B193: Banking in the Toilet

"President Bush said Tuesday the nation's troubled financial system is "basically sound" and urged lawmakers to quickly enact legislation to prop up mortgage giants Fannie Mae and Freddie Mac."

Why would a "basically sound" system ever need to "prop up...giants"? Bitty@ Shakesville

From Paul Krugman at AlterNet:

The case against Fannie and Freddie begins with their peculiar status: although they're private companies with stockholders and profits, they're "government-sponsored enterprises" established by federal law, which means that they receive special privileges.
The most important of these privileges is implicit: it's the belief of investors that if Fannie and Freddie are threatened with failure, the federal government will come to their rescue.
This implicit guarantee means that profits are privatized but losses are socialized. If Fannie and Freddie do well, their stockholders reap the benefits, but if things go badly, Washington picks up the tab. Heads they win, tails we lose.

From Guy R. McPherson Professor of Natural Resources and Ecology & Evolutionary Biology At Arizona State University.

The administration of George W. Bush is characterized by powerful and continuing expressions of nationalism, identification of enemies as a unifying cause, obsession with militaristic national security and military supremacy, interlinking of religion and the ruling elite, obsession with crime and punishment, disdain for the importance of human rights and intellectuals who support them, cronyism, corruption, sexism, protection of corporate power, suppression of labor, control over mass media, and fraudulent elections. These are the defining elements of fascism.

I listened to Naomi Klein last week on Democracy Now. She spoke about her book Shock Doctrine and how this latest banking news fits right in to the disaster capitalism theme of the book.

And Naomi Klein you might remember took on the architect of this crapilicious banking debacle, Alan Greenspan in another Democracy Now program this year. This segment has some real teeth with both Amy Goodman and Naomi Klein holding the Ayn Rand devotee Greenspan’s feet to the fire. His responses are self serving and factually incorrect and/or disingenuous. Here is a sample.

AMY GOODMAN: Well, they are talking about, in one day, for example, the East Rutherford operation center of the Federal Reserve Bank of New York, 100 Orchard Street in East Rutherford, a tractor-trailer truck pulling up, and though accustomed to receiving and shipping large quantities of cash, the vault had never before processed a single order of this magnitude: $2.4 billion in $100 bills. But ultimately, again, $9 billion of $12 billion has gone missing in Iraq.
ALAN GREENSPAN: I am not familiar with any such evidence. And it was certainly not brought to my attention. I, frankly, find it very unlikely that those orders of magnitude were involved in any of the numbers that we were dealing with. You have to make certain that—there’s been a lot of confusion about losses, and people have used the dinar, the basic currency unit of Iraq, and assumed they were American dollars. And, of course, that gives you a highly distorted view. There’s been, I’ve seen, several reports fairly recently in which that sort of mistake was being made. But what I can tell you is that no such numbers of any order of magnitude of the type you are discussing came to the attention of the Federal Reserve.

And from this . . .

NAOMI KLEIN: Mr. Greenspan, I’m wondering whether you feel that you share any responsibility in the rise of this economic populism, because, of course, you took over the Federal Reserve during the Reagan administration, and when Reagan took office, CEOs earned forty-three times more than their workers, and when you left the Federal Reserve, they made more than 400 times more than their workers. So the policies that you pursued—deregulation, privatization, free trade—have contributed to this extraordinary division of income that is really the fuel for this economic populism that you’re now denouncing. So aren’t you the one that has caused this crisis of faith in capitalism? Or, at least, don’t you share some of that responsibility?
ALAN GREENSPAN: Well, look, the whole issue of what has happened in this country with respect to the increasing inequality of income is an issue I address and abhor in the book, and I point out that what is causing it to a very significant extent is the fact that skilled labor is under extraordinary demand as the technologies increase, and we’ve had a dysfunctional education system in this country, both in primary and secondary schools, which is showing up in all of the studies, which indicate that while our children in the fourth grade are doing fairly well relative to international comparisons, by the end of high school, they are in terrible shape. And as a consequence of that, we are not putting the proper number of people into the education cycle to get them up to skill levels, which creates much less, or would create a good deal less, in the way of income inequality.

Blaming the low income workers for not being educated enough? What a tool. A tool with the anguish and even death of millions on his head for directing an economic system that kills rather than develops.

In this consortium of reactions regarding the banking outrages of the past week, I am bringing back this link to an incredibly informative video about Money. It is worth 45 minutes to hear this again. We don’t get any instruction in education about money and what it is. It is basic to all life in this 21st century and I venture to say only a tiny minority of people understand. I am now part of that tiny minority. Here is the link to Money is Debt.

For a second economic video, I returned to something posted earlier this year. This one is really short but full of concepts about economic growth being a negative thing. Depletion and pollution.