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Why the US banking rescue package should be rejected


John Simkin
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Global shares have risen on optimism that a revised version of the $700bn US banking rescue package will be approved by US politicians. The new US package is broadly similar to the first, but includes new measures to help gain Congress's backing. One of the new clauses will raise the government's guarantee on savings from $100,000 (£56,000) to $250,000. Analysts say the Senate is more likely to pass the bill because senators are not facing the same pressure from voters - who are generally opposed to the bailout - as members of the House. All representatives face re-election in November compared with only one-third of senators.

However, it will not tackle issues about rewarding people for carrying out corrupt and irresponsible activities. This is not surprising. A report by the Institute for Policy Studies shows that Bush has been spending $20bn a year subsidizing executive pay. A system was introduced that enables multimillionaire executives to declare their income as capital gains. This means that they pay lower rate of tax than the people who clean their offices. An attempt to remove these loophole last year was blocked by the Senate after a lobbying campaign by these multimillionaires.

These lobbyists were also involved in stopping legislators banning unsustainable lending. A major figure in this is John McCain’s current campaign manager. Over the past financial year, the big banks spent $49m on lobbying and $7m in direct campaign contributions. Fannie Mae and Freddie Mac spent $180m in lobbying and campaign finance over the past eight years. Much of this went to the House financial services committee and the Senate banking committee.

This money was well-spent. When Dick Durban’s 2005 amendment seeking to stop predatory mortgage lending, it was defeated in the Senate by 58 to 40. According to Jim Leach, when he proposed re-regulating Fannie Mae and Freddie Mac, their lobbyists managed in “less than 48 hours to orchestrate both parties leadership” to crush his amendments.

According to George Monbiot: “Campaign finance is the best investment a corporation can make. You give a million dollars to the right man and reap a billion dollars’ worth of state protection, tax breaks and subsidies. When the same thing happens in Africa we call it corruption.”

It is clear that the US government needs to take action. My advice would be to look very closely at what happened in Sweden. In 1991 Carl Bildt, became prime minister of Sweden. He was the leader of the Conservative Party and replaced the Social Democrats who had been in power since 1928.

Economic reforms were enacted, including voucher schools, liberalized markets for telecommunications and energy as well as the privatization of publicly owned companies, privatization of health care.

Bildt also favoured deregulation of the banking system. This was a disaster and it was not long before five of the seven banks, covering 90% of the market, were effectively insolvent. Although it went against his ideology, Bildt had no option but to take over government control of the activities of the banks. The Social Democrats went along with this and the Swedish authorities injected SEK65bn into the banking sector. In return the banks were forced to give the government a stake in return for funding. In fact, the plan was so successful the Swedish taxpayer actually made a profit on the deal.

Despite his successful actions, Bildt lost the 1994 election to the Social Democrats. However, Sweden provides a good example of how you can resolve a banking crisis without losing taxpayers money. Critics might argue that you cannot compare a small country like Sweden with the US. However, the SEK65bn spent by the government represented 4% of the country's GDP. This is equivalent to $850bn in the US case, a figure higher than being proposed by the Paulson/Bernanke plan.

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You don’t mention inflation. I’ve mainly watched CNN during this crisis, and I’ve seen exactly one guest expert (I think he was an economist from Harvard), about a week ago, point out that the $700 billion bailout is inflationary. In the link below, Dave Lindorff goes so far as to say that the bailout will kill the dollar. I know little about economics, but why is the subject of inflation related to this bailout seemingly taboo in the U.S. news media? Is there a conspiracy of silence? Have the corporate owners told the talking heads not to mention inflation or the effect on U.S. currency, because it could help defeat the bill?

http://www.counterpunch.org/lindorff09232008.html

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Asking taxpayers to bail out these bloated multi-millionaires is like the drowning man throwing his life preserver back to the people in the boat. What we really need is for the bankers to bail out the taxpayers. No more "trickle down" nonsense; we're long overdue for a "trickle up" theory.

If Congress doesn't pass this precious bailout, it will be one of, if not the first, time in American history that they disobeyed their masters and listened to the people.

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Asking taxpayers to bail out these bloated multi-millionaires is like the drowning man throwing his life preserver back to the people in the boat. What we really need is for the bankers to bail out the taxpayers. No more "trickle down" nonsense; we're long overdue for a "trickle up" theory.

If Congress doesn't pass this precious bailout, it will be one of, if not the first, time in American history that they disobeyed their masters and listened to the people.

Something that really needs to be pointed out in regards to the bailout issue is a cutting edge book entitled

The Shock Doctrine: The Rise of Disaster Capitalism

by Naomi Klein

http://www.naomiklein.org/main

If the word "Shock," touches a cord in your memory, remember the Operation Shock and Awe, which was the designation for the 2003 invasion of Iraq.

Klein's analysis of the current system of the Bush Administration economic policy is that the policy exploits fear on the part of the American public, regarding "how to handle" the economic woes we are currently experiencing to ram through economic agenda's which are great for big business, but catastrophic for the Joe Six-packs and soccer mom's, that are being wooed to vote for the next Republican administration of Palin/McCain.

A page from Naomi Klein's website states

......Around the world in Britain, the United States, Asia and the Middle East, there are people with power who are cashing in on chaos; exploiting bloodshed and catastrophe to brutally remake our world in their image. They are the shock doctors. Thrilling and revelatory, The Shock Doctrine cracks open the secret history of our era. Exposing these global profiteers, Naomi Klein discovered information and connections that shocked even her about how comprehensively the shock doctors' beliefs now dominate our world - and how this domination has been achieved. Raking in billions out of the tsunami, plundering Russia, exploiting Iraq - this is the chilling tale of how a few are making a killing while more are getting killed......

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Asking taxpayers to bail out these bloated multi-millionaires is like the drowning man throwing his life preserver back to the people in the boat. What we really need is for the bankers to bail out the taxpayers. No more "trickle down" nonsense; we're long overdue for a "trickle up" theory.

If Congress doesn't pass this precious bailout, it will be one of, if not the first, time in American history that they disobeyed their masters and listened to the people.

Something that really needs to be pointed out in regards to the bailout issue is a cutting edge book entitled

The Shock Doctrine: The Rise of Disaster Capitalism

by Naomi Klein

http://www.naomiklein.org/main

If the word "Shock," touches a cord in your memory, remember the Operation Shock and Awe, which was the designation for the 2003 invasion of Iraq.

Klein's analysis of the current system of the Bush Administration economic policy is that the policy exploits fear on the part of the American public, regarding "how to handle" the economic woes we are currently experiencing to ram through economic agenda's which are great for big business, but catastrophic for the Joe Six-packs and soccer mom's, that are being wooed to vote for the next Republican administration of Palin/McCain.

A page from Naomi Klein's website states

......Around the world in Britain, the United States, Asia and the Middle East, there are people with power who are cashing in on chaos; exploiting bloodshed and catastrophe to brutally remake our world in their image. They are the shock doctors. Thrilling and revelatory, The Shock Doctrine cracks open the secret history of our era. Exposing these global profiteers, Naomi Klein discovered information and connections that shocked even her about how comprehensively the shock doctors' beliefs now dominate our world - and how this domination has been achieved. Raking in billions out of the tsunami, plundering Russia, exploiting Iraq - this is the chilling tale of how a few are making a killing while more are getting killed......

Right on Robert!....Naomi Klein's book it on the mark on this matter and very apt. The $700,000,000,000 is only the 'sucker-sum' to get the transfusion started [from the un-rich to the ultra-rich] and the final figure will be 4-5+ X larger, for sure. What happened in Chile and other places, as explained by Klein, is now to happen in the USA [not for the first nor last time - but perhaps in its most extreme form!].

Americans are now in shock and in that state will accept things they wouldn't have otherwise....the bad-guys have learned their lessons well and honed their techniques. We need to hone ours and resist! [as well as expose]

Hi, Peter. Though things are more hospitable here since Burton's departure (mission accomplished), I suggest

you will find things even better at:

http://www.deeppoliticsforum.com/forums/index.php

Absolutely NO PROVOCATEURS allowed. Most of the really good researchers are already there. Hope you

enjoyed your vacation.

Jack

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Russian Railways Chief Yakunin: I Knew About The Crisis, LaRouche Warned Me

Increase DecreaseOctober 3, 2008 (LPAC)-- In today's issue of the leading Russian business daily Kommersant, CEO of Russian Railways (RZhD) Vladimir Yakunin was interviewed under the headline, "Liberal Capitalism Is Coming to an End in Russia." At the outset of his interview, Yakunin stated bluntly that none other than Lyndon LaRouche, the "American alternative economist," had warned him of the onrushing global financial breakdown crisis a long time ago.

Yakunin heads the state-owned railway company, a huge enterprise whose high-speed rail and transcontinental expansion projects are a critical component of Russia's economic development policy. He is a long-time associate of Prime Minister Vladimir Putin, as well as being co-founder of the International Public Forum "Dialogue of Civilizations." The Kommersant interview comes as Russian Railways deals with the impact of the global crash on its own operations. In mid-September, the company abruptly suspended a planned road show for floating a $7 billion Eurobond flotation, when it became clear there would be no takers in the frozen international credit markets.

Kommersant asked Yakunin, "When did you realize that there would be a financial crisis?"

Yakunin: "A year and a half ago. I am not making this up. I remember my first conversation with the American alternative economist, Professor LaRouche (Lyndon LaRouche --Kommersant). He is someone who uses quite powerful algorithms for evaluating the state of the economy and its prospects. And he said to me, "Vladimir, I can tell you with certainty, that the economic crisis is already taking place." He emphasized that the basis of the crisis is the transformation of the economy and, above all, finance, into a virtual economy and virtual finances. Out of the entire monetary circulation taking place in the world today, in his view, only about 15% of the paper money is backed by real value - industrial production, raw materials, etc. It seems to me that right now we are witnessing the accuracy of this formula. This summer, I have been discussing the topic of the crisis both with other economists, and with my friends in the government, so the crisis itself was not unexpected. But I am not a professional financier. If the crisis was visible and obvious to me, it should have been visible and obvious to the people who are running financial policy."

Yakunin told Kommersant that RZhD right now has sufficient liquidity for operations, but no sources of credit for investment, meaning that its investment plans may be slashed by 10-15% over the next two years. Asked about the current Russian government infusion of funds to support the banking sector and financial markets, Yakunin said that "assistance should have a specific address." He expressed support for a two-tier approach, whereby "if it's a speculating institution, let them cover their losses, but if it's a serious bank, which supports a large number of enterprises, maybe entire sectors of industry, probably they should be the first ones to receive government support."

Yakunin said that Francis Fukuyama's famous "end of history," was really the "end of neoliberal theory." Asked where things should go next, he replied, "Towards the formation of a new economic paradigm. Let's begin with the entire world. I mean realty the whole world, and build and implement a new economic theory. I hope that we'll finally get it, that you cannot live on financial surrogates, that the whole world cannot live by a single currency that isn't backed up by anything, called the dollar." He noted President Dmitri Medvedev's interest in a shift to the use of national currencies in trade, noting that this is under discussion with Arab countries.

In a concluding exchange, Yakunin defended his commitment to proceed with acquisition of a 5% stake in Germany's rail company, Deutsche Bahn. The reason for this, he said, is that "We consider the linkage of the European and Russian railroads to be of strategic importance from the standpoint of organizing a container bridge between the Pacific region and Europe." In addition, Yakunin said that the best thing the state could do, under current circumstances, is to invest in infrastructure: "At the risk of sounding paradoxical, I believe that financial investment in large, promising projects, including infrastructure projects, which create real value and will provide something for business to do, can be a stabilizing factor."

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LaRouche: There is NO Excuse to Support The Bailout Bill!

Increase DecreaseClick here for the PDF

October 2, 2008 (LPAC) -- Speaking at an international webcast on Oct. 1, American statesman and economist Lyndon LaRouche delivered an emphatic message to Washington, the nation, and the world: “There is no moral excuse for supporting the bailout bill!’’

“If you go with a bailout, you’re going to destroy the United States in short order, through hyperinflation. The bailout is intrinsically hyperinflationary! The only reason that anybody, in their right mind, would even think of supporting this bill, is because they’re scared. And we need a Gideon’s Army, to pull through the reform. And, some of you Biblical scholars, you know what I’m talking about.

“You have to take all the people who are cowards, who will not step up to the plate, as they say, on this issue, and say, ‘Okay: Dear Coward, we’re taking over. We’re leading.’

“Now, the danger here, of course, is that, you’re going to have a French Revolution problem, as I said, inside the United States. You now have--and some of these idiots, and even my friendly friends out there, who say, `Please! Please, be cautious! Let this bill go through, so they won’t shoot us!’ That’s what they’re saying! They’re saying, that behind the Bush Administration, there are people who would actually use U.S. troops to shoot down people who want to oppose this bill! That’s there, right now! That is reality! And that’s what some of these questions are reflecting.

“There are people in high places, including some very high-ranking people, in terms of their background, who agree totally with what I say about this stuff! But they won’t fight! Because they say, `We’ll be shot! We don’t want to go into a death camp.’ Well, if we go into a death camp because we do this, the world will never forgive those who do it! And the world will never forgive those who capitulate to this!

“Anybody who’s smart, is not going to take on the American people in that fashion. You’re not going to shove a dictatorship down the throat of the American people! They’ll kill you....

“The reason you’re getting such peculiar behavior in the House of Representatives, is because the people out there, who are behind the people who voted against this bill--those people out there are ready to kill! Not because they’re killers, but because they see the destruction of everything that life means to them, is threatening them! They’ve seen a lot of it: Step by step, they’ve put up with it, they’ve accepted it, they’ve crawled for it! They say, `We have to get along! We have to get along!’ The time has come when they know that everything is being taken away from them, and that was too much!

“You’re going to find the rage against the White House, and against the Senate, in particular, is going to escalate in ways, during the coming days, of this week and next week--in ways beyond anything most of you believe! I can see it right there: It’s there. It’s coming.

“The mood in the American people, having gone through fake wars--they’ve had their children sent out into fake wars, like Iraq--it was fake war! There was no need to go there. No need to get into that war. Then they got into it, and they made a mess of it, even what they started. No need.

“Look at the suffering of people, who went into service, come back from that war, not only with death, but injuries--but they can’t get help! They’re condemned to horrible conditions! And in every neighborhood in the United States, there’s someone in that category: It radiates.

“Don’t you see, the hatred you’re building up against Washington, in the people of the United States? And this bill, is one bill too many!

“You’re headed for something like a French Revolution, and you’re going to bring it on your own heads, if you’re dumb enough not to fight this bill, and not to oppose it! There is no excuse for supporting this bill! None! There is no moral excuse for supporting this bill.’’

Will the Bush Administration Use the

Military To Enforce the Bailout?

During the course of his Oct. 1 international webcast, American statesman and economist Lyndon LaRouche warned that there is a clear indication that “a desperate Bush Administration, and what it’s tied to internationally, might try to make a military suppression of resistance to their policy.’’

"They might try to use military force, to force through the kind of legislation, the bailout, which is being attempted now,’’ LaRouche said.

There is a “French Revolutionary’’ mood building among the American people against the destruction of their nation through Bush Administration policy, and the bailout of Wall Street speculators in particular, LaRouche said. The people hate this bill.

“And there’s an instinct in this administration, to use military force against the people of the United States to suppress the opposition to this bill.

“This is reality, right now! Not something ‘coming down’: That is already the reality.

“If this bill were to be pushed through, with or without the aid of military force against the American people by American troops--which are now being stationed for this kind of operation--the United States will disappear, in very short order. And civilization would crash, globally.’’

Later, LaRouche was even more blunt: If American troops, ordered by the President, turn on the American people to suppress the opposition to this bill, the United States will cease to exist! This is worse than treason! Any such action, from any part of government, is worse than treason! And anyone who accepts such an order, is a traitor to the United States.’’

A Sept. 30 report in the U.S. Army publication Stars & Stripes underscored LaRouche’s warning. The paper reported that the 3rd Infantry Division’s 1st Brigade Combat Team is being given a dedicated assignment to NorthCom inside the United States, beginning Oct. 1. The Team will be under the day-to-day-control of U.S. Army North for 12 months, as an on-call Federal response force for natural or man-made emergencies and disasters, including terrorist attacks.

“They may be called upon to help with civil unrest and crowd control,’’ Stars & Stripes reported.

LaRouche had already denounced the creation of NorthCom back in 2002, declaring that it was a “preparation to create a Caesarian military dictatorship’’ over North America.

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