by Peter Ewart
from
Opinion250 Website
|
Peter Ewart is a writer and
college instructor based in Prince George, British Columbia. He can
be reached at
peter.ewart@shaw.ca |
Part 1 – Hello feudalism
September 22, 2008
There is no other way to describe it. The biggest financial institutions in
the U.S., in league with Republican and Democratic leaders in Congress, are
staging a kind of coup d’etat against the American people.
If allowed to proceed, they will put forward legislation later in the week
that will assign dictator-like powers to the U.S. Secretary of Treasury and
certain big banks, and, using these powers, dump hundreds of billions of
more bad debt on ordinary Americans. The consequences are dire, not just for
the economy, but also for the civil rights of Americans.
Working behind closed doors over the weekend, leaders of the political and
financial elite have been putting the final touches on a plan whereby the
big banks and financiers will shift up to $700 billion of bad debt
and toxic mortgages (which they created) onto the backs of the
American people via the federal government, as well as put themselves in an
ideal position to strike a blow at other competitors, including non-monopoly
financial institutions that are smaller or more community and regionally
based.
All of this is in addition to the hundreds of billions that have already
been pledged to bail out various big banks and other Wall Street financial
institutions, as well as pump liquidity into the markets. The scale of this
bailout is almost beyond description.
For example, various politicians and bankers are saying that the total
amount of the bailout will be between $1 to $1.5 trillion, which is bad
enough, being more than the GDP of a country like Canada. The government has
already pledged $200 billion alone to prop up the mortgage companies
Fannie Mae and Freddie Mac.
What the politicians who support this bailout
often fail to mention is that the American taxpayer must also now
take on the debt of these giant mortgage companies, a sum that adds up to
around $5 trillion. If housing prices do not recover (they are already down
more than 15% on average), taxpayers could be liable for a substantial
portion of that amount.
Likewise with the government bailout of AIG Insurance last week which
cost $85 billion and results in the government now owning 80% of the
company. One of the reasons why other banks would not touch AIG with a ten
foot pole was that, over the last few years, AIG has been heavily involved
in what are called “credit default swaps,” a kind of insurance policy for
other companies in case they go bankrupt. If the American economy tanks,
which many believe it is in the process of doing, no one can really say for
sure how much the U.S. government (and the American taxpayer) would get back
from the sale of AIG assets, if anything.
It is important to remember that these hundreds of billions of
government bailout funds are being directed to aid an extremely tiny, but
unimaginably wealthy, section of the population that is notorious for
its greed, corruption, high living and recklessness, and that is responsible
for hatching up the schemes to spread the bad mortgages, toxic securities,
and other questionable financial instruments through, not only the American,
but also the world financial system, thus triggering the worst financial
crisis since the Great Depression of the 1930’s.
Indeed, even the notoriously corrupt emperors
Caligula and Nero of Ancient Rome would be shocked by the
sheer avarice, arrogance, and egotism of this privileged 21st Century elite.
Examples of their out-of-control greed abound.
One individual, Dick Fuld, CEO of the now
bankrupt Lehman Brothers, walked off with $490 million for his term
of office. Goldman Sachs sold toxic securities to unsuspecting
pension funds, companies and individuals around the world, while at the same
time selling “short” these securities, i.e., betting that their value would
decrease. It is estimated that Goldman Sachs made billions of dollars on
this scheme alone, which, if not constituting fraud, certainly borders on
it.
And there are numerous other examples of both
questionable and criminal behavior by top investment banks and brokers.
Which brings us to the legislative proposal that the White House has sent to
Congress.
Who is spearheading this proposal?
None other than Henry Paulson,
Secretary of the U.S. Treasury, who, surprise, surprise, was a former
official with the same Goldman Sachs. The fox looking after the
henhouse, so to speak.
The actual text of the Bush government’s legislative proposal sounds
like the proclamation of a banana republic “coup d’etat” and is chilling in
its implications. For example, the proposal gives Henry Paulson, as
Secretary of the U.S. Treasury, dictatorial powers to designate any
financial institutions he chooses as “financial agents of the Government.”
You can bet that the financial institutions that will be handed these
extraordinary government powers will not be your local credit union,
community-based bank or smaller investment house. Rather it will be the big
banks associated with
the Federal Reserve and other chosen
financial monopolies (both domestic and foreign) that caused the crisis in
the first place and are now using it to mount a sort of “coup” against other
competitors (especially the smaller, non-monopoly ones), and the American
people as a whole.
In other words, the same individuals who wrecked the U.S. financial system
are the very ones given the lucrative contract to “rebuild it.” Many
analysts are predicting that hundreds of smaller banks and financial
companies across the U.S. will go bankrupt in the coming period. Guess who
will be swooping in to take over their business.
Further language in the Bush government proposal gets even spookier.
Section 8 reads:
“Decisions by the [U.S. Treasury] Secretary
pursuant to the authority of this Act are non-reviewable and committed
to agency discretion, and may not be reviewed by any court of law or any
administrative agency.”
In essence, this is putting above the law any
decisions or actions carried out under this Act by the U.S. Secretary or by
any financial institutions it has chosen to be “agents of the government.”
This is feudal rule, pure and simple, whereby the rulers put
themselves over and above the law, and the civil right of citizens to
challenge arbitrary decisions does not exist.
Using this anti-democratic legislation, the U.S. government, working on
behalf of the big banks, can shift hundreds of billions of dollars of the
big banks’ toxic debt onto the American people, as well as knock off other
players in the financial sector that are not part of the “chosen few”. And
nobody can challenge these decisions. No one can even mount a lawsuit
against unfair or discriminatory practices.
How will this cabal of Wall Street financiers that is pulling the
strings of the U.S. government wipe out their competition?
One way - Designated as “financial agents” of
the government, these chosen banks will have huge influence over which
financial institutions get to unload their bad debt and which will not. If
you are a small bank or credit union somewhere in rural America that has
some bad mortgages on your balance sheets and you are not one of the Wall
Street chosen few – watch out!
Another way – The big banks will sell their toxic mortgages at top
price to the government, say 40 cents on the dollar. Then watch the
government turn around and sell these same mortgages back to another arm of
the same banks at a big loss, say 10 cents on the dollar. Thus the big banks
make bundles of money “going up” and “going down.”
This situation is not farfetched at all.
Similar shady banking schemes were
exposed in the aftermath of the U.S. savings and loans scandal of the 1980s.
To their great shame, both Republican and Democratic Party leaders
in Congress, are cheerleading this scheme of the moneybags. The role of
the Democrats is particularly treacherous, in that they are proposing a
“sweetener” to the scheme, i.e., some form of help for homeowners and
ordinary people to add to the “cocktail”.
But people should not be fooled.
No matter how much sweetener you add to a
poisonous brew, it still remains toxic...
Part 2 – Pay, pay and pay again...
September 23, 2008
Sometimes in history, events can go by so slowly it seems as if we are on a
train chug-chugging up a long and steep hill. But inevitably the train,
puffing smoke and steam, labours its way to the crest, and then … the wild
ride down begins.
We are on such a wild ride now, both politically and economically, and, as
the old saying goes, “everyone better hold onto their hats” - events are
developing very fast.
Since I wrote the first part of this series of articles two days ago, The
American people, and people around the world have had time to learn
about the brazen coup d’etat that the Bush government is
trying to pull off. This coup will grant sweeping, dictatorial powers to the
Secretary of the Treasury and his Wall Street backers, and will foist $700
billion dollars of bad debt, like heavy sacks of coal, onto every man, woman
and child living in the United States.
All of this, of course, is in addition to the hundreds of billions of
dollars that the U.S. government has spent on bailing out or propping up
other financial institutions, like Freddie Mac, Fannie Mae,
and AIG Insurance, as well as the taking on of potentially trillions
of dollars of debt from these same institutions.
Over the weekend, the American people were told by both the Republican and
Democratic leadership, as well as various big media and Wall Street pundits
that there is no alternative to this massive bailout, that the financial
system will collapse unless the big financial institutions are paid off,
that workers will lose their jobs, pensioners their savings, and so on. In
short, like the story of Chicken Little, the sky itself will “fall
in” unless the moneybags are rescued.
Is there any truth to the allegation that the financial system will collapse
if the big financial institutions are not bailed out with taxpayer’s money?
Such scare tactics have been typical of the Bush regime, which, as
the entire world now knows, used a similar method to justify the invasion of
Iraq.
The fact of the matter is that the U.S. financial system is already in a
state of collapse and, many analysts believe a severe recession is
almost certain to happen. The attempted “coup” by the Wall Street bankers
and the Bush government is not so much aimed at staving off the inevitable
downturn that is coming, but rather to make a grab for taxpayer cash while
they still can.
To put it another way, in the coming economic storm, the Wall Street
financiers want to be sheltered, all dry and comfortable, in their
taxpayer-funded limousines, while everyone else is on foot trudging through
the rain, getting soaked to the bone.
One thing for sure – When the moneybags get
those limousines, don’t count on them picking up any hitchhikers.
If this financial “coup d’etat” by the Bush government goes through,
it will actually make the looming recession much worse.
Why?
Because such huge government debt (which
ultimately Americans will have to pay for in one way or another) will
severely damage the purchasing power of the American people as a whole,
which is already under tremendous stress from high gas prices, falling house
prices, the slumping dollar, usurious credit card debt, and so on.
In other words, a “crisis of overproduction” will be hastened, and it will
be longer and deeper as a result of the bailout. A crisis of overproduction
is triggered not because too many goods and services are produced. Rather it
is because the purchasing power of ordinary people is weakened to the point
that they simply can’t afford to buy the goods and services.
As a result, sales plummet and there is massive
deflation of prices. Factories close. Unemployment skyrockets. And the
results are not pretty.
The most famous crisis of overproduction? The
Great Depression of the 1930s.
Thus, it is in the interests of the American people to not allow the
government to rob the treasury and bailout the moneybags (who, through their
greed and recklessness, caused the credit and mortgage crisis in the first
place). A much better solution is to demand that the big banks and
financial institutions be made to dig into their own extensive assets and
holdings to clean up the mess.
In any case, the reaction of the people across America has been swift and
splendid. Newsrooms report that people are overwhelmingly against this
bailout. Online discussion boards are raging with opposition. A polling
agency found that only 28% of those American’s polled supported the
government’s proposal.
Now, as a result, some media pundits are beginning to get cold feet,
suggesting that the “cure might be worse than the disease.” Even some
Democratic and Republican leaders, perhaps worrying about their electoral
skins, are backtracking. What appeared to have been a “coup” several days
ago on the part of big government and the big banks, could well turn into a
humiliating “rout.”
That being said, the Wall Street bankers are determined to dump their
problem onto someone somewhere, and Americans will have to be vigilant
about any “new” or “modified” bailout schemes that come via either the
Democratic or Republican Party leadership.
In this time of crisis, the people of the world are with the American people
and wish them all the best in this important struggle.
Americans do not deserve to have to pay for the
greed, abuses and crimes of the Wall Street financiers, who are no
friends to them or, for that matter, anyone else in this wide world.