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Posts Tagged ‘Geithner’

A few years ago, John McCain brought up the issue of “Class Warfare” while running for President. He accused Barack Obama of espousing economic policies that amounted to class warfare. Perhaps McCain was sensitive to the issue because economic class warfare had been the policy of the previous Republican Presidents Bush and Reagan. Of course their economic policies were never described as class warfare, they simply destroyed the economy in order that the relatively few number of people at the top of the food chain could enjoy an extreme prosperity at the expense of most of the American population. John McCain’s fear was that, as President, Barack Obama would put a stop to these policies.Unfortunately, McCain’s fears were misplaced. Obama has done virtually nothing to change the fundamental economy of the United States.

Class warfare is nothing new. It only takes a brief look at history to realize that almost all warfare is class warfare. Consider, for example, a classic case: the overthrow of the Czar of Russia by the Communists. In the early 20th Century there were two distinct classes in Russia – a ruling noble class that included the Czar (by the way, the word Czar is a corruption of the Roman emperor’s title “Caesar”). The problem in Russia was the economy, i.e. the Czar and his family owned just about all the wealth and the people had very little. The people rose up against the Czar and his family, killed them all, and implemented a completely different economic system based upon an ideal of equality.

If we look further back in time to 1776, the American Revolution was a response to England’s class warfare. The King of England believed he essentially owned America – and he may have been right. After all, weren’t they founded as colonies of England and weren’t all the inhabitants subjects of the King? So what was the problem? It was excessive taxation. The taxes extracted by England from the colonists were a heavy burden and ultimately America rose up in class warfare against the King of England and all the royalty that owned the various colonies in America.

It wasn’t long after the American Revolution that a rebellion against the ruling class began in France; it was the French Revolution and it was a rebellion against the class warfare of the royalty of France. Like the uprising against Russian royalty in the 20th Century, things did not go well for the wealthy people of France.

Recently, we have witnessed the “Arab Spring” in the Middle East. In these uprisings it has always been a case of the poorer people rising up against their wealthy masters. It has been class warfare. From these and many other examples of past wars, including World War II, it can be seen that wars are usually caused by economic iniquity. Wars occur when the divide between the wealthy rulers and the common man becomes too vast, and it is seen that a few people at the top of the economic food chain are prospering mightily on the backs of the general population. It is the story of history and it is instructive to note that John McCain was and is very concerned about an outbreak of class warfare in America. But why? Does he know something most of us don’t? Probably.

One of the things that Senator McCain probably knows very well is that all members of the U.S. Senate and many members of the House of Representatives are multi-millionaires. They are not your typical Americans. Another thing that Senator McCain probably knows very well is that the American economy was deliberately transformed by Republican Presidents Reagan and Bush and a willing Congress. This was aided by the appointment of key people, for example, Alan Greenspan, to work in the key financial sections of the government, such as the Federal Reserve and the Treasury, in order to make the transformation from a country where all men were treated equally to one where the wealthy were treated as a separate, entitled class. Few people know the whole story of the downfall of the U.S. economy and how it was the result of many years of Republican, wealthy family favoring, economic policies. This sad story has been exposed on Public Television – and as a result probably seen by relatively few people. It can be seen here: Frontline.

Frontline revealed that Greenspan and his henchmen virtually destroyed the U.S. economy. Interestingly, Timothy Geithner was part of this group of people that deliberately created an uncontrolled marketplace that was doomed to collapse while it made a few people immensely rich at the expense of the average American. Inexplicably, President Obama chose Timothy Geithner to be his Secretary of the Treasury, i.e. Obama knowingly put the fox in charge of the chicken coop. We are by no means in a stable economy, even though we have avoided a complete meltdown. The wealthy class still rules and the Republican party is playing a dangerous game of chicken right now with the economy, threatening to let the country default on its obligations if any attempt is made to tax the wealthy. It’s class warfare alright, and its being waged by the Republican Party in order to benefit a miniscule minority of extremely wealthy Americans.

Any reasonable person would see that the wealthy class is playing with fire, confident that the under-class will cave in and obey. However, that isn’t true, it has never been true. That is the lesson of history from the American Revolution and even before: economically oppressed people always rise up. Look at the Middle East, look at Greece, look at Africa, look at the history of South America and Latin America. The problem is that the wealthy, upper class Republicans are blinded by their own greed and stupidity. They believe their flawed economic ideas will work, but their ideas are nothing more than pouring gasoline on a fire – you get a big flame for a short time, and then the fire dies out. It may well be that we are facing a major economic implosion because the fundamental problems that led to the previous meltdown have not been corrected. Indeed, except for Greenspan, many of the perpetrators of the meltdown are still in the game.

McCain was wrong about Obama, he is not an advocate of class warfare, but that doesn’t mean it won’t happen. It always does when the wealthy class goes too far. Just look at history.

 

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Paul Krugman, the Nobel prize winning economist, is fond of using the term “Zombie banks” to describe banks that are operating despite having liabilities that exceed their assets.  Most of our major banks have fallen into this category – the living dead.  However, it seems that the situation is changing with the Obama/Geithner rescue plan for our financial giants.  We, meaning the government – meaning us, will work a deal with private investors to buy up all the toxic waste inside the banks which we either pay for directly or guarantee to the private investors.  Wall street likes the idea and bank stocks have surged recently as blood begins to flow again into the pale white faces of the undead bankers.  The problem is: it’s our blood.

One thing that our government has conveniently overlooked – at least, and hopefully only for the moment – is that these nearly dead banks never had a soul.  These undead banks functioned more as vampires in our lives than as agents of community development.  Have we forgotten credit cards that sucked people in with promises of 0% interest only to escalate to 33% interest when a payment might be a microsecond late?  Have we forgotten how these vampires gleefully raised the rates on all of our credit cards simultaneously simply because we had somehow overlooked a single credit card payment for a day?  Have we forgotten what it is like to be in Credit Card Hell?

Then, of course, there are the mortgages – the ones given to unsuspecting homeowner wannabees that just wanted a house of their own but needed a break on mortgage payments.  So they got an adjustable rate mortgage that was easy to pay during the first year, but after that the payments were just impossible because the interest rate adjusted into the stratosphere.  Which, of course, is exactly what the banks wanted. Just like Credit Card Hell, the banks had also created Mortgage Hell.

Did you know that General Motors is a bank?  I thought they made cars. It turns out that they are actually a bank, so they got TARP bank bailout funds.  I thought General Electric made appliances.  It turns out that GE Capital Finance is the largest finance company in the world.  It seems that you can make a lot more money by loaning money to people than by building stuff and selling it to people.  When President Obama was on Jay Leno’s show he said that over the past 15 or 20 years about 40% of the U.S. economic growth was based upon the financial sector. That’s what happens when you lend money to people at extremely high interest rates.  So now, in order to rescue our economy, it has become necessary to remove the stake from the heart of the vampire banks and give them new blood.

Paul Krugman points out the problem in today’s New York Times. We can’t just give the vampires a transfusion and then think everything is going to be OK.  It won’t be long before they start stalking us again – offering 0% loans for six monthsb, then an interest rate tied to the value of the Russian Ruble divided by the ratio of the Euro to the dollar times the population of China at the end of the six month introductory period.  We need protection from the vampires. We need “stakeholders”, so to speak, who will stand up to these soulless, deathless entities and tell them “No more!”  Tim Geithner is hinting that he might be thinking that way, but is he a true vampire killer?  Is President Obama?

Many years ago our government (yes OUR government, meaning “us”) had laws that limited interest rates. Back in those days you couldn’t get a “Pay Day” loan.  (Check out My Cash Now.  Their annual interest rate is 485.45%!!!!!)  Then came a period of “deregulation”, i.e. leading the lambs to slaughter where the restrictions on interest rates were lifted and many of us got suckered into loans that drained us of everything we owned and the bloated banks still weren’t satisfied. Of course not; you can never satisfy a vampire.

Guess what?  I just checked the stock market.  They’re back.  What will President Obama do? I think he’s a smart guy. I think he wants to put the “us” back in “U.S.”, but so far he’s being cautious.  I think he doesn’t want to spook the vampires – same with Geithner.  I think both of them might be stealth vampire hunters, but it’s too early to tell. Meanwhile, I would be careful about taking out a new loan from any institution without calculating the total cost to repay it.  Try using an interest rate calculator like this one. For example, if you put in a loan of $10,000 at 18% interest for ten years you’ll find that you have to pay not only the $10,000 but also $7,989 in interest.  On the other hand if the bank jacks up the interest rate to 33% you have to pay $79,160 in interest!!  The vampires love that.

Until President Obama and Secretary Geithner rein in the bloodsuckers it’s best to be careful before taking out any new loans…. and whatever you do, don’t go into any bank after dark.

Ever.

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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?

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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.

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