IS THIS ANY WAY TO RUN AN ECONOMY?
YOU BET IT AIN'T
Bad Behavior Rewarded, Good Behavior Punished. Whatever Happened To That Freakin' Protestant Ethic? Or Any Ethics At All?
I used to get into arguments with my Micro & Macro Economics professors in college back in the 70's. Even then, you could see that the stock market was a casino. It was more often ruled by emotion than logic, rumors rather than facts, opinions and snow-jobs instead of hard-nosed researchers and skeptical investors.
Old, established, successful, reliable companies were frequently under-valued, and not invested in by either Joe Sixpack or many of the "Masters of the Universe." Brand new shiny flashy fly-by-nights got all the attention, and sucked up a lot of the cash, never to be seen again. They were just sexier, I guess, like the hot young thing compared to the faithful but frumpy spouse. Human nature, I suppose.
My profs insisted that humanity had nothing to do with Wall Street. It was all cold logic and careful analysis. The fundamentals were sound. This was their Bible: You were required to memorize it and live by it unquestioningly, regurgitating it on demand, like the Baltimore Catechism I had to imbibe whole in order to become a "Soldier in the Army of Christ," as we young Catholics were called after our Confirmation (a sort of goyischer bar mitzvah).
It required the acceptance as incontrovertibly true of certain basic precepts upon which the whole elaborate structure of the One True Faith was founded. The whole vast megillah was all based on faith, blind acceptance of the basic precepts and first principles, however flawed. I couldn't quite swallow it. Too many internal inconsistencies and contradictions of reality just stuck in my throat. Bottom line, I'm not a believer. In anything.
My devout Chicago-school economics prof's penalized me for that. These were the years when Michael Milken at alia were matriculating at colleges and universities all over the country. They would graduate, ultimately, to Wall Street and the Fed, corporate suites and boardrooms, clawing their way to the top by coming up with schemes and scams that put clever accounting ahead of sound business practices. The tactics resulted in huge rewards for their practitioners, and multiple failures of companies, industries and whole sectors of the economy. Adherence to a religion without a God or any moral or ethical principles brought immediate, enormous earthly rewards.
Young punk MBA's and insanely creative CFO's & CEO's made hundreds of millions for themselves by screwing loyal workers out of their pensions, steadfast investors out of their life savings, suppliers and business partners out of their businesses, government out of their duly owed taxes, and customers out of the quality goods & services upon which they had come to rely. It was the end of Life As We Knew It. And it continues today.
It's all about the bling-bling now. Racist conservative assholes enjoy excoriating gang-bangers for their morality, or lack of it. But, really, they're just trying to grab the big brass American Dream-ring, by any means necessary, just like the extremely white boys in the Lower Manhattan hood. Some may say that Wall Street is copying Compton these days, but it's really the other way around.
The way you make it in the world today is not "working hard and playing by the rules." It's ignoring the rules and screwing everybody you can. That started on Wall Street, long before the current crop of Crips and Bloods was born, yo. And it is absolutely no different, only a lot worse due to its' much greater size and wider effects. Wall Street drive-bys are hitting the whole world today, not just one neighborhood. In the words of somebody, the world is a ghetto.
Like the real, original ghettos in Europe, where Jews were walled in and later exterminated, we are all trapped in this new planetary economic ghetto. Every criminally stupid move the bankers, brokers and CEO's make causes harm to the whole rest of the world, now: Millions of families will suffer the effects of the latest debacle from the "Greed is Good" crowd.
What's a brother to do? Well, you wouldn't know it from reading the corporatist mainstream media, but there are alternatives to continuing supply of our money to the money-junkies. Back in the 70's, we the taxpayers bailed out Chrysler Motors to the tune of $1.2 billion. At the time, many believed that the money should have been given to the workers to start new businesses.
We might have had a dozen Hewlett-Packards or Apple Computers, Famous Amoses or Mrs. Fields Cookies sprouting in garages around Detroit, instead of one big corporate white elephant that is still in danger of extinction, with the subsequent loss of hundreds of thousands of jobs in one fell swoop when it does croak. Better to spread the dough, and the risk, around: More legs for the economic stool might result in fewer collapses. But the parasites who rule the world make their fortunes on these collapses and upheavals. The Hell with the rest of us.
So I say, the Hell with them. If the Ritchie Riches of the world can't or won't bail each other out, then let them disappear. Let's just make that $700 billion available to small and medium sized businesses nationwide in a new public credit market, where the profits go back into our infrastructure: Health care, mass transit, schools, etc, instead of mansions in Malibu and the Hamptons. Let's start taking responsibility for ourselves, and running our own lives, our own economy. Because this system now just ain't working, yawl.
Oh, and there are alternatives, primed and ready to go. We don't have to give Goldman-Sachs Treasury Secretary Henry Paulson a blank check for his buddies back on the Street. Check it out before you sign that check, voters:
YAHOO NEWS SEARCH
Here's what we could have done.
GOOGLE NEWS SEARCH
Some more ideas before we throw away $700 billion+++?
SEEKING ALPHA .COM
"An Alternative Bailout Proposal"
Or, we could eat the rich. You first.
' Here is an alternative plan; take the $700 billion and recapitalize the banks and insurance companies buried in the toxic waste. Specifically exclude the hedge funds; their investors all certified they were big boys who could take their lumps when they got in. Take an equity stake in return and dilute the existing stockholder's equity. Forget congress capping executive compensation, let their shareholders do it as payback for the dilution of equity. Force a mark to market and get all this garbage off everyone's balance sheet. Then take the equity stakes taken in compensation and put it in the social security trust fund (if there really still is one) to reduce the load on the grandchildren we are asking to pay back this debt. The core mortgage securities are not as worthless as currently thought. The CDOs and CDS's are what will require the bulk of recapitalization. But there will be hard equity in the social security trust fund which will more than return the investment and it will be that: an INVESTMENT. Put a steel fence around it to keep congress' hands off. There is a huge universe of possible solutions available when talking about throwing this amount of cash at the problem. If all we did was borrow another trillion dollars to pay everyone's mortgage down, it would have the same bailout effect and would stimulate the largest refinance activity in years. The banks would be back in the black by the end of the year and the unemployment rate would drop as loan officers were called back to work. On top of that, consumers would have cash to spend their way back to an integer GDP. '
"Five Alternative Bailout Plans"
Here's the gamut as of yesterday.
' (1) The Planners: The Republican Study Committee, a group of some of the most conservative Republicans in Congress. The Plan: Two-year suspension of the capital gains and dividend taxes to "encourag[e] corporations to sell unwanted assets." The Problem: It won't work. Over at Time, Justin Fox says the RSC plan "seems to be a joke," and explains that it would just make matters worse by actually discouraging banks from unloading bad mortgage-backed securities. (2) The Planners: Eric Cantor (R-Va.) and some House Republicans. The Plan: Instead of having the Treasury buy mortgage-backed securities outright, insure them and charge premiums, paid to the government. The Problem: It almost certainly won't work. Marc Ambinder has a great explanation of why, but a commenter at Time sums most of it up in a sentence: "Writing insurance requires either a long history of past events or, at a minimum, knowledge of present market prices." There is neither a long history of past events nor a knowledge of present market prices in this case. In fact, as Ambinder points out, there's not even a market for the products that would be insured. That's the fundamental problem, and insuring them wouldn't fix it. (3) The Planner: Our own James K. Galbraith, an economist. The Plan: Prop up the FDIC. Eliminate the "pointless" $100,000 cap on deposit insurance, put a half-trillion dollars in the FDIC fund, give it extra funding for more employees, and keep another $200 billion in reserve. (There's more in Jamie's article, but the FDIC part is the heart of the plan.) The Problem: It may good policy, but so far, there are few takers in Washington. And there's no major political constituency advocating for it in the way that Wall Street is calling for a buy-me-out bailout. (4) The Planner: Senator Bernie Sanders (I-Ver.). The Plan: Make the rich pay for the bailout. Impose a temporary surtax on incomes over $1 million. Pass an economic recovery package that puts people back to work. Then re-regulate and break up any companies that are "too big to fail." The Problem: See #3. (5) The Planner: Hedge Fund Gazillionaire John Paulson. The Plan: Buy Wall Street. No, seriously: Paulson thinks taxpayers (or, more specifically, the Treasury) should buy huge amounts of senior preferred stock in banks. Kevin has more on this, which he points out essentially means nationalizing troubled banks. The Problem: This plan essentially means nationalizing troubled banks. Conservatives will be queasy about it; even Kevin Drum, a liberal, is queasy about it. '
"Group of Democrats Says Alternative Bailout Plan Could Interest GOP Members"
Progressives approach conservatives with low-cost proposal.
' Under the alternate proposal, Wall Street would pay for its own bailout over time through a fee imposed on securities trading. Such an approach would essentially wipe out the underpinning of Paulson’s plan, which would be funded by taxpayers. “I have very little confidence in Mr. Paulson,” DeFazio said. A rough working draft of the proposal released Tuesday lists five major points. It would: • Require the Securities and Exchange Commission (SEC) to suspend “mark to market” accounting principles, which some say have worsened the crisis and could undercut bailout efforts. • Require the SEC to permanently restrict naked short sells, the practice of selling a stock short without first borrowing the shares or ensuring they can be borrowed. • Require the SEC to restore “the up-tick rule” permanently. The agency approved a temporary block on short sales without an up-tick in the market on Sept. 19. • Require the Federal Deposit Insurance Corporation (FDIC) to implement a certificate program that would allow the agency to cover banks’ short-term capital needs with promissory notes. • Increase the FDIC insurance limit on deposits to $250,000 from $100,000. Democratic presidential candidate Barack Obama made a similar proposal Tuesday. Rep. Marcy Kaptur , D-Ohio, who was among those announcing the alternative plan, proposed an additional provision: the creation of an emergency financial crimes office within the Justice Department that would investigate any criminal acts that led to the current economic crisis. '.
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