Tuesday, September 23, 2008

Corporate Socialism or Corporate Crime?

We're living in an Alice in Wonderland world.

It's easier for me to understand Thai politics than it is the global economy. And I haven't a clue what's going on here. Prime Minister Samak Sundaravej is gone, replaced by Somchai Wongsawat, brother-in-law of Thaksin Shinawatra, the billionaire populist deposed by the military and now in exile in England where he apparently still pulls strings. The anti-government protest, fueled by hatred of Thaksin and his successors, continues. And the economy, suffering from declining tourism and falling stock prices due to political uncertainty, is now reeling from the economic meltdown spreading outward from the United States.

What's going on here? I've read the news headlines, the columnists and the blogs, and I still don't know. When I told Jerry I wouldn't shed tears over a U.S. economic collapse brought on by Wall Street (and Republican) greed, he said, "You will, when the value of your dollar dries up." He's right. My money is in a Santa Cruz bank and I withdraw it here with an ATM card. When I arrived a year ago, a dollar bought 34 baht. It dropped down to 31 in the following months, but now has returned to 34. What if the dollar starts falling (it's plunged against the Euro) and doesn't stop? So now I am taking economic policies proposed in Washington more personally.

Bush's treasury secretary, Henry M. Paulson, Jr., has declared an emergency that requires an immediate $700 billion rescue plan for the financial system. Here's how a true maverick (unlike the faux maverick McCain), Vermont Senator Bernie Saunders, describes the move:
For years, as a member of the House Banking Committee and now as a member of the Senate Budget Committee, I have heard the Bush Administration tell us how "robust" our economy was and how strong the "fundamentals" were. That was until a few days ago. Now, we are being told that if Congress does not act immediately and approve the $700 billion Wall Street bailout proposal these "free marketers" have just written up, there will be an unprecedented economic meltdown in the United States and an unraveling of the global economy.

This proposal as presented is an unacceptable attempt to force middle income families (and our children) to pick up the cost of fixing the horrendous economic mess that is the product of the Bush Administration's deregulatory fever and Wall Street's insatiable greed. If the potential danger to our economy was not so dire, this blatant effort to essentially transfer $700 billion up the income ladder to those at the top would be laughable.

So the Republicans who supposedly despise big government, and who've cut taxes on the rich and funding for the poor, have overnight become socialists for corporatism, willing to pour the equivalent of another Iraq war into the coffers of criminals responsible for the greedy decisions that led to the meltdown. As Alice said, "curiouser and curiouser."

According to Chris Hedges, "The lobbyists and corporate lawyers, the heads of financial firms and the crooks who control Wall Street, all those who spent the last three decades assuring us that government was part of the problem and should get out of the way, are now busy looting the U.S. treasury." Hedges says that the culprits are the very same people responsible for funding the current Obama and McCain campaigns, and "the financial industry has come around to collect." So don't expect much oversight from the candidates or even the Democratic party.

Here is Hedges dire warning:

If the financial-services industry is able to suck us dry, our assets, from our homes to our retirement investments, will continue to tumble. Taxes will go up. Jobs will be lost. The grim economic indicators will get worse. The dollar, which has already lost about a third of its value against the euro, will continue to plummet. The rate of foreclosures, one in every 416 U.S. households in August, will skyrocket. Consumer spending, the engine of the U.S. economy, will continue to decline. Industrial production, which has fallen for three consecutive quarters, will fall further. Unemployment, which shot up to 6.1 percent in August from 5.7 percent in July, will get worse. These tremors presage an earthquake.
Ralph Nader, Hedges writes, warned of this economic earthquake years ago, and as recently as July, sent a letter to Congress warning that the federal government's bank insurance fund might be insufficient to handle the developing crisis in the banking industry. "The letter was, at the time, greeted with indifference and ridicule," Hedges says. "Rep. Spencer Bachus, R-Ala., at a congressional hearing, mentioned the letter and assured those present that 'Our banks are well capitalized, our deposit insurance fund is sound. There's absolutely no factual basis for saying that there's not money there to pay.' So much for the ignored wisdom of Citizen Ralph.

Hedges concludes: "If we bail out our corporate masters with hundreds of billions of tax dollars without instituting draconian market reform and launching criminal prosecution, we will be left to bear the cross of corporate malfeasance. We will pay for corporate crime. We will leave those who robbed us free to plunder."

Paul Krugman in the New York Times, writes that "some skeptics are calling Henry Paulson’s $700 billion rescue plan for the U.S. financial system 'cash for trash.' Others are calling the proposed legislation the Authorization for Use of Financial Force, after the Authorization for Use of Military Force, the infamous bill that gave the Bush administration the green light to invade Iraq." There is "justice in the jibes," he concludes.

I’m aware that Congress is under enormous pressure to agree to the Paulson plan in the next few days, with at most a few modifications that make it slightly less bad. Basically, after having spent a year and a half telling everyone that things were under control, the Bush administration says that the sky is falling, and that to save the world we have to do exactly what it says now now now.

But I’d urge Congress to pause for a minute, take a deep breath, and try to seriously rework the structure of the plan, making it a plan that addresses the real problem. Don’t let yourself be railroaded — if this plan goes through in anything like its current form, we’ll all be very sorry in the not-too-distant future

"If Wall Street gets away with this," William Greider writes in The Nation, " it will represent an historic swindle of the American public--all sugar for the villains, lasting pain and damage for the victims." The Bush administration cannot be allowed to led the lemmings over a cliff once again. It's time for people to stand up and be counted.

The agenda is staggering. The United States is ill equipped to deal with it smartly, not to mention wisely. We have a brain-dead lame duck in the White House. The two presidential candidates are trapped by events, trying to say something relevant without getting blamed for the disaster. The people should make themselves heard in Washington, even if only to share their outrage.

The last time that Bush stampeded Congrss into action, it sanctioned a deadly and costly preventative war in Iraq that punished Saddam Hussein rather than Osama bin Laden. Where were the weapons of mass destruction? President Clinton left a budget surplus when his term ended; after nearly eight years the Bush administration has driven the country's economy deeply into debt. The financial bailout will double the trillions already owed, which means foreign lenders will ultimately control the economy. If the U.S. weren't the linchpin to the global economy, it might go bankrupt. But global capitalists cannot permit that.

It all began, I've learned, with the bursting of the U.S. housing bubble. Since the 1970s, people thought that property values would rise indefinitely. Banks signed off on increasingly risky loans (no income, no down payment, low interest), thinking the property would secure the loan. But when prices plunged, householders and banks were left with houses worth less than the money owed on them. So the owners and then the banks defaulted on billions of dollars worth of bad loans. Financial institutions became leery of new loans and liquidity dried up. No money, no new purchases, no growth, global capitalism's greatest nightmare. In order to keep the system going, the government has chosen to prime the pump with billions (and maybe trillions) of aid. But this just rewards the corporate criminals and neglects the victims. I'm sure I've left out a few details, but I think I get the drift.

Don't expect Obama, much less McCain, to bite the corporate hands that feed them. Polls already show that average Americans are against the corporate bailout. They understand that the fox is in the hen house, handing out bibs.

3 comments:

Marcus said...

Hi Will,

Another great post! Thank you! How do you do it?

I couldn't make head nor tail of what's going on in the financial world (except I know the real value of my wages is falling!).... so you've really help shed some light on it all for me.

Thank you again mate,

Marcus

Roxanne said...

As always, thank you for all of the hard work you put into your very informative blog, Will.

I hope that you are doing well. I've been sending positive energy and virtual hugs in your direction.

Yours,
Roxanne

John said...

Thanks for the post. I say, Damn the consequences and let them bleed on Wall Street. 99% of working class folk will not be affected at all by not bailing Wall Street out, and most middle class folk will suffer equally either way. Those who have lost their homes to foreclosure have already paid the price-- no reason they should also be paying to bail out the lenders who could not afford to underwrite this mess.