Ignorance is bliss On Sep 10, 7:10 pm, Frank <[EMAIL PROTECTED]> wrote: > No responses on the biggest bailout it history. Lets discuss if Barry > is an Islamist, thats more important. Or how wonderful Palin is. > > On Sep 10, 2:25 pm, Frank <[EMAIL PROTECTED]> wrote: > > > Record corporate bailout reveals the bankruptcy of American capitalism > > By Barry Grey > > 10 September 2008 > > > The US government takeover of the mortgage finance giants Fannie Mae > > and Freddie Mac has dealt a shattering blow to the ideology of market > > capitalism, which has been used for decades to justify a relentless > > assault on the working class and a vast transfer of wealth to the > > American ruling elite. > > > The endless invocations of the virtues of private enterprise, > > individual entrepreneurship and self-reliance, used to demonize > > socialism and defend a system that exploits the vast majority for the > > benefit of a financial elite, have been exposed as frauds. When it > > comes to big capital, losses are socialized. Only profits remain > > private. > > > The same forces who year after year have inveighed against “big > > government” in order to justify the removal of all legal impediments > > to the accumulation of corporate profits and private fortunes, and > > carry out the destruction of social safeguards for the working class, > > have engineered a massive expansion of government power to safeguard > > the interests of the financial elite. > > > The bailout has as well exposed the real relations of political power > > and influence behind the façade of American democracy. The largest > > government bailout of private companies in world history—whose > > ultimate cost to taxpayers is likely to reach hundreds of billions—was > > sanctioned in advance by the Democratic Congress and given instant > > approval by the leadership of both parties and both of their > > presidential candidates. > > > There have been no investigations into the greatest financial scandal > > in world history. Neither party has any interest in bringing to light > > the swindling and skullduggery of the Wall Street moguls, because they > > are both bound hand and foot to those responsible for the financial > > debacle. > > > What has been revealed is the existence in the United States, behind > > the increasingly tattered veneer of democratic institutions, of a > > plutocracy—the political rule of the rich. When it comes to the basic > > interests of the financial aristocracy, both parties and all of the > > official institutions of society snap to attention and do the bidding > > of their Wall Street masters. > > > The bailout of the two mortgage giants—which account for 80 percent of > > new home mortgages in the US—is a demonstration of the historic > > failure of American capitalism and the profit system on a global > > scale. It was precipitated by the deepest economic crisis since the > > Depression of the 1930s, whose epicenter is the United States. The > > Bush administration moved to take over Fannie Mae and Freddie Mac > > under conditions of a rapid erosion of international confidence in the > > solvency of not only these two companies, but of the United States > > government itself. > > > Over the past several months, global investors, including central > > banks and government investment funds, primarily in Asia and Russia, > > have been dumping their vast holdings in mortgage-backed securities > > issued by the US government-sponsored firms. Fannie Mae and Freddie > > Mac have a combined liability of $5.3 trillion in mortgage-backed > > securities which they own or guarantee. The run on their assets has > > not only intensified the crisis of the two companies, which are > > massively leveraged and have suffered billions of dollars in losses as > > a result of the collapse of the US housing market, it has thrown into > > question the status of all US government debt, including US Treasury > > bonds. > > > The US, by far the world’s largest debtor nation, with a current > > account deficit of nearly $800 billion, is sustained by the inflow of > > hundreds of billions of dollars from abroad. It currently imports $1 > > trillion in foreign capital every year, or over $4 billion every > > working day. > > > But the assumption by the US government of the debts of the two > > mortgage companies, while averting an immediate financial meltdown, > > only compounds the crisis of American capitalism. As Martin Wolf, the > > financial correspondent of the Financial Times wrote on Tuesday, “As a > > result, US housing finance has been brought under direct government > > control and, in the process, the gross liabilities of the US > > government, properly measured, have increased by $5,400 billion, a sum > > equal to the entire publicly held debt and 40 percent of gross > > domestic product.” > > > At a stroke, US sovereign debt has doubled and is now roughly equal to > > America’s gross domestic product. On July 14, one day after US > > Treasury Secretary Henry Paulson called for legislation to give him > > unilateral and unlimited powers to use public funds to rescue Fannie > > Mae and Freddie Mac, the Wall Street Journal editorialized on the > > implications of a government bailout of the two companies. It wrote: > > “But with financial woes mounting, some investors are betting they may > > profit from weighing the unthinkable question: Could the US government > > default?” > > > This immense increase in US government indebtedness can only further > > undermine international confidence in the credit-worthiness of US > > Treasury bonds, resulting in a further decline in the dollar and a > > sharp increase in the interest paid by the US to borrow from its > > international creditors. > > > The claims made by the Bush administration, echoed by the US media, > > that the bailout of the two mortgage finance companies will consume at > > most $200 billion in public funds—itself a massive amount that > > eclipses previous corporate bailouts, including the $160 billion > > bailout of the savings and loans industry less than two decades ago— > > are not credible. An indication of the sums envisioned by US policy > > makers is the fact that the legislation passed last July giving > > Paulson the power to bail out Fannie Mae and Freddie Mac raised the US > > debt limit by $800 billion, increasing the cushion between the debt > > limit and current government indebtedness to $1.1 trillion. > > > Some sense of the social priorities of the US ruling elite and its two > > parties can be gleaned from a comparison between the sums being > > extended to bail out just these two companies and those allocated by > > the federal government in 2008 for education ($67.5 billion), > > unemployment benefits ($37.3 billion), highways and mass transit > > ($53.1 billion) and housing ($7.4 billion). > > > Moreover, the bailout of Fannie Mae and Freddie Mac is only the > > prelude to a far broader use of public funds to bolster the balance > > sheets of major corporations. Democratic presidential candidate Barack > > Obama and his Republican opponent John McCain are both supporting a > > $50 billion bailout of the US auto companies, which will inevitably > > entail further cuts in jobs and wages. And the plunge of the Wall > > Street investment bank Lehman Brothers toward bankruptcy—the firm’s > > stock fell by 45 percent on Tuesday—poses another rescue operation > > similar to the $29 billion bailout of Bear Stearns last March. > > > It is already being widely broached that the government establish a > > permanent mechanism for using taxpayer funds to buy billions of > > dollars in failing assets from major banks and financial companies. > > The Wall Street Journal wrote on Tuesday, “Creating a government- > > backed entity to buy up these assets could jump-start the market for > > home loans and relieve banks and other financial institutions, which > > are taking big hits to their balance sheets as they fall in value.” > > > The Financial Times sounded the same theme, declaring, “The US > > government might end up having to support the recapitalization of a > > much wider range of financial institutions in order to curb the credit > > crunch.” > > > These statements give the lie to the attempt to portray Fannie Mae and > > Freddie Mac as aberrations, which in their reckless speculation and > > pursuit of super profits departed from the norm. On the contrary, they > > typify the financial parasitism and outright criminality that have > > become pervasive characteristics of the workings of American > > capitalism and the social physiognomy of the US corporate elite. > > > The operations of the two government-sponsored firms are entirely in > > line with the unbridled speculation, based on an immense expansion of > > debt, that has become the hallmark of American capitalism. Their role > > in the housing and credit boom that has now come crashing down was of > > a piece with the creation of the vast edifice of paper values, > > engineered through the so-called “securitization” of debt, which > > sustained the super profits and immense salaries raked in by Wall > > Street. > > > In the wake of the bailout, press reports have noted the bloated > > salaries of the companies’ CEOs. Before they were sacked as part of > > the government takeover, Fannie Mae CEO Daniel Mudd and Freddie Mac > > chief Richard Syron took in between them $29.5 million over the > > several years they headed their respective corporations. And they > > stand to receive another $29 million as part of their exit packages. > > > But these sums are by no means exceptional. The Financial Times > > reported last week that compensation for major executives of the seven > > biggest US banks totaled $95 billion between 2005 and 2007. > > > The collapse of Fannie Mae and Freddie Mac is a paradigm of the US > > economy as a whole. Over the past three decades, the decay of American > > capitalism has taken the form of a vast growth of financial > > parasitism. At its heart, this involves the separation of wealth > > creation from the creation of real value > > ... > > read more » --~--~---------~--~----~------------~-------~--~----~ Thanks for being part of "PoliticalForum" at Google Groups. 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