Tuesday, October 28, 2008

McCain stranded on campaign bus

John McCain Accidentally Left On Campaign Bus Overnight

Is the bailout really about loosening credit?

So the $700B bailout (which actually weighs in at over $800B, with its added pork) is suposed to get credit flowing again, right? I mean, that's what it's all about, isn't it?

Well, maybe. It appears that a good portion of that money will be used to line the pockets of investment bankers and to fuel acquisitions.

TIME reports:
Uncle Sam has a new name on Wall Street — Sugar Daddy. Bonuses for investment bankers and traders are projected to fall by 40% this year. But analysts, compensation consultants and recruiters say the drop would be much more severe, perhaps as much as 70%, had it not been for the government's efforts to prop up the financial firms.

Bonuses? The economy is in the shitter, and the taxpayers are funding bankers' bonuses? What's wrong with this picture?

The Wall St. Journal says:
The Treasury's bailout plan is fueling a long-simmering war between financial institutions, prompting fears among small banks that big banks getting rescue money will be encouraged to buy smaller rivals.

Big banks say the purchase of smaller, ailing institutions by larger ones promotes the recovery of the sector. But representatives of some 8,000 community banks -- the bulk of which remain financially sound -- worry that a taxpayer-subsidized consolidation could sweep up healthy institutions that are too small to fight back.

And Bloomberg quotes an industry insider:
Government funds may be used to finance acquisitions, prompting a potential “wave” of deals, Colin Devine, an analyst with Citigroup Inc. said yesterday in a research note.

Just what we need: another round of megabanks buying up local and regional institutions. We wouldn't want want local dollars supporting local economies, would we?

And the New York Times (among others) points out that all of this is actually intended by the administration:
In point of fact, the dirty little secret of the banking industry is that it has no intention of using the money to make new loans...

Treasury wants banks to acquire each other and is using its power to inject capital to force a new and wrenching round of bank consolidation. As Mark Landler reported in The New York Times earlier this week, “the government wants not only to stabilize the industry, but also to reshape it.”

I'm suspicious whenever this administration wants to "reshape" an industry, because inevitably it means one thing: the rich get rich. Redistribution of wealth is nothing new; they've been redistributing it for years - from working stiffs to fat cats.

The Cleveland Plain Dealer has something to say about this. In an editorial published today, they say the "bailout is already off the beam."
The federally forced sale of Cleveland's National City Bank to a Pittsburgh rival Friday requires urgent congressional hearings to force federal regulators to reveal why they've veered so far from the intent of the $700 billion bailout. Instead of vacuuming up troubled assets, the bailout is being funneled into bank acquisitions.

Such bank sales might make sense if the banks being bought out genuinely were failing. But using the taxpayers' dime to sink wounded banks that might otherwise survive is a far more questionable and inefficient way to rid the system of bad debt. It also runs directly counter to how the Treasury promised to use the money.
I have to agree. The backbone of the economy is on Main Street, where the goods and services are produced, and not on Wall Street where they are commoditized and made the objects of speculation. I agree with the Plain Dealer that Congress needs "to force federal regulators to reveal why they've veered so far from the intent of the $700 billion bailout."

In fact, I'll go the Cleveland paper one better. Congress needs to re-enact Glass-Steagall and take additional steps to introduce some adult supervision into the out-of-control greedfest of casino capitalism that is the banking industry. And Justice should start enforcing anti-trust regulations in the finance sector and elsewhere. It's time to recognize that, as Bernie Sanders puts it, "too big to fail" is too big to exist.

The Sinking Ship

At Salon.com, Gary Kamiya sums up "The Republican Shipwreck" pretty well:
There's something surreal about how fast the GOP has gone from arrogant triumphalism to its death throes. Just yesterday, the GOP's mighty Titanic was cruising along, its opulent decks lined with fat-cat financiers and neoconservative warmongers, all smoking cigars, drinking champagne and extolling the deathless virtues of their fearless captain. The compliant media issued glowing dispatches. Karl Rove cackled with glee as he plotted out a permanent Republican majority.

Then the luxury liner hit an iceberg known as reality. The biggest damage was done by the Wall Street crisis, which happened just in time to tilt a close race toward Obama. But the economic meltdown was only one of the disasters for which the GOP is largely responsible. The war that was going to establish American hegemony forever turned out to be one of the worst foreign-policy blunders in our nation's history. The GOP's free-market idolatry led to the gravest financial crisis since the Depression. Its ideological insistence on cutting taxes for the richest Americans ran up a record deficit. Its embrace of torture and denial of due process assaulted the Constitution and eroded America's moral standing. Its doctrine of the "unitary executive" concentrated unprecedented power in the hands of the executive branch. Its anti-scientific denial of global warming endangered the entire planet.
Of course it's more than a little premature to exult in the demise of the Grand Oil Party - they've stolen elections before and they could do it again - indeed, they're trying* - but it does seem that a clear majority of Americans now realize what a house of cards "movement conservatism" was and is. If we're lucky, we may see the Republican Party move backs towards the political center and away from its dual (laissez-faire and religious) fundamentalist base. That would be a step forward for America and the world.

* (For information on how you can stop them from stealing this one, see STEAL BACK YOUR VOTE!)

UPDATE: GOP uses trumped-up ACORN allegations to distract from their efforts to disenfranchise hundreds of thousands of legitimate voters... and the "liberal media" gives them a pass, as usual