16 May 2008
The Federal Reserve Board, with the full backing of the Bush administration, Congress and both political parties, has carried out a massive and unprecedented intervention to avert an imminent collapse of the US banking system and bolster the major Wall Street finance houses.
The Fed’s decision in March to underwrite with $29 billion of its own funds the takeover of investment bank Bear Stearns by JPMorgan Chase, in order to prevent the collapse of Bear Stearns, and its even more extraordinary move to allow major investment banks to avoid a similar fate by borrowing directly from its coffers, was a signal that the US government would marshal whatever resources were necessary to rescue the banking system from the consequences of the speculative binge that had generated billions in salaries and bonuses for the Wall Street elite.
While the government bailout, ultimately to be financed from public funds, has seemingly averted an immediate banking collapse, it has done nothing to address the underlying crisis. Rather, the Fed and the US corporate-financial establishment hope that it has created the conditions for a more orderly “deleveraging” of the financial system, i.e., a liquidation of trillions in vastly inflated and unmarketable assets, in which the social and economic pain is borne overwhelmingly by working class and middle class families.
The Fed’s actions have restored a measure of confidence to the financial markets, reflected in a stock market rally that has driven the Dow Jones Industrial Average back toward the 13,000 level. At the same time, the Fed and most financial analysts are acknowledging that the US housing collapse and credit crunch have precipitated an economic slowdown that will likely be protracted.
http://www.wsws.org/articles/2008/may2008/econ-m16.shtml
Printer-friendly format
Email this thread to a friend
Bookmark this thread
(1000+ posts)
Send PM |
Profile |
Ignore
