Save the Banks and Kill the
Economy
"The problems we face today cannot be solved by the
minds that created them." Albert Einstein (1879-1955),
Physicist and Professor, Nobel Prize 1921 "I don't
see (subprime mortgage market troubles) imposing a serious problem. I think it's
going to be largely contained." U.S. Treasury Secretary Henry Paulson, April 20 2007 "Providing assistance to banks and their borrowers can be
counterproductive, resulting in increased losses to banks, which often ...
take unproductive risks at government expense. The typical result ... is a
deeper hole in the net worth of banks, crippling tax burdens to finance bank
bailouts, and even more severe credit supply contraction and economic
decline." The International Monetary Fund
(IMF), (Study of financial crises from 1970 to 2007) "The dirty little secret ... is that every Republican in this
country wants Obama to fail, but none of them have the guts to say so; I am
willing to say it." Rush Limbaugh, radio activist,
February 27, 2009 It
has become a truism to say that the Democrats and the Obama administration
now ³own² the crucial issue of
the economy. Justly or unjustly, voters are bound to hold them accountable
for the poor state of the U.S. economy. This is not an enviable political
position to be in just before an election, at a time when disgusted voters
are most angry and very anxious about the economy and their economic future.
Recent polls
indicate that nearly two-thirds of Americans think their nation is in a state
of decline and that the economy will remain in the same recessionary state or
get worse next year. Contrary to what President Franklin D. Roosevelt did in
the 1930s, President Barack Obama did not confront the banking industry
head-on after fraudulent practices caused one of the worst financial crises
in U.S. history. In particular, he did not reverse the blanket financial
deregulation that the Clinton and Bush administrations engineered in 1999,
in 2000, in 2004, in 2005 and in 2007
that allowed for creating mortgage-linked synthetic subprime
securities and for betting against them. Instead, his economic operatives
(Geithner, Summers, Bernanke, Orszag, Emanuel,
(L.A.) Sachs, Romer, Bair, ...etc.) threw trillions of public dollars to the
largest banks, allowing top bankers to keep enjoying hundreds of million of
dollars in yearly bonuses, at a time when some 300,000 Americans are losing
their homes through foreclosures
every month. Such a persistent epidemic of home foreclosures
is creating a tremendous drag
on the economy, besides being a social disaster. —The system
that is responsible for so many home foreclosures has not been fixed,
although valiant attempts
have been made to mitigate the process. Meanwhile, also with the intention of saving the largest
banks, regulators began pressing the banks to raise capital asset ratios and
to shrink their risk assets. The Bernanke Fed went so far as to lend money to
the largest banks at zero interest rate, while
paying interest on the excess reserves the banks kept at the Fed, a practice
that resulted in an outright gift to the banks. All these policies have resulted in tightening credit
availability and in provoking the largest plunge in the M3 money
supply since the Great Depression. As long as this condition
endures, there won't be any substantial economic recovery in the United
States. Just as Obama did for the wars, when he kept in position
and even promoted Bush operatives Gates and Petraeus, Obama kept or brought
back as his economic team some of the very Wall Street-connected people who
were responsible for creating the conditions that led to the financial crisis
in the first place. Now, at mid-term, President Barack Obama is saddled with
the devastating image of a defender and promoter of Bush's wars in
Afghanistan and Iraq and is viewed by many as having sided with Wall Street
bankers against Main Street folks, just as George W. Bush did with his
Goldman Sachs-connected Treasury Secretary Henry
Paulson and his banking bailouts. To many Americans, indeed,
the Obama administration looks more and more like a third-term Bush II
administration. For many Americans, it's a nightmare. The biggest mistake that President Barack Obama seems to
have made, at the beginning of his mandate, was to not disassociate himself more clearly from the previous Bush
administration. Now, it's too late, and unfortunately for him and the divided
Democrats, they are poised to suffer the wrath of an enraged and
disillusioned electorate. Indeed, with U.S. real unemployment rate hovering around
17 percent, with 3 out of 4 workers telling pollsters that they doubt that
their wages will increase next year, with many American households' financial
situation deteriorating, with home foreclosures approaching 10
million, with huge fiscal deficits and future tax hikes
likely, with the Bernanke Fed adopting third-world monetary policies in monetizing
the public debt, and with an overall anemic economic growth,
the Obama administration and the Democratic Congress are going into the
November 2 midterm elections with many monkeys on their backs and very little
public confidence. The only thing that runs in their favor is the poor
quality and vision of their Republican opponents who have followed an
obstructionist strategy and have sided time and again with lobbyists, thus
blocking most attempts to straighten things up. Only a credible campaign to
persuade the electorate in extremis that
Democrat incumbents are ³less worse² than their Republican opponents, coupled
with a high turnout at the polls could prevent a Democratic bloodbath in the
U.S. Congress, especially in the House of Representatives, next November.
—If not, President Barack Obama will officially become a lame-duck president
after November 2, and Congress will be paralyzed at a very crucial time when
strong leadership is required to get out of the economic mess. This is a most
unappealing perspective. _____________________________________ Rodrigue Tremblay
is
professor emeritus of economics at the University of Montreal and
can be reached at rodrigue.tremblay@yahoo.com.
He is the author of the book "The
Code for Global Ethics" at: www.TheCodeForGlobalEthics.com/ The
book ³The Code for Global Ethics,
Ten Humanist Principles², by Dr. Rodrigue
Tremblay, prefaced by Dr. Paul Kurtz, has just been released by Prometheus
Books. Please
visit the book site at: www.TheCodeForGlobalEthics.com/ See it on Amazon
USA: See it on Amazon
Canada: See it on Amazon
UK: or, in Australia
at: Please
ask your favorite bookstore and your local library to order the book: The Code for Global Ethics, Ten
Humanist Principles, by Dr. Rodrigue Tremblay, prefaced by
Dr. Paul Kurtz, Prometheus Books, 2010, 300 p. ISBN: 978-1616141721. *****The French
version of the book is also now available. See: www.lecodepouruneethiqueglobale.com/ or on Amazon
Canada _____________________________________ Posted,
Tuesday, Septemer 14, 2010, at 5:30 am Email to a friend: http://www.TheNewAmericanEmpire.com/tremblay=1129.htm or
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