Friday, September 26, 2008

Let the banks fall

The Wall Street Journal reported that Treasury Secretary Henry Paulson, former CEO of former investment bank Goldman Sachs, got down on one knee at the White House on Thursday to beg a group of Democratic leaders to “not say anything that might blow up the troubled deal.”

The “deal”, as we all know, is the Bush administration’s desperate $700 billion bailout plan for the financial industry. Welfare for Wall Street being packaged and sold as necessity for Main Street.

By now we recognize this sky-is-falling argument from the current administration:

Saddam Hussein = terrorism, mushroom clouds, loss of freedom.
Financial crisis = economic calamity for the nation, loss of the American way of life

From stealing an election, to spying on Americans, to invading a country based on lies, to claiming the economy was sound while mortgage defaults soared to records not witnessed since the Great Depression, and now this - “ imminent economic calamity”. Even if it were true that we were on the brink of an economic apocalypse, we wouldn’t know, because no sane person can trust this administration. Never cry wolf.

Down they go

I say let the banks and financial institutions fall. Let them fail. Aren’t these the people who talk about survival of the fittest?

Here’s a short and hopefully easy to understand history of how the banks have robbed us blind over the past decade.

Banks and mortgage lenders busied themselves over the past ten years pushing too-good-to-be-true mortgage terms to encourage borrowers to buy homes they couldn’t afford. Housing prices peaked in 2005 and began declining in 2006, and prices still haven’t bottomed out. Housing foreclosure rates began increasing in 2006 as the housing bubble burst. Simply put, banks and mortgage lenders committed crimes and Americans lost their homes.

Meanwhile, with the country focused on the war in Iraq, congress passed a new bankruptcy law in 2005 that made it harder for individuals to clear their debts through bankruptcy. The banks wanted to make sure that people kept paying their credit cards, no matter what. According to the Center for Responsive Politics, Washington Mutual, Bank of America, JPMorgan Chase and Citigroup spent $25 million in 2004 and 2005 lobbying for bankruptcy reform to protect credit card profits.

While people were beginning to lose their homes, congress was busy doing Wall Street’s dirty work and the banks and financial institutions were pulling in record profits. Take a look at these numbers:

Goldman Sachs
Over $5 billion in profit in 2005
Over $9 billion in profit in 2006
Over $11 billion in profit in 2007
JP Morgan
Over $8 billion in profit in 2005
Over $13 billion in profit in 2006
Over $15 billion in profit in 2007
Bank of America
Over $16 billion in profit in 2005
Over $21 billion in profit in 2006
Close to $15 billion in profit in 2007
AIG
Over $10 billion in profit in 2005
Over $14 billion in profit in 2006
Over $6 billion in profit in 2007
Citigroup
Over $24 billion in profit in 2005
Over $21 billion in profit in 2006
Over $3 billion in profit in 2007
Lehman Brothers
Over $3 billion in profit in 2005
Over $4 billion in profit in 2006
Over $4 billion in profit in 2007

Total: $202 billion in profit from 2005-2007

This is profit, this is in the pocket, this is take home cash. Wall Street Executives were paid over $3 billion in the last five years, according to Bloomberg. With the cost of food, heating oil and gas shooting skyward during the same period, I wonder if you were able to make a profit those years?

But now they need our help. The public. The people.

These people and their predecessors are the “free market” advocates. Since the 1960’s they’ve promoted a global “free market” economy with deregulation and privatization at the heart of their argument. These are the neoliberalists whose religion has been to transfer control of the economy from the state to the private sector.

These are the people that have gotten us into this mess, with their immoral and criminal thirst for profit. These are the people who have pushed for less tax on the rich which has led to the widening gap between rich and poor. These are the people who believe it to be an American right to earn salaries of $20, $30 and $40 million dollars a year.

You mean the market isn’t the best judge? You mean big government is good after all? You mean these greedsters, these psychopaths who feasted on enormous salaries and even larger bonuses generated off of our misery now need that lazy welfare mom’s help, the school teacher’s tax dollars? They have the nerve to ask the American people for help?

Is it a surprise to any of these fraudsters, that the American people, the public, the tax payers, aren’t feeling too generous these days?

We are the engine that keeps the system alive, not them. Not the banks. Not the mortgage lenders. Not the overpaid executives who are running for cover behind Paulson and the threat of disaster. The administration is trying to convince you otherwise. That without this bailout, financial institutions will fail and you won’t be able to get a loan for your car, or college or home. Baloney.

No doubt there is a lot more pain to come for America’s financial institutions. More will go bankrupt. More will be forced into merger or sale. More jobs will be lost. World economies will suffer. Of this there is no doubt. The market will be cleaned out, the worst banks will go and there will be tough times for all.

This will last for a few years, but it will pass. Others banks and financial instituions will survive, as they have through many economic depressions and recessions. And in their wake, a new breed of banks will arise to carry the mantle of capitalism.

But will they have learned a lesson? Will we have learned a lesson?

Only if we shelf any sort of government bailout now and let the banks fail. Only if we put the executives that are guilty in jail for a very long time and send a signal that you will be severely punished if you put yourself ahead of the nation’s well-being. Only if we always remember that capitalism breeds corruption if left to run free. That unfettered capitalism doesn’t work. That strong government regulation is vital to limit the corruption and excessive corporate tendencies that put us in these situations every five to ten years.

This crisis has pushed class issues to the forefront, yet no one wants to talk about it in terms of class. If this isn’t class warfare, tell me what is. Now is the time to send a message that the people make the rules, not the bankers, not private companies, not without our say. Now is the time to drive home the message that it is inhumane to make exorbitant amounts of money while others struggle on a minimum wage that leaves them hovering near the poverty level; that this is not good for our country. That this is unethical and criminal.

Ghandi said "You can judge a society by how they treat their weakest members." You can also judge a society by how they treat their most powerful members. It is judgement day.




2 comments:

José Manuel said...

Bravo!!... you express quite eloquently what most of us know by now. The same thing happened with the Mexican Bank system in the 90's, and while the tax payers are still struggling to make ends meet, those who caused that collapse are living better than ever.

Well done Stein!

Randy said...

Excellent article! I agree with what you said and what Jose said as well.

However if the economy is left to fall then won't the Main St people fall along with it? Even the minimum wage jobs will dry up. I think that will be more personally agonizing for an individual than money that is almost imaginary being given in some type of bail out. No matter how many don't want to help these huge corporations (myself included) by providing a safety net for their extreme negligence I still think something must be done.

Here's a scenario: a hostage taker kills people and mildly injures others yet is critically wounded by police. He may survive if taken immediately to the hospital over someone who's an innocent victim yet only has a stable injury. Who do we take to the hospital as a society? Plenty would say let the hostage taker die right there. But as an EMT you have to prioritize by worst injury to least as a medical obligation. So what's the right choice?

That's not a fool proof analogy because if he dies it doesn't effect anyone else but you see where I'm going...

I think we need to save the country's economy and get the regulations back in place and never allow these gray areas to develop again with no regulation or oversight.