The Worsening Debt Crisis:

[Crewleader]

An Interview with Economist Michael Hudson September 8, 2008

The Worsening Debt Crisis:
Who Got Us into This Mess and What are the Real Political Options?

By MIKE WHITNEY

Michael Hudson is a former Wall Street economist specializing in the balance of payments and real estate at the Chase Manhattan Bank (now JP Morgan Chase & Co.), Arthur Anderson, and later at the Hudson Institute (no relation). In 1990 he helped established the world’s first sovereign debt fund for Scudder Stevens & Clark. Dr. Hudson was Dennis Kucinich’s Chief Economic Advisor in the recent Democratic primary presidential campaign, and has advised the U.S., Canadian, Mexican and Latvian governments, as well as the United Nations Institute for Training and Research (UNITAR). A Distinguished Research Professor at University of Missouri, Kansas City (UMKC), he is the author of many books, including Super Imperialism: The Economic Strategy of American Empire (new ed., Pluto Press, 2002.

Mike Whitney: On Friday afternoon the government announced plans to place the two mortgage giants, Fannie Mae and Freddie Mac, under “conservatorship.” Shareholders will be virtually wiped out (their stock already had plunged by over 90 per cent) but the US Treasury will step in to protect the companies’ debt. To some extent it also will protect their preferred shares, which Morgan-Chase have marked down only by half.

This seems to be the most sweeping government intervention into the financial markets in American history. If these two companies are nationalized, it will add $5.3 trillion dollars to the nation's balance sheet. So my first question is, why is the Treasury bailing out bondholders and other investors in their mortgage IOUs? What is the public interest in all this?

http://www.counterpunch.org/whitney09082008.html

[yourout]

1. The seeds for this mess were planted by Ronnie Raygun and....

the deregulation nonsense.

[Vincardog]

2. The story is not either Fannie or Freddie, the story is the Derivatives the worlds banks have been

pretending are worth something. 12 Trillion or so $$$ at stake. Al Monopoly money.

[mike_c]

3. WOW! That is a must read article! Recommended x 1000....

That is just stunning.

[BeHereNow]

5. Agreed! I just finished reading it. Priceless.

It should be required reading for every American.
Unfortunately, most of them would not be able
to concentrate that long and would probably wander
off to read about Brad Pitt's favorite Starbucks drink instead.

BHN

[bhikkhu]

4. Surreal...nationalizing the two FM's?

It's like an economic d-day that barely makes the news.

I would think that the government's assumption of losses here, by distributed the pain of years of worthless investments and speculation, only guarantees that the bets gone bad will impact everyone rather than just the gamblers. In other words, the $ is royally screwed, if it were not already.

[cyberpj]

6. "...characterize Greenspan's part in the crisis? Hudson: He was its cheerleader"

AMEN BROTHER.
And so many people knew it for a long long time.

[cyberpj]

7. For Dem party to solve this it will take thowing off "DLC stranglehold" on the party:

"Hudson: If the incoming Democratic administration proves to be more of the same, pressure will indeed arise to create a new party. More often economic reform has come from the top, but I don’t see it from the Republicans, given their corruption. Within the Democratic Party the question is whether the Wall Street Democratic Leadership Committee (who gave us Gore and Lieberman after the Clintons) will continue to impose its stranglehold."

AMEN AGAIN!

This is a realy great article - thank you for sharing it.