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Articles
By
Dave & Ariel Lindorff
Accredited
-
Associated |
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Hang
On to Your Wallet! The Government is
About to Rescue Us |
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Posted By Dave Lindorff September 18, 2008
When the financial markets started coming
undone earlier this week, the Treasury
Secretary and the Federal Reserve stepped in,
and with $85 billion of our money (actually
our children's money, since they borrowed it
from China and Saudi Arabia), bought
foundering AIG, the world's largest insurance
company, and assumed its colossal pile of crap
debt.
That didn't help, and the stock market crashed
further, falling to levels not seen in three
years. Banks, meanwhile, stopped lending,
figuring to just hold onto their money and try
to weather the crash. The US Treasury and the
Fed stepped in again, this time pumping nearly
$200 billion more of our money into foreign
money markets, and getting European and other
governments to do the same in an effort to get
the credit markets open again and to stop the
stock market swoon.
It didn't work. Thursday, the markets
continued to fall, well into the afternoon,
and it looked like another seriously down day.
But then Treasury Secretary Henry Paulson came
up with a new idea. He said he and the Bush
administration were considering setting up a
new agency to assume all the bad debt of the
banking sector--meaning all those bad loans
they made, and that they lured unsuspecting
consumers into taking out, by way of deceptive
marketing techniques and outright fraud.
Note that we're talking about perhaps half a
trillion dollars here--of our money again.
The drones in the Democratic Party leadership
in Congress immediately jumped on the
bandwagon, with House Speaker Nancy Pelosi
(D-CA) urging her charges to act quickly to
get some kind of a bill out there to
facilitate the bail-out, which could cost
anywhere from $60 billion to $1 trillion, but
most estimates.
The thing to remember here is that this is not
a rescue of the little guy (though the
Democrats say their rescue plan, when it
appears, will include some kind of relief for
people unable to pay their mortgages). Don't
hold your breath. Odds are those people facing
foreclosure will still be unable to pay their
mortgages, and besides, there's no way there
will be relief for the majority of homeowners
who aren't missing their mortgage payments,
but who are struggling mightily to meet them
each month.
Primarily, who gets helped by this enforced
taxpayer largesse are the fat cats who own all
the stock in these financial institutions, all
the executives who pay themselves outsize
salaries each year for their lousy management
records, all these hotshot traders who make
the deals that later turn sour, long after
they've run off to another job taking their
bonuses with them.
We ordinary people, who live from check to
check, will feel the pain of this "rescue" in
the form of higher taxes in coming years, and
in a devalued dollar--because you can bet that
all that money they're printing, and all that
added debt they're piling on to the mountain
of debt already out there is going to make the
rest of the world pretty queasy about holding
onto dollar-denominated debt, or about buying
any more of it.
When you hear a banker say he's going to help
you, it pays to hang onto your wallet. When
you hear a politician say he's going to help
you, hang onto your wallet. If they're both
saying the same thing, and especially if one
of them is the head of the Federal Reserve
Bank, then you better really hang on tight.
Not that that will do any good.
The real answer to this crisis is, firstly, a
massive dose of trust-busting, so that no bank
or investment bank or insurance company is so
big that its failure becomes a threat to the
financial system, and thus the government has
to rescue it with taxpayer money, and
secondly, a return to the era of Glass-Steagall,
when it was illegal for banks to also be in
the investment banking busiiness.
All the talk of "efficiencies" and of "better
service to the customer" that has been
endlessly parroted to justify mergers like
Citicorp and Travelers, or JP Morgan and Chase
Bank, or now Bank of America and Merrill Lynch
is fraudulent. Just to give an example, my
bank, once known as Willow Grove Bank, a small
family-owned institution, was bought by
another bank and became Willow Financial.
Almost immediately the staffing levels went
down. Recently, the combined entity, which ran
into trouble, was bought by another
institution, Harleyville Bank. Now there are
half as many tellers most of the time. As one
teller confided, "Every time we get bought,
they lay people off."
Of course they do. That's what mergers always
do. To recoup the costs of the merger,
management cuts back on service and
employment.
The truth is, for all the talk about the
efficiencies of bigness, getting a mortgage
today isn't any cheaper than it was in the
1950s, when there wasn't even any such thing
as a national bank that would be "too big to
fail."
The real reason we have mega financial
institutions is that mega financial
institutions pay mega bucks to managers and
make mega donations to the campaign coffers of
politicians. They also get to put some of
those mega-buck managers into key advisory
positions in each administration, Republican
and Democrat, to ensure that government
polices allow them to get even bigger and even
richer--and to ensure that when they screw it
up, they get rescued at the taxpayers'
expense. |
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