promoted by roxy. Originally posted 2008-04-23 18:57:05 -1000

The “bail out” of Bear Stearns five weeks ago did nothing to solve the underlying causes of the unfolding financial meltdown, so another major crisis is unavoidable. The “bail out” of Bear Stearns has merely bought more time for the big players on Wall Street to try and drag this out past the November election, because what they fear above all else is the rise of a progressive political movement strong enough to pry loose their grasp on the credit mechanism -- the financial system -- of our economy.

The fundamental problem is the big players on Wall Street have misused the credit mechanism for their own private gains through the bloating of debt and speculation, at the expense of actually allocating and supplying capital to the real economy. This is what has caused the 30-year decline of the American industrial economy that Barack Obama observes has made many Americans bitter- a comment that was, all too typically, taken out of context by Obama’s opponents. So this diary will look at the underlying truth of Obama’s remarks, and offer some radical observations on the role of Wall Street, and what needs to be done.

M.Collins: The Money Party (5)

"Us versus Them"

Michael Collins
"Scoop" Independent News
Washington, D.C.

We have been warned again and again that seeing the world as an "us versus them" proposition is a fatal error. It's polarizing. It leads to "class warfare." It absolves "us" of the collective responsibility we all have in a democracy. Can't have it, not allowed.

-- originally posted 2008-03-02 20:23:36 -- bumped, cho

Seems to me a lot of people don’t realize the worst financial crash since 1929 has already occurred. I suppose they are waiting for a big explosive fireball and a lot of noise like in a Hollywood movie, or for the nightly news on their wide-screen televisions to show pictures of desperate bankers and brokers splattered on the sidewalks in front of 60-story temples of finance.

This diary is my humble little attempt to let these people know that the crash has already happened. It began in August. I guess they didn’t notice, but a number of financial markets have already collapsed. First, of course, there was the derivatives based on sub-prime mortgages. That seems to be about where the common consciousness stops. But before U.S. Secretary Treasury Hank Paulson and Federal Reserve Chairman Ben Bernanke (a.k.a., Captain Carnage) even lifted a finger to try and sort out the sub-prime mortgage mess, they first had to deal with the collapse of the market for Structured Investment Vehicles. Since these two crises began last summer many other financial markets have also collapsed: corporate junk bonds, asset-backed commercial paper, municipal bonds. This last was saved just last week by New York State Insurance Commissioner Dinallo basically forcing Moodys, S&P and Fitch to give AAA ratings to the monolines insurers. All these markets have pretty much ceased functioning, with not even the banks that created some of this stuff willing to buy their own product. Financial institutions have also been disappearing, especially a number of hedge funds, the most recent being this past week: Peloton, a London-based hedge fund specializing in asset-backed bonds.

In August 2007, an obscure bank in Germany disclosed that it had suffered crippling losses on some financial instruments it held, which were based on a pool of sub-prime mortgages in the United States. Within days, traders in financial markets around the world were panicking as they found it nearly impossible to determine which other banks might be having the same problem, and just how large that problem was. Central banks around the world poured in money to calm troubled financial markets, and U.S. Treasury Secretary Henry Paulson made a show of declaring that the problems of the U.S.