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girl gone mad Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Aug-13-11 01:07 AM
Original message
Rightly Disgusted at the Banks
This is a good piece about how the gluttony of the banks is now threatening to tear Europe apart. The bailouts cannot and will not succeed and the longer this game continues, the riskier it becomes.

Unlike America, European countries do not maintain currency sovereignty. The German taxpayers will have to take a direct hit from these doomed rescue plans. Our massive bank bailouts did not impact our tax rates. The money was funded mostly through monetary operations as an end-run around Congress after the overwhelming public backlash to TARP. We've paid the price in other ways, though, such as higher commodities prices, significant malinvestment of capital and this lingering economic malaise reminiscent of Japan's "lost decade".

It seems like no one is out of the woods yet, except maybe Iceland. Zombie Bank Apocalypse.. coming soon to a theater near you.

German Taxpayers Willingly Subsidise Bankers
August 11, 2011
By Michael Hudson /

NY Times, August 11, 2011
A debate between five economists on Why Arent Germans Protesting?

Rightly Disgusted at the Banks

A bailout, like any other government expenditure, is a tax. Someone must pay all this money. And it is unfair to tax the broad population to pay for a special interest. Instead of being a progressive tax policy, bailouts enable bad behavior by the financial elite, sticking taxpayers with the cost.

Bailouts are unpopular among Europeans who see them as a tax being paid by the population as a whole to financiers at the top of the pyramid. These bankers have lived in the short run, taking large risks of capital for short-term gains to outperform their rivals. It is a game that most individuals have not played with their own savings, and they dont think that governments should compensate banks for taking these risks.

The bonds in question are held largely in German and French banks in Europe, and by U.S. banks. Germans are especially angry by reports that U.S. Treasury Secretary Timothy Geithner intervened in opposition to the insistence of Germanys chancellor, Angela Merkel, that bondholders should take a loss on their irresponsible investments. News reports say that as many as half the troubled securities are held by U.S. money market funds or subject to derivatives gambles. So it is not only European banks that are being bailed out, but also risk-taking U.S. speculators.

Banks bought these bonds to earn high rates of interest; they took a risk, and now the taxpayers will pay. This is morally repugnant.

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truedelphi Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Aug-13-11 01:59 AM
Response to Original message
1. Did you know that The German Chancellor Angela
Merkel had an attempt made on her life shortly after she suggested that Germany pull away from producing nuclear energy?

Anyway, you say in your opening remarks that:
Our massive bank bailouts did not impact our tax rates.

But isn't that only because nothing in America effects tax rates? I mean, in the US, the people who can afford to pay taxes don't pay squat. But European Tax Code has always been much more fair and progressive than tax rates here. Here they have stolen our Social Security and so now there is this huge pretense on the part of our major political players and the media that the only thing that can save us is cutting the "entitlements," rather than doing the right thing and raising the tax rates.
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DCKit Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Aug-13-11 02:09 AM
Response to Original message
2. "This is a good piece about how the gluttony of the banks". Yeah, 'cause you usually post bullshit.
Big K&R biotch.
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truedelphi Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Aug-13-11 02:58 AM
Response to Original message
3. And then I have this thought:
Edited on Sat Aug-13-11 03:02 AM by truedelphi
Even if all the Trillions of dollars invested in the financial debacle were returned, as real dollars and not as "collateral of dubious value" that have been used to "repay" the "loans," even so, the actions taken by both the Bush and Obama administration substantially increases the size of the government. What would the Framers consider if they were to arrive now and see this mess - what sort of adjustments of wording in the original Constitution and its Amendments would they want us to have to help determine what the government can and can't do?

Not one of the individuals living in the 1780's could possibly conceive of the society we have now - and perhaps they would be astounded at the fact that we still retain their quaint notion of two Senators per state. (California, with its 37 million people, is some 18 times larger in population than all of the original thirteen colonies put together. Yet we only get two Senators?) What would the original Framers say about this much control and power in the hands of our 537 elected officials?

For that matter, what would an Eisenhower or a Nixon, both strong proponents of a decent standard of living for America's middle class, say about all of this? I think both men would be astonished at the notion that the cuts being made to our society will continue the decline of our infrastructure. i think that both men would be furious about the one million jobs that will be lost over the next two years. These are jobs that will fall away from the Middle Income side of the equation, while the rich will continue their money hoarding.

And we know what Kennedy had said - he issued an Executive Order that would have established silver as collateral to stand behind the issuance of each and every dollar, and he wanted to end the Federal Reserve. If that Executive Order had become the basis of our economy, we would not have had the perpetual unending, unwinnable wars, from Vietnam to the Two Iraq wars, and Afghanistan and now Libya, as the silver is not there to pay for them.

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girl gone mad Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Aug-13-11 05:34 PM
Response to Reply #3
5. Our political system is broken.
A lot of people on all sides of the spectrum hope that our government can be restrained monetarily. Barring currency revulsion, I don't think that will happen. As long as corporatists control the financial reins, austerity will be endured only by the workers and producers. Theoretically, the financial class can continue successfully looting our economy for many years to come.

As difficult as it will be, we've got to find political solutions. Even if it's just at the local and state level for now, there's a lot we can do to fight back. Think state run banks and alternative types of taxation as well as emphasis on keeping as much capital as possible local.

Here's some analysis of the bailouts that is in line with your concerns:

Even this leaves out a few things. I always want to ask people who argue that the loans were "paid back" exactly how our insolvent banks managed to pay us back. To use Dylan Ratigan's terminology, this was done via wealth extraction, not through smart investment or lending strategies. In that sense, we bore most of the costs of recapitalization and have nothing to show for it.
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banned from Kos Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Aug-13-11 06:42 PM
Response to Reply #5
6. Our "insolvent" banks were required to raise private capital
to pay back TARP and other loans.

BoA was told to raise $34 billion to regain its footing. Its stock was over $50 in 2007 and is now $7 due to frequent dilution and frequent loan loss reserves. This requirement was before Dodd-Frank - which jacked up capital requirements again.

Insolvent banks of 2008 that could not raise money were euthanized - WaMu and Wachovia come to mind.
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girl gone mad Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Aug-13-11 07:05 PM
Response to Reply #6
7. BAC should have been "euthanized" in 2008..
rather than being allowed to rip off their depositors, credit card customers and taxpayers. We've been subsidizing them for years while their top executives sucked out million of dollars in compensation and bonuses. There has been no net economic benefit from this exercise.

Someone needs to put them out of our misery already. There's no chance of that happening before the election, unfortunately.
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banned from Kos Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Aug-13-11 07:22 PM
Response to Reply #7
8. How about the other 4900 banks that are raising fees to make up for losses?
Sheila Bair at the FDIC deserves special praise for her deft handling of the deposit bank crisis. It was the non-deposit banks, mortgage specialists like Countrywide, and AIG, FNM/FRE that regulators screwed up the worst.

I know you hate banks but privatizing them would have soaked up the little political capital POTUS had in 2009 and such policy had no support. Stimulus and health care came first - then FinReg.
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girl gone mad Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Aug-14-11 08:56 PM
Response to Reply #8
9. Banks are already private.
No one hates banks, in theory. Almost everyone hates the concept of socializing the losses of private institutions whose actors handsomely profited from obviously fraudulent activity. Pretty much everyone hates that we handed crooks like Mozilo and Cassano get out of jail free passes, allowing them to walk away with hundreds of millions in ill-gotten gains. Pretty much everyone hates the fact that we spent trillions of dollars rescuing financial parasites while their host (the productive economy) was basically left to bleed out on the operating table.

Bondholders should have been forced to take haircuts, management should have been replaced (and imprisoned, in many cases).

The President sacrificed vast amounts of political and financial capital to prop up these failed criminal banks. What was his return on investments? We're no better off now than we were then. Housing is still fucked, unemployment has barely budged, Bank of America is as close to insolvency as ever, the list of problem banks is swelling, equities are still on life support and we're facing the rapid destruction of our social safety nets (an event now directly attributable to the at least $1.5 Trillion outstanding bank subsidies which will never be paid back).

Obama made one of the worst political calculations of all time. We could literally be looking at the end of our empire as well as the complete destruction of the European Union. Get serious and pay attention to what's happening around you. Who or what will step in to the power vacuum which will be created by this epic neoliberal crash? We may only have one chance to get the direction right. I don't want to think about what will happen if we don't.
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amborin Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Aug-13-11 11:17 AM
Response to Original message
4. K&R
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woo me with science Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Aug-14-11 11:02 PM
Response to Original message
10. K&R nt
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