William Greider: America's Economic Free Fall

[marmar]

via AlterNet:



America's Economic Free Fall

By William Greider, The Nation. Posted August 1, 2008.

In their haste to do anything Wall Street wants, Congress and the lame-duck President are sowing far more profound troubles for the country.




Washington can act with breathtaking urgency when the right people want something done. In this case, the people are Wall Street's titans, who are scared witless at the prospect of their historic implosion. Congress quickly agreed to enact a gargantuan bailout, with more to come, to calm the anxieties and halt the deflation of Wall Street giants. Put aside partisan bickering, no time for hearings, no need to think through the deeper implications. We haven't seen "bipartisan cooperation" like this since Washington decided to invade Iraq.

In their haste to do anything the financial guys seem to want, Congress and the lame-duck President are, I fear, sowing far more profound troubles for the country. First, while throwing our money at Wall Street, government is neglecting the grave risk of a deeper catastrophe for the real economy of producers and consumers. Second, Washington's selective generosity for influential financial losers is deforming democracy and opening the path to an awesomely powerful corporate state. Third, the rescue has not succeeded, not yet. Banking faces huge losses ahead, and informed insiders assume a far larger federal bailout will be needed -- after the election. No one wants to upset voters by talking about it now. The next President, once in office, can break the bad news. It's not only about the money -- with debate silenced, a dangerous line has been crossed. Hundreds of billions in open-ended relief has been delivered to the largest and most powerful mega-banks and investment firms, while government offers only weak gestures of sympathy for struggling producers, workers and consumers.

The bailouts are rewarding the very people and institutions whose reckless behavior caused this financial mess. Yet government demands nothing from them in return -- like new rules for prudent behavior and explicit obligations to serve the national interest. Washington ought to compel the financial players to rein in their appetite for profit in order to help save the country from a far worse fate: a depressed economy that cannot regain its normal energies. Instead, the Federal Reserve, the Treasury, the Democratic Congress and of course the Republicans meekly defer to the wise men of high finance, who no longer seem so all-knowing.

Let's review the bidding to date. After panic swept through the global financial community this spring, the Federal Reserve and Treasury rushed in to arrange a sweetheart rescue for Bear Stearns, expending $29 billion to take over the brokerage's ruined assets so JPMorgan Chase, the prestigious banking conglomerate, would agree to buy what was left. At the same time, the Fed and Treasury provided a series of emergency loans and liquidity for endangered investment firms and major banks. Investors were not persuaded. Their panic was not "mental," as former McCain adviser Phil Gramm recently complained. The collapse of the housing bubble had revealed the deep rot and duplicity within the financial system. When investors tried to sell off huge portfolios of spoiled financial assets like mortgage bonds, nobody would buy them. In fact, no one can yet say how much these once esteemed "safe" investments are really worth.

The big banks and investment houses are also stuck with lots of bad paper, and some have dumped it on their unwitting customers. The largest banks and brokerages have already lost enormously, but lending portfolios must shrink a lot more -- at least $1 trillion, some estimate. So wary shareholders are naturally dumping financial-sector stocks. ......(more)

The complete piece is at: http://www.alternet.org/workplace/93509/america%27s_economic_free_fall

[Joe Chi Minh]

1. For "Invisible Earnings", in future read, [Distinctly Off-Balance Sheet]

"Clandestine Earnings".

Though, somehow, I don't think "Clandestine Mega-Earnings from Ponzi Bubble" are going to appear in a column of the private-account balance-sheets of the supra-criminal sharks of banking boardrooms, who have made a killing out of this public-investment Black Hole. Or rather, who have magically vaporised public investments in their august institutions in the Black Hole created by their Boards' financial administration.

[Demeter]

2. Bailouts for Wall St Are Like Danegelt

which is an old-fashioned term for blackmail, extortion, protection racket....

[formercia]

3. Trying to keep Wall Street afloat until after the elections

and hopefully until January when the carpet will be pulled out as a gift to Obama.

They want to sink the Obama presidency.

[bulloney]

4. I thought Wall Street was supposed to be this haven for the "free market."

Let market forces run the show. Government can only do harm to the performance of the markets. Any pain resulting in the markets is merely the markets "correcting" themselves. That's what these hypocrites preach to us.

But when they get into a pinch from their corruption and carelessness, what's the first thing they do? Come crying to the government for a handout.