The pork-laden, so-called stimulus bill that has wound its way through Congress is just a warm-up for the huge scam that is to come – bailing out greedy bankers and speculators on the backs of working Americans, their children and their grandchildren.
The public is constantly buffeted with endless arguments about how this is necessary to prevent the collapse of the financial system. Yet, there is no evidence that any bailout will prevent this from happening.
The original plan, the so-called TARP (Troubled Asset Relief Program), cost the taxpayers $850 billion and was marketed to the public as a way to purchase non- or under-performing loans from troubled banks, thus bringing balance sheets into positive territory to facilitate further lending. Fine print of this agreement allowed the banks to use the money however they chose, and a last-minute revision removed legislation that limited executive compensation. The results were predictable.
Banks hoarded the money, even refusing to account to the government and taxpayers what they did with it. Executives took huge bonuses. Merrill Lynch distributed more than $3 billion to executives while losing more that $15 billion that was punted to the taxpayers when Merrill Lunch was acquired by Bank of America. Meanwhile, the stock market lost 30 percent of its value, ending the retirement plans of millions. The banks even used this bailout money to hire lobbyists to ask for more money.
Now President Barack Obama wants to do the same thing again, hoping to win support by limiting executive compensation to $500,000. Obama’s plan is being promoted by Treasury Secretary Timothy Geithner, a man who cheated so blatantly on his taxes that he would be in jail were he not politically connected.
One purpose of the bailout is to prevent deflation – a fancy work for decreasing prices. Yet, deflation is a huge benefit to the middle class and working poor. Witness the plummeting of gasoline prices benefiting almost all sectors of society. Food, clothing, and a variety of commodities from copper to pork bellies have decrease in price also.
The next leg is real estate. The mantra of liberals for decades is the need for affordable housing. Well, here it is – not only for the working poor, but also for young people starting families.
So why are we be lectured on the evils of deflation? Because the super-rich and the banks that lent to them will get obliterated. Prices of Manhattan penthouses, California and Florida beachfront property, Cape Cod vacation homes, and San Francisco condos will be worth less than half of what the super-wealthy paid for them if market forces prevail. Hedge funds and their affluent clients will lost their shirts when the banks are forced to call their loans.
To the super-wealthy, market forces only count when politically powerless workers lose their jobs to China, India and Mexico. When their lifestyle is on the chopping block, they become socialist – expecting taxpayers to ante up so they can keep their mansions, skiing chalets, yachts and Lear jets.
Unfortunately, since they finance the political campaigns of our professional politicians, the momentum is now for the taxpayers to ante up trillions of dollars and fork it over to the banks and their hedge-fund pals, presumably for the public good. This is like allowing arsonists to become firemen.
What the federal government should do is charter new banks, provide them with liquidity and let them negotiate with the old banks on the value of the troubled assets. The business cycle will come full circle, the economy will recover, and market forces will prevail. Let the banks and speculators go belly up. That would be real change we can believe in.