In the ever-so-smug company of the rich and powerful it is a given that there is never to be any expression of remorse or other acknowledgment of the pain they have inflicted on the lesser mortals they so cavalierly plunder. It's convenient for them that the media and the politicians, which they happen to own, rarely connect the dots between the scams that made the rich so rich and the alarming rise in the federal debt that is crushing this nation.
The result of this purchased public myopia is that we are left with an absurd debate over how deeply to cut teachers' pensions and seniors' medical benefits while preserving tax breaks for the super-rich and their large corporations. At a time when 10 million American families will have lost their homes by year's end, when $5.6 trillion in home equity has been wiped out, when most Americans face steep unemployment rates and stagnant wages, a Democratic president is likely to compromise with Republican ideologues who insist that further cuts in taxes for the rich is the way to bring back jobs.
Let's deal right off with that canard. There is currently no shortage of corporate profits or excessive executive compensation to explain away the failure of the private sector to create jobs. On the contrary, as The New York Times reports, "In the fourth quarter, profits at American businesses were up an astounding 29.2 percent, the fastest growth in more than 60 years. Collectively, American corporations logged profits at an annual rate of $1.678 trillion." And to add insult to injury, the top executives, who seem unable or unwilling to create jobs or adequately reward their workers, have increased their own compensation by a whopping 12 percent over the previous year, setting the median pay at $9.6 million per year for those in control of the leading 200 companies. The Times adds that "C.E.O. pay is also on the rise again at companies like Capital One and Goldman Sachs, which survived the economic storm with the help of all of those taxpayer-financed bailouts."
Lost in this faux debate is the reality that our debt now looms so large because the government had to bail out many of those same corporations, quite a few of which, like General Electric and AIG, pay no taxes and have no problem paying truly obscene amounts to their top executives. GE CEO Jeffrey Immelt, whom President Barack Obama named chairman of the Council on Jobs and Competitiveness, is making as much as he did before the recession hit, a recession that his GE Capital division did much to cause with its reckless loans. AIG, saved with a government infusion of $170 billion, has just lavishly rewarded its top executives but has providing no relief for the homeowners ripped off by its phony credit default swaps.
The AIG deal was engineered by then-President of the New York Fed Timothy Geithner, who was rewarded for his efforts to save the bankers by being named Obama's treasury secretary. Geithner, an energetic member of the team of Robert Rubin and Lawrence Summers that ran Treasury when the Bill Clinton administration cooperated with congressional Republicans in gutting regulation of the financial community, is proud of saving the banks from the wreckage that they and the Clinton policies caused. Last October he proclaimed the TARP banker bailout program "the most effective government program in recent memory."
What he is referring to is that in order to escape the federal restrictions on executive compensation, the banks have been eager to pay back the TARP funds. What he and other apologists for the Obama and George W. Bush administrations' Bankers First program choose to ignore -- as Paul Atkins and two other members of the Congressional Oversight Panel for the Troubled Asset Relief Program revealed in a damning Wall Street Journal column titled "TARP Was No Win for the Taxpayers" -- is that the banks are not paying back the trillions of dollars in non-TARP governmental assistance that saved them from bankruptcy. " ... It hides the full story of the government's financial crisis effort, of which TARP is but a minor part," the op-ed column said of the maneuvering. The major part is the $1.1 trillion in toxic-mortgage-based securities that the Fed purchased, relieving the banks of their obligations, and the $380 billion bailout of Fannie Mae and Freddie Mac, organizations that backed those securities, along with "other Fed and FDIC programs [that] added another $2 trillion of taxpayer money at risk to the 19 stress-tested banks alone. ..."
What Geithner celebrates is a shell game of his own construction in which far more costly federal programs, with no serious restrictions on banker greed, were used by the banks to "repay" the TARP funds. Nothing was obtained in return from those banks in the way of mortgage cramdowns to keep people in their homes or any restrictions on the interest rates that banks charge on credit cards: Clearly usurious rates of more than 25 percent are now the norm for those struggling to keep their families above water. No wonder consumer confidence is down, the housing market is expected to decline an additional 10 percent over the next year, and the job market is predicted by most of the experts to stagnate for years to come. Continued tax breaks for the 1 percent of the population that controls 40 percent of the nation's wealth will do nothing to restore the confidence of the other 99 percent of consumers who are suffering so.
This at least Obama seems to understand, but count on him to betray his own better instincts by once again following the advice of his treasury secretary and the Wall Street crowd that contributed so lavishly to his first presidential campaign and whose support he seeks once again.
One of the many FACTS that made this a great article. These people are making money hand over fist and they will unleash their minions on anyone who raises their ire....You have to admit these people are a organized well oiled machine. It will be up to the multitudes who realize this is just wrong, to get organized....
“The financial crisis was born in the housing bubble caused by the policies of Fannie Mae and Freddie Mac, the two bankrupt government-sponsored entities..â€
http://www.aei.org/article/103330
It was GOVERNMENT policy which forced business to lend money to people that couldn’t afford it. This subsequently inflated and popped on of the biggest asset bubbles the world has ever known. Yes, Wall Street profited from it – “if the ducks are quacking, feed them†-but SO did everyone else! How conveniently so many forget that–along with the fact the top 5% of earners created most of the “bail out funds†(ie taxes) in the first place and will be the ones that have to pay off the tab going forward.
Those on the left simply cannot stand to accept the fact that they are completely DEPENDENT upon successful businessmen. If everyone has public sector jobs then there is no private sector wealth left to steal to pay anyone.
It is remarkable how you can to the conclusion that government is corrupt yet your solution is to RAISE TAXES –ie GIVE over more money to Government which translates to more power which in turn creates more corruption.
LIMIT THE POWER OF GOVERNMENT – LESS taxes. I thought you figured that out back during the Vietnam war Mr.Scheer?
WaMu and countrywide created the liars loans so they could keep the bank fees growing.
They were not forced to do anything. The fed program were voluntary.
No govt. official made the banks do anything. There was no oversight.
I will tell you why because I actually get it. If your job was to write me a personal check every month I can honestly say I would probably give you the benefit of the doubt that you are a really great guy – meaning I would be less willing to ACCEPT anything to the contrary. I would probably even come to your defense if someone else was threatening your job. If I had a vote, the job would be yours. Great for you, because you like your job. Even better, to keep it, all you have to do is keep writing checks out – best yet its not even your bank account those checks are deposited against!
It’s not very difficult to understand things if you think about them.
Why in the world would a bank loan their money to someone they new wouldn’t pay it back? Regardless the reason, they DID and they FAILED for it.. Do you honestly think a 1% or even 10% fee would be worth it to bankrupt your company? Come on..
Nobody cared because there was a chump on the block (government) with a lot of money buying all the garbage these banks were making. Remember, they (government) are not in this for a financial profit (recall they have the neighbors check book) but simply for a political gain.
And to claim that Fannie and Freddie caused the housing bubble shows that you don't understand the definition of a subprime loan. A subprime loan was one that Fannie and Freddie WOULD NOT BACK. In fact, until 2006 (the very beginning of the bubble collapsing...) Fannie and Freddie both had less than 5% of their loans as subprimes. Then they started backing them and then the market collapsed, due to prices being double what they should have been and too many private mortgage companies lending too much money to people who shouldn't have been lent that much!
“In 1995, the GSEs like Fannie Mae began receiving government tax incentives for purchasing mortgage backed securities which included loans to low income borrowers. Thus began the involvement of the Fannie Mae and Freddie Mac with the subprime market. In 1996, HUD set a goal for Fannie Mae and Freddie Mac that at least 42% of the mortgages they purchase be issued to borrowers whose household income was below the median in their area. This target was increased to 50% in 2000 and 52% in 2005.[118] From 2002 to 2006, as the U.S. subprime market grew 292% over previous years, Fannie Mae and Freddie Mac combined purchases of subprime securities rose from $38 billion to around $175 billion per year before dropping to $90 billion per year, which included $350 billion of Alt-A securities.â€
To say Government did not play its role inflating the housing bubble is total absurdity.
http://online.wsj.com/article/SB122298982558700341.html
In the early 1930s Herbert Hoover increased federal spending and raised the top marginal rate from 25% to 63%. When Franklin Roosevelt took office he greatly increased government spending and paid for it by borrowing and increasing the money supply by 75%. Does anybody remember how all this worked out 80 years ago? Does anybody have any valid reasons why we should expect the exact opposite to happen today?
"Capital must protect itself in every possible way, both by combination and legislation. Debts must be collected, mortgages foreclosed as rapidly as possible. When, through process of law, the common people lose their homes, they will become more docile and more easily governed through the strong arm of the government applied by a central power of wealth under leading financiers.
These truths are well known among our principal men, who are now engaged in forming an imperialism to govern the world. By dividing the voter through the political party system, we can get them to expend their energies in fighting for questions of no importance. It is thus, by discrete action, we can secure for ourselves that which has been so well planned and so successfully accomplished."
- Montagu Norman, Governor of The Bank Of England, addressing the United States Bankers' Association, New York, 1924.
Another reason it's a false debate is budget cuts historically only serve to create the illusion of fiscal responsibility, always to be replaced with ever higher debt ceilings.