Bailing out the Bad Guys: Dems and W working together

[crazymans economics]

William Greider writes in The Nation about “America’s Economics Free Fall” and documents and details how Washington worked in an incredible show of bi-partisian effort to completely cave in to the interests of Wall Street and excuse and reward the incompetency of failing institutions and, even worse, proposed plans that will continue to encourage this reckless behavior by Wall Street at the expense of all Americans. Our Congressional Representatives should be forced to explain why they keep bailing out these financial institutions without consequence!
http://www.thenation.com/doc/20080818/greider
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In the article, Greider writes:

"Washington can act with breathtaking urgency when the right people want something done. In this case, the people are Wall Street’s titans, who are scared witless at the prospect of their historic implosion. Congress quickly agreed to enact a gargantuan bailout, with more to come, to calm the anxieties and halt the deflation of Wall Street giants. Put aside partisan bickering, no time for hearings, no need to think through the deeper implications. We haven’t seen “bipartisan cooperation” like this since Washington decided to invade Iraq."

The danger of bi-partisianship when it comes to Wall Street is that, as we argue in “Crazyman’s Economics” (http://www.crazymanseconomics.com) it ceases to become red or blue, it’s all about GREEN. Democrats are just as much to blame as Republicans on this issue, because anyone who takes on Wall Street is seen by both sides as “anti-American” or a “socialist.”

Greider continues:

"In their haste to do anything the financial guys seem to want, Congress and the lame-duck President are, I fear, sowing far more profound troubles for the country. First, while throwing our money at Wall Street, government is neglecting the grave risk of a deeper catastrophe for the real economy of producers and consumers. Second, Washington’s selective generosity for influential financial losers is deforming democracy and opening the path to an awesomely powerful corporate state. Third, the rescue has not succeeded, not yet. Banking faces huge losses ahead, and informed insiders assume a far larger federal bailout will be needed — after the election. No one wants to upset voters by talking about it now. The next President, once in office, can break the bad news. It’s not only about the money — with debate silenced, a dangerous line has been crossed. Hundreds of billions in open-ended relief has been delivered to the largest and most powerful mega-banks and investment firms, while government offers only weak gestures of sympathy for struggling producers, workers and consumers."

Greider also does what few, if any, in the MSM appears willing to do…challenge the role of the Federal Reserve. A quote I’ve become more fond of the more I see is “The Fed is no more Federal than Fed Ex.”

"The Federal Reserve’s dereliction of duty is central to the financial failures. It betrayed the purpose for which the central bank was first created, in 1913, abandoning the sense of balance the Fed had long pursued and that Congress requires. Most politicians, not to mention the press, are too intimidated to question the Fed’s daunting power, but their ignorance is about to compound the problem. Instead of demanding answers, the political system is about to expand the Fed’s governing powers — despite its failure to protect us. Treasury Secretary Paulson proposed and Democratic leaders have agreed to make the insulated Fed the “supercop” that oversees not only commercial banks and banking conglomerates but also the largest investment houses or anyone else big enough to destabilize the system. This “reform” would definitely reassure club members who are already too cozy with the central bankers. Everyone else would be left deeper in the dark."

So, a financial fire is blazing out of control and Congress’ solution is to hand an arsonist the keys to a fuel tanker and tell him he’s in charge of the fire.


"The political system, once again, is rewarding failure. The Fed is an unreliable watchdog, ideologically biased and compromised by its conflicting obligations. Is it supposed to discipline the big money players or keep them afloat? Putting the secretive central bank in charge, with its unlimited powers to prop up troubled firms, would further eviscerate democracy, not to mention economic justice.If Congress enacts this concept early next year, the privileged group of protected financial interests is sure to grow larger, because other nonfinancial firms could devise ways to reconfigure themselves so they too would qualify for club membership."

So, companies may start purchasing financial institutions to become part of the “protected few” while further damaging the financial structure of the US.

Among the recommendations Greider recommends is this:

"Begin the hard task of re-creating a regulated financial system Americans can trust, one that recognizes its obligations to the broad national interest. This requires regulatory reforms to cover moneypots like private-equity funds and to clear away the blatant conflicts of interest and double-dealing on Wall Street, and also to give responsible shareholders, workers and other interests a greater voice in corporate management and greater protection against rip-offs of personal savings."

We argue in “Crazyman’s Economics” that if we can educate the populace to the point that the losers in the market quit losing, then the correction can happen naturally. However, if Congress keeps rewarding poor performance by encouraging more of it, while burying it’s head in the sand about the converns of the people, then we’ve just begun to feel the pain.

Our Congressmen are home, make sure you ask them why they’re supporting Wall Street while every Main Street in America suffers.

[valerief]

1. The wealthy always help each other. If a congress member doesn't

start out wealthy in Congress, it doesn't take long to fix that problem.