Thursday, November 6, 2008

The “Dirty Little Secret” Of the US Bank Bailout

Obviously I'm overjoyed that Obama carried North Carolina and nailed down the largest victory since Lyndon Johnson's in 1964 (which mainly happened then because the country had been traumatized by the assassination of John F. Kennedy the year before). With the just-announced choice of and acceptance by Mr. Pro-War* "Let's Choose New Blue-Dog Democrats to Populate Our Side of the Aisle" Rahm Emanuel as his White House Chief of Staff, I am not so sure that the changes I would like to see are going to made very quickly (if at all). Was he on the board of Freddie Mac? Stephen Colbert has had a few things to say about Emanuel. (See picture of him and his seating partners at the Democratic Convention here.) One concern that must be addressed immediately is the cessation of the taxpayer bailout that is funding the new too-large-to-fail banks (formerly the too-large-to-fail investment houses), who are hoarding the cash and using it to buy other banks, many of which are not even troubled. Barry Grey dissects the “Dirty Little Secret" Of the US Bank Bailout for us.

27 October 2008 "WSWS" --- In an unusually frank article published in Saturday's New York Times, the newspaper's economic columnist, Joe Nocera, reveals what he calls "the dirty little secret of the banking industry" -namely, that "it has no intention of using the [government bailout] money to make new loans." As Nocera explains, the plan announced October 13 by Treasury Secretary Henry Paulson to hand over $250 billion in taxpayer money to the biggest banks, in exchange for non-voting stock, was never really intended to get them to resume lending to businesses and consumers--the ostensible purpose of the bailout. Its essential aim was to engineer a rapid consolidation of the American banking system by subsidizing a wave of takeovers of smaller financial firms by the most powerful banks. Nocera cites an employee-only conference call held October 17 by a top executive of JPMorgan Chase, the beneficiary of $25 billion in public funds. Nocera explains that he obtained the call-in number and was able to listen to a recording of the proceedings, unbeknownst to the executive, whom he declines to name. Asked by one of the participants whether the $25 billion in federal funding will "change our strategic lending policy," the executive replies: "What we do think, it will help us to be a little bit more active on the acquisition side or opportunistic side for some banks who are still struggling." Referring to JPMorgan's recent government-backed acquisition of two large competitors, the executive continues: "And I would not assume that we are done on the acquisition side just because of the Washington Mutual and Bear Stearns mergers. I think there are going to be some great opportunities for us to grow in this environment, and I think we have an opportunity to use that $25 billion in that way, and obviously depending on whether recession turns into depression or what happens in the future, you know, we have that as a backstop." As Nocera notes: "Read that answer as many times as you want--you are not going to find a single word in there about making loans to help the American economy." Later in the conference call the same executive states, "We would think that loan volume will continue to go down as we continue to tighten credit to fully reflect the high cost of pricing on the loan side." "It is starting to appear," the Times columnist writes, "as if one of the Treasury's key rationales for the recapitalization program--namely, that it will cause banks to start lending again--is a fig leaf.... In fact, Treasury wants banks to acquire each other and is using its power to inject capital to force a new and wrenching round of bank consolidation." Early this month, he explains, "in a nearly unnoticed move," Paulson, the former CEO of Goldman Sachs, put in place a new tax break worth billions of dollars that is designed to encourage bank mergers. It allows the acquiring bank to immediately deduct any losses on the books of the acquired bank. Paulson and other Treasury officials have made public statements calling on the banks that receive public funds to use them to increase their lending activities. That, however, is for public consumption. The bailout program imposes no lending requirements on the banks in return for government cash. Already, the credit crisis has been used to engineer the takeover of Bear Stearns and Washington Mutual by JPMorgan, Merrill Lynch by Bank of America, Wachovia by Wells Fargo and, last Friday, National City by PNC. What the Wall Street Journal on Saturday called the "strong-arm sale" of National City provides a taste of what is to come. The Treasury Department sealed the fate of the Cleveland-based bank by deciding not to include it among the regional banks that will receive government handouts. It then gave Pittsburgh-based PNC $7.7 billion from the bailout fund to help defray the costs of a takeover of National City. PNC will also benefit greatly from the tax write-off on mergers enacted by Treasury. All of the claims that were made to justify the bank bailout have been exposed as lies. President Bush, Federal Reserve Chairman Ben Bernanke and Paulson were joined by the Democratic congressional leadership and Barack Obama in warning that the bailout had to be passed, and passed immediately, despite massive popular opposition. Those who opposed the plan were denounced for jeopardizing the well being of the American people. In a nationally televised speech delivered September 24, in advance of the congressional vote on the bailout plan, Bush said it would "help American consumers and businessmen get credit to meet their daily needs and create jobs." If the bailout was not passed, he warned, "More banks could fail, including some in your community. The stock market would drop even more, which would reduce the value of your retirement account.... More businesses would close their doors, and millions of Americans could lose their jobs ... ultimately, our country could experience a long and painful recession." One month later, the bailout has been enacted, and all of the dire developments--banks and businesses disappearing, the stock market plunging, unemployment skyrocketing--which the American people were told it would prevent are unfolding with accelerating speed. While Obama talks about the need for all Americans to "come together" in a spirit of "shared sacrifice"--meaning drastic cuts in Medicare, Medicaid, Social Security and other social programs--and the cost of the bailout is cited to justify fiscal austerity, the bankers proceed to ruthlessly prosecute their class interests. As the World Socialist Web Site warned when it was first proposed in mid-September, the "economic rescue" plan has been revealed to be a scheme to plunder society for the benefit of the financial aristocracy. The American ruling elite, utilizing its domination of the state and the two-party political system, is exploiting a crisis of its own making to carry through an economic agenda, long in preparation, that could not be imposed under normal conditions. The result will be greater economic hardship for ordinary Americans. The big banks will have even greater market power to set interest rates and control access to credit for workers, students and small businesses. While no serious measures are being proposed, either by the Bush administration, the Republican presidential candidate or his Democratic opponent, to prevent a social catastrophe from overtaking working people, the government is organizing a restructuring of the financial system that will enable a handful of mega-banks to increase their power over society.
Don't miss the comment section at the end of the article. Two of my favorite comments are below:
PNC Bank of Pittsburgh, PA is using this money in an attempt to buyout Ohio's leading bank. That was sure nice of me to lend them the $ to do that - what with no risk and no returns. Morrissey | 10.29.08 - - - - - - - - - Possibly the best documentary I have seen to date, which both predicted and explains this phenomenon is available on DVD, created by William T. Still, titled "Money Masters". Google the name "Money Masters" and buy a copy, or if you have to, get a pirated copy and sit down for a 3 1/2 hour lesson of shocking facts. For anyone paying attention, the crash and bail-out plan was very obvious from the begining of this charade. The only purpose of bailing out banks, was consolidation. It is an indisputable fact, the 480 page "Bail-out" bill was already drafted and waiting to be introduced, long before Paulsen, Bush, McCain and Bernanke began selling the notion US economic fundamentals are sound. As you may recall, it was only a few days later when these same scumbags marched out in the media and began singing the exact opposite song, timed to coincide after all the big money was in position for the stock markets to begin crashing. Imagine how many lying thieving scumbag accUntants and lawyers it would have taken to draft 480 pages and pass it around for approvals ? Months, if not years. Unremarkably, there is not one single high powered lawyer, accUntant or politician is raising even a small complaint, and nobody has mentioned the "Sarbanes Oxley" rulings which sent a few executives to jail from Enron, Worldcom, Imclone and that bitch Martha Stewart. It is easy to understand why these classes of people are not dissenting, because they are both the design engineers and bail-out profiteers, control freaks who will be the only people left standing with money to spend at all the liquidations of property, machinery and many other forms of assets. This "crash" in the stock markets and bank consolidation is just the tip of the iceburg, because the vast majority of sub-prime mortgages will only begin to roll-over in 2009, with millions more coming due through to 2012. Many more financial analysts are begining to see this point in just the last week, and a few have been brave enough to say so on public airwaves, which we can be sure will be quickly vetted to remove these warnings. The average common person is equallly as pathetic as many people who are supposedly "educated" with Ivy league diploma's, incapable of turning off the TV and doing some reading, afraid to know what just happened to their 401K plans, or still trying to figure out what just happened a month after the "parade" left town. Many people will try to pretend they have not incurred the losses until they try to redeem their shares into money. But unfortunately this is the same kind of thinking as to be held up and have your watch and wallet stolen, then to pretend you have not been robbed - as long as you dont try to look at the time or reach into your back pocket. Many more people will be caught in the quagmire within the next 12 months, which is why the US military is already preparing a branch of its forces to implement Martial Law during years of predictable civil disobedience and rioting in the streets which will make Watts look like a christmas party. A number of Asian countries are now reporting dramatic rise in suicide rates due to the market fears, anger, and increasing levels of depression. The exact same thing will happen here in North America over the next few years, as more people sudenly discover they have been completely wiped-out financially, with no job, no food, no roof overhead, and no place to run, hide or escape. There can be no question this crash and financial disaster was as well planned as the crash in 1929, and it is also a fact these events were intimately planned to the last detail and executed by exactly the same groups of people in the Bilderberger consortium, made up from the most wealthy private individuals in all 4 corners of the globe, including decendents of Rothschild, JP Morgan, Schiff, heads of state in England, Europe and North America, along with all the new players on the field who dominate ownership of the media, Turner and M and military industrial complex of the United State of Asassination My suggestion, is to stop paying all taxes, all bank mortgages and equity loans, and especially all government debts. Bring this mess to its knees en-mass, show solidarity to each other citizen in need, and remove these powers from the consolidated hands of the thieves on Wall St, Bay St, and every other stock market around the globe. Peter Carson Vancouver CanaDUH
* On these electronic pages during the electoral season we have tracked the machinations and motives of Rahm Emanuel (1,2). Long ago Rahm chose 22 key races, open or Republican seats, where Dems might win. By any reasonable criteria, all the candidates chosen by Rahm, save perhaps for one, were pro-war as is Emanuel himself. In two cases Rahm had to put in considerable dollars and effort in the primaries to drive out antiwar candidates. He drove out Cegelis in Illinois's 6th CD, at the cost of one million dollars, in favor of Tammy ("Stay the course") Duckworth who lost in the general election. In California's 11th CD primary, Emanuel backed the prowar Steven Filson who lost to the antiwar candidate, Jerry McNerney, who went on to win in the general election. Looking at all 22 candidates hand-picked by Rahm, we find that 13 were defeated, and only 8 won! (3) (One is still undecided.) And remember that this was the year of the Democratic tsunami and that Rahm's favorites were handsomely financed by the DCCC. Tammy Duckworth, for example, was infused with $3 million ­ and was backed in the primary by HRC, Barack Obama, John Kerry, etc. The Dems have picked up 28 seats so far, maybe more. So out of that 28, Rahm's choices accounted for 8! Since the Dems only needed 15 seats to win the House, Rahm's efforts were completely unnecessary. Had the campaign rested on Rahm's choices, there would have been only 8 or 9 new seats, and the Dems would have lost. In fact, Rahm's efforts were probably counterproductive for the Dems since the great majority of voters were antiwar and they were voting primarily on the issue of the war (60% according to CNN). But Rahm's candidates were not antiwar. So Rahm Emanuel nearly seized defeat from the jaws of victory. The Dems fully intended to pursue the war and the neocons thought that they had found a new host in the Dem party ­ but the voters now perceive the Dems as antiwar and if they do not deliver, they will be damaged. After all Ralph Nader and Chuck Hagel are waiting in the wings for 2008Either Emanuel is completely incompetent or else Emanuel is putting the interests of Israel ahead of Democratic victories. You decide. In either case why would he remain in a position of influence in the Dem party? A good question. A footnote to all this is the skullduggery behind the scenes in the campaign of one of Rahm's losers, Diane Farrell, who lost to Christopher Shays in CT. Farrell successfully passed herself off as antiwar in some quarters, getting the last minute endorsement of Katrina Vanden Heuvel at The Nation. But here is Farrell's "plan" for Iraq according to her web site: "Have Congress step up to its proper oversight role and get the administration to articulate and implement a transition plan in which the U.S. will reduce its role and begin to bring troops home. Set achievement benchmarks, rather than dates, for implementing such a pullback." Farrell does not support the Murtha or McGovern bills; she even rejects "timetables," and puts the onus of getting out of Iraq on "the administration" as opposed to Congressional action, namely her had she won. Why would The Nation support such a candidate? Was it simply incompetence, not doing one's homework? At the same time backers of Farrell, calling themselves Greens, managed to get the hard working and principled Green candidate in her district to withdraw on the basis of "private" and still secret assurances that Farrell would be antiwar in the end. Maybe we will now find out the nature of those assurances. One suspects that if Farrell had adopted a strong antiwar position and challenged her Green opponent that way, rather than conniving to force him out, she might have won the race. But then of course she would have lost Rahm's lucre.

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