Saturday, October 1, 2011

12 Shocking Quotes From Insiders About The Horrific Economic Crisis That Is Almost Here

12 Shocking Quotes From Insiders About The Horrific Economic Crisis That Is Almost Here

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We are getting so close to a financial collapse in Europe that you can almost hear the debt bubbles popping. All across the western world, governments and major banks are rapidly becoming insolvent. So far, the powers that be are keeping all of the balls in the air by throwing around lots of bailout money. But now the political will for more bailouts is drying up and the number of troubled entities seems to grow by the day. Right now the western world is facing a debt crisis that is absolutely unprecedented in world history. Europe has had a tremendously difficult time just trying to keep Greece afloat, and several much larger European countries are now on the verge of a major financial crisis. In addition, there is a growing number of very large financial institutions all over the western world that are also rapidly approaching a day of reckoning. The global financial system is a sea or red ink, and when we get to the point where there are hundreds of ships going under how is it going to be possible to bail all of them out? The quotes that you are about to read show that quite a few top financial and political insiders know that things cannot hold together much longer and that a horrific economic crisis is coming. We built the global financial system on a foundation of debt, leverage and risk and now this house of cards that we have created is about to come tumbling down.

A lot of people in politics and in the financial world know what is about to happen. Once in a while they will even be quite candid about it with the media.

As I have written about previously, Europe is on the verge of a financial collapse. If things go really badly, things could totally fall apart in a few weeks. But more likely it will be a few more months until the juggling act ends.

Right now, the banking system in Europe is coming apart at the seams. Because the global financial system is so interconnected today, when major European banks start to fail it is going to have a cascading effect across the United States and Asia as well.

The financial crisis of 2008 plunged us into the deepest recession since the Great Depression.

The next financial crisis could potentially hit the world even harder.

The following are 12 shocking quotes from insiders that are warning about the horrific economic crisis that is almost here....

#1 George Soros: "Financial markets are driving the world towards another Great Depression with incalculable political consequences. The authorities, particularly in Europe, have lost control of the situation."

#2 PIMCO CEO Mohammed El-Erian: "These are all signs of an institutional run on French banks. If it persists, the banks would have no choice but to delever their balance sheets in a very drastic and disorderly fashion. Retail depositors would get edgy and be tempted to follow trading and institutional clients through the exit doors. Europe would thus be thrown into a full-blown banking crisis that aggravates the sovereign debt trap, renders certain another economic recession, and significantly worsens the outlook for the global economy."

#3 Attila Szalay-Berzeviczy, global head of securities services at UniCredit SpA (Italy's largest bank): "The only remaining question is how many days the hopeless rearguard action of European governments and the European Central Bank can keep up Greece’s spirits."

#4 Stefan Homburg, the head of Germany's Institute for Public Finance: "The euro is nearing its ugly end. A collapse of monetary union now appears unavoidable."

#5 EU Parliament Member Nigel Farage: "I think the worst in the financial system is yet to come, a possible cataclysm and if that happens the gold price could go (higher) to a number that we simply cannot, at this moment, even imagine."

#6 Carl Weinberg, the chief economist at High Frequency Economics: "At this point, our base case is that Greece will default within weeks."

#7 Goldman Sachs strategist Alan Brazil: "Solving a debt problem with more debt has not solved the underlying problem. In the US, Treasury debt growth financed the US consumer but has not had enough of an impact on job growth. Can the US continue to depreciate the world’s base currency?"

#8 International Labour Organization director general Juan Somavia recently stated that total unemployment could "increase by some 20m to a total of 40m in G20 countries" by the end of 2012.

#9 Deutsche Bank CEO Josef Ackerman: "It is an open secret that numerous European banks would not survive having to revalue sovereign debt held on the banking book at market levels."

#10 Alastair Newton, a strategist for Nomura Securities in London: "We believe that we are just about to enter a critical period for the eurozone and that the threat of some sort of break-up between now and year-end is greater than it has been at any time since the start of the crisis"

#11 Ann Barnhardt, head of Barnhardt Capital Management, Inc.: "It's over. There is no coming back from this. The only thing that can happen is a total and complete collapse of EVERYTHING we now know, and humanity starts from scratch. And if you think that this collapse is going to play out without one hell of a big hot war, you are sadly, sadly mistaken."

#12 Lakshman Achuthan of ECRI: "When I call a recession...that means that process is starting to feed on itself, which means that you can yell and scream and you can write a big check, but it's not going to stop."

*****

In my opinion, the epicenter of the "next wave" of the financial collapse is going to be in Europe. But that does not mean that the United States is going to be okay. The reality is that the United States never recovered from the last recession and there are already a lot of signs that we are getting ready to enter another major recession. A major financial collapse in Europe would just accelerate our plunge into a new economic crisis.

If you want to read something that will really freak you out, you should check out what Dr. Philippa Malmgren is saying. Dr. Philippa Malmgren is the President and founder of Principalis Asset Management. She is also a former member of the Bush economic team. You can find her bio right here.

Malmgren is claiming that Germany is seriously considering bringing back the Deutschmark. In fact, she claims that Germany is very busy printing new currency up. In a list of things that we could see happen over the next few months, she included the following....

"The Germans announce they are re-introducing the Deutschmark. They have already ordered the new currency and asked that the printers hurry up."

This is quite a claim for someone to be making. You would think that someone that used to work in the White House would not make such a claim unless it was based on something solid.

If Germany did decide to leave the euro, you would see an implosion of the euro that would be truly historic.

But as I have written about previously, it should not surprise anyone that the end of the euro is being talked about because the euro simply does not work.

The only way that the euro would have had a chance of working is if all of the governments using the euro would have kept debt levels very low.

Unfortunately, the financial systems of the western world are designed to push governments into high levels of debt.

The truth is that the euro was doomed from the very beginning.

Now we are approaching a day of reckoning. We have been living in the greatest debt bubble in the history of the world, but the bubble is ending. There are several ways that the powers that be could handle this, but all of them will lead to greater financial instability.

In the end, we will see that the debt-fueled prosperity that the western world has been enjoying for decades was just an illusion.

Debt is a very cruel master. It will almost always bring more pain and suffering than you anticipated.

It is easy to get into debt, but it can be very difficult to get out of debt.

There is no way that the western world can unwind this debt spiral easily.

The only way that another massive economic crisis can be put off for even a little while would be for the powers that be to "kick the can down the road" a little farther by creating even more debt.

But in the end, you can never solve a debt problem with more debt.

The next several years are going to be an incredibly clear illustration of why debt is bad.

When the dominoes start to fall, we are going to witness a financial avalanche which is going to destroy the finances of millions of people.

You might want to try to get out of the way while you still can.

Labor Movement Rolls Into Wall Street Occupation

Labor Movement Rolls Into Wall Street Occupation

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The steel and concrete of Lower Manhattan comes alive every day during rush hour, when gray suits pulse through subway tunnels and the city's arteries get choked with street vendors, construction workers and other folks hustling to make a living. Now that a bunch of rabble-rousers have occupied the neighborhood, the workers who form Gotham's backbone are starting to reclaim their turf as well.

It may be too early to draw parallels between the Occupy Wall Street protests at Zuccotti Park (aka Liberty Plaza) and their antecedents in Tahrir Square and Madison. But the movements suggest a general trajectory of grassroots organizing: a spark of protest led by younger activists, followed by the support of labor organizations, bringing up the rear and then moving to the fore.

By Wednesday, the Village Voice reported, the historically militant Transport Workers Union had voted to back, and provide food and services to, the Occupy Wall Street movement. In a video recorded during an evening protest, TWU Local 100 member Christine Williams declared, "The people have finally woke up. And we're here and we're staying and we're not going anywhere."

TWU spokesperson Jim Gannon told the Voice: " A motion was brought up to endorse the protests' goals; I don't know why it took us so long to do it." Better late than never, the union says it now plans to amass on the afternoon of October 5 and march to Zuccotti Park.

Other labor-oriented solidarity actions have been undertaken by professors at the City University of New York affiliated with the Professional Staff Congress union (of which this author is also a member). Their group, Solidarity with OWS, is organizing a demonstration against police abuse this Friday afternoon. (Other notable lefty academic allies include Frances Fox Piven, Christian Parenti, and Stanley Aronowitz.)

According to Crain's New York Business, local unions are collaborating with community-based groupssuch as Make the Road New York, Coalition for the Homeless and Community Voices Heard -- all organizations that are in daily contact with the struggles of the city's poor and working-class.

The city's doormen, security guards and maintenance workers see common ground with the occupation, too. The Huffington Post reports that their union, SEIU 32BJ, said that a planned October 12 rally would embrace the current protests' theme:

"The call went out over a month ago, before actually the occupancy of Wall Street took place," said 32BJ spokesman Kwame Patterson. Now, he added, "we're all coming under one cause, even though we have our different initiatives."

The General Assembly, a proudly amorphous body that is helping coordinate the demonstrations, has set up a Labor Support and Outreach Working Group, which, according to September 29 meeting minutesposted to the Assembly's website, has encouraged protesters to join a demonstration of the Communication Workers of America nearby. Organizers are reportedly gearing up "to carry out a very creative direct action in support of the phone workers."

The convergence between the Wall Street occupation and labor activism may escalate in the coming days amid a standoff between New York Governor Andrew Cuomo and public sector workers. The statewide Public Employees Federation just voted narrowly to reject a five-year contract that would have staved off layoffs at the expense of higher healthcare costs and wage freezes. On Tuesday, PEF union president Kenneth Brynien told reporters that when members saw the concessions demanded of them, "The sacrifices were too great, and they said, 'Enough is enough."

That axiom would fit nicely among the panoply of anticapitalist slogans that protesters have displayed in Downtown Manhattan, proclaiming "People over Profit" and "Heal America, Tax Wall Street."

As sister campaigns emerge in other areas under the banner of "Occupy Together," the Wall Street actions could serve as a kind of petri dish for future protest tactics, building on the occupationalgroundwork laid by smaller demonstrations, such as a recent encampment at City Hall to protest budget cuts, and a Wall Street protest in May that drew union support from 1199 SEIU and the United Federation of Teachers.

As ITT's Akito Yoshikane reported, the lifeblood of the protests has been the young and the frustrated. But the occupation also represents swelling resentment across all sectors of society -- covering expressly the 99 percent of us who are getting screwed and shafted by corporate moguls and, more tragically, our own elected representatives.

Yet the proactive anger has been building in the labor movement far from Wall Street. An editorial by the Socialist Worker points to protests in recent months -- by longshoremen in Washington, striking hospital workers in California, and the groundbreaking Verizon strikers -- as signs of new "fighting mood" among the rank and file:

Workers haven't yet prevailed in all of these struggles, nor will all of them win in the future. But what unites these fights is the activism and solidarity on display, despite a hostile corporate media and aggressive employers.

Labor's new sparks of resistance are proof positive that the defiant spirit of the battle in Wisconsin last winter wasn't a flash in the pan, but a sign that growing numbers of working people are rediscovering their capacity to struggle. After decades of a one-sided class war, the fightback has begun.

Whether organized labor is finally catching up to youth activists, or the young occupiers are at last rekindling an older legacy of mass resistance, the cross-fertilization of movements is underway. Don't ask the diverse alliance to state their agenda -- the movement is organically structured, with no formal "list of demands" yet, and that's part of the fun. Not everyone came to Wall Street knowing exactly what they wanted, but everyone there today knows they've had enough, and that they're not the only ones.

How Companies Plunder and Profit from the Nest Eggs of American Workers

How Companies Plunder and Profit from the Nest Eggs of American Workers

The following is an excerpt from Retirement Heist: How Companies Plunder and Profit From the Nest Eggs of Americans Workers, by Ellen E. Schultz by arrangement with Portfolio, a member of Penguin Group (USA), Inc., Copyright (c) Ellen E. Schultz, 2011.

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In December 2010, General Electric held its Annual Outlook Investor Meeting at Rockefeller Center in New York City. At the meeting, chief executive Jeffrey Immelt stood on the Saturday Night Live stage and gave the gathered analysts and shareholders a rundown on the global conglomerate’s health. But in contrast to the iconic comedy show that is filmed at Rock Center each week, Immelt’s tone was solemn. Like many other CEOs at large companies, Immelt pointed out that his firm’s pension plan was an ongoing problem. The “pension has been a drag for a decade,” he said, and it would cause the company to lose 13 cents per share the next year. Regretfully, to rein in costs, GE was going to close the pension plan to new employees.

The audience had every reason to believe him. An escalating chorus of bloggers, pundits, talk show hosts, and media stories bemoan the burgeoning pension-and-retirement crisis in America, and GE was just the latest of hundreds of companies, from IBM to Verizon, that have slashed pensions and medical benefits for millions of American retirees. To justify these cuts, companies complain they’re victims of a “perfect storm” of uncontrollable economic forces—an aging workforce, entitled retirees, a stock market debacle, and an outmoded pension system that cripples their chances of competing against pensionless competitors and companies overseas.

What Immelt didn’t mention was that, far from being a burden, GE’s pension and retiree plans had contributed billions of dollars to the company’s bottom line over the past decade and a half, and were responsible for a chunk of the earnings that the executives had taken credit for. Nor were these retirement programs—even with GE’s 230,000 retirees—bleeding the company of cash. In fact, GE hadn’t contributed a cent to the workers’ pension plans since 1987 but still had enough money to cover all the current and future retirees.

And yet, despite all this, Immelt’s assessment wasn’t entirely inaccurate. The company did indeed have another pension plan that really was a burden: the one for GE executives. And unlike the pension plans for a quarter of a million workers and retirees, the executive pensions, with a $4.4 billion obligation, have always been a drag on earnings and have always drained cash from company coffers: more than $573 million over the past three years alone.

So a question remains: With its fully funded pension plan, why was GE closing its pensions?

That is one of the questions this book seeks to answer. Retirement Heist explains what really happened to GE’s pensions as well as to the retirement benefits of millions of Americans at thousands of companies. No one disputes that there’s a retirement crisis, but the crisis was no demographic accident. It was manufactured by an alliance of two groups: top executives and their facilitators in the retirement industry—benefits consultants, insurance companies, and banks—all of whom played a huge and hidden role in the death spiral of American pensions and benefits.

Yet, unlike the banking industry, which was rightly blamed for the subprime mortgage crisis, the masterminds responsible for the retirement crisis have walked away blame-free. And, unlike the pension raiders of the 1980s, who killed pensions to extract the surplus assets, they face no censure. If anything they are viewed as beleaguered captains valiantly trying to keep their overloaded ships from being sunk in a perfect storm. In reality, they’re the silent pirates who looted the ships and left them to sink, along with the retirees, as they sailed away safely in their lifeboats.

The roots of this crisis took hold two decades ago, when corporate pension plans, by and large, were well funded, thanks in large part to rules enacted in the 1970s that required employers to fund the plans adequately and laws adopted in the 1980s that made it tougher for companies to raid the plans or use the assets for their own benefit. Thanks to these rules, and to the long-running bull market that pumped up assets, by the end of the 1990s pension plans at many large companies had such massive surpluses that the companies could have fully paid their current and future retirees’ pensions, even if all of them lived to be 99 and the companies never contributed another dime.

But despite the rules protecting pension funds, U.S. companies siphoned billions of dollars in assets from their pension plans. Many, like Verizon, used the assets to finance downsizings, offering departing employees additional pension payouts in lieu of cash severance. Others, like GE, sold pension surpluses in restructuring deals, indirectly converting pension assets into cash.

To replenish the surplus assets in their pension piggy banks, companies cut benefits. Initially, employees didn’t question why companies with multi-billion-dollar pension surpluses were cutting pensions that weren’t costing them anything, because no one noticed their pensions were being cut. Employers used actuarial sleight of hand to disguise the cuts, typically by changing the traditional pensions to seemingly simple account-style plans.

Cutting benefits provided a secondary windfall: It boosted earnings, thanks to new accounting rules that required employers to put their pension obligations on their books. Cutting pensions reduced the obligations, which generated gains that are added to income. These accounting rules are the Rosetta Stone that explains why companies with massively overfunded pension plans went on a pension-cutting spree and began slashing retiree health benefits even when their costs were falling. By giving companies an incentive to reduce the liability on their books, the accounting rules turned retiree benefits plans into cookie jars of potential earnings enhancements and provided employers with the means to convert the trillion dollars in pensions and retiree benefits into an immediate, dollar-for-dollar benefit for the company.

With perfectly legal loopholes that enabled companies to tap pension plans like piggy banks, and accounting rules that rewarded employers for cutting benefits, retiree benefits plans soon morphed into profit centers, and populations of retirees essentially became portfolios of assets and debts, which passed from company to company in swirls of mergers, spin-offs and acquisitions. And with each of these restructuring deals, the subsequent owner aimed to squeeze a profit from the portfolio, always at the expense of the retirees.

The flexibility in the accounting rules, which gave employers enormous latitude to raise or lower their obligations by billions of dollars, also turned retiree plans into handy earnings-management tools.

Unfortunately for employees and retirees, these newfound tricks coincided with the trend of tying executive pay to performance. Thus, deliberately or not, the executives who green-lighted massive retiree cuts were indirectly boosting their own pay.

As their pay grew, managers and officers began diverting growing amounts into deferred-compensation plans, which are unfunded and therefore create a liability. Meanwhile, their supplemental executive pensions, which are based on pay, ballooned along with their compensation. Today, it’s common for a large company to owe its executives several billion dollars in pensions and deferred compensation.

These growing “executive legacy liabilities” are included in the pension obligations employers report to shareholders, and account for many of the “growing pension costs” companies are complaining about. Analysts, shareholders, and others don’t understand that executive obligations are no different from pension obligations for rank-and-file workers and retirees—they are governed by the same accounting rules, and they represent IOUs that a company has on its books. In some ways, executive liabilities are like public pensions: large, growing, and underfunded (or, as in the case of the executives, unfunded).

Unlike regular pensions, the growing executive liabilities are largely hidden, buried within the figures for regular pensions. So even as employers bemoaned their pension burdens, the executive pensions and deferred comp were becoming in some companies a bigger drag on profits.

To offset the impact of their growing executive liabilities on profits, many companies take out billions of dollars of life insurance on their employees, using the policies as informal executive pension funds and collecting death benefits when workers, former employees, and retirees die.

With the help of well-connected Washington lobbyists and leading law firms, over the past two decades employers have steadily used legislation and the courts to undermine protections under federal law, making it almost impossible for employees and retirees to challenge their employers’ maneuvers. With no punitive damages under pension law, employers face little risk when they unilaterally slash benefits, even when promised in writing, since they can pay their lawyers with pension assets and drag out the cases until the retirees give up or die.

As employers curtail traditional pensions, employees are increasingly relying on 401(k) plans, which have already proven to be a failure. Employees save too little, too late, spend the money before retiring, and can see their savings erased when the market nosedives.

But 401(k)s have other features that ensure that the plans, as they exist, will never benefit the majority of employees. The plans are supposed to provide a level playing field, the do-it-yourself retirement vehicle so perfect for an “ownership” society. But the game has been rigged from the beginning. Many companies use these plans as part of a strategy to borrow money cheaply, or in schemes to siphon assets from pension funds.

And just as the new accounting rules led to such mischief, so too did new anti-discrimination rules. Implemented in the 1990s, the rules were intended to ensure that employers didn’t use taxpayer-subsidized 401(k) plans for the favored few, but would make them available to a broad swath of workers. But thanks to the creativity of benefits consultants, employers have used the discrimination rules to shut millions of low-paid employees out of their plans and to provide them with less generous benefits, while enacting other restrictions that make the plans more valuable to managers and executives, at the expense of everyone else.

Today, pension plans are collectively underfunded, hundreds are frozen, and retiree health benefits are an endangered species. And as executive pay and executive pensions spiral, these executive liabilities are slowly replacing pension obligations on many corporate balance sheets.

Meanwhile, the same crowd that created this mess—employers, consultants, and financial firms—are now the primary architects of the “reforms” that will supposedly clean it up. Under the guise of improving retirement security, their “solutions” will enable employers to continue to manipulate retirement plans to generate profit and enrich executives at the expense of employees and retirees. Shareholders pay a price, too.

Their tactics haven’t served as case studies at Harvard Business School, and aren’t mentioned in the copious surveys and studies consultants produce for a gullible public. But the masterminds of this heist should take a bow: They managed to take hundreds of billions of dollars in retirement benefits that were intended for millions of workers and divert them to corporate coffers, shareholders, and their own pockets. And they’re still at it. It might not be possible to resuscitate pension plans, but it isn’t too late to expose the machinations of the retirement industry, which has its tentacles into every type of retirement benefit: profit-sharing plans, 401(k)s, employee stock ownership plans (ESOPs), and plans for public employees, nonprofits, small businesses, and even churches.

The retirement industry has exported its tactics, using them to achieve similar outcomes in retirement plans in Canada, Europe, Australia, and elsewhere, and has big plans for Social Security and its overseas equivalents as well. Unless it is reined in, the global retirement industry will continue to capture retirement wealth earned by many to enrich a relative few.

U.S. Now Controls More than Half of World Arms Sales

U.S. Now Controls More than Half of World Arms Sales

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American arms merchants enjoyed a dominant year in 2010 as the United States was responsible for selling more than half of all weapons worldwide.
Although U.S. arms exports actually declined last year, compared to 2009, the dramatic drop in global arms deals resulted in American suppliers controlling 53% of the market (up from 35% in 2009). Altogether, the U.S. inked $21.3 billion in new weapons orders with foreign countries in 2010. These figures do not include arms deals made directly between commercial weapons makers and other countries outside of the U.S. government program known as the Foreign Military Sales (FMS) system.
Only 49% of all U.S. deals were with developing countries, which usually account for the vast majority of international military purchases. These nations accounted for 70% of all new arms agreements with American suppliers last year. In 2010, U.S. companies led the world in arms sales to developing countries, controlling 40% of the market.
The United States overwhelmingly dominates arms sales to the Near East, with the bulk of sales in the last four years going to Saudi Arabia, the United Arab Emirates, Egypt and Iraq.
Among developing countries, India was the top buyer overall, concluding about $6 billion in new deals. Next were Taiwan ($2.7 billion) and Saudi Arabia ($2.2 billion).

Obama Can Kill Anyone He Wants To

Obama Can Kill Anyone He Wants To

Now we know what embattled Yemeni President Saleh meant when he cryptically told reporters from the Washington Post and Time yesterday: “We are fighting the al-Qaeda organization in Abyan [in Yemen] in coordination with the Americans and Saudis.” The defiant Saleh, who’s long promoted himself as an asset in America’s seemingly nonstop Long War on Terrorism (LWT), apparently knows what he’s talking about. Hours later, Yemen’s military announced that a missile strike had killed Anwar al-Awlaki, the bombastic, American-born Islamist who’s been linked to Al Qaeda and to recent terrorist attempts against the United States.

He’s not exactly Osama bin Laden, whose takedown in Pakistan in April helped spark the current US-Pakistan confrontation. But Awlaki’s assassination, and that’s what it was, is a signal that the Obama administration intends to pursue the LWT to the ends of the earth, regardless of the consequences, even if it means an extrajudicial killing of an American citizen.

Not that killing noncitizens is kosher, but killing an American isn’t. Still, rules are rules, and American citizens are supposed to have legal and civil rights that protect them from political or prosecutorial assassinations, even if they’re bad guys. Apparently, no longer. Still, Awlaki’s killing comes as no surprise, since the Obama administration long ago deemed him kill-worthy. As the Wall Street Journal points out, the CIA tried to kill Awlaki recently: “The U.S. narrowly missed Mr. Awlaki in a failed assassination attempt back in May. U.S. drones fired on a vehicle in the southern Yemen province of Shebwa that the cleric had been driving in earlier the same day.”

Since then, the United States has vastly expanded its Predator and Reaper drone capability far beyond Afghanistan and Pakistan, setting up bases on Indian Ocean islands and targeting Yemen, Somalia and other countries.

The killings were first announced by the Yemen defense ministry and its military, ironic in that the entire country of Yemen is perched at the brink of a civil war in which its establishment, including its military command, has divided loyalties. Not only Awlaki, but another American citizen was killed in the US-orchestrated attack, too:

“Yemen's Defense Ministry said another American militant was killed in the same strike alongside al-Awlaki—Samir Khan, a U.S. citizen of Pakistani heritage who produced ‘Inspire,’ an English-language al-Qaida Web magazine that spread the word on ways to carry out attacks inside the United States.”

Awlaki was born in New Mexico, and he was linked to the Fort Hood shootings at a military base in Texas and to the attempted Times Square bombing, though his exact role in those and other cases is unclear, that is, whether he masterminded or organized them or simply served as a kind of spiritual mentor to people who were planning acts of violence anyway. The point is, no judicial case has been made against Awlaki, he hasn’t been formally accused in those events or others, the charges against him have never been proved in court. He was deemed guilty by the CIA and the US national security apparatus, and the sentence of death was carried out.

Speaking to the Wall Street Journal, a senior US official said: “His death takes a committed terrorist, intent on attacking the United States, off the battlefield. Awlaki and AQAP [Al Qaeda in the Arabian Peninsula] are also responsible for numerous terrorist attacks in Yemen and throughout the region, which have killed scores of Muslims.” Of course, whether Awlaki and AQAP have killed scores of Muslims or not isn’t the point: unless the Obama administration truly wants to arrogate to itself the role of world policeman, it shouldn’t be in the business of executing, extrajudicially, anyone it wants to, whether they’re guilty of killing Muslims, Hindus, Jews or Christians.

The due-process-free assassination of U.S. citizens is now reality

The due-process-free assassination of U.S. citizens is now reality

Without a shred of due process, far from any battlefield, President Obama succeeds in killing Anwar al-Awlaki

Anwar al-Awlaki

FILE - In this Nov. 8, 2010 file image taken from video and released by SITE Intelligence Group on Monday, Anwar al-Awlaki speaks in a video message posted on radical websites. A senior U.S. counterterrorism official says U.S. intelligence indicates that U.S.-born al-Qaida cleric Anwar al-Awlaki has been killed in Yemen. (AP Photo/SITE Intelligence Group, File) NO SALES (Credit: AP Photo/SITE Intelligence Group, File)

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(updated below)

It was first reported in January of last year that the Obama administration had compiled a hit list of American citizens whom the President had ordered assassinated without any due process, and one of those Americans was Anwar al-Awlaki. No effort was made to indict him for any crimes (despite a report last October that the Obama administration was “considering” indicting him). Despite substantial doubt among Yemen experts about whether he even had any operational role in Al Qaeda, no evidence (as opposed to unverified government accusations) was presented of his guilt. When Awlaki’s father sought a court order barring Obama from killing his son, the DOJ argued, among other things, that such decisions were “state secrets” and thus beyond the scrutiny of the courts. He was simply ordered killed by the President: his judge, jury and executioner. When Awlaki’s inclusion on President Obama’s hit list was confirmed, The New York Times noted that “it is extremely rare, if not unprecedented, for an American to be approved for targeted killing.”

After several unsuccessful efforts to assassinate its own citizen, the U.S. succeeded today (and it was the U.S.). It almost certainly was able to find and kill Awlaki with the help of its long-time close friend President Saleh, who took a little time off from murdering his own citizens to help the U.S. murder its. The U.S. thus transformed someone who was, at best, a marginal figure into a martyr, and again showed its true face to the world. The government and media search for The Next bin Laden has undoubtedly already commenced.

What’s most striking about this is not that the U.S. Government has seized and exercised exactly the power the Fifth Amendment was designed to bar (“No person shall be deprived of life without due process of law”), and did so in a way that almost certainly violates core First Amendment protections (questions that will now never be decided in a court of law). What’s most amazing is that its citizens will not merely refrain from objecting, but will stand and cheer the U.S. Government’s new power to assassinate their fellow citizens, far from any battlefield, literally without a shred of due process from the U.S. Government. Many will celebrate the strong, decisive, Tough President’s ability to eradicate the life of Anwar al-Awlaki — including many who just so righteously condemned those Republican audience members as so terribly barbaric and crass for cheering Governor Perry’s execution of scores of serial murderers and rapists: criminals who were at least given a trial and appeals and the other trappings of due process before being killed.

From an authoritarian perspective, that’s the genius of America’s political culture. It not only finds ways to obliterate the most basic individual liberties designed to safeguard citizens from consummate abuses of power (such as extinguishing the lives of citizens without due process). It actually gets its citizens to stand up and clap and even celebrate the destruction of those safeguards.

* * * * *

In the column I wrote on Wednesday regarding Wall Street protests, I mistakenly linked to a post discussing a New York Times article by Colin Moynihan as an example of a “condescending” media report about the protest. There was nothing condescending or otherwise worthy of criticism in Moynihan’s article; I meant to reference this NYT article by Ginia Bellafante. My apologies to Moynihan, who rightly objected by email, for the mistake.

UPDATE: What amazes me most whenever I write about this topic is recalling how terribly upset so many Democrats pretended to be when Bush claimed the power merely to detain or even just eavesdrop on American citizens without due process. Remember all that? Yet now, here’s Obama claiming the power not to detain or eavesdrop on citizens without due process, but to kill them; marvel at how the hardest-core White House loyalists now celebrate this and uncritically accept the same justifying rationale used by Bush/Cheney (this is war! the President says he was a Terrorist!) without even a moment of acknowledgment of the profound inconsistency or the deeply troubling implications of having a President — even Barack Obama — vested with the power to target U.S. citizens for murder with no due process.

Also, during the Bush years, civil libertarians who tried to convince conservatives to oppose that administration’s radical excesses would often ask things like this: would you be comfortable having Hillary Clinton wield the power to spy on your calls or imprison you with no judicial reivew or oversight? So for you good progressives out there justifying this, I would ask this: how would the power to assassinate U.S. citizens without due process look to you in the hands of, say, Rick Perry or Michele Bachmann?

The truth about voter suppression

The truth about voter suppression

The GOP is pushing restrictive voting legislation unlike anything since the Voting Rights Act of 1965

The truth about voter suppression

(Credit: AP/Mary Altaffer)

The national trauma of the 2000 presidential election and its messy denouement in Florida and the U.S. Supreme Court made, for a brief moment, election reform a cause célèbre. The scrutiny of election administration went far beyond the vote counting and recounting that dominated headlines. The Florida saga cast a harsh light on the whole country’s archaic and fragmented system of election administration, exemplified by a state where hundreds of thousands of citizens were disenfranchised by incompetent and malicious voter purges, Reconstruction-era felon voting bans, improper record-keeping, and deliberate deception and harassment.

The outrage generated by the revelations of 2000 soon spent itself or was channeled into other avenues, producing, as a sort of consolation prize, the Help America Vote Act (HAVA) of 2002, an underambitious and underfunded law mainly aimed at preventing partisan mischief in vote counting. The fundamental problem of accepting 50 different systems for election administration, complicated even more in states like Florida where local election officials control most decisions with minimal federal, state or judicial oversight, was barely touched by HAVA. As Judith Browne-Dianis, of the civil rights group the Advancement Project, told me: “The same cracks in the system have persisted.”

Banks Successfully Lobbied For Weaker Bailout Repayment Rules So They Could Pay Bonuses

Banks Successfully Lobbied For Weaker Bailout Repayment Rules So They Could Pay Bonuses


When the nation’s biggest banks were bailed out in 2008 via the $700 billion Troubled Asset Relief Program, the money came with a few (very loose) strings, including restrictions on executive compensation and some requirements for the amount of capital the banks would have to raise in order to escape from TARP.

But as a new report from the Special Inspector General for TARP shows, even these restrictions were too much for some of the nation’s biggest banks — including Bank of America, Wells Fargo, and PNC — who lobbied for easier payback requirements so that they could be freed from restrictions on paying bonuses. And Treasury obliged their requests:

Federal banking regulators relaxed the November 2009 repayment criteria only weeks after they were established, bowing at least in part to a desire to ramp back the Government’s stake in financial institutions and to pressure by institutions seeking a swift TARP exit to avoid executive compensation restrictions and the stigma associated with TARP participation. The large financial institutions seeking to exit TARP were notably persistent in their efforts to resist regulatory demands to issue common stock, seeking instead morecreative, cheaper, and less sturdy alternatives that provide less short- or long-term loss protection than new common stock. Bank of America, Wells Fargo, and PNC, for example, requested expedited repayment, but each institution balked at issuing the amount of common stock required by regulators.

The practical upshot of weakening standards and letting banks repay their bailout funds early is that several of them were likely too weak to confidently stand on their own. As CNN Money put it, “this report is the first in many months to raise new questions about the health of some of the biggest banks after they were allowed to stand on their own two feet.”

Not all regulators were on board with allowing the biggest banks to leave TARP. Federal Deposit Insurance Corp. Chairman Shelia Bair, for instance, said that the banks’ repayment plans were based on a “gimmick.” “That just mystified me. The point was if they’re not strong enough, they shouldn’t have been exiting TARP,” Bair said. But Treasury still saw fit to let banks repay TARP and get back to paying outsized bonuses. But hey, at least they’re cutting down on office foliage!

Police Arresting Protesters on Brooklyn Bridge

Police Arrest About 500 Protesters on Brooklyn Bridge

Robert Stolarik for The New York TimesSome demonstrators that walked from Zuccotti Park in lower Manhattan to the Brooklyn Bridge were arrested on Saturday when they blocked traffic on the Brooklyn-bound lanes.

Updated, 7:58 p.m. | In a tense showdown above the East River, the police arrested about 500 demonstrators from the Occupy Wall Street protests who took to the roadway as they tried to cross the Brooklyn Bridge on Saturday afternoon.

The police did not immediately release precise arrest figures, but said it was the choice of those marchers that led to the swift enforcement.

“Protesters who used the Brooklyn Bridge walkway were not arrested,” said the head police spokesman, Paul J. Browne. “Those who took over the Brooklyn-bound roadway, and impeded vehicle traffic, were arrested.”

But many protesters said that they thought the police had tricked and trapped them, allowing them onto the bridge and even escorting them across, only to surround them in orange netting after hundreds of them had entered.

“The cops watched and did nothing, indeed, seemed to guide us onto the roadway,” said Jesse A. Myerson, a media coordinator for Occupy Wall Street who was in the march but was not arrested.

Things came to a head shortly after 4 p.m., as the 1,500 or so marchers reached the foot of the Brooklyn-bound car lanes of the bridge, just east of City Hall.

In their march north from Zuccotti Park in lower Manhattan — headquarters for the last two weeks of a protest movement against what demonstrators call inequities in the economic system — they had stayed on the sidewalks, forming a long column of humanity penned in by officers on scooters.

Where the entrance to the bridge narrowed their path, some marchers, including organizers, stuck to the generally agreed-upon route and headed up onto the wooden walkway that runs between and about 15 feet above the bridge’s traffic lanes.

But about 20 others headed for the Brooklyn-bound roadway, said Christopher T. Dunn of the New York Civil Liberties Union, who accompanied the march. Some of them chanted “take the bridge.” They were met by a handful of high-level police supervisors, who blocked the way and announced repeatedly through bullhorns that the marchers were blocking the roadway and that if they continued to do so, they would be subject to arrest.

There were no physical barriers, though, and at one point, the marchers began walking up the roadway with the police commanders in front of them – seeming, from a distance, as if they were leading the way. The Chief of Department Joseph J. Esposito, and a horde of other white-shirted commanders, were among them.

Ozier Muhammad/The New York TimesPolice secured some protesters’ hands with plastic ties.

After allowing the protesters to walk about a third of the way to Brooklyn, the police then cut the marchers off and surrounded them with orange nets on both sides, trapping hundreds of people, said Mr. Dunn. As protesters at times chanted “white shirts, white shirts,” officers began making arrests, at one point plunging briefly into the crowd to grab a man.

The police said that those arrested were taken to several police stations and were being charged with disorderly conduct, at a minimum.

A freelance reporter for The New York Times, Natasha Lennard, was among those arrested. She was later released.

Mr. Dunn said he was concerned that those in the back of the column who might not have heard the warnings “would have had no idea that it was not O.K. to walk on the roadway of the bridge.” Mr. Browne said that people who were in the rear of the crowd that may not have heard the warnings were not arrested and were free to leave.

Earlier in the afternoon, as many as 10 Department of Correction buses, big enough to hold 20 prisoners apiece, had been dispatched from Rikers Island in what one law enforcement official said was “a planned move on the protesters.”

Etan Ben-Ami, 56, a psychotherapist from Brooklyn who was up on the walkway, said that the police seemed to make a conscious decision to allow the protesters to claim the road. “They weren’t pushed back,” he said. “It seemed that they moved at the same time.”

Mr. Ben-Ami said he left the walkway and joined the crowd on the road. “It seemed completely permitted,” he said. “There wasn’t a single policeman saying ‘don’t do this’.”

He added: “We thought they were escorting us because they wanted us to be safe.” He left the bridge when he saw officers unrolling the nets as they prepared to make arrests. Many others who had been on the roadway were allowed to walk back down to Manhattan.

Mr. Browne said that the police did not trick the protesters into going onto the bridge.

“This was not a trap,” he said. “They were warned not to proceed.”

In related protests elsewhere in the country, 25 people were arrested in Boston for trespassing while protesting Bank of America’s foreclosure practices, according to Eddy Chrispin, a spokesman for the Boston Police Department. The protesters were on the grounds and blocking the entrance to the building, Mr. Chrispin said.

The End of Poverty

Is Another Depression Possible?: A Comparison of "The Great Depression" and "The Great Recession"

Is Another Depression Possible?: A Comparison of "The Great Depression" and "The Great Recession"

Go To Original

In 2007, the world became engulfed in the largest economic slump since the Great Depression. The crisis was so damaging it was coined “the Great Recession” and there was much comparison of the recession to the Great Depression of the 1930s in the mainstream media. However, what many failed to do was an in-depth analysis of both the Great Depression and the Great Recession, to compare and contrast to two. Thus, this article will be a comparison of both economic downfalls, ending in an analysis of the current economic situation America finds itself in and asking the question if another Great Depression is possible.

The decade prior to the 1930s, the US was in a time of great economic boom known as “The Roaring Twenties.” Yet while the nation’s income rose about 20% (from $74.3 billion in 1923 to $89 billion in 1929), the majority of this wealth went to the richest as can be seen by the fact that “in 1929 the top 0.1% of Americans had a combined income equal to the bottom 42%” [1] and that the disposable income per capita rose 9% from 1920 to 1929, while the top 1% enjoyed a massive 75% increase in per capita disposable income. This greatly increased wealth disparity and led to a imbalance in the US economy where demand wasn’t equal to supply and thus there was an oversupply of goods as “those [the poor and the middle class] whose needs were not satiated could not afford more, whereas the wealthy were satiated by spending only a small portion of their income,” [2] which caused the US to become reliant on three things to keep the economy afloat: credit sales, luxury spending, and investment by the rich. However, the major flaw of an economy based on credit sales, luxury spending, and investments was that all three of those activities depended upon people’s confidence in the economy. If confidence were to lower, then those activities would come to a halt and with it the US economy.

The massive inequality in wealth was not solely in terms of socioeconomic status, but also extended to corporations as well. During the first World War, the federal government subsidized farms in earnest as they wanted to feed not only Americans, but also Europeans. However, once the war ended, so did subsidies for farms. The government began to support the automobile and radio industries, with help from then-President Calvin Coolidge in the form of pressuring the Federal Reserve to keep easy credit, as to allow for both industries to easily be heavily invested in.

In the 1920s, the profits of the automobile and its connected industries such as lead, nickel, and steel skyrocketed, so much so, that by 1929 “a mere 200 corporations controlled approximately half of all corporate wealth.” [3] The automobile boom also led to the creation of hotels and motels which in turn led “Americans spent more than a $1 billion each year on the construction and maintenance of highways, and at least another $400 million annually for city streets” [4] in the 1920s. In addition to the massive success of the automobile industry, the radio industry also preformed exceptionally well as “Radio stations, electronic stores, and electricity companies all needed the radio to survive, and relied upon the constant growth of the radio market to expand and grow themselves.” [5]

This dependence on two main industries to support the entire US economy led to quite serious problems as in the case of depending on the spending habits of the upper class to support the economy, if the expansion of either the radio or automobile industries slowed down or halted, the US economy would meet the same fate.

Still further, there was wealth inequality on the international banking scene. After World War 1, the Americans lent their “European allies $7 billion, and then another $3.3 billion by 1920” and by 1924 “the U.S. started lending to Axis Germany,” eventually “climbing to $900 million in 1924, and $1.25 billion in 1927 and 1928” [6] The Europeans then used the loans to buy US goods and thus were in no shape to pay back the loans. One must realize that after World War 1, virtually all of Europe was hit hard economically by the war and thus unable to make any goods with which to sell, yet the US played a role as well due to its high tariffs on imports, thus increasing the difficulty in which Europe could sell goods and pay off its debt.

Yet, the massive wealth inequalities domestically were not the only problems that led to the stock market crash, financial speculation was rampant also, which allowed corporations to make huge amounts of money. As long as stock prices continued to rise, the corporation itself became near-meaningless. “One such example is RCA corporation, whose stock price leapt from 85 to 420 during 1928, even though it had not yet paid a single dividend.” [7] This was a serious fundamental problem in the stock market as many forgot that if stock prices increase extremely quickly, a bubble is being created and sooner or later it will burst. This speculation greatly distorted the values of corporations. Usually, the stock price somewhat correlates with the performance of the company, but due to the rampant speculation, companies that were doing horribly could now seem as if they were great investments, all based on the increase in their stock price.

A factor that led to rampant speculation was the ability to buy stocks on margin, which allowed for one to buy stocks without actually having the money. Due to this, investors could potentially get extremely high returns on their investments. Buying stocks on margin was quite easy as the process

functioned much the same way as buying a car on credit. Using the example of [the RCA corporation], a Mr. John Doe could buy 1 share of the company by putting up $10 of his own, and borrowing $75 from his broker. If he sold the stock at $420 a year later he would have turned his original investment of just $10 into $341.25 ($420 minus the $75 and 5% interest owed to the broker). That makes a return of over 3400%! [8] (emphasis added)

This massive speculation led stock prices to incredibly high levels, with “the total of outstanding brokers' loans [being] over $7 billion” [9] by mid-1929.

The stock market bubble soon burst as on October 21, 1929, prices began to fall so rapidly that the ticker fell behind. Prices fell even further due to investors fears which led them to sell their shares. The speculation and wealth inequality caused a major undermining of the entire market which led to the wealthy ending their spending on luxury items and investing, as well as “[the] middle-class and poor stopped buying things with installment credit for fear of loosing their jobs, and not being able to pay the interest,” [10] and with it the US economy came to a griding halt. The lack of spending led to a nine percent decrease in industrial production from October to December 1929. This led to job losses, defaults on interest payments, and the destruction of the radio and automobile industries as inventory grew due to no one having the ability to purchase anything.

Internationally, loaning had already come to an abrupt halt earlier in the decade because “With such tremendous profits to be made in the stock market nobody wanted to make low interest loans” [11] and trade quickly ended as the US increased already high tariffs and foreigners quit purchasing US goods.

A topic that is rarely mentioned in regards to the Great Depression is the role of the Federal Reserve. The Fed played a major role in why investment purchases collapsed dramatically. The main problem was that in the onset of the Great Depression, there was rampant deflation. This was caused by the fact that the M1 money supply had reached a peak in 1929 and went downhill from there, yet the Fed didn’t see this. Instead, they saw “only the statistics on the monetary base, the currency in circulation plus the funds held as reserves by the banks with the twelve Federal Reserve Banks,” [12] which showed that the monetary base had been steadily increasing since about 1929. Thus, since the Fed saw that the money supply was increasing, they found no reason to act, when in reality, the M2 money supply was decreasing rapidly. However, in the late 1920s, the Fed acted to end speculative banking and wound up applying more restrictive monetary policies than thought. This resulted in banks closing en masse, which the Fed initially welcomed, yet this caused the banks and the banking public [to become] alarmed. Some people withdrew their funds from the banks. The banks became worried about withdrawal of deposits and even runs on banks. The banks reacted by holding reserves in excess of what the Fed required. [13]

This massive withdrawal of funds emptied the coffers of banks, thus causing the aforementioned deflation. The Fed’s actions, along with the stock market crash, led to a 90% decrease in investment purchases, cutbacks in the labor force due to business not being able to sell anything, and a downturn in consumer spending.

Thus, due to a mixture of socio-economic and industrial wealth inequality, high tariffs on foreign imports, a stock market bubble, and poor economic management by the Federal Reserve, the United States descended into the Great Depression.

Initially, in the onset of the Depression, then-President Hoover decided against the government taking action to help individuals on the grounds that “if left alone the economy would right itself and argued that direct government assistance to individuals would weaken the moral fiber of the American people.” [14] However, when he was forced by Congress to intervene in the economy, Hoover focused his “spending [on stabilizing] the business community, believing that returning prosperity would eventually ‘trickle down’ to the poor majority,” [15] and thus began the first implementation of what would later be called in the ‘70s, “trickle-down economics.”

The public, being appalled by the lack of empathy from Hoover, voted Franklin D. Roosevelt (FDR) into office. Once in office, he began embarking on programs that would come to be known as “The New Deal.” However, this was not a deal concerned with easing the pain of the Depression on ordinary people, rather FDR “sought to save capitalism and the fundamental institutions of American society from the disaster of the Great Depression.” [16] While the popular view is that the New Deal was radically different from Hoover’s plan, in reality the two plans didn’t truly differ to much as while some social programs were implemented, overall FDR’s plan “tended toward a continuation of ‘trickle down’ policies, albeit better-funded and executed more creatively.” [17]

He never truly adopted Keynesian economics, which argued that the “government should use its massive financial power (taxing and spending) as a sort of ballast to stabilize the economy.” [18] This can be seen in the Agricultural Adjustment Act which paid farmers to produce less, however, this “did little for smaller farmers and led to the eviction and homelessness of tenants and sharecroppers whose landlords hardly needed their services under a system that paid them to grow less” [19], while also not addressing the main problem of the Depression: weak consumer spending. Overall, the Act benefited mainly moderate and large agriculture operations. Another example is the National Industrial Recovery Act. The National Industrial Recovery Act encouraged industries to avoid selling below cost to attract more customers, and while this was good for businesses in the short run, it “resulted in increased unemployment and an even smaller customer pool in the long-run.” [20] FDR’s overall goal, while he did aid in the creation of social programs such as Social Security and enacted many jobs programs, was to protect capitalism and the very institutions that led to the Great Depression.

Another topic that isn’t even mentioned in examinations of the Great Depression is the Depression’s effect on home mortgages. During the 1920s and early 1930s, the US experienced a housing boom, whose peak was around 1924 for single-family houses and 1927 for multi-family houses.[21] In 1928, when the Fed began cracking down on speculation, housing investments began to fall due to the sharp increase in interest rates. Housing debt had “increased rapidly during the 1920s and continued to grow even after housing starts had begun to decline and house prices had leveled off” [22] and due to deflation, housing debt continued to increase until 1932. While rising debt usually doesn’t pose a problem for households as long as they could make their loans payments, yet household incomes and wealth decreased greatly during the Depression, thus leading “loan delinquencies and foreclosures [to soar], fueled by falling household incomes and property values.” [23] It was extremely difficult for homeowners to keep their property as “Falling incomes made it increasingly difficult for borrowers to make loan payments or to refinance outstanding loans as they came due.” [24] However, the situation would improve as unlike the experience with the financial industry, the government stepped in to remedy the situation with the creation of agencies such as the Federal National Mortgage Association and the Federal Home Loan Bank System which aided homeowners in financing their mortgages.

Unlike the Depression, where falling mortgages were a side effect of the overall economic crash, in this current recession, mortgages played a major role in facilitating a near collapse of the global economy. Ordinary Americans found themselves able to purchase homes as credit was easily available. Yet due to predatory lending on the part of banks, the majority of these houses were being bought by people who couldn’t afford them and many homeowners would soon find themselves having underwater mortgages due to “one-year adjustable –rate mortgages (ARMs) with teaser rates for first 2-3 years of a mortgage” which “were set artificially low and then reset much higher.” [25] Due to credit rating agencies lowering the requirements for having mortgages rated AAA, the majority of these mortgages “were packaged into opaque securities and sold to public” and this “Subprime loans increased from 9% of new mortgage originations in 2001 to 40% in 2006.” [26] Yet at the end of 2006, events took a turn for the worse as mortgage payments decreased and with it the value of mortgage-backed securities.

The mortgage bubble burst left in its wake “destroyed household savings in the ensuring financial meltdown, forcing individuals to slash their spending,” [27] which led to a massive decrease in consumer spending and a long, painful recession. The housing bubble burst also had larger consequences as “The disappearance of cushion against future losses virtually froze the credit market.” [28] In addition to this, several large financial institutions such as Lehman Brothers and Bear Stearns collapsed, thus prompting the government to intervene, though not on the behalf of the American people.

Just as in the Great Depression, the US government’s main goal was to protect the very institutions that caused the financial crisis instead of dealing with them. There were cries from leaders of the financial and political elite that massive companies such as AIG were “too big too fail,” thus the US government embarked upon a $700 billion bailout. However, the true cost of the bail out is more like $839 billion as

the $700 billion [was] in addition to an $85 billion agreement on a bailout of the insurance giant American International Group, plus $29 billion [was] support that the government pledged in the marriage of Bear Stearns and JPMorgan Chase. On top of all that, the Congressional Budget Office [said] the federal bailout of the mortgage finance companies Fannie Mae and Freddie Mac could cost $25 billion. [29]

This money was paid to the corporations by the US taxpayer. While the financial institutions stated that they needed to money to survive, once gotten, corporations used to bailout money to stabilize their corporations, but also to hand out massive bonuses to corporate executives. [30] This bailout did not address the root causes of the financial meltdown: incompetence of the US government in regulating the financial industry, massive financial speculation, and predatory lending.

As they had during the Depression, the Federal Reserve played a role in bringing about the recession. Their main goal was to try “to artificially prop up those markets [of bad debt and worthless assets] and keep those assets trading at prices far in excess of their actual market value.” [31] To this end, the Fed provided $16 trillion to domestic and foreign banks in the form of secret loans and bought mortgage-backed securities that were in reality, completely and totally worthless. [32] In addition to this, many of the people on the board of directors at the Federal Reserve also had connections to corporations that received bailout money.

For example, the CEO of JP Morgan Chase served on the New York Fed's board of directors at the same time that his bank received more than $390 billion in financial assistance from the Fed. Moreover, JP Morgan Chase served as one of the clearing banks for the Fed's emergency lending programs.


In another disturbing finding, the GAO said that on Sept. 19, 2008, William Dudley, who is now the New York Fed president, was granted a waiver to let him keep investments in AIG and General Electric at the same time AIG and GE were given bailout funds. One reason the Fed did not make Dudley sell his holdings, according to the audit, was that it might have created the appearance of a conflict of interest. [33] (emphasis added)

Thus, there was a very cozy relationship between the Federal Reserve and the banks that received bailout funds. This only serves to show the revolving door relationship between the two groups and how the Fed’s actions were subject to the interests of the large banks.

However, these are not the only actions the Fed took that helped to create the financial crisis. Their role goes back even further, almost a decade. In the early 1990s, Congress played a large role in trying to increase the amount of homeowners by passing the Home Ownership & Equity Protection Act of 1994 (HOEPA), which planned to address concerns of “reverse redlining” which was“the practice of targeting residents of specific disadvantaged communities for credit on unfair terms, and in particular by second mortgage lenders, home improvement contractors, and finance companies.” [34] To achieve these ends, the Act called for the establishment of residential mortgage loans which were fixed so that it would be easier for low-income home owners to repay their loans. The Act also gave the Fed the ability, not only to ensure that HOEPA was carried out, but also to

exempt specific mortgages or categories of mortgages from any or all of the HOEPA requirements, or prohibit additional acts or practices in connection with any mortgage (not just “high cost mortgages”) that the Board determines are unfair, deceptive, or designed to evade HOEPA, or that are made in connection with a refinancing of a mortgage loan that the Board finds to be associated with abusive lending practices, or that are otherwise not in the interest of the borrower. [35]

However, then-Fed Chairman Alan Greenspan refused to curb predatory lending as he touted a kind of laissez-faire economics and argued that the market would take care of itself. This refusal to attack predatory lenders would come back in later years in the form of the current financial crisis.

Many thought that with the election of Barack Obama, he would fulfill his much touted goals of “hope and change” to restore the US, yet this did not occur with America’s foreign policy, nor did it occur with America’s economic policy. Obama’s economic team consisted of former Treasury Secretary Robert Rubin who was the “chairman of Citigroup Inc.'s executive committee when the bank pushed bogus analyst research, helped Enron Corp. cook its books, and got caught baking its own” and also “was a director from 2000 to 2006 at Ford Motor Co., which also committed accounting fouls and now is begging Uncle Sam for Citigroup- style bailout cash.” [36] Two former Citigroup directors, Xerox Corp. Chief Executive Officer Anne Mulcahy and Time Warner Inc. Chairman Richard Parsons, were appointed to his economic team. Both Mulcahy and Parsons have shady pasts as not only were “Xerox and Time Warner got pinched years ago by the Securities and Exchange Commission for accounting frauds that occurred while Mulcahy and Parsons held lesser executive posts at their respective companies,” [37] but both were directors at Fannie Mae when that company was breaking accounting rules. To round out the group, former Commerce Secretary William Daley was appointed and at the time of his appointment, Daley was “a member of the executive committee at JPMorgan Chase & Co., which, like Citigroup, is among the nine large banks that just got $125 billion of Treasury's bailout budget.” [38] Thus, it was no surprise to anyone who was paying close attention to the financial crisis and Obama’s economic team that instead of attacking the root causes of the crisis, instead these advisors opted for a massive stimulus package of almost $800 billion. The situation had long been one where the patients were running the asylum.

While the stimulus undoubtedly saved millions of jobs, it didn’t fulfill its main objective: stimulate the economy. The debt ceiling debacle would serve to only make the situation worse as the Republicans wanted solely austerity measures implemented and the Democrats capitulated, almost without a fight. Both parties began to create in the public’s mind the idea that the only way to rein in the deficit was for austerity measures to be implemented. However, these austerity measures will only serve to exacerbate the situation as the IMF stated that implementing austerity measures “will hurt income in the short term and worsen unemployment in the long term.” [39] Thus, the $2 trillion that the government plans to cut in social programs will only serve to make an already horrid situation even worse.

Currently, America’s fiscal situation is in tatters. While the stock market is doing well, the real problem is unemployment, which is on a level that hasn’t been seen since the Great Depression [40] and things are not going to get better soon. This becomes a serious problem as without employment, people don’t have money to spend and America’s economy “is predominantly driven by consumer spending, which accounts for approximately 70 percent of all economic growth.” [41] (emphasis added)

Another Depression is possible due to the fact that while things may seem to have calmed down for now, the deep, structural problems within America’s economy still exist, are still active and therefore still have the potential to do major damage in the future. Economist Nouriel Roubini stated that another crisis is already manifesting itself in developed nations. [42] The only thing that the bailouts served to do was delay the inevitable: the bailed out corporations will fail due to their own risky practices and they will bring the US and world economies down with them.

Notes

1: http://www.gusmorino.com/pag3/greatdepression/index.html
2: Ibid
3: Ibid
4: Ibid
5: Ibid
6: Ibid
7: Ibid
8: Ibid
9: Ibid
10: Ibid
11: Ibid
12: http://www.sjsu.edu/faculty/watkins/dep1929.htm
13: Ibid
14: http://iws.collin.edu/kwilkison/Online1302home/20th%20Century/DepressionNewDeal.html
15: Ibid
16: Ibid
17: Ibid
18: Ibid
19: Ibid
20: Ibid
21: http://research.stlouisfed.org/publications/review/08/05/Wheelock.pdf
22: Ibid
23: Ibid
24: Ibid
25: http://www.ijeronline.com/documents/volumes/vol1issue1/ijer2010010107.pdf
26: Ibid
27: Ibid
28: Ibid
29: http://www.nytimes.com/2008/09/21/business/21qanda.html
30: http://www.cbsnews.com/stories/2008/11/12/earlyshow/main4595179.shtml
31: http://newsblaze.com/story/20080927140845tsop.nb/topstory.html
32: http://sanders.senate.gov/newsroom/news/?id=9e2a4ea8-6e73-4be2-a753-62060dcbb3c3
33: Ibid
34: http://apps.americanbar.org/buslaw/committees/CL130000pub/newsletter/200708/natter.pdf
35: Ibid
36: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aNCFKvAMUQ6w
37: Ibid
38: Ibid
39: http://www.huffingtonpost.com/2011/09/13/imf-austerity_n_960199.html
40: http://www.globalresearch.ca/index.php?context=va&aid=25098
41: http://fivethirtyeight.blogs.nytimes.com/2010/09/19/consumer-spending-and-the-economy/
42: http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20110911/REG/309119958