By Dave Lindorff
Boy, investors don't fool around do they?
When they see a dud, they let you know it. And that's exactly what they've done with regard to that $700 billion bailout bill Congress passed on Friday.
The measure, largely developed by Treasury Secretary Hank Paulson on a Napkin over crepes with Ben Bernanke, the Fed Chairman, as they were discussing the collapse of the American financial system two weeks ago, was never really about rescuing that system. It was about figuring out a way for Paulson to extract his buddies at Goldman Sachs from the debacle of all those mortgage-based derivatives they and he had created to turn crap into gold.
Congress, which knew better, and which, last Monday, under an avalanche of angry calls and emails form taxpayers who were being hit with the bill, initially rejected this ripoff, caved in when the lobbyists arrived, suitcases full of cash, and when Paulson and Bernanke warned them that failure to act would lead to a new Great Depression, and perhaps the imposition of martial law (the Bush administration backed this latter threat up by dispatching an active military unit to duty within the country, for the first time since the Civil War, noting that it could be used for "crowd control" purposes as needed).
So on Thursday evening the measure passed and was rushed to the President's desk for signature before Congress could change its addled mind.
The market promptly dropped by 1.5 percent the next day.
Asian and European investors, looking at this disaster, which both failes to address the credit crisis that has frozen the US economy like a new ice age, and which undermines the already staggering dollar, fled their stock markets and pulled their money from banks, leading to stock market crashes and bank failures around the globe over the weekend. Then, no sooner did markets open in the US today than they too crashed, with the Dow Jones average down a record 7.3 percent by 3 pm, the NASDQ down 8.6 percent and the S&P down 7.6 percent. All these indexes were hitting depths not seen in over four years. The dollar, meanwhile, was also dropping like a rock against the Japanese Yen, zooming down from over 105 Yen to the dollar on Friday to almost parity of $1.00 for 100 Yen.
Clearly, investors and currency speculators don't see the Paulson/Bernanke/Congress rescue as a rescue of the US economy at all. And neither should the rest of us.
So what will the public get for their $700 billion?
Nothing but trouble.
By blowing that wad, Paulson, Bernanke, Bush and the Congress, including our two big-league presidential candidates, Barack Obama and Joohn McCain, have ensured that there will be no money left for the economic stimulus package that is really needed to keep the broader economy out of the toilet, not to mention for such critical needs as education funding, food assistance programs and of course, homeowner rescues. They may not even be able to pay for the bigger war they both want in Afghanistan, much less the one already going on in Iraq.
As for all those Americans who, pensions having become a thing of the past, have been counting on their hard-earned 401(k) savings to get them through old age, they can kiss those babies good-bye. They've just lost close to 20 percent of their value, courtesy of Hank and Ben's wonderful adventure, and it's not over yet.
But at least the partners at Goldman Sachs will walk away from this crash with their golden eggs intact.
DAVE LINDORFF is a Philadelphia-based journalist and columnist. His latest book is "The Case for Impeachment" (St. Martin's Press, 2006 and now available in paperback edition). His work is available at www.thiscantbehappening.net
Dave Lindorff is a founding member of the collectively-owned, journalist-run online newspaper www.thiscantbehappening.net. He is a columnist for Counterpunch, is author of several recent books ("This Can't Be Happening! Resisting the (more...)