The
Banks Get Their
Presidential Pardon
By Jeff Berg
18 September,
2008
Countercurrents.org
There is at least one straight forward way to describe the financial events of the last week: The banks are receiving their Presidential pardon early. In the words of economist Dr. Michael Hudson “The government has come down on the side of the sharks.” Effectively what we are seeing is a battle between creditors and debtors and the creditors have won.
The biggest
loser by far will be the American taxpayer and their access to the
“entitlements” they have paid for. Entitlement being the
strange euphemism the U.S. government has substituted for what we
in the rest of the world refer to as the right to live. The next biggest
loser may well be whichever Presidential candidate inherits this mess.
The Hanoi Hilton could begin to look good to whoever takes up residence
in what would be better described as The Red Ink House.
Another winner in this battle of ideas over very big money are those
like Grover Norquist whose self-professed goal over the last two decades
has been to “shrink it down to a size where we can drown it
in the bathtub.” It being the U.S. government. The only way
to do this of course is to bankrupt it first. Reagan had a good go
at it but his “legacy” has been left in shade by the outsized
profligacy and recklessness of Bush and Cheney. As he has so very
often Gore Vidal turned the most memorable phrase about this tickets
unerring abilities: “Everything Bush touches turns to poo like
King Midas in reverse.”
The financial crisis on Wall Street that has exploded into the news this week has come as a great surprise to many. The reason for this surprise is however no surprise at all. The media giants have once again utterly failed in their duty to inform. As was the case in the run-up to the Iraq war so too has it been in the run-up to the greatest financial crisis to hit the U.S. since the Great Depression. The reasons for this media failure is depressingly similar. The media chose to highlight the opinions of those most self-interested in the course of these events to be the ones that were allowed to frame the issue and speak with authority.
Instead of Dean Baker we got the head of Fannie Mae telling us there was no real estate bubble. Instead of Martin Weiss or Mysh Shedlock we got the CEO of Bear Sterns saying "There is absolutely no truth to the rumors of liquidity problems that circulated today in the market." Instead of Nouriel Roubini we got President Bush and his echo men telling us “America’s economy is sound.” Something John McCain tried out for size the other day only to discover he didn’t like the fit. Amazingly the media was no longer willing to play along. Evidently the next emperor will have to find a different set of clothes.
The internet, as it was with the issue of Iraq, has again been the only place where the public good has been defended. It is also the only place where rigorous adherence to the guiding principles of empiricism, research and the marshalling of coherent argument has taken place. Not that those analysts engaged in the yeoman work required to parse the financial facts from the “Don’t worry be happy.”, and “Nothing to see here.”, fictions would have been easy to find for anyone hoping to happen upon them. Far from it. The needles in this haystack are, well, just that and the ever mindful powers that be are even now enabling the legislation that will make the task very much harder. Nonetheless at least they were there. Undiluted, cogent and easy to understand. Which most decidedly cannot be said of “The best news team in television” much less Fox, MSNBC, and the others.
Unfortunately there is a third parallel between the Iraq war catastrophe and the current crisis. Those the media has championed have once again carried the day. The money started flowing in the early days of this administration via both tax cuts and deregulation. But when these proved insufficient the government decided on a more direct approach. And so on August 2007 to the tune of $38 billion there was an infusion of cash into the money markets. Then came the bailouts. Bear Sterns. $29 billion. Next were Fannie Mae and Freddie Mac. $200 billion and counting. Now we have AIG. $85 billion.
Then of course there was this weeks $50 billion injection into the money markets in addition to the Fed’s $20 billion “28 day single-tranche repo”. (don’t ask) And this does not even include the many other multi-billions made ever present at the Fed’s “discount window.” To put what all this means into the Fed’s own words. U.S. Dept. of Treasury, Sept. 17, 2008: “The Treasury Department announced today the initiation of a temporary Supplementary Financing Program at the request of the Federal Reserve. The program will consist of a series of Treasury bills, apart from Treasury's current borrowing program, which will provide cash for use in the Federal Reserve initiatives.” There now, don’t you feel better? It’s an “initiative”. Why it even sounds progressive.
These staggering sums are, sadly, only the tip of the iceberg for the part of the government that actually is of the people, by the people, and for the people. According to everyone, even the mainstream commentators have now finally caught up, this crisis is only about half-way through its unwinding. N.B. Even this depressing projection will only be true if the unregulated credit default swaps market doesn’t go boom. ($50 to $60 trillion) If it does all bets are off. If that happens this crisis will then truly be both global and more than equal to the task of reminding us all of the lessons we failed to remember from the dirty thirties.
All of this is occurring even as the Republicans seek to entrench the Bush tax cuts, and Obama sings from only a slightly different hymnal. Even as the Iraq/Afghanistan wars is threatening to end up costing $3 trillion, and with the current account deficit coming in at $183.1 billion this quarter. A stunning 5.1% of GDP And while this collapse is having a salutary effect for now on the price of oil the problems with oil supply are really just starting. The next four years certain to prove beyond a shadow of doubt that peak oil is a theory in the same way that round earth is a theory. The costs of climate change too with its vanishing glaciers, artic ice, and monster storms only now just starting to give us hints at just how expensive the future we are building is likely to be.
The only thing more consistent in all this than the media’s failure to inform is the studious avoidance of any talk of cutting military spending as a way out of this credit and debt crisis. Obama advocates increasing military spending and McCain advocates even more. Countless forests are felled for newspaper and magazine pieces about the $70 trillion or so of unfounded liabilities that are represented by Medicare and Social Security. But never once is even a single twig wasted by major media on investigating the possibility that U.S. military spending is both the problem and the solution for so many of America’s ills. No doubt it is their heightened environmental sensitivities that make them so circumspect.
It has no doubt been said before and may prove to be as false a hope now as it was then. Nonetheless I am finally feeling that the most important of Vidal’s pithy turns of phrase is about to be born out. “Oh yes our Empire too will end. We will run out of money.”
Jeff Berg is a founding member of Post Carbon Toronto. He is an activist and freelance writer focusing on Energy & Emissions and their micro and macro implications ecologically, economically and socially. He can be reached at [email protected]
