The Fleecing of America

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By Stephen Lendman (about the author) Page 4 of 11 page(s)

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-- lets the Fed create its own rules for distributing earnings as well as payments to foreign banks.

EESA greatly expands Treasury and Federal Reserve powers. Rewards fraudsters and does nothing for beleaguered homeowners. Both presidential candidates voted for the bill. Obama hypocritically saying that the plan is "our best and only way to prevent an economic catastrophe (and be able to help families) on Main Street." McCain pretty much agreed in a bipartisan show of homage to their big Wall Street backers.

Ignored is their criminal fraud. The harmful fallout to many millions, and the fact that $700 billion (now $850 billion) is a down payment with trillions more to come. A systematic looting of public funds. Nearly all of it to fraudsters.

Ahead of EESA's initial defeat, the American Bankers Association (ABA) was pleased with the plan. Its chief executive, Ed Yingling, called the financial crisis "like a big Category 4 hurricane." Unleashed an army of lobbyists on Congress. To assure final legislation contained wanted measures and excluded ones bankers opposed.

In the end, the ABA prevailed. It got nearly everything it asked for. So did Wall Street, but they're far from out of the woods. Nonetheless, big banks are taking advantage by devouring smaller and some big ones. Weaker ones on the cheap. Merrill Lynch to Bank of America. Bear Stearns and Washington Mutual to JP Morgan Chase, and Wachovia's retail banking operations (including $400 billion in deposits) to Citigroup for $1 a share. Then Wells Fargo trumped Citi for most of Wachovia for $7 a share. A deal now held up after New York Supreme Court Justice Charles Ramos blocked it temporarily.

The above acquisitions were giveaways under planned creative destruction. Enabling greater consolidation in the hands of fewer giant players. The result is less competition and a fundamentally unfair system less fair.

The announced deals are for starters. Many more will follow as a powerful industry concentrates into few, larger hands. But providing no help for distressed households. Nor relief for over-indebted homeowners facing foreclosure. Rejecting better, fairer ways to recapitalize banks in crisis. Measures proved effective in the past yet unconsidered.

Also unaddressed are severe money market stresses and unwillingness of banks to lend to each other. Resume a free flow of credit. It shows in unprecedented spreads on unsecured inter-bank lending. Only confidence can change that. Something no government can legislate. It can make good policy as a way to start building it.

On September 30, the Financial Times columnist Martin Wolf headlined his commentary: "Congress decides it is worth risking depression" and said "We are watching the disintegration of the financial system." Such a "dire outcome is no longer impossible." The free flow of credit is frozen and unless thawed "no modern economy can survive. Yet that is now threatened."

We're experiencing a "downward spiral of panic." What economist Hyman Minsky called "revulsion." A "Minisky Moment." The final stage of bubble deflation when cheap credit ends or is frozen like now. Investors dump assets. Any bad news roils markets, and it's infectious. Quickly turning euphoria into "revulsion" and creating downward momentum much greater and faster than the upside.

Wolf has mixed feeling about EESA. Calls it flawed and directed by the wrong man. A "titan of high finance charged with bailing out Wall Street," but worrying mostly about Congress doing nothing and causing "ruin." He wants something passed and much more. Ensuring "liquidity needs are fully met during this period." Europeans addressing the same issue. Worrying about a greater crisis ahead, yet ending with a hopeful thought. Winston Churchill's words that "The United States invariably does the right thing, after having exhausted every other alternative." The greater issue now is a deepening crisis so great that no constructive intervention can work.

Events are fast-moving and changing almost daily. So far in an intensifying contracting cycle. A perfect storm of:

-- recession;

-- rising unemployment;

-- public trauma;

-- failing banks;

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I am a 72 year old, retired, progressive small businessman concerned about all the major national and world issues, committed to speak out and write about them.

The views expressed in this article are the sole responsibility of the author
and do not necessarily reflect those of this website or its editors.