As promised in yesterday's column, today's is about rescuing the wealthy from themselves.
The current financial mess we're in should call into question whether a system where financial institutions write the rules, is the very best way to go. Perhaps it's time we joined other wealthy, comfortable nations by instituting logical controls on the amount of wealth that can be accumulated in the hands of Wall Street and its shareholders and more importantly, the way they do business.
Other nations manage to raise vast capital while providing a deep, rich safety net for its citizens. We can do the same but first we have to tear down the system that was built to redistribute wealth from the working classes to the ruling classes and this is a very good time to do that.
I know, I know, you don't like the words and you've been told since birth that you, too, can join the ruling elite. But the truth is that you cannot - and you know it. When you begin to see the US financial industry in an existential way you will be in a position to begin a process that will result in economic security for all Americans.
Financial-market wise guys, who had been seized with fear, are suddenly drunk with hope. They are rallying explosively because they think they have successfully stampeded Washington into accepting the Wall Street Journal solution to the crisis: dump it all on the taxpayers. That is the meaning of the massive bailout Treasury Secretary Henry Paulson has shopped around Congress. It would relieve the major banks and investment firms of their mountainous rotten assets and make the public swallow their losses - many hundreds of billions, maybe much more. What's not to like if you are a financial titan threatened with extinction?
If Wall Street gets away with this, it will represent an historic swindle of the American public - all sugar for the villains, lasting pain and damage for the victims. My advice to Washington politicians: Stop, take a deep breath and examine what you are being told to do by so-called "responsible opinion." If this deal succeeds, I predict it will become a transforming event in American politics - exposing the deep deformities in our democracy and launching a tidal wave of righteous anger and popular rebellion. As I have been saying for several months, this crisis has the potential to bring down one or both political parties, take your choice.
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As Congress debates whether to hand over a $700,000,000,000 check to the Bush administration with no strings attached, conservatives are already arguing that none of that money should end up in the hand of regular people:
On Sunday Treasury Secretary Henry Paulson resisted suggestions that the program be changed to include further relief for homeowners facing mortgage foreclosures. Mr. Paulson said Sunday that because financial markets remain under severe stress there is an urgent need for Congress to act quickly without adding other measures that could slow down passage. "We need this to be clean and to be quick," Mr. Paulson said in an interview on ABC's "This Week."
Mr. Paulson said he was concerned that debate over adding all of those proposals would slow the economy down, delaying the rescue effort that is so urgently needed to get financial markets moving again.
"The biggest help we can give the American people right now is to stabilize the financial system," Mr. Paulson said.
Shorter Paulson: Giving all the money to the people who caused this crisis is the best way for the masses to help themselves. Ain't trickle-down economics grand?
Read More Cash for Trash
Some skeptics are calling Henry Paulson’s $700 billion rescue plan for the U.S. financial system “cash for trash.” Others are calling the proposed legislation the Authorization for Use of Financial Force, after the Authorization for Use of Military Force, the infamous bill that gave the Bush administration the green light to invade Iraq.
There’s justice in the gibes. Everyone agrees that something major must be done. But Mr. Paulson is demanding extraordinary power for himself — and for his successor — to deploy taxpayers’ money on behalf of a plan that, as far as I can see, doesn’t make sense.
Some are saying that we should simply trust Mr. Paulson, because he’s a smart guy who knows what he’s doing. But that’s only half true: he is a smart guy, but what, exactly, in the experience of the past year and a half — a period during which Mr. Paulson repeatedly declared the financial crisis “contained,” and then offered a series of unsuccessful fixes — justifies the belief that he knows what he’s doing? He’s making it up as he goes along, just like the rest of us.
So let’s try to think this through for ourselves. I have a four-step view of the financial crisis:
Read More Retirees Filling the Front Line in Market Fears
Older Americans with investments are among the hardest hit by the turmoil in the financial markets and have the least opportunity to recover.
As companies have switched from fixed pensions to 401(k) accounts, retirees risk losing big chunks of their wealth and income in a single day’s trading, as many have in the last month.
“There’s a terrified older population out there,” said Alicia H. Munnell, director of the Center for Retirement Research at Boston College. “If you’re 45 and the market goes down, it bothers you, but it comes back. But if you’re retired or about to retire, you might have to sell your assets before they have a chance to recover. And people don’t have the luxury of being in bonds because they don’t yield enough for how long we live.”
Today’s retirees have less money in savings, longer life expectancies and greater exposure to market risk than any retirees since World War II. Even before the last week of turmoil, 39 percent of retirees said they expected to outlive their savings, up from 29 percent in 2007, according to a survey by the Employee Benefit Research Institute, an industry-sponsored group in Washington.
“This really highlights the new world of retirement,” said Richard Johnson, a principal research associate at the Urban Institute in Washington. “It’s a much riskier world for retirees, because people don’t have defined-benefit plans. They have pots of money and they have to worry about making it last.”
Read More Give Main Street a Fair Shake
By Katrina vanden Heuvel
The Administration has put a corporate-led bailout on the table with the threat that Congress pass it as is or face a worldwide economic catastrophe. We've seen this kind of shock and awe, do it our way or else, fear mongering before. Yes, action is needed, but that action must be smart, just and effective. Action must ensure that this taxpayer-funded rescue doesn't reward the very people on Wall Street who created this mess while shafting the needs of Main Street. The President, the Federal Reserve, SEC and Congressional committees responsible for regulation and oversight failed to act in the public or national interest and allowed this economic meltdown to reach crisis proportions. It's ironic that the same people and firms that preached free-market capitalism are the ones now demanding a speedy taxpayer bailout.
This bailout should be seized as an opportunity to start addressing the real economic crisis--the one on Main Street--where the struggle to make ends meet is increasingly more dire in an economy marked by job losses, crumbling infrastructure, the lowest levels of personal savings since the 1920s, Gilded Age inequality and the highest level of foreclosed homes since the Great Depression.
Read More This Modern World - Tom Tomorrow
Foreign Banks Hope Bailout Will Be Global
PARIS — The financial crisis that began in the United States spread to many corners of the globe. Now, the American bailout looks as if it is going global, too, a move that could raise its cost and intensify scrutiny by Congress and critics.
Foreign banks, which were initially excluded from the plan, lobbied successfully over the weekend to be able to sell the toxic American mortgage debt owned by their American units to the Treasury, getting the same treatment as United States banks.
On Sunday, the Treasury secretary, Henry M. Paulson Jr., indicated in a series of appearances on morning talk shows that an original proposal introduced on Saturday had been widened. “It’s a distinction without a difference whether it’s a foreign or a U.S. one,” he said in an interview with Fox News.
The prospect of being locked out of the bailout set off alarm bells among chief executives of overseas banks whose American affiliates also hold distressed mortgage-related assets, like Barclays and UBS. The original text provided access to the $700 billion bailout for any financial institution based in the United States.
As the day wore on, some raised their concerns with the Treasury Department, arguing that foreign institutions were both big employers and major players in the American capital markets. By Saturday evening, the language had been changed to allow any financial institution “having significant operations” in the United States.
Read More From: Bridge Loan to Nowhere
In response, the Men in Black have now gone to Congress. They have put a check for $700 billion and a loaded gun on the table. Sign the check, they insist, and give us unreviewable power to buy bad assets, or take responsibility for the collapse of the whole financial system and, likely, the world economy.
In America's money-driven political system, leaders of both parties love to pretend that the sound of money talking is the voice of the people. Both presidential candidates and Democratic Congressional leaders are mostly nodding, with the Democrats adding trademarked noises about balancing off gifts to Wall Street with mortgage relief, another small economic stimulus program and perhaps some curbs on executive pay. Meantime, save for a handful of splendid exceptions, notably Gretchen Morgenstern of the New York Times, American newspapers just keep giving their readers more reasons to keep deserting them.
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Demand that the Bailout Legislation Be Rejected
We are witnessing a bankers' coup d’etat. In the name of saving the economy from a crisis created by their own greed and immense profits, the biggest bankers have taken a country and a people hostage.
“Give us your money and tear up what’s left of your Constitution or we will sink your economy,” is the message from Wall Street and the Bush Administration. “Give us the power and money we demand or you will be left jobless from a new economic depression."
Under the pretext of the banking crisis, the Bush Administration is changing the way this country operates. This is not simply taking trillions of dollars from the people and giving it to the richest bankers to do with as they see fit.
Click here to send your letter to Congress
Congress is poised to vote to give the Executive Branch of government, and specifically the White House’s political appointees in the Treasury Department, the absolute right to take our money and give it to domestic and foreign banks and corporations without any oversight of elected officials, from the courts, or from the people.
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An Open Letter from Cliff Narby
September 23, 2008
Dear Congressman Hall, Senator Clinton and Senator Schumer,
I am writing to ask you to vote "no" to the Treasury Dept. and Federal Reserve sponsored $700 million bailout of our financial system.
I am angry at myself for not writing to you sooner about this matter. Some of my friends and neighbors have been commenting for the past 2 years on the house of cards that is the mortgage business today, the "bubble" housing market, and on the mystery of derivatives (also a house of cards) used by the investment bankers, hedge funds and speculators. I have no doubt that you have heard similar opinions.
I believe that this bailout is a band-aid.
There is no doubt in my mind that the consequences of no bailout will be severe, but those consequences are coming anyway. I believe that you cannot permit the Administration to rush this ill-conceived legislation through your Congress. The proposed $700 billion is going to be "created" by the Treasury - what do you think the effect of that flood of new money will be?
I believe that we must face the music for all of the errors and sins that home buyers, brokers, mortgage companies, appraisers, lawyers, mortgage insurers and guarantors, banks, hedge funds, bond rating agencies, credit bureaus, investors, speculators, credit card companies and ordinary folk have committed in the past 5 years.
I believe that home buyers (not the speculators) knew, or should have known, what would follow when they bought more house than their income could support, accepting the mortgage companies' low interest or low payment terms in an ARM. A $375,000 house with a $375,000 mortgage is not a prudent investment, nor a sound loan. Their lawyer, at closing would have, or should have, warned them about future adjustments to their monthly payments. Similarly, those who borrowed Home Equity loans for consumption purposes (I include motor vehicles) should have known what may happen when payment terms changed or they encountered other difficulties (loss of overtime, a job, etc.). Imprudent citizens will have to lose their houses. Job losses will have to be endured. Economic recession or depression is an inevitable discipline that we will have to endure.
However, the faults of home buyers pale beside the immoral behaviour of the hedge funds, investment banks, mortgage companies, bond and credit rating agencies and other participants in the credit and futures markets. I believe that these people were either criminally corrupt or criminally negligent as they borrowed mountains of debt on top of unsound mortgages, home equity loans and credit card debts, creating these so-called derivatives to do so. The executives of these enterprises knew very well that the lending and borrowing practices which their firms were pursuing were dangerously imprudent.
Please suggest some action to bring the CEOs and other senior officers of this group to account. I would recommend criminal prosecution (same as Enron), jail and heavy fines (to extract the compensation that these individuals received while engineering this train wreck).
Our governments (federal and state) have been too slow to restrain the "irrational exuberance" of the housing, credit and futures markets. No oversight has been applied to hedge funds and derivatives in giant mystery pools of capital and debt. Inadequate attention has been applied by the Fed. to banks and their lending practices. Same with state oversight of insurers. There is no transparency in hedge funds and derivatives.
I believe that the proposed bailout is an outrageous offence to the taxpayer, who gets to foot the bill, covering the criminal or incompetent financial market participants. It transfers wealth from all to a few. The Treasury Department must not be given a free hand to buy bad assets from the financial industry.
Please ask Congress to ignore our current President and his administration. Please consult with former (in my opinion) sound regulatory executives such as Paul Voelker, Alan Greenspan and Arthur Levitt
I am copying a number of my friends and neighbors (and others) and I urge them to lend their voices to the effort to block the bailout. (Some may not agree with me!)
Yours sincerely,
Clifford G. Narbey
Carmel, NY 10512
