U$ Fed Bailout of Financial Institutions is a Joke!

[laughingwillow]

I recently read about the gubmit's plans to offer about $700,000,000 to failing financial institutions in order to stop the bleeding of the economy. This move amounts to corporate socialism, imo. Another term would be fascism. The burden will fall squarely on the shoulders of American tax payers; trickle down economics at its worse.

Meanwhile the taxpayers are stuck footing the bill under the guise that its the only move to free up credit for future use. But just how much into debt does the country want to go? I believe the practice of borrowing money is too rampant in the first place. Many countries in Europe frown on borrowing to fuel purchases.  Our economy has been over extended due to our addiction to credit purchases. And its time to stop that practice. Allowing the financial institutions to live with the consequences of their greedy ways would do more in the long run to fix our ailing economy than attempting to get us back to the place/mind set that created this mess in the first place.  

lw

[laughingwillow]

We know a family that decided to move to California a couple of years ago. They were living in a house in Iowa valued at $150,000. Their annual income never topped $55,000. (I did their taxes.) He managed computers and she was a part-time waitress. They have three kids.

Anyway, the family managed to secure a bridge loan for $90,000 to help them move before their house sold. (They were really in a hurry to leave Ioway.) They also procured a loan for a house valued at $750,000 in Berkeley. Their plan was to move to CA and have the man start selling real estate while the mom stayed home with the kids. Never mind that this fellow had never sold a house in his life. That was two years ago. Their house in Iowa finally sold a month or two back. I have no idea how things are going in CA. They stopped talking to us soon after I told them I thought the plan was a bad idea.

According to them, the financial institution never asked them how much money they made, nor how they planned on making a living after the move. As this guy had NO outside sales experience, I had a tough time believing a bank approved almost $850,000 in loans for a family never making $60,000 per year and a breadwinner getting into a tough field with no experience, high failure rates and no pay unless houses were being sold.

That financial institution deserves to go under. No if's and or buts about it.

lw

[caulfield]

This is what we are going through:
 
Japanese Asset Price Bubble
 
It's a short entry on Wiki so it is really worth reading. Here are the results of that particular economic crisis...
 
December 29, 1989
Nikkei index topped @ 38,957.44
 
April 2003
Nikkei index bottomed @ 7603.76
 
Lost 80.48% over 14 years (which earned it the title "The Lost Decade" of Japan)
 
As of 2008 Japan still has a national debt which is 195.5% of the total GDP. In 2007 the USA had a national debt which is 60.8% of the GDP. One thing the Japanese have to say about our current crisis is that when it happened to them, no amount of government intervention in the form of monetary softening worked as every measure they took to ease lending completely struck out.
 
Case in point, we just increased the national debt by about 8% to invest taxpayer money (in VERY high risk securities) to prop up the financial industry and yet the Dow drops nearly 2%...

The good news is that this is making McCain and Palin look really ignorant.

[laughingwillow]

Thanks for the link, caul.

Just found this...

http://www.independent.co.uk/news/busin ... 37560.html

Fury at $2.5bn bonus for Lehman's New York staff
By David Prosser
Monday, 22 September 2008

Up to 10,000 staff at the New York office of the bankrupt investment bank Lehman Brothers will share a bonus pool set aside for them that is worth $2.5bn (£1.4bn), Barclays Bank, which is buying the business, confirmed last night.

The revelation sparked fury among the workers' former colleagues, Lehman's 5,000 staff based in London, who currently have no idea how long they will go on receiving even their basic salaries, let alone any bonus payments. It also prompted a renewed backlash over the compensation culture in global finance, with critics claiming that many bankers receive pay and rewards that bore no relation to the job they had done.

A spokesman for Barclays said the $2.5bn bonus pool in New York had been set aside before Lehman Brothers filed for chapter 11 bankruptcy in the United States a week ago. Barclays has agreed that the fund should continue to be ring-fenced now it has taken control of Lehman's US business, a deal agreed by American bankruptcy courts over the weekend.

Barclays is paying $1.75bn for the US operation of Lehman and is keen to retain its best staff. It said it had made no promises to individual staff members about how much they will receive but that the bonus fund would be paid out. In addition to the $2.5bn cash pool, Barclays is also in negotiations with about 30 executives it considers to be Lehman's best assets and plans to offer them contracts worth tens of millions of dollars. British employees of Lehman described the bonus payments as a "scandal" as they waited anxiously yesterday to see whether a deal could be struck with buyers circling the bank's European operations.

Many of Lehman's UK staff are particularly angry about the US payouts because it has emerged that in the days running up to the bankruptcy, some $8bn in cash was transferred out of the account of the bank's European business into accounts at the New York head office.

There is no suggestion any of this cash was used to supplement the bonus fund, but partly as a result of the transfers, PricewaterhouseCoopers (PWC), the administrator to the European business, initially found it impossible to guarantee salaries would be paid. The September wages of thousands of European staff were only secured in the middle of last week, when PWC negotiated a £100m loan to fund the payments. PWC wrote to Lehman Brothers' head office in New York last week, requesting the repayment of the $8bn, but a spokesman said yesterday that the administrator had received no formal response.

The row will increase pressure on the Government to tackle perceptions that City pay is out of control. Speaking on The Andrew Marr Show on BBC1 yesterday, Gordon Brown said Britain would review financial services awards following the credit crisis. "There's been a great deal of irresponsibility," the Prime Minister said. "There's an element of the bonus system that is unacceptable."

However, Adair Turner, who formally takes over today as chairman of the Financial Services Authority, the UK's chief City regulator, warned it would be very difficult to police individual pay deals.

"I think it would be really exceptional in any industry to have direct regulation on what different people are paid, I don't think that's appropriate and I don't think that would be workable," he said.

"What is appropriate for regulators to do, is the need to ask searching questions about the nature of people's remuneration and to ask questions of institutions as to whether they are paying out bonuses before they are really sure whether the profits are really there."A spokesman for the TUC said the US payouts were unfair. "It looks like those that will suffer the most from the Lehman Brothers' collapse are those at the bottom of the corporate chain while many of those at the top will be looked after," he said.

Critics of the UK's attitude towards City pay also pointed out that the US has much stronger litigation laws. For example, advocates acting for Lehman creditors in the US said over the weekend that they might sue Richard Fuld, the investment bank's chief executive, who was paid $34.4m last year, in an attempt to force him to return some of the money.

[Stonehenge]

It's a bailout of the rich bankers. Homeowners will end up screwed under the Bush plan. The demos want to throw a bone to the borrowers but their main concern is that they get some of the loot themselves. There will be more stealing and corruption here than ever before.

Interest payments on the national debt will soon be our biggest expense. How long after that before other countries refuse to buy our bonds and we become insolvent?

[caulfield]

Interest payments on the national debt will soon be our biggest expense. How long after that before other countries refuse to buy our bonds and we become insolvent?

Thank you for adding that question! If only MORE people would ask it of our leaders and politicians...

2017 is the current timeline for our debt to officially overwhelm us as the corruption of and false promises we initiated to Social Security triggered by the Baby Boomer retirement will decimate the US dollar.

I know it is a controversial standpoint for me to cry out against something as fundamental as Social Security of our citizens, but because we have NEVER found any way to control the cost of healthcare in this country, we have only ourselves to blame.

Social Security as it currently exists was initally designed as nothing more than a petty pyramid scheme supported by a rising population and a growing GDP. Because of this it is often used as a soapbox for politicians to promise things we cannot afford when approval ratings fall (like Bush and Medicare part D) or when people complain about the sorry state of our privatived healthcare system...

On top of this, the government has been unfairly using money from the generated surplus (which is dwindling). They put the surplus into a "Trust Fund" to invest in for the benefit of the US citizens and their future. So what do they invest it in? Treasury securities... So now Uncle Sam has the right to use the money from the sale of those government bonds however it sees fit.

I think in any other corporate arena such a practice would be called money laundering... But go figure.

God bless America!

[caulfield]

I know Andrew Jackson is infamous for his cruelty to Native Americans, but two quotes by him really ring true today...

"The bold effort the present (central) bank had made to control the government ... are but premonitions of the fate that await the American people should they be deluded into a perpetuation of this institution or the establishment of another like it."

"Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves."

Years ago, Steinbeck wrote The Grapes of Wrath to protest against the enslavement of the US citizen to the banking system as Washington turned a blind eye and supported corporate America. When the fog finally clears from this economic catastrophe, I hope another writer has the balls to stand up and do the same for all of us...

If we do not do our duty to crucify our politicians, revolt against our current system, and DEMAND some real changes, then the next generations will do it for us... But instead of crying out against our leaders and our government, they will blame us for being a generation of worthless, greedy, self-centered, ignorant people who lived far beyond their means, charged the bill on credit, and passed the debt on to our children.

I truly hope it does not come to that.

Peace all.

[laughingwillow]

Right on, caul.

But it sure appears we are headed in that direction. (Do nothing.)

I'm not real optimistic that the current, backward trend is going to reverse any time soon. Authoritarianism is on the rise in this country, imo. And the mainstream media is helping propagate the necessary mindset to the masses.

As it stands, an effort is required extract oneself from the current reality being sold to the people. Spiritual children are being allowed to set the precedent and make laws inhibiting real personal (spiritual) growth. The symbolic has replaced the active for most. The only hope I see is in the potential for a psychedelic revolution, where the active sacrament is returned to It's rightful place in the act of worship.

lw

[senorsalvia]

It really boggles the mind to think about this stuff eh??  I mean, it's not as if the public at large is unaware of the ever more present signs of economic duress...  Gas prices/milk/taxes/yadda yadda...  I'd make a bit of a guesstimate and say that the US will end up steadily dwindling its assets until we are merely another country instead of the actual economic superpower of the globe.......

[caulfield]

the US will end up steadily dwindling its assets until we are merely another country instead of the actual economic superpower of the globe.......

The facts below are collected from Wikipedia reflecting data as of 2007 estimates:

China
National debt = 18.4% of GDP
Current account balance = $372 billion (Ranked #1)

Russia
National debt = 5.9% of GDP
Current account balance = $93 billion (Ranked #4)

USA
National debt = 60.8% of GDP
Current account balance = -731.2 billion (Ranked #164)

None of the data above takes into account the current economic crisis, the upcoming recession which will affect our GDP, or the incoming flood of liabilities stemming from Social Security obligations and the interest on our debts. If you want to know what the economic landscape will look like within the next 20-50 years, there is a brilliant document known as the BRIC thesis written by a Goldman Sachs analyst which theorizes that the collective economies of Brazil, Russia, India, and China will in the next few decades eclipse the rest of the world.

Part of the reason the US dollar and our economy is artificially propped up by foreign interests is that for years we have forced the world to value oil in US dollars. Iran and Russia have implemented alternatives however for an increasing number of interested nations. Because of this, countries by the handful have been unlinking the value of their currency as a hard proportion of the USD causing it to fluctuate with increased volatility.

Add to this the fact that China and Russia invited India to join the SCO (the East Asian counter to NATO) and granted Iran observer status (which they DENIED to the USA), and it is very little wonder why we spend so much on our military and wage so much war... It is the last vestige of our dying greatness.

[Stonehenge]

One factor working in our favor is the fact the usa is too big to fail. If even a relatively small country like France failed, it could drag down the world economy and produce a world wide depression. Even more so with a big country like ours. Everybody's economy is intertwined with everybody else's.

The trouble is that the recession has spread world wide and even China is feeling the pinch. I'm afraid we could be in for another great depression. This time, instead of cash being king, gold and other commodities will be king. You have to eat so food producers will be strong. You need ferts to produce food so fert producers will be strong. You also need fuel so the middle east will always be strong. China may fail if the world can no longer afford it's products.

If the federal bailout fails and other countries don't prop us up, the result could be disasterous for the whole world. Unemployment could go above 25% here and over 50% in some parts. There could be wide spread starvation. The do gooders will have a hard time feeding themselves. All the children we saved in africa will die and it'll be our fault.

[laughingwillow]

Speaking of economically bleeding the U$ to death........ That's exactly what bin Laden said was the goal when he began waging war on our country all those years ago. Granted, he's had a lot of "inside" help with fucking our economy. (Trickle down economics, corporate greed and deregulation leading to unfettered capitalism, to name a few of the true enemies of the State.)

Capitalism is the survival of the fittest. The current remedy is something completely different. More trickle down, voodoo economics. The same companies wanting the gubmit to stay out of their affairs earlier are now expecting a handout to compensate for the rampant corporate greed that is in the process of taking our economy down. Corporate socialism appears to be live and well in the U$. Meanwhile any gubmit program aimed at improving the lives of those living on the margins is deemed socialism, and by popular definition, insidiously evil.  

lw

[caulfield]

Privatize the gains ; Socialize the losses...

Doncha love America?!

I acknowledge the validity that the US is "too big to fail", but ascribe to it with a great deal of defensive caution. Due to the death of our industry, our service based economy rooted in the financial sector, our outrageous system of a market driven by insane amounts of internal spending, and a populace enslaved by massive borrowing, many have speculated that we are ill prepared for the days of reckoning to befall our world economies.

Japan, Russia, China, and the UK all have indexes which are suffering due to their links to and investments in the United States economy, but their institutions are not leveraged as riskily as ours are (well, maybe Japan) and they have the infrastructure in exports and trade to tighten their belts and ride through this (well, maybe not the UK).

When the dot-com burst, we rode through it because lending and spending recovered (thanks to Greenspan's foolishness), but now the fundamental workings of our economy are essentially broken. The folks who wish to perpetuate this cycle (for eternity if possible) can now be grateful that we have a government big enough to dig into the gears and tinker about (on our dime). The rest gather on YouTube or at Ron Paul meetups to show off their holdings in gold, trade foreign bonds, and exchange literature by Peter Schiff.

Why is it always a choice between extremes in this country...?

I am neither a libertarian, a Ron Paul cultist, a Peter Schiff fanatic, a doomsday prognosticator, or a conspiracy theorist. I work a nine to five for a 403B which is heavily invested in the S&P. Neither am I a goldbug, but I do accumulate silver bullion to diversify my portfolio. Though I am not a patriot, I do admire a great number of our founding fathers.

So it truly is with a heavy heart that I decry the collapse of the US economy, and I want to believe that Warren Buffet is correct when he states that this too (as all business cycles) shall come to pass.

[Stonehenge]

I think we will come out of it and it won't be as bad as the great depression though in the short run it will likely be bad. I just hope SS doesn't go under and all those retirees end up on the street with nothing. I don't mind if the stock holders lose their shirts as long as the average guy can find a job.

[laughingwillow]

Btw, most most of the folks thinking this crisis isn't going to develop into something too serious are the ones voting for Palin/McLame in the upcoming election, imo.

Any step closer to a fascist state is a dangerous thing at this point. And this bail out amounts to corporate socialism, which is a form of fascism. This is trickle down socialism and it sets a terrible precedent, imo. The act of bailing these fat cats out goes against every principal of capitalism. At least how its been advocated by the very same fat cats looking for a hand out.

This will be a mistake. Mark my words. Printing up a trillion dollars will  cause rampant inflation as the value of our currency continues its downward spiral.

These companies NEED to fail. Just like the current administration NEEDS to be impeached. The corporate and political entities are joined at the hip. The systematic looting of our economy by corporate pigs following deregulation granted by our neocon gubmit has directly lead to the crisis at hand, imo. The corporate State is almost in place.

lw