Free money creation to bail out America’s elite financial speculators, but not for Social Security or Medicare
Only the “Crazies” Get the Bank Giveaway Right
What has made the post-2008 crash most remarkable is not merely the delusion that the way to get rich is by debt leverage (unless you are a banker, that is). Most unique is the crash’s aftermath. This time around the bad debts have not been wiped off the books.
There have indeed been the usual bankruptcies – but the bad lenders and speculators are being saved from loss by the government intervening to issue Treasury bonds to pay them off out of future tax revenues or new money creation.
The Obama Administration’s Wall Street managers have kept the debt overhead in place – toxic mortgage debt, junk bonds, and most seriously, the novel web of collateralized debt obligations (CDO), credit default swaps (almost monopolized by A.I.G.) and kindred financial derivatives of a basically mathematical character that have developed in the 1990s and early 2000s.
These computerized casino cross-bets among the world’s leading financial institutions are the largest problem.
Instead of this network of reciprocal claims being let go, they have been taken onto the government’s own balance sheet. This has occurred not only in the United States but even more disastrously in Ireland, shifting the obligation to pay – on what were basically gambles rather than loans – from the financial institutions that had lost on these bets (fraudulently inflated loans) onto the government (“taxpayers”).
The government took over the mortgage lending guarantors Fannie Mae and Freddie Mac (privatizing the profits, “socializing” the losses) for $5.3 trillion – almost as much as the entire national debt.
The Treasury lent $700 billion under the Troubled Asset Relief Plan (TARP) to Wall Street’s largest banks and brokerage houses. The latter re-incorporated themselves as “banks” to get Federal Reserve handouts and access to the Fed’s $2 trillion in “cash for trash” swaps crediting Wall Street with Fed deposits for otherwise “illiquid” loans and securities (the euphemism for toxic, fraudulent or otherwise insolvent and unmarketable debt instruments) – at “cost” based on full mark-to-model fictitious valuations.
Altogether, the post-2008 crash saw some $13 trillion in such obligations transferred onto the government’s balance sheet from high finance, euphemized as “the private sector” as if it were the core economy itself, rather than its calcifying shell.
Instead of losing on their bad bets, bad loans, toxic mortgages and outright fraudulent claims, the financial institutions cleaned up, at public expense. They collected enough to create a new century’s power elite to lord it over “taxpayers” in industry, agriculture and commerce who will be charged to pay off this debt.
If there was a silver lining to all this, it has been to demonstrate that if the Treasury and Federal Reserve can create $13 trillion of public obligations – money – electronically on computer keyboards, there really is no Social Security problem at all, no Medicare shortfall, no inability of the American government to rebuild the nation’s infrastructure.
The bailout of Wall Street showed how central banks can create money, as Modern Money Theory (MMT) explains. But rather than explaining how this phenomenon worked, the bailout was rammed through Congress under emergency conditions. Bankers threatened economic Armageddon if the government did not create the credit to save them from taking losses.
Even more remarkable is the attempt to convince the population that new money and debt creation to bail out Wall Street – and vest a new century of financial billionaires at public subsidy – cannot be mobilized just as readily to save labor and industry in the “real” economy.
The Republicans and Obama administration appointees held over from the Bush and Clinton administration have joined to conjure up scare stories that Social Security and Medicare debts cannot be paid, although the government can quickly and with little debate take responsibility for paying trillions of dollars of bipartisan Finance-Care for the rich and their heirs.
Rest @ link
Posted by D on July 21st, 2011
The first ever GAO(Government Accountability Office) audit of the Federal Reserve was carried out in the past few months due to the Ron Paul, Alan Grayson Amendment to the Dodd-Frank bill, which passed last year.
Jim DeMint, a Republican Senator, and Bernie Sanders, an independent Senator, led the charge for a Federal Reserve audit in the Senate, but watered down the original language of the house bill(HR1207), so that a complete audit would not be carried out.
Ben Bernanke(pictured to the left), Alan Greenspan, and various other bankers vehemently opposed the audit and lied to Congress about the effects an audit would have on markets.
Nevertheless, the results of the first audit in the Federal Reserve’s nearly 100 year history were posted on Senator Sander’s webpage earlier this morning.
The list of institutions that received the most money from the Federal Reserve can be found on page 131 of the GAO Audit and are as follows..
Citigroup: $2.5 trillion ($2,500,000,000,000)
Morgan Stanley: $2.04 trillion ($2,040,000,000,000)
Merrill Lynch: $1.949 trillion ($1,949,000,000,000)
Bank of America: $1.344 trillion ($1,344,000,000,000)
Barclays PLC (United Kingdom): $868 billion ($868,000,000,000)
Bear Sterns: $853 billion ($853,000,000,000)
Goldman Sachs: $814 billion ($814,000,000,000)
Royal Bank of Scotland (UK): $541 billion ($541,000,000,000)
JP Morgan Chase: $391 billion ($391,000,000,000)
Deutsche Bank (Germany): $354 billion ($354,000,000,000)
UBS (Switzerland): $287 billion ($287,000,000,000)
Credit Suisse (Switzerland): $262 billion ($262,000,000,000)
Lehman Brothers: $183 billion ($183,000,000,000)
Bank of Scotland (United Kingdom): $181 billion ($181,000,000,000)
BNP Paribas (France): $175 billion ($175,000,000,000)
and many many more including banks in Belgium of all places
View the 266-page GAO audit of the Federal Reserve(July 21st, 2011)
CBO: $120 trillion: The shocking true size of our nation’s debt
Michael D. Tanner is a senior fellow at the Cato Institute.
OP-ED NY POST, 6/26/11
EXCERPT The CBO released a new report this week showing that the federal government’s publicly held debt would top 101% of GDP by 2021, more than the value of everything produced in this country over the course of a year. By 2035, the publicly held debt, CBO says, could top an almost unfathomable 190% of GDP. And that was the good news. The federal government actually has three different types of debt.
(1) Debt held by the public, the type of government bonds that you — or the Chinese government — might own. Growing levels of publicly held debt can drive up interest rates in the long-run, and may already be choking off interbank lending.
(2) There is “intragovernmental” debt—debt that the federal government owes itself, such as to the so-called Social Security Trust Fund. Intragovernmental debt exceeds $4.6 trillion. The good news here is that it is not projected to grow much ….. because both SSS and Medicare are already running deficits — there’s nothing left to steal.
(3) “Implicit govt debt”…….unfunded obligations of programs such as Social Security and Medicare — that is owed in benefits in excess of the amount of taxes that they expect to take in.
– SNIP long read–
Here’s a graph that shows how Obama “Stimulated” the Economy——with run-away spending.
Now the US Treasury and HHS entries must be seen in this context. Ohaha’s
then-COS—the power-mad Rahm Emanuel—took control of the US Treasury, took
over the census, and put his brother in charge of Medicare/Aid billions and O/Care
billions. Can you say offshore accounts? Govt fraud? Money laundering? Illegal
conversions of govt monies?
The $700B TARP Bailout is now being called, “A MASTERFUL DECEIT.” Congress’ phony outrage is a puzzlement. If HR 1424 was a ‘MASTERFUL DECEIT’ then CONGRESS didn’t do its job.
TITLE I—TROUBLED ASSETS RELIEF PROGRAM
(required ‘Congressional Oversight’ sections follow)
Sec. 101. Purchases of troubled assets.
Sec. 102. Insurance of troubled assets.
Sec. 103. Considerations.
Sec. 104. Financial Stability Oversight Board.
Sec. 105. Reports.
Sec. 107. Contracting procedures.
Sec. 108. Conflicts of interest.
Sec. 111. Executive compensation and corporate governance.
Sec. 116. Oversight and audits.
Sec. 118. Funding.
Sec. 119. Judicial review and related matters.
Sec. 121. Special Inspector General for the Troubled Asset Relief Program.
Sec. 125. Congressional Oversight Panel.
Sec. 127. Cooperation with the FBI.
Sec. 129. Disclosures on exercise of loan authority.
In HR 1424, there are enough rules, regs and CONGRESSIONAL OVERSIGHT REQUIRED that not one Thin Dime should have been ‘misspent.’ So if anything crooked did go on Congress should look in a mirror. They dropped the ball — or were they in on the scam?
$6.4 Billion Stimulus Goes to Phantom Districts
watchdog.org | November, 2009 | staff
FR Posted August 09, 2010 by bronxville
Just how big is Obama’s stimulus package? Well for one, it has doubled the size of the House of Representatives, according to recovery.gov. TARP funds were distributed to 440 congressional districts that do not exist.
According to data retrieved from recovery.gov, nearly $6.4 billion was used to “create or save” just under 30,000 jobs in these phantom congressional districts–almost $225,000 per job. The web site operates on an $84 million budget and is tasked with monitoring the distribution of the $787 billion stimulus package passed by Congress–which, for the record, counts 435 members–in early 2009…