The Big Bank Job: It's A Giveaway, Not A Bailout

[Better Believe It]

September 25, 2008
The Big Bank Job
The Insanity of the $700 Billion Giveaway
by Michael Hudson

Michael Hudson is a former Wall Street economist specializing in the balance of payments and real estate at the Chase Manhattan Bank (now JPMorgan 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)


The banksters’ plan now is for icing on the cake – to take Mr. Paulson’s $700 billion and run. It’s not a “bailout of the financial system.” It’s as giveaway – to insiders, to sell out all their bad bets. Companies across the board will get rid of their bad mortgages, and also their bad car loans, furniture time payments, credit-card loans, student loans – all the debts that any competent actuary could have told them never could have been paid in the first place.

Here’s why the government giveaway logic is fallacious: It’s a giveaway, not a bailout. A bailout is designed to keep the boat afloat. But the existing Wall Street boat crafted by the investment bankers seeking to unload their junk must sink. The question as it sinks is simply who will be able to grab the lifeboats, and who drowns.

If Congress should be so destructive as to buy out $700 billion of bad loans (for starters), the sellers will do just what Russia’s kleptocrats did. They will take their money and move it abroad to a “hard” currency country. This will help collapse the dollar. Up will go gasoline costs and prices for other imports. America will be turned into a Russian-style post-Soviet economy, having endowed a new domestic kleptocracy of insiders, who use some of their gains to finance the campaigns of American Yeltsins such as McCain.

What it can do is provide a one-time transfer of wealth to insiders who already have been playing the debt-credit system and siphoning off its predatory financial proceeds to themselves. The Wall Street bankers, brokers and fund managers to whom I’ve been speaking for many decades all know this. That is why they pay themselves such large annual bonuses and large salaries each year. The idea is to take as much as you can. As the saying goes: “You only have to make a fortune once in a lifetime.” They have been salting away their fortunes year after year, mainly in hard assets: real estate (free of mortgages), fine furniture, boats and trophy art. One last $700 billion heist and they can make their getaway.

Please read the entire article at:

http://www.counterpunch.org/hudson09252008.html

[LisaM]

1. While I don't want the banks to fail and the economy to be wiped out

I also don't want to foot the bill for people who bought/sold houses for more than they were worth, then re-financed so they could put in one bathroom per person and a kitchen that cost tens of thousands of dollars. It pisses me off, frankly. And I blame the sellers as much as I do the buyers. Doesn't your conscience prick you if you sold your house for double its real worth, knowing that someone else might then struggle to pay for it?

[Carni]

3. credit default swaps

The bigger issue are *credit default swaps* and those are what brought down these investment banks.

Most normal people didn't even know such things existed, but warren Buffett was warning that they were financial WMD's back in the late 90's.

Contrary to what we are being largely told, this crisis wasn't just brought on by Joe blow buying more house than he could afford--it goes way beyond that.

[LisaM]

5. I know - I was being facetious to some degree

but still, lending so that people could live well beyond their means and indulge in luxuries they just don't need - while some of us DO live within our means, pay cash as we go, and know that we can't afford to buy houses in the markets where we live - well it sticks in my craw. What's going on in the housing market is a symptom - but a very representative one.

[Greyhound]

2. This myth of saving anything just drives me nucking futz.

Hudson has nailed it, and the sheeple will go right along with them as they are lead to the slaughterhouse.

:kick: & R

[chill_wind]

4. Once again, he calls it what it is. His is a daily clarion voice

in the wilderness. Seems no one is listening.


K & R