by Dave Lindorff
When the financial markets started coming undone earlier this week,
the Treasury Secretary and the Federal Reserve stepped in, and with $85
billion of our money (actually our children's money,
since they borrowed it from China and Saudi Arabia), bought foundering
AIG, the world's largest insurance company, and assumed its colossal
pile of crap debt.
That didn't help, and the stock market crashed further, falling to
levels not seen in three years. Banks, meanwhile, stopped lending,
figuring to just hold onto their money and try to weather the crash.
The US Treasury and the Fed stepped in again, this time pumping nearly
$300 billion more of our money into foreign money markets, and getting
European and other governments to do the same in an effort to get the
credit markets open again and to stop the stock market swoon. That was
on top of some $700 billion already spent on bailouts.
It didn't work. Thursday, the markets continued to fall, well into
the afternoon, and it looked like another seriously down day. But then
Treasury Secretary Henry Paulson came up with a new idea. He said he
and the Bush administration were considering setting up a new agency to
assume all the bad debt of the banking sector--meaning all those bad
loans they made, and that they lured unsuspecting consumers into taking
out, by way of deceptive marketing techniques and outright fraud.
Note that we're talking about perhaps half a trillion dollars
here--of our money again. And remember, much or even most of this money
will never get repaid, and we're talking about money that could have
funded reduced class sizes in every school in America, a national
healthcare system, a crash R&D program into non-carbon energy and (not or) a strengthened Social Security and Medicare program.
The drones in the Democratic Party leadership in Congress
immediately jumped on the bandwagon, with House Speaker Nancy Pelosi
(D-CA) urging her charges to act quickly to get some kind of a bill out
there to facilitate the bail-out, which could cost anywhere from $600
billion to $1 trillion, but most estimates.
The thing to remember here is that this is not a rescue of the
little guy (though the Democrats say their rescue plan, when it
appears, will include some kind of relief for people unable to pay
their mortgages). Don't hold your breath. Odds are those people facing
foreclosure will still be unable to pay their mortgages, and besides,
there's no way there will be relief for the majority of homeowners who aren't missing their mortgage payments, but who are struggling mightily to meet them each month.
Primarily, who gets helped by this enforced taxpayer largesse are
the fat cats who own all the stock in these financial institutions, all
the executives who pay themselves outsize salaries each year for their
lousy management records, all these hotshot traders who make the deals
that later turn sour, long after they've run off to another job taking
their bonuses with them.
We ordinary people, who live from check to check, will feel the
pain of this "rescue" in the form of higher taxes in coming years, and
in a devalued dollar--because you can bet that all that money they're
printing, and all that added debt they're piling on to the mountain of
debt already out there is going to make the rest of the world pretty
queasy about holding onto dollar-denominated debt, or about buying any
more of it.
When you hear a banker say he's going to help you, it pays to hang
onto your wallet. When you hear a politician say he's going to help
you, hang onto your wallet. If they're both saying the same thing, and
especially if one of them is the head of the Federal Reserve Bank, then
you better really hang on tight.
Not that that will do any good.
The real answer to this crisis is, firstly, a massive dose of
trust-busting, so that no bank or investment bank or insurance company
is so big that its failure becomes a threat to the financial system,
and thus the government has to rescue it with taxpayer money, and
secondly, a return to the era of Glass-Steagall, when it was illegal
for banks to also be in the investment banking busiiness.
All the talk of "efficiencies" and of "better service to the
customer" that has been endlessly parroted to justify mergers like
Citicorp and Travelers, or JP Morgan and Chase Bank, or now Bank of
America and Merrill Lynch is fraudulent. Just to give an example, my
bank, once known as Willow Grove Bank, a small family-owned
institution, was bought by another bank and became Willow Financial.
Almost immediately the staffing levels went down. Recently, the
combined entity, which ran into trouble, was bought by another
institution, Harleyville Bank. Now there are half as many tellers most
of the time. As one teller confided, "Every time we get bought, they
lay people off."
Of course they do. That's what mergers always do. To recoup the
costs of the merger, management cuts back on service and employment.
The truth is, for all the talk about the efficiencies of bigness,
getting a mortgage today isn't any cheaper than it was in the 1950s,
when there wasn't even any such thing as a national bank that would be
"too big to fail."
The real reason we have mega financial institutions is that mega
financial institutions pay mega bucks to managers and make mega
donations to the campaign coffers of politicians. They also get to put
some of those mega-buck managers into key advisory positions in each
administration, Republican and Democrat, to ensure that government
polices allow them to get even bigger and even richer--and to ensure
that when they screw it up, they get rescued at the taxpayers' expense.
__________________
DAVE LINDORFF is a Philadelphia-based journalist and columnist.
His latest book is "The Case for Impeachment" (St. Martin's Press, 2006
and now available in paperback edition). His work is available at www.thiscantbehappening.net
