The other day in the grocery store, I watched as the lady just ahead of me paid an incredibly high total for her goods with a credit card. Shortly thereafter, that brought to mind the largest scam in the history of the USA.
When the Fed Gov't bailed out the speculative banks (and AIG, et.al.) a few years ago, I suspect that the public in general missed the biggest part of that scam. But before I get into that portion of the story, let's consider the following. [If this weren't so tragic, it would be comical beyond belief.]
Here's what happened. The richest one-tenth of one percent of the people in this country, through speculative banking, did this:
1. created bizarre financial instruments such as credit default swaps which were supposed to guarantee or "insure" investments; [Technically, they weren't "insurance policies", so no money reserves were required to back them up.]
2. created mortgage-backed securities, lied about their quality, and sold them to investors on a grand scale...along with the bogus credit default swaps.
As we all know, the whole scam went bust when subprime mortgages defaulted in large numbers. But they were just the trigger of the crisis. The underlying causes were: the lying about the quality of the mortgage-backed securities; and the phony credit default swaps which were backed by zero reserves. Then the investment banks told the Fed Gov't that they were "too big to fail", and the Gov't sold that lie to the public. Next came the $787 billion bailout. Unfortunately, that was just a small part of the scam.
The main ripoff was the following. The Gov't made approximately $13 TRILLION in loans available to those banks...at far less than one percent interest. They were the same banks that were the richest in the country, fraudulently sold shabby products, gambled it all...lost...and then had the Gov't bail them out AND loan them huge amounts of money at almost zero percent interest.
Let's imagine this--- I interview Hank Paulson, Ben Bernanke, and several prominent economists, and they all agree... "Yes, obviously it was a scam. If those few banks had failed, the economy would not have collapsed. Things would have gotten bad, but with adjustments, the market would have corrected itself. Smaller banks would have filled in the gaps. We should have let them fail and made the $13 trillion in loans (at less than 1% interest) available to American housholds. They borrow money every single day with credit cards...at anywhere from 9% to 22% interest. Imagine what it would do for Main Street and the economy if every household had a $15,000 loan at less than 1% interest, instead of a credit card balance of thousands at, say, 12-15% interest."
Not only was the financial bailout and loan program a scam, but the money was not used as intended. Originally, the Gov't was going to buy up all the "toxic assets"; instead, the money was simply given to the banks to do with as they pleased. They made more bets. There are still approximately one quadrillion dollars worth of credit default swaps out there...guaranteeing nothing.
So, as I sit here sipping Wild Turkey and shooting through my window at a target outside, I wonder: why does the Gov't loan money to super-rich banks at almost zero percent interest instead of to households?...and, why do we commoners put up with mega banks at all? There are plenty of smaller, local banks that would love to have our business. I suggest we boycott the big boys. Immediately. Let them eat credit default swaps.
By the way, I heartily recommend the movie, Where the Buffalo Roam... and the documentary film, Buy the Ticket, Take the Ride. Gonzo galore.
Just my opinion.
Dr. Gonzo
Showing posts with label bailouts. Show all posts
Showing posts with label bailouts. Show all posts
Wednesday, December 25, 2013
Friday, October 30, 2009
More of the Same from DC
My sources for this piece are: the previously cited PBS Frontline documentaries The Warning, Breaking the Bank, and Inside the Meltdown; also, a syndicated article by David Sirota, TARP on Steroids.
When Brooksley Born, the woman who formerly headed the Commodity Futures Trading Commission (CFTC) under Clinton, proposed regulating the then obscure market of Over-the-Counter Derivatives, she essentially was shut down by Alan Greenspan, Arthur Levitt, Larry Summers, Tim Geithner, and others in a series of private meetings and Congressional Hearings. [See The Warning.] A decade or so later, the "toxic" OTC Derivatives played a major role in the recent financial meltdown. Ms. Born, who was ridiculed in the late '90s, was vindicated in 2008-2009. Alan Greenspan, the wizard who seemingly could do no economic wrong, finally had to admit that he was totally wrong in constantly pushing for zero regulation of the Wall Street bankers. Arthur Levitt, former head of the SEC, has admitted publicly that he was wrong about Brooksley Born...and has praised her profusely. He is no longer a power in DC.
What about Larry Summers and Tim Geithner, the financial/economic titans who castigated Born during the Clinton days while relentlessly pushing for zero constraints on the Wall Street Bandits during the Clinton and Bush years...what happened to them? As you may know, they have top economic/financial posts in the Obama Administration. Prior to that, along with Hank Paulson, they were the main architects of the now infamous bank bailouts---one of the greatest heists in modern history. Geithner is now the Treasury Secretary, and Summers is again a top economic advisor to the President of the United States. WOW! What punishment for being so wrong in the past. They are still in positions where they can funnel money to their former Wall Street cronies.
Funny I should mention that. Currently there's a legislative bill known as the Financial Stability Improvement Act. Basically, it's another TARP-in-the-making (Troubled Assets Relief Program), or as Representative Brad Sherman calls it, "TARP on steroids". The bill is being pushed hard by the Obama Administration, especially by Summers and Geithner. More bailouts for Fat-Cats are coming, while the average citizen continues to be gouged by banks because those banks are rushing to beat the regulations taking effect in February. Most people with credit cards (including me) have noticed that their interest rates have skyrocketed up for no good reason.
So it would appear that there is not much "change" from the Bush years regarding OTC Derivatives (still unregulated) and the bailing out of the big, elite bankers (who contribute about equally to Repub and Dem election campaigns). Why am I not surprised.
What does surprise me, though, is the amount of chicanery that we tolerate from national politicians. Here's a thought: in the next election, vote out ALL INCUMBENTS. If things don't improve after that, then in the following election, vote out ALL INCUMBENTS. Etc. How much do we have to take before we see the need for an entirely clean slate? Someone please tell me.
When Brooksley Born, the woman who formerly headed the Commodity Futures Trading Commission (CFTC) under Clinton, proposed regulating the then obscure market of Over-the-Counter Derivatives, she essentially was shut down by Alan Greenspan, Arthur Levitt, Larry Summers, Tim Geithner, and others in a series of private meetings and Congressional Hearings. [See The Warning.] A decade or so later, the "toxic" OTC Derivatives played a major role in the recent financial meltdown. Ms. Born, who was ridiculed in the late '90s, was vindicated in 2008-2009. Alan Greenspan, the wizard who seemingly could do no economic wrong, finally had to admit that he was totally wrong in constantly pushing for zero regulation of the Wall Street bankers. Arthur Levitt, former head of the SEC, has admitted publicly that he was wrong about Brooksley Born...and has praised her profusely. He is no longer a power in DC.
What about Larry Summers and Tim Geithner, the financial/economic titans who castigated Born during the Clinton days while relentlessly pushing for zero constraints on the Wall Street Bandits during the Clinton and Bush years...what happened to them? As you may know, they have top economic/financial posts in the Obama Administration. Prior to that, along with Hank Paulson, they were the main architects of the now infamous bank bailouts---one of the greatest heists in modern history. Geithner is now the Treasury Secretary, and Summers is again a top economic advisor to the President of the United States. WOW! What punishment for being so wrong in the past. They are still in positions where they can funnel money to their former Wall Street cronies.
Funny I should mention that. Currently there's a legislative bill known as the Financial Stability Improvement Act. Basically, it's another TARP-in-the-making (Troubled Assets Relief Program), or as Representative Brad Sherman calls it, "TARP on steroids". The bill is being pushed hard by the Obama Administration, especially by Summers and Geithner. More bailouts for Fat-Cats are coming, while the average citizen continues to be gouged by banks because those banks are rushing to beat the regulations taking effect in February. Most people with credit cards (including me) have noticed that their interest rates have skyrocketed up for no good reason.
So it would appear that there is not much "change" from the Bush years regarding OTC Derivatives (still unregulated) and the bailing out of the big, elite bankers (who contribute about equally to Repub and Dem election campaigns). Why am I not surprised.
What does surprise me, though, is the amount of chicanery that we tolerate from national politicians. Here's a thought: in the next election, vote out ALL INCUMBENTS. If things don't improve after that, then in the following election, vote out ALL INCUMBENTS. Etc. How much do we have to take before we see the need for an entirely clean slate? Someone please tell me.
Thursday, October 8, 2009
The Devastating National Debt
Our national debt is somewhere in the neighborhood of eleven trillion dollars. During the reign of George W. Bush, the debt almost tripled in size. According to a PBS Frontline piece (Ten Trillion and Counting), under Obama and the Democrats, the national debt will grow at a faster rate than it did under Bush. By the end of this year, it will be almost thirteen trillion dollars.
American voters keep electing politicians---both Democrats and Republicans--- who believe in institutionalized deficit spending. Dick Cheney's view (a direct quote) was: "Deficits don't matter." Medicare Part D (drug coverage), ramrodded through by the Bush Administration and criticized as being a gift to large drug companies, is an "entitlement" law that will cost sixty billion dollars this year alone. Remember the bank bailouts, and their architect, Bush's Treasury Secretary Henry Paulson? The price tag on those was close to a trillion dollars, if I recall correctly. [Paulson, by the way, was an elite Wall Street investment banker before he was Treasury Secretary.] Essentially, we now have the nine largest banks in this country nationalized by the Fed Government; that's how Frontline's piece, Inside the Meltdown, characterizes the situation. The largest insurance company in the world, AIG (American International Group), also was nationalized---the Feds own 80% of it. It is intimately connected to banking because AIG writes policies insuring that large investment banks in the U.S. and around the world will not go bankrupt.
Under Obama we have the so-called "Recovery Stimulus Plan". I believe the initial cost is about one trillion dollars. $787 billion already has been added to the national debt. According to the OMB, this year's annual budget deficit will be $1.7 trillion, the largest annual deficit in our history. All of this doesn't even consider the cost of any health care legislation.
By 2017, the total national debt (not the annual deficit) is projected to be $21 trillion. Shortly thereafter, it will reach $23 trillion, and then will be more than the economic output of the entire country. Our largest creditor, China, already has stated that it's concerned about the economic viability of the United States. Every day the Fed Government "sells" its debt---that's government-speak for borrowing money. What happens when no one any longer comes to the "sale"?
Government has over-promised relative to "benefits". Either taxes have to be substantially increased, or promised "benefits" have to be substantially reduced...or both.
American voters keep electing politicians---both Democrats and Republicans--- who believe in institutionalized deficit spending. Dick Cheney's view (a direct quote) was: "Deficits don't matter." Medicare Part D (drug coverage), ramrodded through by the Bush Administration and criticized as being a gift to large drug companies, is an "entitlement" law that will cost sixty billion dollars this year alone. Remember the bank bailouts, and their architect, Bush's Treasury Secretary Henry Paulson? The price tag on those was close to a trillion dollars, if I recall correctly. [Paulson, by the way, was an elite Wall Street investment banker before he was Treasury Secretary.] Essentially, we now have the nine largest banks in this country nationalized by the Fed Government; that's how Frontline's piece, Inside the Meltdown, characterizes the situation. The largest insurance company in the world, AIG (American International Group), also was nationalized---the Feds own 80% of it. It is intimately connected to banking because AIG writes policies insuring that large investment banks in the U.S. and around the world will not go bankrupt.
Under Obama we have the so-called "Recovery Stimulus Plan". I believe the initial cost is about one trillion dollars. $787 billion already has been added to the national debt. According to the OMB, this year's annual budget deficit will be $1.7 trillion, the largest annual deficit in our history. All of this doesn't even consider the cost of any health care legislation.
By 2017, the total national debt (not the annual deficit) is projected to be $21 trillion. Shortly thereafter, it will reach $23 trillion, and then will be more than the economic output of the entire country. Our largest creditor, China, already has stated that it's concerned about the economic viability of the United States. Every day the Fed Government "sells" its debt---that's government-speak for borrowing money. What happens when no one any longer comes to the "sale"?
Government has over-promised relative to "benefits". Either taxes have to be substantially increased, or promised "benefits" have to be substantially reduced...or both.
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