ECONOMY IN CRISIS? Treasury Sec. Paulson, Fed Chair Bernanke

[Mr_Jefferson_24]

Run time: 139:03 https://www.youtube.com/watch?v=TAvs0E46TH4   Posted on YouTube: July 16, 2008 By YouTube Member: Views on YouTube: 0   Posted on DU: September 25, 2008 By DU Member: Mr_Jefferson_24 Views on DU: 586

 
The midsummer song and dance we got from these snakes does not match their rhetoric now.

Do they even care? I doubt it.

[Mr_Jefferson_24]

1. Bailout extortion...

By Margie Burns
Online Journal Contributing Writer

http://onlinejournal.com/artman/publish/article_3795.shtml

---snip---

Treasury Secretary Paulson and Federal Reserve Director Bernanke issued only generalized warnings, if dire, in testifying at the Senate Banking Committee hearing Tuesday. One question left unanswered was a big one: ‘What exactly is the harm in not authorizing the smashing sum of $700 billion-plus to bail out some entities in the financial industry?’

(Another big question not answered: Which entities would get the money, or the most, and why?)

The only itemization listed consumer lending -- automobile loans, mortgages, and college education loans -- along with a few references to businesses lending money to each other.

Tabling that second category for now, the argument about consumer lending seems to be that businesses will no longer be found -- absent the $700 billion authorization -- willing to lend Americans money for automobile purchases, mortgages, or college tuition. No car loans; no mortgages; no education loans. . . .

[Mr_Jefferson_24]

2. How Wall Street Can Bail Itself Out Without Destroying The Dollar

by Thom Hartmann

http://www.commondreams.org/view/2008/09/26

---snip---

Historically, from the founding of our country until the last century, most people invested rather than speculated. When rules limiting speculation were cut during the first big Republican deregulation binge during the administrations of Warren Harding, Calvin Coolidge, and Herbert Hoover (1921-1933), it created a speculative fever that led directly to the housing bubble of the early 20s (which started in Florida, where property values were going up as much as 70 percent per year, and then spread nationwide, only to burst nationally starting in 1927 as housing values began to collapse), then the falling housing market popped the stock market bubble and produced the great stock market crash of 1929. That speculation aggregated enormous wealth in a very few hands, crashed the housing and stock markets, and produced the Republican Great Depression of 1930-1942.

Franklin D. Roosevelt, as part of the New Deal, put into place a series of rules to discourage speculation and promote investment, including maintaining - and doubling - the Securities Transaction Excise Tax. Other countries followed our lead, and the UK, France, Japan, Germany, Italy, Greece, Australia, France, China, Chile, Malaysia, India, Austria, and Belgium have all had or have STETs.

Perhaps the most important benefit of immediately re-instituting a STET in the USA, however, isn't that it would raise enough money to bail out the banks and billionaires (and after that crisis is covered, could pay for a national health care system), or that it would encourage investment and calm down markets. Those are all strong benefits, and absent the current Republican Administration bailout proposal would stand-alone strongly.

But the Republican Bush Administration is currently suggesting that we borrow $700 billion (or more) from China and Saudi Arabia and other countries and investors, add that to our national debt, and repay it with interest (making the actual cost over the next 20 years over $1.4 trillion). This is what Republican Herbert Hoover tried in 1931 when he first created the Reconstruction Finance Corporation (later totally reinvented by FDR) to bail out the banks in 1931. Hoover's RFC bailed out the bankers, paid off huge salaries in the banking and investment world, bought him a few months (maybe that's the real goal of the Bush/McCain Republicans now - just hold things together until after the elections), but ultimately led to the failure within two years of virtually all the banks in the United States. The bailout failed. . . .

[Mr_Jefferson_24]

3. Bailing Out Wall Street Won't Save Main Street

By MOSHE ADLER

http://counterpunch.com/adler09262008.html

---snip---

Wall Street must be saved for the sake of Main Street, Secretary Paulson and Chairman Bernanke tell us. First, everyone has toxic financial instruments in their 401k's; and second, these instruments are clogging the credit system. But in fact neither claim is true.

The first claim is not true simply because the majority of Americans don't have any retirement accounts at all. And the claim that the credit system is clogged is not true because there is no object that can be removed in order to clear it. What is true is that the securities that Wall Street invented are toxic. But this is precisely why they should remain where they belong, in the vaults of those who created and pushed them. Otherwise they will poison the rest of us, the poorest among us the most. The government can and should stave off the increase in unemployment, but the only way the government can accomplish this is by hiring workers itself. A bailout will make matters worse.

If it were indeed true that all Americans owned these new financial instruments, then the decline, or even the total collapse, of their value, would actually not have made a difference to anybody. When the value of everybody's assets falls by the same proportion, nobody gains and nobody loses, because monetary wealth is only relative. Thus, if Wall Street and Main Street were really the same, there would have been no economic crisis to begin with. But the fact is, only 53% of full-time full-year workers participate in a retirement plan, and for Americans who are only part-timers or temporary workers the proportion is even lower. The majority of Americans will therefore not benefit from the bailout at all. But will they be hurt by it? Badly.

If Wall Street fortunes were to evaporate, the result would be a major realignment of wealth in the country. The rich would become poorer, and as a result the poor would become richer. The very first thing a bailout will do is prevent this realignment from taking place. The rich will continue to have their jets and their palaces and the poor will continue to struggle to go to the doctor and to find housing. Heads, the rich win. Tails? Let's toss again. . . .

[Mr_Jefferson_24]

4. The Great Crash of 2008

by James Buchan

http://www.commondreams.org/view/2008/09/27-4

---snip---

In all the commentary on the crisis, certain facts have been thought too elementary for consideration, so I shall consider them. The first is this: the business of banking is not profitable (as you have been told) but miserably unprofitable. It is this unprofitability rather than the idiocy or wickedness of bankers that makes the enterprise so unstable. The arrogance of bankers, their extravagant rewards and public philanthropy, are the abstract counterparts of the massive architraves and pediments of the old bank architecture, such as the Barclays Bank headquarters in Norwich. How could they not be safe as houses?

The fundamental business of taking in money and putting it out again earns a wafer-thin interest margin and will only keep bankers in luxury if it is conducted on a colossal scale. Even the most prudent banks borrow ten times their own capital, while investment banks (who do not take deposits from the public) borrow very much more: Lehman Brothers 30 times, and even the respectable Goldman Sachs 22 times. At that extent of what is known in the US as leverage, a small fall in values wipes out the bank's capital, leaving its lenders exposed to loss, and their lenders likewise in a daisy chain of failure. Commercial banks are not well-managed institutions and investment banks (with the exception, it is said, of Goldman Sachs) are not managed, in the industrial sense, at all. An unsupervised trader can wipe out a bank's entire capital, as in 1995 at Baring Brothers, or so terrify management that they reverse his trades at fire-sale prices, as at Société Générale last February.

Even at that level of leverage, profitability is still too low and banks have sought ways to ex pand their lending through various legal and quasi-legal means. (J K Galbraith used to say that as the speculative waters subside, all manner of crimes are revealed to an astonished public view.)

In a regulatory filing, AIG made no secret that some of its credit insurance instruments were designed to help banks evade restrictions on their lending. Another tactic was to combine packets of loans into interest-bearing securities and sell them on to other investors. This allowed banks to replenish their funds and originate more loans, but at the risk of spreading the default far and wide - which is why bad debts in run-down cities in the Midwest affected investors in London, Frankfurt and Tokyo. . . .

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The commentary of Common Dreams readers --

from Humbaba:

This plunder of the American Treasury is the last chance the Republicans have to deny education, healthcare and retirement to the American people for the rest of the New American Century. Our fear based Religious Reich is so cowered into blind obediance that they have joined right in with this sacrifice of everyman's child. There is no angel to stay the hand of the butchers this time. It will be brother against brother for the survival of humanity.

from Toast:

"...maybe much more..."

There is no maybe in this equation. Any other scenario you might project would be based upon wish fulfillment. This forced corporatist dividend payout is one of the most corrupt demands CheneyOilCo and buds have made to date.

... and it won't be their last.

Well over 4000 Americans have perished in Iraq. That will be but a drop in the bucket compared to the toll on ordinary Americans if Congress fuels this latest class war salvo.

The numbers who could not pay for heating last winter alone were staggering. This ransom on the US Treasury does nothing to relieve the mounting needs of countless millions more who are now in dire need of help. We continue to redefine homelessness in America.

It is criminal... and a dark stain on American history. To fuel and insure the object of their greed, corporatism has killed compassion and "life, liberty and the pursuit of happiness" are but mere footnotes in our failed democracy.

NO!!!

from Bryan D:

this bailout is the most absurd piece of trash that has arisen since the 9/11 tv show - both sad episodes starring george the coward bush, who, though lacking in substance, has encouraged us in both instances to cower in fear, to tremble worse than a virginal bride on her wedding night

bush is a lame duck and his admonitions were completely ignored - the shock doctrine has enabled us to recover more quickly - but, i ask you, when has he seemed more disgusting or more useless than he was when he took all of 12 minutes to lay out his non-case for the bailout with a litany of horrors that will soon befall us

maybe the spectacle of him siting in the classroom on 9/11 with his textbook upside down

clearly the public has decided that the bailout is not warranted - but that doesn't deter the politicians from going ahead anyway

why, its almost as if our opinions don't matter

like most people i say let wall street drown or die - whichever comes first

this may be awkward for many of us but i think it is preferable to staying the course - which benefits fewer and fewer

after that we can stand down the military, close the overseas bases, turn off funding for space weapons, defund new generation nukes

then, while on that euphoric role, we can rewrite the tax code so that these viscous corporations and wealthy elites actually pay their fair share of taxes

then and only then do we have a shot at a new day

[Mr_Jefferson_24]

5. The Money Party: Bailout blackmail -- just say no!

By Michael Collins -- known around here as Autorank
“Scoop” Independent News

http://onlinejournal.com/artman/publish/article_3796.shtml

---snip---

How do you argue with a premise like that -- vote yes and you get a chance to live. Vote no and you’ll be soon living in a cold house or damp shelter, if you’re lucky enough to be off the street.

This is the same type of argument that was used to pass the USAPATRIOT Act after 9/11. It had to be passed right away. The vulnerability to attack was blamed on the Constitution. We were asked to forget the president’s disregard for the many warnings of just such an attack. The people paid for that egregious error through the loss of constitutional rights.

Now we’re told that to avoid economic ruin and all that portends, we must give up common sense, evaluation, and deliberation and allow more debt to be piled on our backs.

The largest financial institutions have made very bad decisions. They bought into schemes that were senseless. Subprime loans sold as premium securities and the looming credit derivatives melt down -- 50 times larger than the subprime problem -- are obvious losers just on the face of it. . . .