Posts Tagged ‘Bailout’

The news for Bank of America and Citibank  today is grim. Their stock values are tanking, investors have lost confidence, and many fear nationalization.  I guess they think that nationalization would cause them to lose all of the value of their investments in these banks. Wait a minute. In the last five years Bank of America stock has dropped about 92% and Citi has dropped about 96%. How much more is there left to lose? These two banks, and others too, are on life support.  They are being fed on an I-V of our tax dollars, otherwise known as the Great Bank Bailout.  It’s time to take a step back and review the patients’ prognosis.

They are suffering from massive infections.  Their circulatory systems are infected with toxins for which we have no cure.  It’s like bank-eating bacteria.  These patients are going to die without more truly massive transfusions, but no one wants to donate any more blood. And why should they? What have the banks done for us lately? Aren’t they largely responsible for this massive infection that has crept around the world, destroying the economies of country after country?  Can massive blood infusions even save the patients? They not only need new blood, they also need some sort of antibiotic to kill the infection and to prevent future infections. But the banks say they’ll take the blood, but their religion prevents them from taking antibiotics.  No medicine for them; just blood please.

It’s time for the doctor to tell these poor infected banks the truth.  They’re going to die.

OK. So now what do we surviving relatives do? Should we immediately take over the banks, i.e. nationalize them, before they die? And if we do that, what to we do about the infected, toxic tissues in their vaults?  And what about hidden toxins we may not even know about yet? Does it make sense to pour new blood into these son-to-be dead banks and then get the infection ourselves? No, it doesn’t. It’s like there’s plague on Wall Street.  We can’t help them anymore.  Let them and their investors go and meet their maker.

Meanwhile, while the banks take their last, gasping breaths, we (meaning the government – remember government of the people, by the people, and for the people?  That’s us.) start our own National Banks. We start fresh with new blood, that is to say: money.  Sure, it’s our tax dollars, same as in the bailout thing.  But this time we are not buying toxic waste or flushing money down the toilet. We are creating our own banks with no toxic assets, nothing hiding in the closet, nothing lurking in the dark corners. Just a brand new, government-operated set of banks that will meet all of our banking requirements in a completely honest way while the sick banks dissolve into pools of coagulated ooze.  Thankfully, unless we are investors in those pathetic banks ourselves, its not our problem.

Now here’s the real beauty of my plan: the Republican Party has to wholeheartedly endorse it because it is founded on two of their fundamental guiding principles: 1) You Are On Your Own 2) We are not paying to get you out of a mess you got yourself into.

Imagine that. I kind of always thought of myself as a Democrat, but now that I look at it this way, maybe I have some Republican values too.  Maybe I’m actually more like President Obama: I think I have found a truly bipartisan solution to the banking crisis.  President Obama, are you listening? I think the Republicans will go along with us on this one. No, really. How could they say no?

Add to FacebookAdd to DiggAdd to Del.icio.usAdd to StumbleuponAdd to RedditAdd to BlinklistAdd to Ma.gnoliaAdd to TechnoratiAdd to FurlAdd to Newsvine

Read Full Post »

In 1933, Fred Zwicky, an astrophysicist at Cal Tech noticed an anomaly in his star data.  The measured motion of certain galaxies did not agree with what theory predicted.  He decided that there must be some unseen matter that affects the motion of these galaxies.  His work was noted and soon forgotten. It was not until forty years later that Vera Rubin,  a young astronomer at the Carnegie Institution of Washington noticed the same effect in the motion of stars within spiral galaxies, including our own Milky Way. Her measurements indicated that there had to be much more matter in these galaxies than we had thought – we just couldn’t see it.  Today, the existence of this undetectable matter, improbable as it seems, is accepted as a fact by the scientific community. It even has a name: Dark Matter.

I mention this because it illustrates an important point.  We all have our own view of the world and how things work.  However, sometimes we encounter events that don’t fit into our explanation of the world.  We are confronted with a set of data that, no matter how we look at it, turn it sideways or upside down, we just can’t make it fit into our neat little picture of the way things are.  It is at times like these that we have to consider whether our concept of the world is wrong in some way, and, if so, what is a truer picture of the world?  Just as Zwicky and Rubin found that they could not overlook some data that didn’t make sense, we are now confronted with an analogous situation in our society. Something doesn’t make sense about our country and its economy. Something just doesn’t seem to add up about the way our banks operate and how our government interacts with these wealthy institutions.  It make me wonder if there is perhaps some dark matter here too.

We are perhaps, all of us, already too familiar with the collapse of our economy.  Remember how the government helped rescue Bear Stearns but let Lehman Brothers fail? Remember how Secretary Paulson suddenly said the sky was falling and he had to give hundreds of billions to Goldman Sachs and the other big banks – but he wanted a piece of paper signed by someone in authority that said he could never be prosecuted for any part of his role in bailing out the banks?  Didn’t that seem a little strange, like maybe his orbit was a little eccentric?  Remember how a bill was rushed through Congress and John McCain called off his campaign (temporarily) so he could go back to D.C. and do nothing? Wasn’t that a little odd? Did that fit in with our idea of how things work in our government?  Remember how the banks took the handout of $300 billion or so from Congress and then refused to say how they spent it – all the while giving out multi-million dollar bonuses to their employees, even while the banks, like Merrill Lynch were disintegrating? Does that make sense?  Remember how the GM, Ford, and Chrysler execs flew to D.C. in their corporate jets and told Congress they were broke?  And then Citibank goes out and buys a $50 million corporate jet after they received $45 billion in bailout money.  Somehow this just doesn’t add up, does it?  There has to be some dark matter here, I think.

This all started to make sense when I saw Bill Moyers show on PBS a few days ago. His guest was Simon Johnson, a professor of economics at MIT’s Sloan School of Management. Simon contends that we don’t have a democracy in this country; instead we have an oligarchy – rule by an elite group of very powerful people.  Oligarchies were a problem in ancient Greece; so were plutocracies, i.e. rule by the wealthy. The problem with an oligarchy is that they often try to be invisible; indeed, that is partly how they maintain their control. They work behind the scenes in such a way we never see them moving, we only see the tracks they left behind.

Here is one of those tracks: when Secretary Geithner was testifying before the Senate Finance Committee last week, and he was asked by Senator Sanders the following question, “In 2006 and 2007, Lloyd Blankfein, the CEO of Goldman Sachs was the highest paid executive on Wall Street, making over $125 million in total compensation. Due to its risky investments, Goldman Sachs now has over $168 billion in total outstanding debt. It’s laid off over 10 percent of its workforce.  Late last year, the financial situation at Goldman was so dire that the taxpayers of this country provided Goldman Sachs with a $10 billion bailout. Very simple question that I think the American people want to know.  Yes or no, should Mr. Blankfein be fired from his job and new leadership be brought in?

Mr. Geithner replied, “Senator, that’s a judgment his board of directors have to make….”

What???? The CEO of Goldman Sachs drives the company so solidly into the ground that the government has to provide emergency funding or Goldman Sachs will vaporize, and Secretary Geithner can’t figure out whether the CEO should be replaced????

There’s dark matter here all right, and lots of it.  Its getting hard to know where Goldman Sachs and the other big banks on Wall Street end and our government begins.  I’m not so sure there is an end or a beginning.  Maybe its just one big, smooth, money-law continuum where the laws are not absolute, money can be created from laws and laws from money, and everything is, in general, relative.

The problem is that we’ll never know until someone shines some light on the dark matter – but who is going to do that?

Add to FacebookAdd to DiggAdd to Del.icio.usAdd to StumbleuponAdd to RedditAdd to BlinklistAdd to Ma.gnoliaAdd to TechnoratiAdd to FurlAdd to Newsvine

Read Full Post »

It’s like being on the Titanic and seeing that the lifeboats are already all full.  The ocean is littered with icebergs and the water is freezing. The stern of the ship is rising out of the water and you are left alone to fend for yourself, there is nothing the crew can do for you, the Captain is standing at the sinking ship’s wheel, knowing that the end is near.

America’s older people, the retirees and the near-retirees, the baby-boomers who had stashed away everything they could into their 401k funds for as long as they can remember, can only look at their account statements and weep.  Their money is gone, at least most of it.  Their jobs are gone because they retired or were simply laid off.  They hadn’t planned on this.  Who had? They can’t go back to work because most employers, despite all the equal opportunity laws in the world, prefer younger, lower paid, more energetic, workers.  They can’t get by on only Social Security. And they are ignored by the government’s Stimulus Plan. The job creation, tax cut, road building, green energy, education supporting, bill has nothing for them.  It’s as if Yeats had instead written, “Cast a cold eye on retirees,  Lawmakers pass by.”

We are a country incapable of anticipation. We only take action after a disaster has occurred. We couldn’t see the housing bust coming.  We couldn’t see the meltdown of our economy coming.  Now we can’t see an absolute disaster coming for the millions and millions of retired and near retired Americans who suddenly realize that their ship is sinking. Their only retirement money has vaporized as the stock market has lost 50% of its value.  They are quiet people, these old ones.  They’re not marching in the streets. Instead their lives are becoming quietly desperate as they sit in their living rooms and watch television, knowing that next winter they probably won’t be able to pay the heating bill and that their car will only last another 10,000 miles but they can’t afford to buy another. And their house? Yes, it was their ace in the hole. They thought they could always sell it if they had to and downsize perhaps to an affordable apartment – but not anymore, for their house is no longer even worth what they paid for it, and besides no one is buying houses anyway. So they sit in their quiet houses and wait for a government to save them. A government that barely knows they exist and is looking for a way to “solve” the Social Security problem.  A government that isn’t coming.

The problem is that half of the government is made up of people whose philosophy is “You’re on your own”, and the other half is concerned with helping the young people find jobs and go to school. The retired, the near-retired, the old and infirm can’t help but think of those poor, unfortunate, older people who found themselves stranded on Titanic’s deck after the lifeboats had departed.  They knew, more clearly than most, perhaps, that death was waiting and no help would come for them.  They would soon be forgotten as the world went about its business of business.

The great poet William Butler Yeats wrote his own epitaph:

Cast a cold Eye

On Life, on Death.

Horseman pass by!

Unless our comatose government wakes up, we will find that he also wrote an epitaph for an aging generation of Americans.

Add to FacebookAdd to DiggAdd to Del.icio.usAdd to StumbleuponAdd to RedditAdd to BlinklistAdd to Ma.gnoliaAdd to TechnoratiAdd to FurlAdd to Newsvine

Read Full Post »

OK, so Treasury Secretary Geithner has revealed his plan to save us from the toxicity of the banks.  Sort of anyway.  He was a little short on details, but he seems to have a vague, multi-pronged, approach that has, more or less, scared the Hell out of Wall Street.  One of the ideas that doesn’t exactly seem to have people clamoring to be first in line is the “bad bank” sort of idea that would buy up all those toxic mortgages from the dying banks. You know, the ones with those executives who made all those idiotic investment decisions, for which they were only paid about $30 million or so each year.  Maybe they should have been paid more. I’ll bet they would have exercised better judgment if they had only been paid a lot more.  Right?

Speaking of better judgment, I wonder who’s going to actually buy all those toxic assets that might be worth anything from zero to a million dollars or more?  Imagine being able to buy the mortgage for a foreclosed property in Detroit that sold for $200,000 three years ago.  Of course the building is sort of a fixer-upper now, I guess you might even say that about the entire neighborhood too, but I would bet you could get it really cheap. Just don’t ask me who you could sell it to or when.  Anyway, that’s the plan to get the poisoned banks off of life support.  The best part is that you too, yes you, the average American citizen, will soon be able to buy these toxic offerings so that the government won’t be the only ones propping up the U.S. banking industry.  Think about it – it could be the steal of a lifetime! The question Wall Street is asking is: who’s doing the stealing and who’s getting robbed?

While Geithner is striving heroically to save the banks, it seems that the smart money is betting against him. The Dow fell almost 5% today after he revealed his plan, which, it would seem, is sort of a vote of no confidence, I think.  The crowd is voting with their feet and heading for the exits. Elvis has left the building.  But nobody wants to say out loud what they all know inside: it’s the banks. You know, the banks that gorged themselves on all those delicious mortgages and then found out they were toxic? Really toxic?  Trillions of dollars toxic?  They’re dying. The banks are dying.  I guess it’s like eating ten pounds of arsenic or cyanide or fast food and still hoping you’ll somehow live, but everyone knows you won’t make it because you just took in too much poison and no one has the cure.

The simple fact is that trillions and trillions of dollars have been lost by the rich folk, and Secretary Geithner and the U.S. Treasury just don’t have enough money to save them. The poisonous real estate loans are slowly killing them, but no one wants to admit that the patient can’t be saved.  The only solution is to let them go, Secretary Geithner. Let them go to that big vault in the sky. They’ll be happier there.

But for us who are left behind, there is hope!!! We’ll bury the banks deep underground with all their toxicity and start fresh all over! We won’t have to eat their toxic mortgages! We’ll begin again with brand new National Banks! Banks with rules and regulations that are enforced! Banks that exist for the benefit of all the people and not to enrich the rich folk! What a novel idea!

The signs of death are all there Secretary Geithner. You don’t have enough anti-toxin in all of D.C. to cure the banks, and neither do the American investors.  You just have to let them go.  I know it’s difficult to see them die, but they’ve been bit by their own deadly snakes and there’s nothing we can do now.

Don’t worry, just let them go and try to get some sleep, you’ll feel better in the morning. Tomorrow is a new day.

Add to FacebookAdd to DiggAdd to Del.icio.usAdd to StumbleuponAdd to RedditAdd to BlinklistAdd to Ma.gnoliaAdd to TechnoratiAdd to FurlAdd to Newsvine

Read Full Post »

No matter how bad you think the economy is, it’s worse than you think it is.  A few days ago, Nobel Prize winner Paul Krugman suggested that we may have some “zombie banks” in the U.S. These Zombie banks, he uses a mythical “Gotham Bank” as an example, have assets that are less than their liabilities – a lot less.  Yesterday, economist Nouriel Roubini, the NYU professor who predicted our current economic meltdown, told a conference in Dubai that the U.S. financial system is “effectively insolvent”.  He expects the U.S. banks to have losses of about 3.6 trillion dollars while only having assets of about 1.4 trillion dollars.  Roubini stated that the economic systems of both the U.S. and Europe are effectively bankrupt.   It sort of puts in perspective the 350 billion dollar TARP bailout, doesn’t it?  Our economic ship has been sinking and we’ve been bailing with a teacup.

So what do we do?  As David McWilliams, an Irish economist, points out, the U.S. doesn’t have enough money to bail out the banks. He also suggests that we probably can’t borrow the money either because the only country with enough money to bail us out is China and they already own as much U.S. debt as they want.  As McWilliams quotes in his article, the China Business News has already said, “the US must pay back its debts, and to do that, it needs to live a more frugal life, instead of others lending it money to maintain its over-consumption”.  So how are we supposed to bail out our banks who apparently need over 2 trillion dollars just to get back to zero?  McWilliams suggests that the only answer is for the U.S. to print a lot of money – effectively devaluing the dollar and sending us into hyperinflation.  The advice for the average investor then would be simple: buy gold.

Maybe. However, there is another way; its just a matter of how you look at the situation.  If we take the viewpoint that the U.S. banks are “too big to fail”, we have an insoluble problem because we can’t stop them from failing.  As Krugman says, without naming names, our major banks are already zombie banks. They are dead banks walking.  If we persist in our belief that these are sacred institutions that cannot be allowed to fail then we should know that when these banks finally do die – as they must – we will be buried with them.  The time has come to view these failing banks as what they truly are: failed businesses. That’s it, that’s all they are. They are failed businesses.  They are not your business, and they are not mine either.  They belong to the rich folks who made some really, really bad investment bets.  Does that mean we have to bail out the rich folk?  I don’t think so, not with my money anyway, and not with yours either.

The solution is for us to start our own bank to replace the inept banks that made the wrong business decisions.  Our bank – the people’s bank – would be a U.S. government owned and operated bank. A bank of the people, by the people, and for the people.  Where would it get it’s money from? Why, from us of course, the U.S. taxpayers. Except, instead of using our tax dollars to bail out the rich folk we would maintain our ownership of our money. Our money would be in our bank, with temporary custody given to the government.  Until we are paid back we would receive regular interest payments on our contributions.  The nice thing about this bank would be that it would be operated for the benefit of the people – no more 33% interest rates on credit cards, no more “gotcha” adjustable rate mortgages, no more personal loans at 12% interest when inflation is at 3%.

The idea of a national banking system makes the rich folk shudder with horror.  They would much rather we just pay for their losses and bail them out indefinitely.  Except, this time they have gone too far.  We can’t pay their bill. They have gone too far.  It’s as simple as that.

Their poorly run investment businesses are dead banks walking, but they don’t know it.

Add to FacebookAdd to DiggAdd to Del.icio.usAdd to StumbleuponAdd to RedditAdd to BlinklistAdd to Ma.gnoliaAdd to TechnoratiAdd to FurlAdd to Newsvine

Read Full Post »

It seems pretty clear that we are entering a new phase in the financial crisis.  The U.S. banking system, having already received $350 billion in TARP bailout money is failing again – even though they never lent the $350 billion to customers who applied for new loans.  This new phase of bank meltdowns is related to businesses defaulting on commercial loans.  Perhaps this explains why the banks didn’t loan the original $350 billion – they all knew that there was more bad news to come and that the damage from the housing bubble would flow over to the general business sector.

Now, in the space of only a few days, there is bad news about Citibank, Bank of America, JP Morgan Chase, and others.  They all need a lot more money – taxpayer money to be exact.  It looks like they will be needing the remainder of the authorized TARP funds and maybe a lot more – who knows.  Certainly the banks won’t be telling us the facts until the last minute.  So what do we do?  Do we just keep shoveling money into these banks and let them just squirrel it away, afraid to lend it to anyone and thus ensuring that the economy will continue its death spiral?

There is an alternative to simply giving away all of our tax dollars to the wealthy people who own the banks.  Nationalization.  I know, I know…  The banks and the rich folk don’t like the idea.  Nevertheless, there are more and more voices saying the time has come for the government to really step in and sort out this mess because the people who run the banks are really only interested in saving their money and not in saving the economy.  It might be helpful to look at what is happening in Europe for a moment.   Yesterday, the Irish government nationalized the Anglo-Irish Bank, one of the largest banks in Ireland.  They are following the precedent set by the British government last year when they nationalized the Northern Rock Bank at the beginning of the real estate meltdown.  Northern Rock is now a very stable bank.

This is a good time to have a discussion of the pros and cons for nationalizing the U.S. banks that are in major trouble.  It is also a good time to discuss the whole nature of our banking system and why we have exclusively privately owned banks anyway.  Why shouldn’t the government operate a system of banks, sort of as a non-profit utility?  Are we afraid that would cut into the profits of the private banks and the millions of dollars of profit that goes to their owners and employees?

We are approaching a decision point.  Our banks have become dysfunctional.  They don’t loan money and they don’t make money.  So, I have to ask: what useful purpose do they serve or are they likely to serve in the near future?  Our economy drifts along toward another precipice: the complete collapse of our banking system.  Only the government has the ability to get us out of thus situation now. The real question is this: should we continue giving our tax dollars to these banking businesses or should we just have our own national banks that are really owned by the American taxpayer.

I heard there is a joke going around Wall Street saying that The Bank of America really is the Bank of America now, since the government already owns so much stock in the company.

I’m thinking that maybe it’s not a joke; maybe it’s a solution.

Add to FacebookAdd to DiggAdd to Del.icio.usAdd to StumbleuponAdd to RedditAdd to BlinklistAdd to Ma.gnoliaAdd to TechnoratiAdd to FurlAdd to Newsvine

Read Full Post »

The old saying is that if a dog bites a man it isn’t news, but if a man bites a dog then it’s news.  Well, we haven’t been bit – we’ve been robbed – by the banks!  That is news I suppose, but somehow in our Bushian world of doublespeak and lies it’s hard to be shocked about anything anymore.  We just sort of shrug our shoulders and go on, just like the peasants in the old Soviet Union.  After all, what can we do? Do we really expect our elected representatives to do anything? They’re the ones who let this happen!  Stampeded by Paulson and Bush, not to mention the pre-debate theatrics of John McCain, our elected representatives gave bushels – no shiploads (I said shiploads) of cash to the big boys of finance: Goldman Sachs, Morgan Stanley, Bank of America, and on and on. No accountability needed boys, just spend the money any way you want and get our economy moving again and save us from the next Great Depression.

So here we are. The banks haven’t bought the “Troubled Assets” we were told they would buy. They’re not giving us loans. They’re still giving big bonuses to the idiots who got us into this financial swamp. And the rest of the $350,000,000,000? Who knows – they refuse to say what they are doing with it. It seems that they are mostly just sitting on the money, now that our tax dollars have replaced all the money they foolishly lost in their insane real estate Ponzi scheme.

Meanwhile, the real estate market is in a state of freefall, the likes of which havn’t been seen since the Great Depression. No one wants to say it.  It’s like the Emperor’s New Clothes where everyone just goes along with whatever the Emperor claims. We’ve been robbed! We have been robbed by the banks – it’s as simple of that.   And now they are drooling over the remaining $350,000,000,000 that has been set aside as part of the $700 billion TARP bailout fund.  Just to put this total TARP bailout of $700 billion in perspective, the total cost of the Iraq War, from beginning to end, is estimated by most analysts to be in the same ballpark, many even calculate it will cost a bit less. And the banks stonewall, refusing to give us any accounting at all about what they are doing with our money! Can’t you just see the look of outrage on the faces of Bush and Paulson? Boy, they sure were fooled weren’t they?

No, we were the ones who were fooled – again. If there is one hallmark of the Bush administration it is the constant deception of the American public. Now, in cahoots with the American banking industry, Bush and his cronies have enabled the banks to rob us blind at a time when the nation and the world are falling into an economic abyss.  It is a disgrace without comparison in American history.

I can only wonder, will we ever have justice?

Read Full Post »

« Newer Posts - Older Posts »

%d bloggers like this: