Wow. Where to start. While over the summer we had economic problems plaguing the country, now we have disaster, or so we are told. By the White House, the Federal Reserve Bank, the Congress, the Network News, all very reputable sources who would never create a fake crisis in order to force a bill down our throats as quick as possible, while not allowing our elected representatives to read it, very similar to the patriot act after 9-11. Well that was my sarcasm, because actually they have and they are trying again.
700 billion dollar bailout. We need it now or face a complete meltdown. No oversight by congress, judicial system, or any future president ever. This is the Mantra you have heard if you have been watching corporate news. Run by and for the interests of powerful men in this country. Read the Internet and you get a different picture. You get to read opinions of economists, and many who saw this mess coming 5 years ago. And some who saw these trends coming as far back as carter, and some who see this mess through lens of globalization.
So lets go through this mantra one by one. 700 billion dollars is needed. Why? They admit they have not used any formula and have merely picked a large random number. They( treasury Secretary paulson and fed chairman Bernake) admit they wont have time to spend all that money anyway before the next president arives.
Who gets the 700 billion? Well Paulson and Bernake would like to hand it over to wall street banks who are in the mess. There argument is that because of all this bad debt( in the form of mortgages not being paid and investment in mortgages that were packaged as stocks that have declines sharply) on the books of these banks, that they are refusing to lend out any new money thus freezing the economy. So the 700 billion would by the bad debt, taking it off the banks books while giving them cash to begin lending and get the economy flowing again. That is the corporate media side of the story and we all know there are 3000 sides to every story.
Another side of this story is the homeowner. If they are given the money, in theory, it will solve the economic slowdown as well. They pay their mortgage, banks get paid off, banks begin to get of rid of the bad debt, stocks prices go up also as mortgages are paid and the bad investments look better, and the debacle is reversed.
Why has the corporate media reported so favorably for one story, lets give the money to the banks, while painting the homeowner as the wicked witch from the west who should have known better and should not have taken on a mortgage he could not afford. One solution i describes helps everyone, the latter. While the former solution saves the banks, actually rewarding some like JP Morgan Chase who was able to by Bear Sterns and Washington Mutual at bargain basement prices, and Bank of America who bought Meryl Lynch. But in the former solution the homeowner is left in the dust, as is the average investor who was tricked into buying bad stock.
How were they tricked? Well the mortgages of bad credit people were lumped together with mortgages of good credit people and made into a stock, this stock was falsely and illegally given a triple a rating by the two rating agencies who were paid mighty sums by the investment houses.
So for our fraud tally we have bankers 1, homeowner/stock owner 0
So why were these mortgages packaged as stocks anyway? Well as a Bank or a Mortgage firm you are limited with how many mortgages you can have on your books based on a few factors. One factor for a savings and loan bank like Bank of America is how much money in deposits they have on hand. So by bundling up mortgages as stocks and selling them banks and mortgage firms were able to remove the mortgages from their books, thus freeing up room for more mortgages, and more fees.
Fraud tally bankers 2, homeowner/stock owner 0
In an update on the fraud front, today (November 3rd 2008) it was released that operations at Wamu approved every single loan that came through the company. When underwriters refused to approve loans that looked fraudulent workers were reprimanded and put on probation. A few months ago Wamu closed up shop, as the biggest US bank to ever fall. It was later sold to JP Morgan for 1.9 billion dollars. The race to approve mortgages was promoted by executives by offering free vacations to whoever sold the most mortgages each month. One employee won a free month in Jamaica for approving 3.5 million in mortgage loans in one month.
In one particular case, one underwriter remembers denying a very fraudulent loan, getting reprimanded, and her boss approving the loan only for it to go into default 4 months later. Not one months payment was paid.
Fraud tally, Bankers 3, homeowners 0
What about all those people who qualified for prime mortgages, based on their good credit but were sold sub prime so the mortgage lendor could clean up in fees? I read one case in particular of a returning Iraq Vet who qualified of for the best rates yet he was fooled into signing up for the subprime, no interest, no money down loan, and boom he lost his house. How is an average person supposed to know what he qualifies for? Are we not supposed to trust the numbers that mortgage houses crunch?
Fraud tally, bankers 4, homeowner 0
The next part of the mantra we are hearing is this needs to be solved now, using our 700 billion dollar plan, or else you haven't seen nothing yet( in terms of crisis). Really? To me it seems like they are rushing into this, like they want this rushed through, with out review or oversight. Why else do it so close to a congressional recess? But Ian they didn't DO anything, the economy is its own beast and it just crashed. I am not buying that either, the bankers of this country have long history of creating crashes to benefit themselves.
A great great great documentary on this is called money master and can be seen on Google video for free. and One example they give is the farming industry around the 1800's, i forget the year. But the plan was to loan and loan and loan to farmer, (side note is that 95% of farming in this country used to be family owned farms), and than one day all these loans were called in and when most couldn't pay, which was expected, the banks took over huge areas of land. This was done for a few reasons. One was to end family farms and create the rise of corporate farming run by a few companies. And we have we seen from this current economic crisis merging of huge banks, becoming more and more concentrated.
Another result of the farming crisis of the 1800's was now that we have taking away a large portion of the nations jobs, farming. Most Americans have no jobs, and so they were ushered into factories and mines to work for someone else. This is one of the most fascinating times in America for me to study because i see it as the turning point of when Americans stopped sustaining themselves by working for themselves (farming) and were moved like cattle into factories to work for someone else, to rely on someone else for food, money, for life. This is when Americans lost a huge amount of power they had. Now they could be abused, being told "do this if you want to feed your family, do this if you want to pay your mortgage". I read something once that talked about the pride of an American before this farming crisis, and an American would not be caught dead working in a factory, why anyone would sweat all day with their labor for someone else to make a profit was looked upon as crazy, and i agree. But one day this all changed, and i would like to know why and how, and how we get back to that mindset.
So how is 700 billion dollars going to help? If an individual was in trouble with debt from one credit card would opening a new card to pay off the old one solve anything? No, So why try this on a Macro level? Why is only one plan being talked about on the news, and whats the rush? Where is a new deal type plan? Why are we throwing money at the wall street men who got us into this mess? Why is there no talk of jail time? Why was the bush justice department attacking state attorney generals who tried to arrest corrupt bankers? Why are small banks throughout America saying that they are benefiting from this wall street mess? And why wont the corporate media tell us this fact and other facts to paint the whole picture? Do people believe the Bush administration when they tell us this is a buy in and not a bailout, and one day we can sell this debt we are buying with the 700 billion dollars for a profit? Sound like a story I once heard about about a war in the middle east paying for itself and not costing us a billion dollars a month, in a country that rhymes with istack.
One part of the bailout bill that is hardly being discussed says that the 700 billion dollars can be invested in anything on wallstreet not simply banks that are in trouble. This is kind of odd, i thought the point of this is to save banks and mortgage firms that are in trouble? The treasury secratary also has the power to invest in foreign banks. This is the best line of them all. The US economy is in trouble and to save it we will use US taxpayer money to invest in foreign banks, hmmm? To take this further one economist on cnbc claimed that Paulson and the President would veto any bill that did not allow the 700 billion to be spent on foreign banks. This does not make sense to me, the only explanaition i heard is that foreign governments must be making large threats against the US Government to force this administration to act this way.
A solution proposed by Thom Hartmann, and others im sure, is to reinstate a tax on wall street for every trade. The argument goes that Wall Street's main purpose was to raise capitol and give investors a way to make money over a long period of time. But recently speculators have changed the way wall street operates by buying large amounts of stock to raise the price than to dump it all in a few days time. This is called speculative traiding and many blame this for the housing bubble now and before the 1929 collapse.
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 theadministrations of Warren Harding, Calvin Coolidge, and Herbert Hoover(1921-1933), it created a speculative fever that led directly to the housingbubble of the early 20s (which started in Florida, where property values weregoing up as much as 70 percent per year, and then spread nationwide, only toburst nationally starting in 1927 as housing values began to collapse), thenthe falling housing market popped the stock market bubble and produced thegreat stock market crash of 1929. That speculation aggregated enormouswealth in a very few hands, crashed the housing and stock markets, and producedthe Republican Great Depression of 1930-1942. Franklin D. Roosevelt, as part of the New Deal, put into place a series ofrules to discourage speculation and promote investment, including maintaining –and doubling – the Securities Transaction Excise Tax. Other countriesfollowed our lead, and the UK, France, Japan, Germany, Italy, Greece,Australia, France, China, Chile, Malaysia, India, Austria, and Belgium have allhad or have STETs.
This tax is not a completely new idea we used it in the United States from 1914 to 1966, and to fund the civil war and the spanish american war. Other countries right now are using this policy. If we were to instate a .25 percent STET (tax) on everystock, swap, derivative, or other trade today, it would produce – in its firstyear – around $150 billion in revenue.
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 (makingthe actual cost over the next 20 years over $1.4 trillion). This is whatRepublican Herbert Hoover tried in 1931 when he first created the Reconstruction Finance Corporation (later totally reinvented by FDR) to bail out the banks in1931. 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 realgoal of the Bush/McCain Republicans now – just hold things together until afterthe elections), but ultimately led to the failure within two years of virtually all the banks in the United States.
How do they use the same play from the same play book year after year? How do we fall for it year after year? How do they pass bailouts against the will of America year after year? How do these elected officials who fuck America year after year, continue to be reelected year after year? And does half of America not care, year after year.
If we don't change this here is my prediction, one day we will have One of everything, One bank, One credit card, One store to buy everything, One Media company, One news paper, One health care plan, One retirement plan, One stock to invest in, One utility to buy electricity and oil from, One place to get a mortgage from. A world without choices a world without competition means the shit with stay at the top by force.