PROTESTS AND PITCHFORKS: As New Bank Bailouts Seem Likely, There Is More to Speak Out Against
There's a phrase that's worked its way into the Japanese language: "Lehman Shokku"-translated as Lehman Shock. It refers to what happened to 460,000 people after Hank Paulson and Tim Geithner let the global Lehman Investment Bank collapse. A former Lehman executive told me over Matzoh at a Passover seder that she believes the decision reflected a competitive conflict and ego battle between the former Goldman Sachs chief turned Treasury Secretary and the bullheaded CEO of Lehman.
The clash of two power-crats in New York triggered a hard rain across the world.
Bloomberg reports on a forty year old former bank employee, Miki, who "now sleeps in cardboard boxes under the elevated Hanshin expressway in Umeda, Osaka's central business district...as the global recession triggered by the implosion of Wall Street banks batters Japan. ... Miki's loss of housing shows how Japan's 2.95 million unemployed people threaten to fuel a rise in homelessness."
Bloomberg is doing more than reporting bad news; it is also suing the Federal Reserve Bank for information that the privately run "public institution" wants to hide. Bloomberg wants the FED to disclose securities the central bank is accepting on behalf of American taxpayers as collateral for $1.5 trillion of loans to banks.
As the sun creeps through and the weather warms, there's an expectation that the new season will wipe out the winter's bad karma and lead to a desperately needed economic recovery. Obama Advisor Larry Summers, like an evangelist from the Elmer Granty era, sees the signs in small upticks of business activity. Now, according to the News n Economic blog comes an analyst, Roger Shealy, who has examined the footnotes and available data concluding "The Fed is holding a larger share of risky assets as collateral for its riskless currency and Treasuries lent on the open market."
Translation: We are living on Quicksand.
The Fed also admits that its consumer credit plan is faltering. Reports TIME: "The second round of the Federal Reserve's attempt to restart the nonbank consumer-lending market, the so-called TALF program, went even worse than the faltering first round did last month. The poor performance is causing some Fed officials to doubt the entire premise of the effort to restart nonbank credit markets."
On top of that, as the Treasury Department runs so-called "stress tests on the soundness of the banks," the Fed wants the banks to stay silent on the results. Again, Fed watcher Bloomberg is on the case: "The U.S. Federal Reserve has told Goldman Sachs Group Inc., Citigroup Inc. and other banks to keep mum on the results of "stress tests" that will gauge their ability to weather the recession, people familiar with the matter said."
On this Easter weekend of "He Has Risen," a lot seems to be still falling.
For the most cogent explanation of what's going on, visit the Baseline Scenario website run by former IMF exec and MIT Professor Simon Jenkins:
"Just as global financial liberalization created the potential for capital to move violently across countries and greatly facilitated speculative attacks on currencies, so financial deregulation within the United States has made it possible for capital markets to attack - or, in less colorful terms, go short or place massive negative bets on - the credit of big banks and, in the latest developments, the ability of the government to bailout/rescue banks.
"The latest credit default spreads data for the largest banks show a speculative run underway. As the system stabilizes, it becomes more plausible that a single big bank will fail or be rescued in a way that involves large losses for creditors. This would like trigger further speculative attacks on other banks, much as the shorting of countries' obligations spread from Thailand to Indonesia/Malaysia and then to Korea in fall 1997."
In other words, them chickens will soon be coming home to roost.
The banks seem confident that having learned the disastrous lessons on Lehman Shokku, the government will keep bailing them out. Quiet as it's kept, insolvency in many banks suggests another wave of bailouts is coming.
The banks seem confident that they have "captured" the government and can depend on taxpayer monies to pay off their crimes and mistakes. At the same time, they are worried about something else: US.
JP Morgan Chase overlord Jamie Dimon fears that the public anger will torpedo the schemes the banks are running, saying, '"If you let them vilify us too much, the economic recovery will be greatly delayed."
"The 'center vs. the pitchforks' idea fundamentally misconstrues the current debate. This is not about angry left or right against the center. It's about centrist technocrat (close to current big finance) vs. centrist technocrat (suspicious of big finance; economists, lawyers, nonfinancial business, and - most interestingly - current/former finance, other than the biggest of the big, particularly people with experience in emerging markets.)"
If anything, this seems the time to get the pitchforks going, to intensify the pressure, to make noise and press for change. Paul Krugman tells us that the policy world and the bankers want to rebuild a corrupt system, writing:
"Despite everything that has happened, most people in positions of power still associate fancy finance with economic progress. Can they be persuaded otherwise? Will we find the will to pursue serious financial reform? If not, the current crisis won't be a one-time event; it will be the shape of things to come."
That's why events like this weekend's banking protests organized by a new force, A NEW WAY FORWARD, is crucial. Their three-word phrase, NATIONALIZE, REORGANIZE and DECENTRALIZE sums up the aims spelled out at ANewWay.org
They have issued a call:
Pledge to Break Up the Banks: Tell Obama and Congress, "If it's too big to fail, it's too big to exist.
Dismantle the power of the financial elite and make policies that keep a new crop from springing up.
We want our economy and politics restored for the public.
If the protests fail along with the banks, you can bet, the pitchforks will be back.
Mediachannel.org blogger Danny Schechter wrote PLUNDER: Investigating Our Economic Calamity (Cosimo Books at Amazon.com) and is making a film on the crisis. Comments to email@example.com.