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Goal of Bailouts: Prevent the Elite from Losing



April 07, 2009 – Comments (12)

It's becoming more and more obvious, even to those who don't really pay much attention, that throughout this financial crisis the common man has been hung out to dry while the elite are being bailed out right and left. I believe this is what will lead to more and more rioting...even here in the US. Sean Olender wrote a great article in the San Francisco about this very topic. Here's the link and a few excerpts (emphasis mine):

'Bailout psychology' destroying the economy

President Obama must stop the bailouts and start the prosecutions. It's time to focus on anti-poverty programs to protect the growing unemployed from hunger and homelessness. Stealth payments to billionaire bondholders must cease immediately.

Since the mid-1970s, average Americans' wages have stayed flat when adjusted for inflation. Productivity rose, profits rose, but not wages. To compensate for stagnant wages and the desire to consume more each year, Americans worked more, retired later, spouses went to work, and many burned savings. Then they started borrowing. Debt became America's growth industry.

The scheme collapsed because Americans' wages weren't sufficient to pay the interest on existing debts. The only way out of this is to tighten our belts and pay down debt, the opposite of what our bank-owned government is advising.

The administration and the banks keep talking about a credit crisis, but there isn't one. Banks are lending. If you want a mortgage and can afford to pay it back, you can borrow at low rates today. You can finance a car at low rates for seven years. But most Americans don't want more debt because it is a debilitating path to poverty. The average American family already pays 14 percent of annual income in interest to banks.

To fix this fake crisis, there are fake discussions about what the government must do. The endlessly recycled plan to buy "troubled" assets isn't to get banks lending again, because they haven't stopped lending. The plan seeks for taxpayers to buy worthless assets at high prices to absorb rich investors' losses. That's it. It keeps coming back as a different plan, but with that same goal. There is no goal beyond that one goal: keep rich people from taking losses.

Obama and his economic gurus all chant, "Credit is the lifeblood of the economy," but they don't mean credit. They mean debt. Imagine the president saying, "Debt is the lifeblood of our economy. We desperately need to get more American families deeper in debt." That's what he means, and that's what these bailouts hope to do.

In a Sept. 14 article in this newspaper, I noted that banks push senators, with the blessing of the administration, to introduce bills that are bailouts, but disguised to appear not to be bailouts. The goal is to accomplish the desired result without risking your bought-and-paid-for representative.

Imagine you bet $500,000 on a stock and it dropped to $20,000. If you owned Treasury Secretary Tim Geithner, he'd get on TV and explain that if the government didn't buy your shares for $500,000, the economy would suffer because you couldn't invest anymore. He'd say the "free market" isn't pricing the stock "right," and we have to "help" the market with taxpayer money to make sure you get the "right" price.

Bailout psychology is destroying the economy. Banks hold off on foreclosures in the hope of refinancing borrowers into government-backed loans that will almost certainly default - at taxpayer expense. I've talked to ordinary people delinquent on credit cards who put off bankruptcy because they "heard" the president was unhappy with unfair bank practices and "help was coming soon." Millions of homeowners desperate to sell are keeping empty houses off the market waiting for a "rebound," flushing a stream of income down the toilet.

Worsening economic figures are being used to confirm that more bailouts are needed rather than that previous ones might be failing. The logic is much like medieval blood letting: The patient died because we didn't drain enough of his blood.

The promise of more bailouts also keeps everyone from doing what's necessary. Millions of houses sit empty, open to vandalism and destruction, while millions of Americans live in cars or on the street. Our tax money is given to banks and speculators to hold houses empty.

...To "fix" all these problems, the George W. Bush administration, and now the Obama administration, have chosen people (or their accomplices) who stole from the public. That's why no one has been prosecuted. Would former Treasury Secretary and Goldman Sachs chief Henry Paulson have pressured for an investigation of Goldman Sachs? Right.

As president of the Federal Reserve Bank of New York, current Treasury Secretary Geithner had a front-row seat during the run-up to the crisis and watched for years while pushing a "no regulation" policy. Why? At that time his friends were winning their bets and making a lot of money.

Why didn't Bush or Obama pick Brooksley Born (the Commodity Futures Trading Commission chair who tried to regulate credit default swaps) or Harry Markopolos (the whistle-blower in the Madoff scandal) to serve as treasury secretary or chairman of the SEC? Because Born and Markopolos are technically competent and possess integrity. Banks would tolerate neither quality in an administration official.

We have a crisis of confidence, because fraud permeates most of our banks and financial institutions. The solution is law enforcement, not handouts. On Jan. 31, 2009, Santa Barbara police held a 53-year-old homeless man on $20,000 bail for shoplifting $7.69 worth of soup and bread. Yet Bush did not move to prosecute a single executive at any of these banks, and Obama likewise doesn't want to be "vengeful" by investigating the crimes of investment bankers.

If the government feels lenient, can't it let alone families camping in a vacant lot in Sacramento, or homeless people stealing bread?

...Save your money until the government stops the bailouts. Your children will thank you for the peace and security.

12 Comments – Post Your Own

#1) On April 07, 2009 at 9:37 PM, JGus (28.15) wrote:

It should read San Fransisco Chronicle.

Also, I didn't mention it because it is fairly self-evident, but the elites are being spared AT THE EXPENSE of the common man. I don't know when it will begin (here - it's already happening in other places around the globe) or how bad the rioting will get, but there is a growing number of people who are becoming more and more pissed off. When people have nothing left to lose...they tend to lose it!

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#2) On April 07, 2009 at 10:16 PM, nau99 (28.48) wrote:

The prosecution won't occur with this administration either. 

That being said - great post.  This has nothing to do with political party... it has everything to do with economic classes. 

One of these days reality will set in and individuals will be aware that the push to put funds into 401Ks and IRAs was all a deception to allow those in early to cash out and have a wonderful life.

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#3) On April 07, 2009 at 10:25 PM, OtherOracleOfOMA (30.01) wrote:

These guys are all irredeemably corrupt. If Obama wants to salvage his administration and the economy, he needs to try every single collaborator in this heist under RICO, and I mean NOW.

You seriously have to wonder if Obama has any real power at all. If he does, what the hell was he thinking appointing neoliberal hacks like Tim Geithner and Larry Summers? Bah...

Good post though.

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#4) On April 07, 2009 at 11:56 PM, RookieQB (29.22) wrote:

Big Rec homie!

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#5) On April 08, 2009 at 1:57 AM, StatsGeek (28.60) wrote:

I'm with ya, man!

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#6) On April 08, 2009 at 9:44 AM, EHoyle80 (< 20) wrote:

The Stock Research Portal on the AIG bonuses: “It is about time someone stepped up to the table with respect to the egregious bonuses paid by AIG and like companies – whether in the context of U.S. ‘bail-out funds’ being indirectly applied to pay such bonuses, or what otherwise in recent years was in essence arguably an expropriation of investor returns by the Boards and managements of these companies.”

Via Stock Research Portal

These bonuses are absolutely ridiculous.

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#7) On April 08, 2009 at 1:50 PM, StatsGeek (28.60) wrote:

Who cares about the stupid bonuses.  The were 0.1% of the bailout.  More not seeing the forest for the trees.

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#8) On April 08, 2009 at 5:24 PM, OldEnglish (27.40) wrote:

Don't worry, just because the masses are too stupid to investigate now. In five years those same ignorant masses won't be calling prosecutions, they'll be calling for lives. And rightfully so.

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#9) On April 08, 2009 at 7:49 PM, RVAspeculator (28.46) wrote:

How long will it take America to WAKE THE HELL UP.   I wish could get something like this post played during a commercial on American Idol.

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#10) On April 08, 2009 at 8:15 PM, SharpSEO (49.54) wrote:

StatsGeek said:

"Who cares about the stupid bonuses.  The were 0.1% of the bailout.  More not seeing the forest for the trees."

Yeah, they're a small % of the bailout itself. But bonuses and compensation packages, as they're structured, are a HUGE part of the problem. Rewarding execs for taking on ridiculously large risks is a major contributor to our current state of affairs.


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#11) On April 12, 2009 at 9:37 PM, fewl10 (< 20) wrote:

This is almost as good as Karl Denninger.  Keep up the great work.  Mabye we really will get "change", for WORSE!

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#12) On April 13, 2009 at 4:51 PM, tfirst (73.39) wrote:

Hope and change...... Hope I have enough change left to buy torches and pitchforks.....The Federal reserve is the problem. I thought the Constitution said only Congress can coin money? There is also a law the calls for insolvent banks to go into receivership for bankruptcy, not bailouts. Why do these people not obey the law? Have we forgotten the savings and loan fraud? that was handled fairly well and was over in a year...Where are the true patriots who will take this country back?? Can I defraud the government out of payroll taxes???I think not. I'm tired of my taxes being used to cover-up the fraudulent practices of the investment culture.

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