- 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.
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- 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 $300
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. That was on top of some
$700 billion already spent on bailouts.
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- 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.
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- Note that we're talking about perhaps half a trillion
dollars here--of our money again. And remember, much or even most of this
money will never get repaid, and we're talking about money that could have
funded reduced class sizes in every school in America, a national healthcare
system, a crash R&D program into non-carbon energy and (not or) a strengthened
Social Security and Medicare program.
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- 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 $600 billion
to $1 trillion, but most estimates.
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- 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.
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- 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.
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- 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.
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- 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.
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- Not that that will do any good.
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- 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.
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- 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."
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- Of course they do. That's what mergers always do. To
recoup the costs of the merger, management cuts back on service and employment.
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- 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."
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- 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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- DAVE LINDORFF is a Philadelphia-based journalist and
columnist. His latest book is "The Case for Impeachment" (St.
Martin's Press, 2006 and now available in paperback edition). His work
is available at www.thiscantbehappening.net
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- http://www.counterpunch.org/lindorff09192008.html
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