain – The Nader Page
The current finger pointing by the deregulation crowd in Congress and their ideological soul mates in the media reminds me of the 1939 film classic The Wizard of Oz. It is as though these spin masters want us to pay no attention to the government officials behind the deregulation curtain.
Indeed, the right-wing pundits and the revisionists in Congress are spending an inordinate amount of time falsely claiming that our nation’s current financial disaster stems from the Community Reinvestment Act, a law passed by Congress and signed into law by President Jimmy Carter in 1977. The primary purpose of this modest law is to require banks to report on where and to whom they are making loans. Community organizations have used the data produced as a result of this law to determine if banks were meeting their lending obligations in the minority and lower-income communities in which they do business. Congress passed this law because too many lenders were discriminating against minority borrowers. “Redlining” was the name given to the practice by banks of literally drawing a red line around minority areas and then proceeding to deny people within the red border home loans – even if they were otherwise qualified. The law has been in place for 30 years, but the right-wing fringe claims it somehow is responsible for predatory lending practices that date back just to the beginning of this decade.
Notice what these revisionists are not mentioning.
No “thank you” to former Senator Phil Gramm for pushing the repeal of the Glass-Steagall Act.. This law was passed in the wake of the stock market crash of 1929 – and designed to separate banking from securities activities. In 1999, when Congress passed the Gramm-Leach-Bliley Act and in so doing repealed Glass-Steagall the banks strayed into rough waters by looking for fast money from risky investments in securities and derivatives.
As predatory lending mushroomed out of control, the regulators — key among them, the Federal Reserve and the Office of Comptroller of Currency — sat on their hands. The Federal Reserve took exactly three formal actions against subprime lenders from 2002 to 2007. Bloomberg news service found that the Office of Comptroller of the Currency, which has authority over almost 1,800 banks, took three consumer-protection enforcement actions from 2004 to 2006.
No “tip of the hat” to the Bush Administration for preempting state regulators and Attorneys General from using state consumer laws to crack down on predatory and sub-prime lending by national banks.
And, let us not forget the folks at Fannie Mae and Freddie Mac. Imagine allowing these two government sponsored enterprises–that were weakly regulated by HUD–to claim they were meeting the national housing goals by counting the purchase of subprime loans. Back in May of 2000, our associate Jonathan Brown warned that it would be inappropriate and counterproductive to encourage Fannie and Freddie to meet the housing goals by purchasing subprime loans. Too bad our members of Congress and the regulators at HUD were infected with deregulatory zeal. Former Texas Senator and current UBS executive Phil Gramm — would-be President John McCain’s Treasury Secretary-in-waiting — pushed through the Commodities Futures Modernization Act of 2000, which deregulated the derivatives market. With help from his wife, Wendy, the former head of the Commodity Futures Trading Commission who went on to a post on the Enron board of directors, Gramm removed the controls on Wall Street so it could innovate all sorts of exotic financial instruments. Instruments far riskier than advertised, and now at the core of the financial meltdown.
The SEC, through its “consolidated supervised entities” program, decided that voluntary regulation would work for the investment banking sector. Not surprisingly, this was a scheme cooked up by Wall Street itself. The investment banks were permitted to double, triple and go 20 times (and more) down on their bets by using lots of borrowed money. They made minimal disclosures to the SEC about what they were doing, and the SEC didn’t bother to review those disclosures adequately. Too bad for the investment banks — and the rest of us — they made lots of bad bets. The SEC has now closed the voluntary program, though now there aren’t any major investment banks left (the two remaining ones have converted themselves into conventional banks).
It is time to start paying very close attention to government officials behind the deregulation curtain. Let your Members of Congress know you are not willing to bailout the gamblers on Wall Street with a no-strings attached pile of taxpayer dollars. The time for regulation is upon us.
FAIR USE NOTICE: This blog may contain copyrighted material. Such material is made available for educational purposes, to advance understanding of human rights, democracy, scientific, moral, ethical, and social justice issues, etc. This constitutes a ‘fair use’ of any such copyrighted material as provided for in Title 17 U.S.C. section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. If you wish to use copyrighted material from this site for purposes of your own that go beyond ‘fair use’, you must obtain permission from the copyright owner.
see
The Economy Sucks and or Collapse
McCain: If I Was A Dictator Which I’ve Always Aspired To Be!
Updated: added another video
He sounds delusional in this interview. ~ Lo
http://cspanjunkie.org/
OCTOBER 01, 2008
Vodpod videos no longer available.
more about “McCain: If I Was A Dictator Which I’v…“, posted with vodpod
***
McSame as Bush: Dictatorial Aspirations
“I’m not saying this is the perfect answer. If I were dictator, which I always aspire to be, I would write it a little bit differently.”
– John McCain to the editorial Board of the Des Moines Registerhttp://thinkprogress.org/2008/10/01/m…
“I told all four that there are going to be some times where we don’t agree with each other, but that’s OK. If this were a dictatorship, it would be a heck of a lot easier, just so long as I’m the dictator”
see
Senate Passes Sweetened $700B Bailout
KIRO Seattle
POSTED: 3:30 am PDT October 1, 2008
UPDATED: 7:02 pm PDT October 1, 2008
House To Vote Friday
The Senate has passed a $700 billion bailout for the financial industry aimed at preventing the economy from plunging into a recession.
Democrats and Republicans teamed to approve the bill after sweetening it with tax breaks.
The bailout was approved in a 74-25 vote.
Both presidential candidates, Democrat Barack Obama and Republican John McCain, returned to Washington to cast “aye” votes.
[…]
Senate Passes Sweetened $700B Bailout – Smart Savings News Story – KIRO Seattle.
h/t: CLG
FAIR USE NOTICE: This blog may contain copyrighted material. Such material is made available for educational purposes, to advance understanding of human rights, democracy, scientific, moral, ethical, and social justice issues, etc. This constitutes a ‘fair use’ of any such copyrighted material as provided for in Title 17 U.S.C. section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. If you wish to use copyrighted material from this site for purposes of your own that go beyond ‘fair use’, you must obtain permission from the copyright owner.
see
Not One Dime! By Mike Whitney
By Mike Whitney
10/01/08 – “ICH”
The mystery has been solved.
For nearly a year, we have been asking ourselves why the investors and foreign banks that bought up hundreds of billions of dollars of worthless mortgage-backed securities (MBS) from US investment banks have not taken legal action against these same banks or initiated a boycott of US financial products to prevent more people from getting ripped off?
Now we know the answer. It’s because, behind the scenes, Henry Paulson and Co. were working out a deal to dump the whole trillion dollar mess on the US taxpayer. That’s what this whole $700 billion boondoggle is all about; wiping out the massive debts that were generated in the biggest incident of fraud in history. Rep Brad Sherman explained it like this last night to Larry Kudlow:
“It (The bill) provides hundreds of billions of dollars of bailouts to foreign investors. It provides no real control of Paulson’s power. There is a critique board but not really a board that can step in and change what he does. It’s a $700 billion program run by a part-time temporary employee and there is no limit on million dollar a month salaries……. It’s very clear. The Bank of Shanghai can transfer all of its toxic assets to the Bank of Shanghai of Los Angeles which can then sell them the next day to the Treasury. I had a provision to say if it wasn’t owned by an American entity even a subsidiary, but at least an entity in the US, the Treasury can’t buy it. It was rejected.
The bill is very clear. Assets now held in China and London can be sold to US entities on Monday and then sold to the Treasury on Tuesday. Paulson has made it clear he will recommend a veto of any bill that contained a clear provision that said if Americans did not own the asset on September 20th that it can’t be sold to the Treasury. Hundreds of billions of dollars are going to bail out foreign investors. They know it, they demanded it and the bill has been carefully written to make sure it can happen.”
So, why hasn’t the Treasury Secretary explained the real purpose of the bailout to the American people? Could it be that he knows that his $700 billion bailout would end up like the Hindenburg, vanishing in sheets of flames?
This is a terrible bill, and it confers absolute authority on one of the central players in the scandal, Henry Paulson, who was the Chairman of Goldman Sachs at the time this MBS garbage was being peddled around the planet to credulous investors. Now Paulson will be in a position to buy up any “troubled asset” he that he believes could pose a threat to “financial market stability”. That’s just great! It is clear that Paulson will use his unchecked powers to wipe the slate clean and remove any possibility that foreign investors will take legal action against the real perpetrators; the giant Wall Street investment banks.
So, how do the American people like paying off Paulson and Co. future legal bills? Is that how taxpayer revenue should be spent instead of on education, health care and infrastructure?
There’s another reason why Paulson is working so hard to pass the Bailout for Tycoons Bill; it’s a windfall for the banking giants. Citi did not simply pick up Wachovia by happenstance nor did JP Morgan purchase Washington Mutual because it wanted to perform its civic duty and prevent a full-system meltdown. No way; they were clearly aware of the way the wind was blowing. In fact, neither case manages to pass the smell test.
This is from AP’s Sara Lepro:
“Citigroup agreed Monday to purchase Wachovia’s banking operations for $2.1 billion in a deal arranged by federal regulators, making the Charlotte-based bank the latest casualty of the widening global financial crisis.
The deal greatly expands Citigroup’s retail franchise—giving it a total of more than 4,300 U.S. branches and $600 billion in deposits—and secures its place among the U.S. banking industry’s Big Three, along with Bank of America Corp. and JP Morgan Chase & Co.
But it comes at a cost: Citigroup Inc. said it will slash its quarterly dividend in half to 16 cents. It also will dilute existing shareholders by selling $10 billion in common stock to shore up its capital position.
In addition to assuming $53 billion worth of debt, Citigroup will absorb up to $42 billion of losses from Wachovia’s $312 billion loan portfolio, with the Federal Deposit Insurance Corp. agreeing to cover any remaining losses. Citigroup also will issue $12 billion in preferred stock and warrants to the FDIC.
(Ed; Here’s the punch line) “The government’s proposed $700 billion rescue plan for financial institution, being voted on Monday by the House of Representatives, likely will prove of added benefit to Citi.
While the plan broadly aims to prevent banks from profiting on the sale of troubled assets to the government, there is an exception made for assets acquired in a merger or buyout, or from companies that have filed for bankruptcy. This could allow Citigroup to sell toxic mortgages and other assets it gained from Wachovia for a higher price than the bank actually paid for them.” (“Citigroup to buy Wachovia banking operations”)
Huh?!? So Citi not only gets an army of depositors (the cheapest capital available!) but, at the same time, is going to be able to dump it’s mortgage-backed junk on the taxpayer? And, guess what? The JP Morgan deal looks nearly identical.
Is this “insider baseball” or not?
Does anyone want to wager that G-Sax will also get a privileged spot at the public trough sucking up billions of taxpayer dollars to patch together its tattered balance sheet?
And what will the net result of Paulson’s Bailout for Fraudsters be; more consolidation of the financial industry and the utter annihilation of local and regional banks. That’s a sure thing. The mom and pop banks across the country are going to take it in the stern sheets if this bill is passed. Bet on it.
The country has no time for this cynical scavenger-hunt. The system is listing badly and we have ONE chance to get this emergency bill right. There is no way an industry rep like Henry Paulson, who has spent his entire career feathering his own nest and handing out plums to his buddies, can operate in the best interests of the American people. Paulson has got to go!
According to Bloomberg News , Sept 29:
“The Federal Reserve will pump an additional $630 billion into the global financial system, flooding banks with cash to alleviate the worst banking crisis since the Great Depression. The Fed increased its existing currency swaps with foreign central banks by $330 billion to $620 billion to make more dollars available worldwide. The Term Auction Facility, the Fed’s emergency loan program, will expand by $300 billion to $450 billion. The European Central Bank, the Bank of England and the Bank of Japan are among the participating authorities.
The crisis is reverberating through the global economy, causing stocks to plunge and forcing European governments to rescue four banks over the past two days alone.” (Bloomberg)
Get it? The Fed has ALREADY brushed aside Congress’s “No” vote and pumped money into the system; and look what happened.
Nothing!
Libor is still at historic highs, the Ted spread has widened to record levels and interbank lending is grinding to a standstill. There’s a run on the money markets that is reducing the ability of businesses to turn over short term debt. The system is shutting down, folks, and Paulson’s snake oil won’t help. Why throw another $700 billion down a rathole? 400 reputable economists–not the “faith based” industry hacks that work for the Bush administration–are opposed to this bailout. It has to be stopped.
This is a “real time” meltdown and it requires real solutions, not bailouts for foreign creditors and Wall Street Goliaths. (Foreign victims of this scam will have to sue the perpetrators not the US taxpayer) As Nouriel Roubini, chairman of Roubini Global Economics, points out, we are on the verge of the “mother of all bank runs”, a cross-border savaging of reserves that would crash the entire financial system. Here’s Roubini on the next shoe to drop:
“The next step of this panic could become the mother of all bank runs, i.e. a run on the trillion dollar plus of the cross border short-term interbank liabilities of the US banking and financial system as foreign banks as starting to worry about the safety of their liquid exposures to US financial institutions; such a silent cross border bank run has already started as foreign banks are worried about the solvency of US banks and are starting to reduce their exposure. And if this run accelerates – as it may now – a total meltdown of the US financial system could occur. We are thus now in a generalized panic mode and back to the risk of a systemic meltdown of the entire financial system. And US and foreign policy authorities seem to be clueless about what needs to be done next. Maybe they should today start with a coordinated 100 bps reduction in policy rates in all the major economies in the world to show that they are starting to seriously recognize and address this rapidly worsening financial crisis.” (Nouriel Roubini’s EconoMonitor)
We have no time for Paulson’s self serving shenanigans. This is not how one goes about recapitalizing the banking system or bringing stability to the financial system. It’s time to get rid of the lobbyists and banking vermin and bring in the economists and the people with real experience. Paulson’s plan is loser. Not one dime should go to this latest Wall Street swindle. No bailout!
FAIR USE NOTICE: This blog may contain copyrighted material. Such material is made available for educational purposes, to advance understanding of human rights, democracy, scientific, moral, ethical, and social justice issues, etc. This constitutes a ‘fair use’ of any such copyrighted material as provided for in Title 17 U.S.C. section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. If you wish to use copyrighted material from this site for purposes of your own that go beyond ‘fair use’, you must obtain permission from the copyright owner.
see
Exclusive: Helicopter to Hell by The Other Katherine Harris
Black Monday Galore: A Speculator’s Seesaw Paradise
by Michel Chossudovsky
Global Research, September 30, 2008
There is something disturbing about the Black Monday collapse of Wall Street which followed the rejection of the proposed bailout legislation by the US Congress, and which has not been addressed by the media.
There was prior information on how the Congressional vote would proceed.
There was also an expectation that the market would crumble if the proposed 700 billion dollar bailout were to be rejected by the US Congress.
Speculators had already positioned themselves.
On Black Monday September 29, markets around the world collapsed on news that the US Congress had voted against the bailout. The Dow Jones industrial average fell by 778 points, a decline of almost 7 percent, the largest one day decline since Sept. 17, 2001, when the market opened after September 11, 2001.
In percentage terms, it was the 17th-biggest one day decline of the DJIA. Those who were involved in speculative trade prior to Congress’ rejection of the legislative process, made billions on Black Monday. And then on Tuesday, they made billions, when the market rebounded, with the Dow jumping up by 485 points, a 4.68% increase, largely compensating for Monday’s decline.
Those financial actors who had advanced inside information regarding the Congressional decision or had the ability to influence the vote of members of Congress made billions of dollars when the market crumbled.
Ironically, almost twice as much money was “wiped out” from the US stock market on Black Monday September 29 (1.2 trillion dollars) than the value of the Paulson bailout (700 billion dollars). “Even before the opening bell, Monday looked ugly. But by the time that bell sounded again on the New York Stock Exchange, seven and a half frantic hours later, $1.2 trillion had vanished from the U.S. stock market.”
While public opinion celebrates the refusal of US Congress to accept the bailout, the decision of the legislature feeds the speculative onslaught, which in turn favors a greater concentration of wealth and financial power.
In a bitter irony, political uncertainty regarding the proposed bailout constitutes ammunition for the speculators.
Short Term Speculation
What has characterized the stock market in recent years is a seesaw up and down movement, where a temporary meltdown on one day is compensated by an upward rebound on the following business day. Analysts invariably dispel the speculative mechanisms. The rebound is attributable to “regained investor confidence”.
Within a trading day, there is considerable volatility.
There have been numerous “Black Mondays”. Two weeks prior to the 29 Septmber meltdown, on Monday, September 15, 2008, the Dow Jones industrial average (DJIA) declined by 504 points (4.4%). The financial slide had led to an 800 point decline of the Dow Jones in less than a week.
Amply documented, these short term swings in stock markets are the object of a lucrative speculative trade.
Those who had advanced warning of Congress’ decision made a bundle of money on Black Monday. And the following day, Tuesday, when markets rebounded by 4.7% after a 7 percent collapse of the DJI, they made another bundle of money.
Was the Congressional decision in any way connected to the speculative onslaught?
“Black Mondays” are potentially the source of windfall profits. The revenues to be derived by financial institutions, which not only have foreknowledge and inside information but also the ability to manipulate the market are enormous.
Were these up and down swings the result of market manipulation?
Short Selling
In the last two weeks, the U.S. Securities and Exchange Commission established a temporary and partial ban on short-selling. How effective it was remains to be established.
The temporary ban on short selling dampens but does not preclude the speculative drive. Short selling is the act of selling stock which you do not possess and then buying the stock back in the spot market once the price has collapsed.
“The SEC ordered traders, including hedge funds, to stop short selling nearly 800 financial stocks… The emergency measure also required large managers to disclose what stocks they are selling short, or betting on a price drop. The order is set to expire on Thursday at midnight unless SEC commissioners decide to extend it. (Reuters, 30 September 2008)
The news reports suggest that the market rebounded on the presumption that Congress would pass an amended version of the $700 billion bailout. Again what is significant is that there is more money to be made on speculating on whether the bailout will or will not be implemented than on the bailout itself.
The market is in crisis but there is no consistent downward trend. What is happening is a downward movement and then on the following day, the market rebounds and then goes down again and then rebounds.
On each short term movement, institutional speculators including the financial institutions which are the targeted beneficiaries of Paulson’s bailout, make billions of dollars speculating on the short term movement of the stock market, the daily ups and downs.
What is more profitable for the banks: the bailout or speculating on whether the bailout will or will not be adopted?
There is money to be made if you have inside information as to what is happening behind closed doors at the US Congress, on the negotiations between the US Congress, the Treasury, the Fed and Wall Street’s financial institutions.
Similarly, there is money to be made in spreading rumors on negotiations pertaining to the bailout and speculating on the likely short term movement of stock markets which results from the release of false and/or misleading information.
In the weeks ahead, the Paulson bailout will be the object of speculative transactions on Wall Street.
Will it be adopted? Under what form will it be adopted? Will it be postponed? Will it be thrown out?
Moreover, the lifting of the temporary ban on short selling by the SEC will play a proactive role in exacerbating market instability, while also facilitating the further appropriation of wealth instrumented through speculative trade.
The speculators of the late 1920s belong to a bygone age. Today’s speculative transactions are integrated into the normal functions of giant financial institutions.
At each meltdown and upward rebound, massive speculative gains accrue to major financial speculators. Those who stand to gain are those who have a privileged relationship to the Treasury, Congress and the Federal Reserve as well those involved, behind the scenes, in shaping government economic and financial policy.
© Copyright Michel Chossudovsky, Global Research, 2008
The url address of this article is: www.globalresearch.ca/index.php?context=va&aid=10397
see
The Economy Sucks and or Collapse
Mosaic News – 9/30/08: World News from the Middle East
Warning
.
This video may contain images depicting the reality and horror of war/violence and should only be viewed by a mature audience.
Mosaic needs your help! Donate here: http://linktv.org/contribute
“US Financial Crisis Felt Around the World,” Al Arabiya TV, UAE
“Syria Warns About Extremists in Lebanon,” Al Jazeera TV, Qatar
“Karzai Appeals to Saudi Arabia,” Press TV, Iran
“Interview With Head of Afghanistan’s Intelligence Agency,” Al Jazeera English, Qatar
“Darfur & SLA Sign Memorandum of Understanding,” Sudan TV, Sudan
“Eid in Jerusalem,” Dubai TV, UAE
“Looking After Children During the Holidays,” Nile TV, Egypt
Produced for Link TV by Jamal Dajani.
Vodpod videos no longer available.
more about “Mosaic News – 9/30/08: World News fro…“, posted with vodpod
see
Bail Out Mainstreet
Sept 30, 2008
The free markets are completely discredited. There is significant political space to build a broad consensus for a 21st-Century New Deal that would stop spending our tax dollars on war and Wall Street, and instead help struggling homeowners and build affordable housing; fund job creating projects for clean energy and rebuilding our infrastructure; and fund a universal health-care system that would help American families, while cutting the nation’s long-term healthcare costs.
Vodpod videos no longer available.
more about “Bail Out Mainstreet“, posted with vodpod
(1) Call your Senators and Representative at 800-473-6711 or 800-828-0498 or 202-224-3121 and say “Filibuster the Bailout!”
(2) Find or Organize a “No Bailout” protest near you: http://bailoutmainstreet.com/
see
Exclusive: Helicopter to Hell by The Other Katherine Harris
US Senate to Vote on Wall Street Bailout Today!!! (Kucinich)
Casino Capitalism + Palintology + Politicizing and militarizing sports by William Blum
[Added the video that William cited in his report]
by William Blum
www.killinghope.org
Oct. 1, 2008
The Anti-Empire Report
Read this or George W. Bush will be president the rest of your life
101 ways to get rich without doing anything socially useful
Why do we have this thing called a “financial crisis”? Why have we had such a crisis periodically ever since the United States was created? What changes occur or what happens each time to bring on the crisis? Do we forget how to make things that people need? Do the factories burn down? Are our tools lost? Do the blueprints disappear? Do we run out of people to work in the factories and offices? Are all the services that people need for a happy life so well taken care of that there’s hardly any more need for the services? In other words: What changes take place in the real world to cause the crisis? Nothing, necessarily. The crisis is usually caused by changes in the make-believe world of financial capitalism. Continue reading
Exclusive: Helicopter to Hell by The Other Katherine Harris
by The Other Katherine Harris
Featured writer
Dandelion Salad
Oct 1, 2008
Question: What could be worse than Hank Paulson’s $700-billion proposal to pay banksters too much for worthless derivative securities?
Answer: “Helicopter Ben” Bernanke on the loose, dropping more than $1 trillion on the banksters, in loans based on their garbage securities’ FULL FACE VALUE (hyperinflated by up to 200 percent). Continue reading
US Senate to Vote on Wall Street Bailout Today!!! (Kucinich)
http://www.senate.gov/general/contact…
http://www.congress.org/congressorg/home
A 2nd Vote for the Bailout of Wall Street is happaning today in the US Senate.
Our voices were heard and the House of Representatives voted down the bailout package.
PLEASE CONTACT YOUR REPS!
Vodpod videos no longer available.
more about “US Senate to Vote on Wall Street Bail…“, posted with vodpod
see
Tell Congress: No to Bailout! (Action alerts)
Dennis Kucinich on The Rachel Maddow Show
Rep. Dennis Kucinich Rejects $700 Billion Bailout + Plan being rushed with no alternatives
Exclusive: Resolving the Wall Street Financial Crisis: Monetary Reform by Nikki Alexander
Money As Debt (video) + “In Debt We Have Trusted,” For over 300 years By Jim Kirwan
Riz Khan: Robert Fisk: Challenge Authority
Riz Khan speaks to award-winning journalist Robert Fisk about Barack Obama, US foreign policy and more.
When Corporations Spy by Tom Burghardt
by Tom Burghardt
Global Research, September 30, 2008
Antifascist Calling – 2008-09-24
As if illegal spying and dirty tricks by state agencies weren’t threat enough to democratic institutions and grassroots activist organizations, hundreds of corporate spy outfits are doing their part–to defend the “homeland” and the bottom line–for the multinational grifters who plunder the world’s wealth.
Money As Debt (video) + “In Debt We Have Trusted,” For over 300 years By Jim Kirwan
Replaced video Feb. 20, 2023
Ethaniel RockX on Oct 28, 2015
Paul Grignon’s 47-minute animated presentation of “Money as Debt” tells in very simple and effective graphic terms what money is and how it is being created. It is an entertaining way to get the message out. Continue reading
Bush’s Artificial Prosperity: The devastating results of the Republican debt based economy by John Kelley
Sent to me by Jason Miller from Thomas Paine’s Corner. Thanks, Jason.
by John Kelley
9/30/08
“A billion here, a billion there, pretty soon you’re talking about real money.” A quote that was for many years wrongly attributed to the late Senator Everett Dirksen seems applicable here. So far the cost of Fannie Mae, Freddie Mac, Lehman Bros. AIG and what Wall Street is asking for equals a trillion dollars. While its not peanuts in anyone’s book the real cost is probably more like 2-3 trillion dollars. That is in addition to the 100s of billions of dollars pumped into the economy by the fed to prevent a credit freeze up before last week.
August 9, 2007 $24 billion, August 10, 2007 $38 billion, November 12, 2007 $42 billion, November 27, 2007 $8 billion, March 12, 2008 $200 billion, August 13, 2008 $70 billion, September 18, 2008 $180 billion, September 24, 2008 $30 billion, pumped into the economy by the fed, all money printed producing more debt for America.
That is in addition to the $700 billion proposal. And that doesn’t count the money that was pumped into the economy through massive tax cuts for the rich and the deficit war spending that took us from a $5 trillion surplus to a $9 trillion dollar national debt.
This all happened for a simple reason. Trickle down economics doesn’t work. That extra money was used for speculation while squeezing equity out of the American worker for even more gambling cash. Bush was willing to do anything to avoid a recession on his watch, even if it meant creating a depression for the next guy. He just ran out of time.
Putting Marble in the Outhouse
For the American economy to work, consumer spending, which makes up 70% of the economic activity, had to continue even though consumer income when adjusted for inflation was falling. Wages and benefits fell almost 30% since 1970 when adjusted for inflation while corporate profits rose to record levels. The only way Americans have kept up is to work longer hours, put more people in the household work and live off credit.
How do you grow an economy when consumers don’t have any more money? Easy credit, made available by the extra cash infused into the system and low interest rates, pushed the American worker to borrow to keep up through home equity loans, credit card purchases and auto loans. Pushing people out of guaranteed retirement benefit plans and into 401(k)s added more gambling dollars to the players table.
While traditional and investment banks were getting loans to finance this consumer debt from the Fed at record low interest rates, consumers were paying record high interest rates. The money rolled in from this “spread”. The biggest product produced by our new financial transaction centered economy was debt based collateral instruments that were then used to borrow more.
All of these consumer liabilities were booked as assets. They were bundled into mortgage-based securities/bonds and bought at an inflated worth by people who borrowed more money to do it. Those in turn were sometimes rebundled into new financial instruments which investors leveraged already leveraged financial products to buy.
This has brought about the situation where, a large part, if not most of the economy was based not on investment of one’s savings, you know like they tell us commoners we should do, but on how much could be borrowed, which only depended primarily on how much the deal makers could make off the deal. The more money you had the lower the interest rate.
One of the primary maxims in business is to always use someone else’s money when possible. Buyers of these financial instruments borrowed 80-90% of their purchase money. In the hedge funds, qualified investors (in other words rich people) borrowed 90% of their investment money to get in, which was then leveraged again at sometimes twenty to one to play the market with and take over companies.
Banks became direct investors in those deals and leveraged buyouts, instead of just lending the money. Paying the money back was never intended. The debt was loaded on the purchased company or instrument making it someone else’s problem. One of the things that deregulation insured was that you could pass the responsibility on to the next guy and take your profits, except for the guy at the bottom—the homeowner.
So for every $250,000 home mortgage, the financial wizards multiplied the debt many times that at each step. See why even a small uptick in foreclosures can create economic catastrophe in this Ponzi scheme?
This excess magic capital that was generated by this scheme was not used to make America more competitive by huge investments into research and innovations but to help financial corporations, hedge funds and leveraged buyout companies go on a huge buying binge in order to try and dominate the new global economy. In return for this direct giveaway of American tax dollars and income, those favored rich shipped jobs overseas, established headquarters off shore to avoid taxes and gave themselves huge bonuses.
Then somebody asked the questions, what are these debt instruments standing behind more debt really worth? The answer is no one really knows, but they are worth nowhere near their posted value.
The Impact of a Debt Based Economy
Instead of setting free the supposed market magic of pure capitalism, the creation of this regulation-free, almost-free-money environment turned into a free for all where the most larcenous characteristics of Wall Street were glorified. According to the Scott Burns (www.scottburns.com) in an article printed September 28, 2008 Bear Stearns, Bank of America, UBS, Merrill Lynch, Morgan Stanley, Wachovia, GMAC Bank, IndyMac Bank, Countrywide, JP Morgan, Citigroup, CIBC, HSBC, Freddie Mac, Fannie Mae, Lehman Brothers and “independent rating companies” Standard & Poor, Moody’s and Fitch all worsened the problem through their deceptive and illegal actions.
What were those actions? They ranged from abusive and illegal loan practices, deceiving investors about the amount of risk they were taking, deceptive advertising, securities fraud, fraudulent ratings, structuring products to hide real risk, hiding their true positions and developing tax evasion schemes.
Fed Chairman, Ben Bernake says that we will buy up these bad debts at a price that is closer to what they would be “in a more normal market” or through a process of “price discovery”. What does that mean? Simply we’re going to give them more then their real value. Then hopefully other fools will rush in and pour more money into these institutions to recapitalize them. Then we will wait for who knows how long for those debts to reach a value somewhat close to the price they bought them for. When? Maybe never.
The powers that be in the Fed and SEC stopped short selling which they blamed for “crashing companies.” In all reality it was an attempt to stop the public from learning how worthless these financial instruments really are before a bailout value could be established based on their true value. Short sellers bid on what they think a stock will fall to (in other words its current present worth), something the bailout boys don’t want you to know.
Bernake also made the statement to Congress that the “economy was severely undercapitalized”. The economy is undercapitalized? That means the whole economy has borrowed too much money, issued Treasury Bonds with out sufficient capital behind them to print more money to prevent an economic slowdown. In other words, what took place was an expansion of the economy that outpaced actual growth in wealth creation through an inflationary money supply. Choices made out of political opportunism and blatant greed.
The Plans
Now, Secretary Treasurer Paulson, who used to work for Goldman Sachs, is proposing we bail his former company and other friends out with more debt, and that they be the “experts” appointed to handle this mess they have created. Understand what Paulson is demanding: That we borrow MORE. Print an extra $700 billion and give it to him to do as he wishes. Take note that 200 well known university economists say the Paulson plan won’t work.
Consumers have started spontaneous protests all over the country against bailing out the big boys and with half of Congress facing re-election they are listening. The Conservative Republicans are not, as some have reported, asking to let the companies fail and the market correct itself. Instead they are asking for the government to set up an insurance plan financed by the companies and backed by the government that would insure the bad debts. Something like selling flood and wind insurance to a Galveston homeowner when Ike was 50 miles offshore.
Of course anyone who doubts the brazenness of the house Republicans only need look at the add-ons they want. They want even less regulation, to reduce the capital gains rate to 15% (half the tax rate on wage earners), and to lower taxes on money they have made on their offshore operations. And of course they are still lobbying like mad to keep the tremendous tax break for the rich implemented by Bush.
Showing their concern for those common citizens suffering from this mess of deregulation, Senate Republicans blocked a plan on Friday by the Democrats to pump $56 billion into the economy through public works projects, more help for the unemployed and money for states who are underfunded for Medicare. No worry however. Even if it had passed, Bush had promised to veto it. They did support the $630 billion spending bill to continue government operations past Wednesday, funding for the Pentagon, veterans medical care, homeland security and of course a $25 billion bailout for those geniuses in the auto industry.
The bankers, speculators and stock traders, who certainly don’t want to “out-brazened,” want the government to give Paulson complete control of the money no strings attached. Trust us they say. Paulson as recently as 2004 was advocating for these looser restrictions that created the problem.
Paulson has already helped big investment houses Goldman Sachs and J.P. Morgan buy companies while we take their bad debt. The reason they bought the bankrupt Washington Mutual was because they figured the government, you and I, would take WaMu’s bad debt off their hands.
The Democrats want some guarantees: 1) equity in the companies they give money to–exactly what any other creditor would ask for, 2) limits on management compensation, 3) authority for bankruptcy judges to demand refinancing or restructuring of mortgages where homes are worth less then their mortgage, 4) new regulatory controls, 5) bipartisan oversight of the Treasury Secretary’s management of the bailout, 6) and some realistic price on what they take on.
While a deal will be made and probably include most of the Democratic proposals and something for the House Conservative Republicans to save face, the problem is systemic and this bailout won’t solve the problem. It will only offer a short temporary boost in the market before it resumes a downward spiral.
The amount of bad debt in the mortgage market and in all of the other overvalued “exotic financial instruments” is much more than $700 billion and the system will continue to hemorrhage as commercial loans start to fail, most of that held by smaller regional banks. Inflation will not be far behind.
Bush’s false prosperity will leave a wake of devastation for decades. He’s hoping one more quick bailout by daddy’s friends will postpone utter disaster until he has stepped out of office. The only good news is that writers and historians will have a field day.
see
Exclusive: Resolving the Wall Street Financial Crisis: Monetary Reform by Nikki Alexander
Dennis Kucinich on The Rachel Maddow Show
Fed Pumps Further $630 Billion Into Financial System + Stocks plunge
Stampeded by Fear, Scammed by Lies: Why the Bailout Failed by Walter Brasch
Exclusive: Wall Street wants us to panic… by The Other Katherine Harris
“They Just Don’t Get It” By Richard C. Cook
Personal Finance Meltdown Makeover: Take the Long View by Susan Boskey
Dandelion Salad 