Billions for Wall Street, A Kick in the Pants for You and I

Gretchen Morgenson reported this in an article called “Rescue Me: A Fed Bailout Crosses a Line” published in the New York Times (3/16/08): “For the government to print money at the expense of taxpayers as opposed to requiring or going about a receivership and wind-down of any insolvent institutions should be troubling to taxpayers and regulators alike,” said Josh Rosner, an analyst at Graham Fisher & Company and an expert on mortgage securities. “The Fed has now crossed the line in a very clear way on ‘moral hazard,’ because they have opened the door to the view that they are required to save almost any institution through non-recourse loans — except the government doesn’t have the money and it destroys the U.S.’s reputation as the broadest, deepest, most transparent and properly regulated capital market in the world.”

This incredible action of the Federal Reserve in funding the purchase of the reckless Bear Stearns investment bank by JP Morgan, with the promise of more, shows that the Bush administration will do anything to rescue its rich friends responsible for the unfolding financial debacle in this country. While watching the American working people and small businesss face foreclosure, bankruptcy and unmanageable inflation with little more then a sop of a tax refund, Bush and company promise to take care of their friends no matter what the cost to the rest of us. Every time the feds print more paper and push it into the economy it increases the national debt, deflates the dollar against other currencies and fuels inflation. If you haven’t gotten your tax rebate yet, by the time you do it might not buy more then a couple of tanks of gas.

While Wall Street laments and fears the kinds of loss in stock value that James E. Cayne, Chairman of Bear Stearns took (from $1.2 billion to $13 million) on his stock, the view of the average American is that, hey, I’d take a little humiliation for $13 mill. The fed says it needs to prevent a financial collapse; unfortunately pumping more paper money into the system and lowering the interest rate will not fix the problem and probably make it worse. Oil jumped to a new record (a new one being set every day now) of $112 a barrel. This is an automatic consequence of a dollar that is worth less. All commodities and overseas manufactured items jump in price, which of course is most stuff since we don’t make anything here anymore.

The fed cut of interest rates has made little change in mortgage or credit rates to consumers. The spread between borrowing from the fed and lending to consumers has widened, putting additional money in the pockets of investment banks to help them cover their reckless behavior. In the meantime, regular Americans are trying to decide whether to let their SUV be repossessed because of high gas prices and ride the bus or keep it, let the house go and live in their SUV. Credit cards? . . . just forget paying them.

These things are not accidents, they are the result of policies since the Reagan administration (Clinton included) that promoted trade deficits through outsourcing, encouraged cheap credit, removed financial regulations, and ignored national deficits.

Bailing out Bear Stearns won’t fix the problem. Not just Bear Stearns, but all kinds of investment banks, private equity firms and hedge funds are holding trillions in paper holdings that are backed by real assets worth pennies on the dollar, their value inflated by speculation and fed policy. The contribution of the war at $12 billion a month in deficit spending cannot be discounted either. Assets were leveraged at a rate of 30-1 in many cases, all based on the idea that houses, strip malls, and companies that would continue to be worth more no matter what reality dictated.

But Bush and friends continue to decide that saving Wall Street from its own follies is more worthy than making sure that the American worker and small businesses that actually produce the wealth in this country have a secure future. Worse, their continued pursuit of the same policies will insure a total meltdown of the American economy and leave America just another third world country.

John M. Kelley is the Managing Editor of We the People News, a monthly progressive newsmagazine in based in Corpus Christi, Texas. He can be reached at: Read other articles by John, or visit John's website.

6 comments on this article so far ...

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  1. Don Hawkins said on March 18th, 2008 at 10:26am #

    Something is rotten in the state of Denmark

  2. simuvac said on March 18th, 2008 at 10:41am #

    For you and “me”.

    It is the objective case here.

  3. Arch Stanton said on March 18th, 2008 at 11:43am #

    So let me get this straight here: You’re saying that Bush and Wall Street don’t have our best interests at heart? Doh! I guess we better do something about it.

  4. HR said on March 18th, 2008 at 6:18pm #

    Gee, what a surprise. Who’d a thought, in a country populated by fools — and I mean damned fools — who elected monster trash like Reagan, Bush, Clinton, Bush, and pick any of the three corporate candidates running now. People get the government they deserve. And, Obama appears to be a disciple of Reagan. Sickening how that corporate lackey of a “Democratic” candidate can babble about supposed excesses in the 70s (yeah, excesses of increasing salaries for corporate executives while workers lost ground, excesses of corporate consolidation, excesses of inflation, excesses of murder in Southeast Asia, and the like) and then essentially give praise to one of the worst monsters ever to occupy the White House.

  5. Michael Kenny said on March 19th, 2008 at 8:45am #

    It’s totally peripheral but please, please, the English language! “For” takes the accusative. “For you and me”, therefore. (Would you say “a kick in the pants for I”?)

  6. D. R. Munro said on March 19th, 2008 at 11:42am #

    Wow, talk about invasion of the English pedants. . .

    Anyways . . .

    Perhaps a good old kick in the pants is what people need?