Pissing away $700 billion

Half of the bank bailout is being paid out as dividends ! These bastards are shameless!

U.S. banks getting more than $163 billion from the Treasury Department for new lending are on pace to pay more than half of that sum to their shareholders, with government permission, over the next three years.

And in case you missed it two weeks ago: one of every ten dollars of the "bailout" is being used to pay bonuses! That's right - the bastards are getting $70 billion in bonuses for destroying the financial system and wrecking the economy.

Joe Nocera reported in The New York Times on an Oct. 17, internal conference call for senior employees of JPMorgan Chase, in which a Morgan Chase employee had the bad grace to ask,

“Chase recently received $25 billion in federal funding. What effect will that have on the business side and will it change our strategic lending policy?”

That would be a key question, wouldn’t it? Afterall, the whole purpose of the $700 billion bank rescue was to unfreeze the credit markets and get banks lending again.

Someone taped the conference call, and Nocera was allowed to hear it. Read carefully the reply of Morgan Chase chief executive, Jamie Dimon:

“Twenty-five billion dollars is obviously going to help the folks who are struggling more than Chase,” he began. “What we do think it will help us do is perhaps be a little bit more active on the acquisition side or opportunistic side for some banks who are still struggling. And I would not assume that we are done on the acquisition side just because of the Washington Mutual and Bear Stearns mergers. I think there are going to be some great opportunities for us to grow in this environment, and I think we have an opportunity to use that $25 billion in that way and obviously depending on whether recession turns into depression or what happens in the future, you know, we have that as a backstop. . . . We would think that loan volume will continue to go down as we continue to tighten credit to fully reflect the high cost of pricing on the loan side.”

And I’ll add a link here about how many banks getting bailout money are using the funds to buy up other banks. Note the observation that the bailout is all about consolidation. Haven’t we learned yet that too big to fail is too big to exist?

So the $700 billion rescue of the financial system is being pissed away. And what’s starting to happen in the real economy is frightening. The economic news this morning is that U.S. gross domestic product shrunk by three tenths of one percent in the third quarter. Hidden in the GDP numbers is a shocking decline of 14.1 percent in sales of durable goods. The havoc being wreaked on the manufacturing sector is appalling – and it’s the manufacturing sector that we desperately need to rebuild, if we are to stop consuming more than we produce.

Nondurable goods dropped 6.4 percent, and real personal consumption expenditures fell 3.1 percent.

But those are the official numbers. The reality is much worse.

In Unapologetic economic stupidity, Richard Daughty,, writing as the Mogambo Guru, cites the most recent statistics from DeepCaster.com and shadowstats.com: "Real US Consumer Price Inflation is running at around 13% annually, Real US Unemployment at about 14.5% annually, and Real US GDP is at a negative 2%, while real M3 (monetary creation) is running at 14% annually according to the quite credible calculations of shadowstats.com." (Unfortunately, a subscription is required for both DeepCaster.com and shadowstats.com, so I am not able to furnish a more direct link.)

Daughty also notes that while the U.S. government has now sunk into over $10 trillion in debt, interest payments are being held down by artificially low interest rates. In fact, he states that "the sustainability of the government, consumer spending and the economy rests on the continuation of artificially low interest rates." Right now, 10 cents of every tax dollar collected is required just to pay the INTEREST on the debt. Now think about THIS: The yield on a 10-year Treasury note right now is 4.01%, but the historical average, going back 46 years, is 7.04%. Which means that we can expect just the interest on the U.S. government debt, never mind paying back the principal, to reach nearly 20 percent of all government revenues collected.

Obama can NOT do anything on his own. He will be facing the hordes of angry white men stirred up by the likes of Limbarf and O'Reilly. He will be facing the entrenched power of oligarchical wealth - insurance companies, financial companies, hedge funds, big oil, big pharma, and the Reps and Senators they own, both Dem and Rethug. He will be facing a judiciary packed these past eight years with the worst conservative hack ideologues.

And he will be surrounded by economic advisers who are part of the problem. Dismay and disgust has often been voiced here on the blogosphere over who Obama has selected as economic advisers. The sad fact is that Obama voted for this bailout, despite a raging flood of anger and opposition, by bloggers as well as many others. Obama ignored us then. But he’s not going to be able to ignore reality. He was wrong, and we were right. The problem is that a lot of innocent people are going to get hurt by his being wrong.

Folks, our work is just beginning.

0
No votes yet

Comments

guess that is the new American way.
Thanks Tony.

 

The two leading European financial and business media, with international readership, are the UK daily newspaper the Financial Times and the weekly Economist.

Attempts to provide political leaning labels to these journals are, I believe, misleading. When it is done, then the FT is usually seen as centre-right and the Economist as more to the right. It is wrong to attempt such simplistic categorisations, however, because, although this may come as a surprise to the Wall Street Journal, it is quite possible to believe in free markets and regulated global capitalism and still hold liberal progressive social views. I have known and occasionally worked with journalists associated with both these print outlets and they have my respect for their sincerity and high degree of integrity. It is this which has maintained their world-wide reputation.

Although the most likely to endorse Barack Obama, if either of them did, I was still pleasantly surprised when the FT did so a few days ago.

The main barrier that either of these two journals might have in supporting Obama is undoubtedly the element of protectionism in his economic policy. This view is provided in its most extreme form by one of the FT’s outside contributors William Butler, Professor of European Political Economy, London School of Economics and Political Science, writing in conjunction with Anne Sibert in an article for Centre for Economic Policy Research, criticising "the (mostly) dangerous or (occasionally) just plain silly protectionism of Barack Obama" ( I am providing <a href=http://blogs.ft.com/maverecon/2008/02/the-dangerous-protectionism-of-barack-obama/>this link</a>, because the posts examining their views are the most interesting aspect of the dialogue they have created.)comprehensive health-care reform. This plan would achieve nearly universal insurance without the mandates of rival schemes: characteristically, it combines a far-sighted goal with moderation in the method. Mr McCain’s plan, based on extending tax relief beyond employer-provided insurance, also has merit – it would contain costs better – but is too timid and would widen coverage much less.

Such views did not deter the FT. On October 26th, they came out in full endorsement of Obama:

We applaud his main domestic proposal:

Mr Obama is most disappointing on trade. He pandered to protectionists during the primaries, and has not rowed back. He may be sincere, which is troubling. Should he win the election, a Democratic Congress will expect him to keep those trade-thumping promises. Mr McCain has been bravely and consistently pro-trade, much to his credit.

In responding to the economic emergency, Mr Obama has again impressed – not by advancing solutions of his own, but in displaying a calm and methodical disposition, and in seeking the best advice. Mr McCain’s hasty half-baked interventions were unnerving when they were not beside the point.

On foreign policy, where the candidates have often conspired to exaggerate their differences, this contrast in temperaments seems crucial. For all his experience, Mr McCain has seemed too much guided by an instinct for peremptory action, an exaggerated sense of certainty, and a reluctance to see shades of grey.

He has offered risk-taking almost as his chief qualification, but gambles do not always pay off. His choice of Sarah Palin as running mate, widely acknowledged to have been a mistake, is an obtrusive case in point. Rashness is not a virtue in a president. The cautious and deliberate Mr Obama is altogether a less alarming prospect.

Rest assured that, should he win, Mr Obama is bound to disappoint. How could he not? He is expected to heal the country’s racial divisions, reverse the trend of rising inequality, improve middle-class living standards, cut almost everybody’s taxes, transform the image of the United States abroad, end the losses in Iraq, deal with the mess in Afghanistan and much more besides.

Succeeding in those endeavours would require more than uplifting oratory and presidential deportment even if the economy were growing rapidly, which it will not be.

The challenges facing the next president will be extraordinary. We hesitate to wish it on anyone, but we hope that Mr Obama gets the job.”

After this endorsement, there was some speculation as to which way the Economist might go. The question was answered today. They come out in favour of Obama.

Fair use restriction prevents me from giving a sufficiently long enough extract to give justice to the complex argument that describes the difficulties that they had in making their final decision that led to the headline “America should take a chance and make Barack Obama the next leader of the free world”. I would, in any case, like all progressives to read the article in full, as it provides an insight into how the “thinking Right” would view his presidency. Although many of us would not share all the views expressed in the Economist article, it is an opinion that will need addressing when the euphoria of his candidacy moderates.

Their conclusion, however, is one that we can all welcome:

He has earned it

“So Mr Obama in that respect is a gamble. But the same goes for Mr McCain on at least as many counts, not least the possibility of President Palin. And this cannot be another election where the choice is based merely on fear. In terms of painting a brighter future for America and the world, Mr Obama has produced the more compelling and detailed portrait. He has campaigned with more style, intelligence and discipline than his opponent. Whether he can fulfil his immense potential remains to be seen. But Mr Obama deserves the presidency.

It is a pity that all the Joe the Plumbers, like their heroine Sarah Palin, do not read more widely and more intelligently. If they did, they would know that the endorsement of these two leading business and financial papers are an extraordinary achievement for Barack Obama and commend him as much as any number of Warren Buffets.

I couldn't sort out the formatting, which now seems to have rectified some of iitself, so have posted this as a reply, not as a separate commentary. I hope Tony doesn't mind. It is not worth squat but I didn't want to chuck it away. Grrr!! 

 

Sorry also about the title being truncated. I'll try and find a blog to link to in order to post a properly formatted version on, in case anyone is interested.

Sorry Welshman ... maybe you wouild be happier with just the plain ole HTML editor.  Let me know and I can turn the WYSIWYG editor off for you ...

Thanks Roxy but I think I fell between old HTML and new flashy buttons. I like the new offerings, so I will have another go at some other time.

It has forced me to set up a new blog, however. Nothing posted on it yet: Only In American Politics. It will be somewhere that I can use to rant about the new administration whilst everyone else is allowing Barack Obama a reasonable honeymoon period!