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David Sirota
David Sirota
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New Crisis, Old Isms

Comment

The Federal Reserve Bank's decision last week to address the housing crisis by extending $200 billion of taxpayer-financed credit to Wall Street banks was met with a stunned reaction typical of surprising events. But really, the move was the expression of longstanding isms that routinely package corruption as sound public policy.

Some background: During the housing boom, banks doled out home loans to financially strapped borrowers, often on predatory terms. On the creditor side, these same banks packaged many of the loans as complex securities and sold them off to unwitting investors, generating a handsome profit on the paper transactions. At the same time, Wall Street used campaign contributions to coerce Congress into blocking anti-predatory-lending bills and repealing a landmark law regulating how banks could buy and sell securities.

Predictably, many borrowers are now defaulting on their loans, meaning losses for financial institutions that hold mortgages and mortgage-backed securities. The Fed responded with what author Naomi Klein calls disaster capitalism — the age-old practice of using a crisis to enrich corporate interests. In this case, the Fed is using the housing emergency to justify giving taxpayer cash to Wall Street in exchange for its worthless mortgages.

"What the Fed really did was lend money to banks and accept the counterfeit currency as collateral, treating it just as though it were real money," says Dean Baker, the co-director of the Center for Economic and Policy Research.

But this is not only disaster capitalism, it is also Big Boy Bailout-ism — the kind we've become accustomed to since the savings and loan scandal of the 1980s. It is an ideology that rewards wealthy political donors for irresponsible behavior and ignores the real victims.

If you are a banking executive whose risky loans go bad, your industry's campaign donations get you Big Boy Bailout-ism that makes taxpayers "take the bad loans off the banks' books," as one financial analyst gushed this week.

If you are a regular Joe who can't pay your home loan, you get foreclosed on.

The Fed's scheme also embraces Feed-the-Beast-ism — an ideology that prescribes pumping taxpayer money into a crisis, rather than demanding reforms.

Confronting an energy and climate emergency, Republicans' answer was not massive alternative energy investments, but a 2005 energy bill giving tax breaks to the carbon-belching fossil fuel companies that finance the GOP. In the face of a health care catastrophe, the Bush administration's 2003 Medicare bill didn't crack down on pharmaceutical industry profiteering, but instead created a system that effectively subsidizes drug industry campaign donors. The list of examples goes on, and now includes the housing crisis.

The Fed's action says the solution to the credit crunch is not to re-regulate the banking industry or force it to clean house, but to loan Wall Street your hard-earned taxpayer money, allowing the same destructive system to remain and permitting the same vultures to stay in their jobs — and, of course, to keep writing big campaign checks.

But worst of all is the Trickle Down-ism. For three decades, our government has said economic challenges can be solved with tax cuts for the wealthy — the same people who, not coincidentally, underwrite political campaigns. Trickle Down-ism claims that the wealthy will spend the tax cuts and the benefits will "trickle down" to us commoners.

It's the same nonsense with housing today. The root of the financial crisis is mortgage defaults — brought on, in part, by Trickle Down-ism's original failure to raise wages. Yet, rather than help borrowers pay or restructure their mortgages, the government is covering the banks' losses, claiming that aid will eventually "trickle down" and benefit the rest of us.

During the Great Depression, Eleanor Roosevelt said, "We need not fear any isms if our democracy is achieving the ends for which it was established." It's the "if" part that has become the problem.

David Sirota is a bestselling author whose newest book, "The Uprising," will be released in June of 2008. He is a fellow at the Campaign for America's Future and a board member of the Progressive States Network — both nonpartisan organizations. His blog is at www.credoaction.com/sirota. COPYRIGHT 2008 CREATORS SYNDICATE, INC.



Comments

6 Comments | Post Comment
Right on!! David. Keep up the good work!
Comment: #1
Posted by: ontheres
Fri Mar 21, 2008 9:51 AM
You've been kickin' ass and takin' names recently, David. Great work!
Just a thought, but you might look to see if you can find any skeletons in Obama's closet, or perhaps compare the substance on presidential front-runner political views and maybe contrast it with Nader:
http://www.democracynow.org/2008/1/3/vote_for_change_atrocity_linked_us
http://www.votenader.org/issues/
Bret
--
We are being lied to; know the truth:
http://www.ExcaliburBooks.com/RedAlert/
Comment: #2
Posted by: Bret Hughes
Fri Mar 21, 2008 10:38 AM
Yes, another great read, David, but we have no populist candidate in the coming election. I'm considering NADER
Comment: #3
Posted by: jim
Fri Mar 21, 2008 11:49 PM
The real solution Dave, is to abolish the Federal Reserve ,and do away with the fractional Reserve banking system, and get back on the gold standard.
The money the Federal reserve now prints is the fiat currency backed by nothing tangible, LIKE GOLD!
They print money at will, Hence inflation!Which as I have had explained to me is nothing more then a hidden tax.


"Banking establishments are more dangerous than standing armies".

Thomas Jefferson
Comment: #4
Posted by: On their trial
Sat Mar 22, 2008 4:42 AM
The immorality and utter hypocrisy of our ruling elite could not be any clearer. Just consider this rich boy bailout(I wonder, do we cover their gambling losses at Vegas, also?), the heparin fiasco that has killed Americans just so corporate America can increase it's profit margin by dealing with Chinese manufacturers who are proven to have regard for nothing but the bottom line, and 13 Ameriican servicemen being electrocuted to death while taking showers in KBR built and mainrtained facilities in Iraq! These deaths, (executions?) have been taking place since 2004 and yet not only has the Pentagon done nothing about it, they told the mother of the last one to die that he peobably killed himself by taking an electrical device into the shower. Americans, we are nothing but material to be used and discarded as needed, a reality brought home to me while serving in Vietnam.
Comment: #5
Posted by: michael nola
Sat Mar 22, 2008 9:37 AM
George W Bush attended the Economic Club of New York meeting on March 14, 2008 where he practically danced a jig with Henry Kissinger and was so up-beat that you had to conclude that he was verily "the cat who ate the canary." What would make George W Bush so happy? The economy sucks, there are record foreclosures, his poll ratings are in the upper 20's and the prospects of Republicans holding White House, House and Senate are very slim. So why so happy?
Could it be that George W Bush did what he does best - cheat? His whole personal history is full of "getting away with it."
Now the specifics:
1) Please look at the video of George W Bush at the Economic Club of New York 03/14/2008:
http://www.youtube.com/watch?v=OFzEPyWa7OA
2) Then read the CNN article dated 03/17/2008 regarding JP Morgan's buyout of Bear Stearns at $2/share:
http://edition.cnn.com/2008/BUSINESS/03/16/stearns.morgan/
3) This past Tuesday, when Bear Stearns was trading around $65 a share, there was huge put volume in the March $30 strike. Over 55,000 contracts traded that day at an average price of 15 cents a contract.
http://www.thestreet.com/s/who-traded-55000-bear-30-puts-tuesday/newsanalysis/optionsfutures/10407812.html?puc=_htmlttt
4) Note the highly unusual option trading on Friday March 14, 2008 where 17,000 March $25 puts traded at $7/sh:
http://www.cnbc.com/id/15840232?video=686026799
5) Now Bush has a history of insider trading in Harken Energy:
http://www.thetruthaboutgeorge.com/special/harken.html
or
http://www.thenation.com/doc/20020722/leopold20020718
6) Lastly, on March 17th after the $2/share sellout was announced, George W Bush was far more reserved with reporters:
http://www.washingtonpost.com/wp-dyn/content/video/2008/03/17/VI2008031700861.html?sid=ST2008031602369
Bottom line, George W Bush had the means and the motive to trade on the insider news that Bear Stearns would be bought out by JP Morgan at $2/share on March 16, 2008. The 55,000 March 30 puts cost only $825,000 and netted a profit of $137,500,000.
Nice profit for a days work.
Comment: #6
Posted by: J Snow
Sat Mar 22, 2008 11:00 AM
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