Excellent Financial Crisis Write-Up

Hale Stewart has an excellent post describing the timeline leading up to the 2008 financial collapse.  Unsurprisingly, there is a good amount of Republican hypocrisy thrown into the mix: they were pushing for entities to provide more high-risk loans before they blamed those entities for the entire crash.  Of course, only a small fraction of high-risk loans were made by those entities, but when did a Republican let reality get in the way of their delusion?

The post’s premise is supported by a ton of research done by a wide variety of folks.

If you’re at all interested in knowing exactly what happened, read this post.  There is some economic jargon thrown in, but slog your way through it.  You’ll be better off because you’ll know what to look for in the future.

2008 Financial Crisis & Transportation Pieces

Some viable proposals from someone who understands the complexity of financial markets.  Regulation as it was practiced in the 1950s and 1960s is in order.  We know the Bushies hated it; what will Obama do?

Slightly dated now, but how does the current bear market stack up against the post-1929 market, the post-oil crisis of 1973-74 and the early 2000’s tech crash?  It’s pretty bad.  I think since this graph was generated, things have leveled off.

Simple solutions to “too big to fail”.  If it’s too big to fail, it’s too big to exist.  It’s time to start breaking up corporations that are too big for their britches.

84% of Americans in 2007 were against privatization of roads.  Does that mean they recognize that government is better at managing some projects than the private sector?

Speaking of transportation, a reduction in gasoline-fueled vehicles doesn’t only mean a movement toward hybrids and electric vehicles.  High-speed rail deserves a good, hard look, followed up by some serious action.

I first heard of Plug-in Hybrid Electric Buses this summer.  They’re very expensive at the moment due to the lack of market penetration, the same problem every new technology faces.  After 1,000 roll off the assembly line, they should only cost $40,000 more than 20th century buses.  At which point, they’ll pay for themselves in fuel savings in just a few years.  And emissions are reduced by 90%.  As soon as carbon costs are included, PHEBs will be very sought after.

Bail Out Total as of Nov. 18, 2008

I’ve tried to keep track of the growing amount of bail out dollars since I realized that the corporate media was focused only on Bush’s Bailout.  Little attention is being paid to what was given to AIG or Bear Stearns or Fannie/Freddie or … the list does go on.  Most of them garnered a small piece of attention when first announced, but I haven’t seen much in the way of keeping track of the total or more importantly what that total bailout means for the U.S. economy.  Others are doing a better job than I of keeping track and I will use them as a source.  One of my daily visits is to bonddad’s blog.  He notes that CNBC is his source of the following: the Bailout total is $3.8 Trillion.

The biggest heist in history is going on right now.  It is being perpetrated by George Bush and his gang of cronies.  What will happen to the U.S. economy as a result?  How long will it be before the U.S. defaults?  Will the Cons receive the blame they so richly deserve?

Financial Crisis: Bush Defends “Free-Market”

Worshippers of the free-market religion have found themselves racing to defend their beliefs in the face of overwhelming evidence that their “free-market” doesn’t work.

First, the latest economic numbers.  Jobless claims jumped to the highest level since just after the events of 9/11/01.  516,000 claims were made last week.  As corporations try to keep their profits and executives try to keep their obscene compensation flowing, millions of Americans are going unemployed.

Which leads to Americans being unable to afford their homes.  Foreclosures continue to set records.  A couple of statistics bear watching: there were 25% more foreclosures this October compared to last October, which was higher than the October before.  279,500 homes received at least one foreclosure notice last month, 5% higher than those issued in September.  More than 84,000 properties were reposessed last month.  That’s 84,000 families that just lost their homes before the holiday season.  How many of those folks lost their jobs earlier this year because executives wanted their multi-million dollar incomes?  That’s what the “free-market” generates.  Programs are being enacted to help homeowners stay in their homes.  Not surprisingly, it’s been the banks that have initiated those programs.  Bush’s government continues to drag its feet – the “compassionate conservatives” don’t care if thousands of Americans lose their homes.  Their motto: “You’re on your own.”

Financial Crisis News: Mortgages & Bush’s Bailout Update

After waiting for the near-collapse of the global economy, the Bush “administration” has finally rolled out a plan to assist homeowners who are being crushed by record numbers of foreclosures and owing more on their house than it’s worth.  The Big 3 leftover banks have already announced plans to modify home mortgages to ensure people can stay in them.  But I’m going to be more specific than the article.  Here’s one paragraph that needs more information:

Despite calls from members of Congress and some housing advocates for the government to take a more direct role in preventing foreclosures, federal agencies have been slow to present their own plans to modify the loans of millions of homeowners at risk.

How about:

Despite calls from members of Congress and some housing advocates for Bush’s government to take a more direct role in preventing foreclosures, federal agencies stuffed with Bush’s cronies have been slow to present their own plans to modify the loans of millions of homeowners at risk.

Agencies are under one branch’s control: Bush’s.  Bush, under direction from unitary executive advocates, hasn’t shied away from doing whatever he wanted with regard to torture, rendition, enforcement of regulations on industry and countless other issues.  If Bush were the compassionate conservative he sold himself as during his elections, he would have already done something about the mortgage crisis.  Instead, Bush the Con chose to do nothing for those he didn’t consider “his base”.

Speaking of executive powers, Treasury Secretary Paulson has, without advance notice, changed how the Bush Bailout will proceed.  The money will not be used to purchase bad bank assets.  Instead, Paulson’s Treasury Dept. will purchase more bank stock, in the hopes that it would help their balance sheets and encourage banks to lend more money.  As additional evidence that the Bushies only cared about power to further enrich themselves, Paulson isn’t lifting a finger to help out the struggling auto industry, which by the way is also about to collapse.  Rich Wall St. campaign donors, union auto workers or average homeowners: which group is receiving assistance from Bush?

The lack of transparency with Bush’s Bailout (our tax dollars) has finally found its way into the corporate media’s hazy focus.  Basic questions about what banks are doing with the money cannot be answered, despite assurances when the Bailout was made public that transparency and accountability were strong features of the bill.

On a more irritating note, the Wall St. elite are saying that the woes hitting Wall St. are finally hitting Main St.  Ummm, no.  Actually Main St. did not benefit from the economic “recovery” from 2003-2008.  Wall St. sure did, but the vast majority of us did not. The view that Main St. is “finally” hurting, just like the poor Wall Streeters is painfully immoral.  They want our tax dollars to bail them out with no accountability and no transparency and nothing in return.  Some trust-busting needs to happen early in the Obama administration.  There is no reason to leave these snobbish Wall Streeters in charge of their corporations anymore.  They, along with their puppets in our government, have destroyed the economy and countless livelihoods.  Enough.

Global Warming Deniers Turn Into Delayers

The past 8 years saw a well-coordinated assault on climate change research and results.  Deniers were prevalent across the landscape, citing authors of fiction and “studies” funded by the fossil fuel industry as evidence that global warming wasn’t occurring.  Some began shifting to delaying tactics: even if global warming was occurring, there was nothing we could do about it (wrong).  Industry wanted no action on climate change because it would likely mean a reduction in profit and executive compensation.  Conservatives have that name because they like policies and business the way they are – anything different or change frightens them, regardless of how necessary those changes are.

Now that the economy has gone down the drain and Barack Obama has been elected President, the delayers are trying to set the tone for his early efforts to address climate change.  They’re now claiming that the failing economy is the primary reason why no effort can be made on the issue of climate change.  Indeed, they’re going so far as to say that the poor state of the economy demands additional drilling and development of new nuclear (fission) energy.

This reflects corporate America’s narrow focus on the next quarter’s performance instead of the next 10 year’s performance.  Here is the problem in a nutshell: delaying action will only increase future costs of adaptation and mitigation.  Pennies that corporations save today by ignoring the costs of climate change will cost them dollars tomorrow.  Additionally, municipalities have already saved money and created new jobs by addressing the problem.  The exact opposite from what delayers are saying has happened?  Yes.  I’ll say it again: instead of costing more money and jobs, improving efficiency and diversifying energy portfolios have saved money and created jobs.

The very real threats of increased desertification, rising sea levels and geopolitical destabilization are being pooh-poohed by business “leaders”, especially in the U.S.  If those threats come to pass, do you think businesses will deal with the costs they helped cause?  A quick look at the trillions of dollars being given away to irresponsible financial and automotive corporations provides a quick answer: of course not.  Corporations are all too happy to privatize profit and socialize loss.  As much as that irritates me, I accept that pushing for climate change solutions will actually help businesses stay profitable.

Bush and Banks Robbing the American Taxpayer

I’ve written about this a little since Sep 15th, when everything in the financial markets went to hell.  I didn’t trust the Bush “administration” to handle the financial crisis with any degree of honesty or integrity.  I take no pleasure in reading news reports that my worst fears continue to come true.  Bush and Sec. Treasury Paulson are taking American taxpayers for a ride; a ride that they will never be held accountable.  How bad is it already?  As detailed by Jerome a Paris, here are the up-to-date details:

• the original $700 billion bailout;
• an additional $140 billion in tax breaks for banks (quietly non-announced by the Bushies);
• $150 billion for AIG, on much sweeter terms than they were paying for the earlier $85 billion bailout (with a whoopping 5% drop in the interest rate they have to pay, for instance);
• lest we forget, the $29 billion guarantee to JPMorgan for Bear Stearns assets (but that’s almost small change now);
• and $1,200 billion new liabilities on the Fed’s (ie ultimately the taxpayers’) balance sheet, backed by mostly junk paper;

That’s $2.3 Trillion in just under two months’ time.  From a party that will whine for the next four years that Democrats are being fiscally conservative.  Is it responsible or moral to give away more taxpayer money to banks that ran around unregulated for years?  Is it responsible or moral to renegotiate the AIG deal with a lower interest rate when they blew through their original giveaway in a few weeks’ time?  Is it moral or responsible for the Federal Reserve to refuse to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral?

This is the kind of immoral and irresponsible behavior that cost the Cons the 2008 elections.  Yet, the lesson they’ve learned so far from the elections is they didn’t attack Democrats enough; they weren’t loud enough about their failed ideas and policies.  Believe me, the American voter heard more than enough disgusting Con attacks.  Voters have suffered under the Cons’ failed policies.  The problem is Con policies are too extreme for America.  If Cons want to come back toward the center-left the nation actually occupies, they’ll win plenty of elections.

Companies Making Economy Worse

I wrote about this late last month – companies are going to make the recession deeper and longer.  It’s not hard to figure out why.  Two-thirds of the U.S. economy is made up of consumer spending.  In order for people to spend money, they need access to money.  Instead of increasing wages, Cons decided to make credit more available via credit cards since the 1980s and mortgages in the past decade.  Households owe more than they make on a yearly basis: credit card debt is massive, which led to people borrowing against their equity in order to keep buying stuff.  Now, housing values are less than what people owe on them.  They only thing left is wages, which haven’t increased for a super-majority of Americans in 30-some years.

In order to continue making profit so shareholders and executives can be paid enormous sums of money, corporations are laying people off.  That means … people won’t make money.  That means they can’t pay their bills or buy stuff.  Let’s see.  If people aren’t employed, one of the things they can’t pay every month is … their mortgages.  When people don’t pay their mortgages … they get foreclosed on.  Sure enough, the trend is being picked up and is being reported.  Job losses are now fueling more foreclosures.

In order to minimize the recession we’re already in, companies need to be hiring people.  Americans making an income can pay their bills and buy things, keeping the economy afloat.  Companies have initiated a negative-feedback system.  As more people have less money, they’ll buy fewer things.  Companies looking only at their quarterly numbers will fire more workers so they can continue to pay stockholders and executives.  And so on.  Companies will have to wait until their actions are countered by other economic forces.  But how many Americans will lose their jobs in the interim?

President-elect Obama is inheriting an incredibly challenging economy.  It will take visionary work, of the style he has, to lead the country to a better economic future.

3 Super Banks

There was a large public outcry against sending $700 billion to corporate banks a couple of months ago.  It wasn’t hard to figure out why.  Those banks and their Con-servative government gamed the system against Americans for years. People wanted the $700 billion to go to people and projects that would actually benefit the economy.  Remember, the Bush administration redacted portions of the contracts with the banks that would allow Americans to see where their tax money went.  Instead of opening up credit markets, the banks were allowed to buy each other out.  Now, there are 3 Superbanks left.

In a sad demonstration of just how little analysts actually understand the banking-government relationship and a disgusting demonstration of how the corporate media has allowed that relationship to become a cancer in our economic system, the article has the following:

Moreover, many analysts worry about how federal and state authorities, who were unable to prevent the current financial industry meltdown, will be able to monitor the new giant banks that combine a wide range of operations from investment banking to consumer lending.

Those authories were able to prevent the current financial industry meltdown, they just chose not to.  There are laws on the books regulating banking activity – they just need to be enforced.  That is exactly what the corrupt Bush administration chose not to do.  They argued against regulation of the industry.  So instead of changing the law (transparency), they decided not to enforce it.  We have a Department of Justice for a reason.  But it requires people in government who want to govern, hence the govern in government.  Bush and his cronies achieved power with the intention of using the U.S. government as their personal piggy-bank.  By the time the American people could respond, they would have sucked everything dry.  And it’s worked spectacularly.  This country has over $10 Trillion in debt, half of which was racked up in the past 7 years.  The other half took decades to accumulate, most of which happened under Con-servative presidencies.

Here is what I said when the financial crisis struck: If the corporation is too big to fail (if its failure would harm the economy), it’s too big to exist.  Sen. Bernie Sanders from Vermont has quite succintly put that concept together and I’m happy to borrow it.  Here is what it means: in the wake of the worst economic crisis since the Great Depression, Con-servatives allowed the already too-large financial corporations to grow even bigger.  Consumers now have fewer choices.  This situation is a violation of the Sherman Anti-Trust Act.  The federal government has the responsibility to enforce that Act and break up these Mega-Banks to more manageable size.  In fact, the new Big 3 control 1/3 of this country’s banking industry.  The rich got much, much richer with Cons in the White House.  The American people got screwed.  In fact, when Americans have to keep paying higher ATM taxes and higher account taxes and higher taxes associated with everything they do through their bank, I hope they think about how good bank consolidation is for them.

In fact, existing federal banking laws say that no bank can have more than 10 percent of the domestic deposit market — a threshold recently surpassed by all three superbanks.

When asked whether the government would take any action, a Justice Department official was noncommittal.

The worst financial crisis in 70 years, and the DoJ official is noncommittal.  I hope no one seriously wonders why John McCain lost so badly on Tuesday.  He offered nothing different in his approach.  At least with Democrats, there is a chance of a difference.  It will require Americans pushing them to do the morally correct thing, because those MegaBanks will wave loads of taxpayer cash under elected officials’ noses to keep looking the other way while they run amok.

In the current environment, such rapid consolidation is a “no brainer,” says Gregory F. Udell, Chase Chair of Banking and Finance at the Indiana University Kelley School of Business.

The risk of creating monopolies, he says, “is a lot less than the risk of having a lot of zombie institutions out there.”

He also points out that consolidation in the banking sector, though recently at a fever pitch, is nothing new.

Indeed, the number of commercial banks and savings & loans in the United States has fallen in the past 20 years to 8,451 as of June, compared to 16,574 in 1988, according to FDIC data.

In the wake of the S&L crisis (another Con-caused disaster for average Americans), Cons allowed banks to eat each other up, reducing competition and transparency in the industry.  In the wake of this latest crisis, the process has simply accelerated.  As far as Udell’s sentiment goes: it’s another arrow shot into the free-market religious zealots.  As long as taxpayers are tapped to socialize corporations’ losses, there is no free-market.

I can’t wait until the Cons in charge of our government are sent back to the holes where they came from.  I can’t wait until responsible adults are running this country again.  The banks need to be broken up into manageable pieces.  The American people need officials who advocate for their interests.

Bush & the FBI

Chalk another score up for George Bush’s lawless style of governing.  The FBI requested additional agents to investigate crimes that helped trigger this year’s financial meltdown.  Bush denied the FBI those agents.  After 2001, Bush transferred 2,400 agents from more traditional crime-fighting efforts to anti-terrorism.  Forget that no one of consequence or sophistication has been caught planning terrorist attacks – most Americans realize that a group of gambling Wall Streeters likely perpetrated fraud against the U.S.  Thanks to the cowboy president, they’ve gotten away with it.  Small businesses can’t get loans, workers are being laid off.  And Bush refuses to investigate what parties share fault for all of it.  Here is the statistic that speaks volumes: “Nationwide, only about 180 agents are investigating mortgage fraud in what has been called the most serious financial crisis since the Great Depression. About 100 additional agents are investigating corporate fraud, including the subprime loan debacle.”  Oh, another thing: the cons have been all over ACORN for supposed voter registration fraud.  Have you seen any high-profile cons calling for corporate fraud investigation?  I didn’t think so.  They’re all about getting elected, not about governing.