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 New Crisis, Old IsmsPosted on Mar 21, 2008By David Sirota The Federal Reserve Bank’s decision last week to address the housing crisis by extending $200 billion of taxpayer-financed credit to Wall Street banks was met with a stunned reaction typical of surprising events. But really, the move was the expression of longstanding isms that routinely package corruption as sound public policy. Some background: During the housing boom, banks doled out home loans to financially strapped borrowers, often on predatory terms. On the creditor side, these same banks packaged many of the loans as complex securities and sold them off to unwitting investors, generating a handsome profit on the paper transactions. At the same time, Wall Street used campaign contributions to coerce Congress into blocking anti-predatory-lending bills and repealing a landmark law regulating how banks could buy and sell securities. Predictably, many borrowers are now defaulting on their loans, meaning losses for financial institutions that hold mortgages and mortgage-backed securities. The Fed responded with what author Naomi Klein calls disaster capitalism—the age-old practice of using a crisis to enrich corporate interests. In this case, the Fed is using the housing emergency to justify giving taxpayer cash to Wall Street in exchange for its worthless mortgages. “What the Fed really did was lend money to banks and accept the counterfeit currency as collateral, treating it just as though it were real money,” says Dean Baker, the co-director of the Center for Economic and Policy Research. But this is not only disaster capitalism, it is also Big Boy Bailout-ism—the kind we’ve become accustomed to since the savings and loan scandal of the 1980s. It is an ideology that rewards wealthy political donors for irresponsible behavior and ignores the real victims. If you are a banking executive whose risky loans go bad, your industry’s campaign donations get you Big Boy Bailout-ism that makes taxpayers “take the bad loans off the banks’ books,” as one financial analyst gushed this week. If you are a regular Joe who can’t pay your home loan, you get foreclosed on. The Fed’s scheme also embraces Feed-the-Beast-ism—an ideology that prescribes pumping taxpayer money into a crisis, rather than demanding reforms. Confronting an energy and climate emergency, Republicans’ answer was not massive alternative energy investments, but a 2005 energy bill giving tax breaks to the carbon-belching fossil fuel companies that finance the GOP. In the face of a health care catastrophe, the Bush administration’s 2003 Medicare bill didn’t crack down on pharmaceutical industry profiteering, but instead created a system that effectively subsidizes drug industry campaign donors. The list of examples goes on, and now includes the housing crisis. The Fed’s action says the solution to the credit crunch is not to re-regulate the banking industry or force it to clean house, but to loan Wall Street your hard-earned taxpayer money, allowing the same destructive system to remain and permitting the same vultures to stay in their jobs—and, of course, to keep writing big campaign checks. But worst of all is the Trickle Down-ism. For three decades, our government has said economic challenges can be solved with tax cuts for the wealthy—the same people who, not coincidentally, underwrite political campaigns. Trickle Down-ism claims that the wealthy will spend the tax cuts and the benefits will “trickle down” to us commoners. It’s the same nonsense with housing today. The root of the financial crisis is mortgage defaults—brought on, in part, by Trickle Down-ism’s original failure to raise wages. Yet, rather than help borrowers pay or restructure their mortgages, the government is covering the banks’ losses, claiming that aid will eventually “trickle down” and benefit the rest of us. During the Great Depression, Eleanor Roosevelt said, “We need not fear any isms if our democracy is achieving the ends for which it was established.” It’s the “if” part that has become the problem. David Sirota is a bestselling author whose newest book, “The Uprising,” will be released in June. He is a fellow at the Campaign for America’s Future and a board member of the Progressive States Network—both nonpartisan organizations. His blog is at www.credoaction.com/sirota. © 2008 Creators Syndicate Inc. Previous item: Gore Vidal Speaks Seriously Ill of the Dead Next item: 'Tibet Libre!': Protesters March on the Eiffel Tower Elsewhere: . CommentsAre you a Truthdig member yet? Login now, or register with Truthdig.
By Cynthia, April 4 at 6:33 pm # yes and that’s not even the half of it - check out a fascinating interview with Michael Greenberger, on Fresh Air (NPR, Terry Gross), April 3 - available online.
By ITSCRAZY, March 23 at 1:39 pm # We still payDon’t forget the banks made their predatory lending undischarged through bankruptcy with 100 mil in campaign lobbying efforts. We pay off the loans and the rich get bailed.
By valupak, March 23 at 2:43 am # Why feed the wolves?Those banks fully knew that most of those predatory loans would have to eventually be foreclosed on. They were counting on a profit anyway, because even after the legal fees of foreclosure, the banks figured on the price of houses going up enough to still make themselves a profit after they had kicked the homeowners out in the street. Yeah, you can tell me that we had to bail out Bear Sterns because it’s good people’s money in there too, but really, what kind of ‘good people’ think that making money by conning people out of their homes is a fair & decent business practice? Would investing with a conscience be too much to expect of investors?
By Eric L Prentis, March 21 at 10:02 am # Excellent Article by David SirotaThe definition of inflation is a decline in the dollar’s purchasing power which is too much money chasing too few goods and services. US fiscal and monetary policies are responsible for the inflation of gas, food and healthcare that have a disproportional, deleterious effect on lower income Americans. The national debt over the last seven years has increased 66 percent from $5.6 trillion dollars to approximately $9.3 trillion dollars, due mainly because of the Republican tax cuts for the rich. When the economy is doing well, huge deficit federal spending stimulates over consumption, contributing to increased imports, higher trade deficits, a lower valuation of the US dollar thus increasing the cost of imports such as oil now at approximately $100 dollars per barrel. Currently, the Federal Reserve is flooding the banking system with money to try to bail out their friends on Wall Street. US fiscal and monetary policies ensure that even more and more money, controlled by the rich, continues to drive up prices. There is no free lunch in economics, someone has to pay more as a percentage of their income and that someone is the poor. In the US, the rich get richer and the poor get poorer because of government policies that support the US plutocracy. Where are the politicians who want to make the system fairer and ultimately make the US perform better?
By carl baydala, March 21 at 9:29 am # FavouritismThe whole tenor of the recent sub-prime debacle is to try and resolve the issue without attaching blame. They ( the Fed ) just want try and fix the problem in the least amount of time. The financial system is after all the corner stone of the American Empire. If it falters or breaks down, the Fed must do whatever it takes to make things right again. And, according to the Fed there are certain components of the financial system that are more important than others; the Fed has determined that these people will be helped before others will. The homeowner is only a bit player in the whole scheme. A bit player in the sense that he has no power compared to the financial institutions and the other major players in the game. It does not surprise me to learn that the Fed is essentially bailing out its pals after they have run afoul as it were. But, you will notice that assigning blame is not at the centre piece of Fed action, even though they are only now politely referring to ‘ bad lending practices ‘ as a source of the problem at hand. The Fed is detrmined to fix the problem at all or any cost. Through lowering rates or lending or whatever it takes to get the players up and running again. Up and running so they can return to the game of profit making. That is the essence of the system and I think the people will be much more contented when they come to realize this fact. For me the whole lesson just adds more meaning to the phrase “ Don’t fight the Fed “. I had always assumed that this meant something related to the lowering and raising of interest rates and that we were all governed and influenced by the people who manage and control such things. But, now it looks like the phrase has an added meaning as well. It means for me that the Fed will not only dictate what is in store as regards my economic health, but it also means that the Fed will protect its friends first before considering the needs of the general population. The Fed, as we are all coming to appreciate more and more, is not a public institution and never has been. Favouritism is at the heart of all Federal Reserve actions.
By Ivan Hentschel, March 21 at 8:09 am # Of course!This is all just horrific bunk. An ism here, an ism there, another ism, everywhere! The article is corect, and the truth is morally disgusting. Here we are, in 2008, facing an election that has every basic principal we ought to be worried about shrouded in race, gender, sex and religion, and the world’s bankers are burning Rome while we all fiddle. Capitalism made America what it is (or should be) and greed has killed it.
By msgmi, March 21 at 8:00 am # OversightWhere is the oversight/transparency over the Fed which is made up of sitting BigBank CEOS...it’s tax dollar money and they ,da banks, bail each other out with it while John Doe citizen is thrown under the bus in most cases.
By DennisD, March 21 at 6:49 am # Lack of interestThe silence from the Dims in Congress is deafening. No one is looking out for the public(tax payer)interest in the latest Wall St./Fed/Government scam and yet Pelosi is calling for a Tibet investigation. WTF! Some things never change, if you’re not a player, you’re being played. Add Your Comment |
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Huckabee’s Major Misfire
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