Tag: Financial crisis

Too Big to Jail

The current global economic crisis has taken us into an extraordinary new realm of irresponsibility. It is being depicted as a man-made calamity so vast and complex that nobody can be held accountable for it. This makes sense only to those who are afraid of being held accountable. As James Howard Kunstler puts it in his current blog post:

In the typhoon of commentary that’s blown around the world a step behind the financial tsunami that’s wrecking everything, two little words have been curiously absent: “fraud” and “swindle.”

The usual suspects in the authoritarian, “conservative,” and libertarian precincts of the blogosphere are united in proclaiming that this global meltdown, which may end up costing taxpayers trillions of dollars, is one big accident, in which no punishable acts have been committed. The reason for this strange claim of global amnesty is that that the most powerful players in government and business committed so many potentially punishable breaches of trust that nothing less than a wholesale turnover of the world’s leadership elites is called for. Because the commentariat works for these elites, they have declared that the guilty parties are effectively too big to jail. Here is a summary of the sophistries that are being deployed.

1. No individual/company/government is fully responsible.

2. The global financial system is too complicated for a cause to be found.

3. All political parties were implicated.

4. Everyone was doing it.

5. Nobody could have predicted the magnitude of the disaster.

6. Punishing people will not do any good.

The Financial Crisis Explained in One Interview!

Originally posted via Socialist Appeal (UK):

Still flummoxed by the financial crisis? In this classic comedy sketch, John Fortune and John Bird explain why we are in such a mess.

Soon To Come, As The Meltdown Deepens

The ongoing economic meltdown is terrifying, but at the same time many of us have no real idea of what’s rolling down the pike at us.  

There are many aspects of the crisis and the coming recession which are impossible to predict. One impact though, will be unavoidable: crippling budget crises at the state and municipal levels, driven by falling real estate values, layoffs, business closings, increased borrowing costs and recession.

What Happens When the Banks Don’t Lend

To get a sense of what this could look like, it is instructive to look at what happened to New York City starting in 1975, when bank credit dried up and a fiscal crisis kicked in that was to last more than a decade. Remember that this was a budget crisis isolated to a single city, rather than the generalized collapse of the banking system we are seeing now.

The immediate background is that by the early ’70s, the City’s budget was deep in the red, kept going with fiscal jiggery-pokery especially in Mayor Lindsay’s second administration and under his successor, Mayor Beame. The back story is more complex of course, having much to do with federal policy since the Eisenhower administration which directed resources to suburbanization at the expense of city and country–money for interstates, not mass transit and railroads, subsidizing vast auto-dependent tracts of single houses on what had been farmland–you know the deal.

What plunged the City into crisis was the large banks refusing, collectively, in March, 1975 to extend credit to New York any longer, declining to roll over loans and boycotting the City’s bond auctions. The Beame administration moved to lay off 25,000 city workers and defer contractual raises for others, cut services, increase the transit fare and institute tuition in the City College of New York system.

For months there was a political war over how things would get resolved, with highway workers, cops and other city employees staging militant demonstrations and threatening an October general strike. The NY State government stepped in with aid but the federal government refused until massive pressure from the financial industry was brought to bear.

With everyone staring into the abyss of bankruptcy (and the possibility of a judge writing off the bonds the banks still held or canceling union contracts), the municipal unions made a devil’s pact with the banks, the details of which I leave for another post.

“The Bronx Is Burning”

What I want to remind people of is what happened to NYC once the austerity, service cuts, layoffs, tighter credit, tax hikes and the rest of the bank-sponsored “rescue package” kicked in.

Garbage piled up in the streets, and law enforcement abandoned whole neighborhoods. The public education system, already jolted by the refusal in the ’60s of Blacks and Latina/os to accept a two-tier, heavily segregated system, now faced serious cuts. Class sizes ballooned. “Non-essential” programs like art and music education and vocational training disappeared.

The Transit Authority adopted a policy of “deferred maintenance”–only fixing things when they broke down completely. One leader of the militant opposition within Transport Workers Union, Local 100 at the time, Arnold Cherry, pointed out whenever he spoke that every housewife knows that if you don’t empty the crumbs out of the toaster, eventually it stops working. Not TA management, though–the system veered toward total collapse in the early ’80s.

Meanwhile, landlords in “bad neighborhoods” emulated the Transit Authority, milking their aging apartment buildings for every dime in rent they could collect while “deferring” maintenance, laying off supers, ignoring heating oil bills, and finally abandoning the buildings themselves rather than pay city taxes. Or, given a chance, burning them down to collect the insurance.

This was seared into the national consciousness in the famous blimp shot of a five-alarm fire in the South Bronx during the 1977 World Series while Howard Cosell intoned, “There it is, ladies and gentlemen, the Bronx is burning.” As much as 40% of the housing stock in the borough was destroyed during these years, feeding an impossible-to-ignore homeless population and pumping up rents for vacant apartments in surviving buildings. (The City, meanwhile, was closing firehouses as a money-saving measure.)

Huge cuts in the NYC medical system on top of deteriorating social conditions laid the ground work for what Nick Freudenberg and his co-authors identify as a deadly “syndemic”: the three interlinked epidemics of TB, murder and HIV infection.

Even after the emergency financial aid was paid back, and the City’s budget was balanced and the banks decided they would once again buy long term bonds issued by the city (1981) , the Emergency Financial Control Board kept austerity policies in place and the damage they did to millions of people reverberated through the decade and up to the present. To cite only one example, the City College system which had boasted free tuition for NYC residents before the crisis, now costs upwards of $2000 a semester.

What It Means

I could go on. There are a lot of particular lessons to learn from the New York City fiscal crisis, and how various social forces responded and what kinds of popular resistance developed and worked.

But lesson number one is that this kind of crisis is on the agenda right now, in cities around the country, and once it erupts, there is no quick bounceback. Start trying to size up the situation where you live and figure out who your allies are going to be in the coming years.

Crossposted from Fire on the Mountain.

Liquidating the Empire

Original article, by Pat Buchanan, via antiwar.com:

“Liquidate labor, liquidate stocks, liquidate the farmers.”

So Treasury Secretary Andrew Mellon advised Herbert Hoover in the Great Crash of ’29.

Hoover did. And the nation liquidated him – and the Republicans.

Why the panic won’t stop

Original article, by Lee Sustar, via socialistworker.org:

Tomorrow, tomorrow

I love ya, tomorrow

You’re always

a day away!



– From the Broadway show Annie

SO MUCH for that $700 billion bailout that was supposed to save world capitalism.

The Obama-McCain debate: Right-wing politicians agree on bailout and militarism

Original article, by Patrick Martin, via World Socialist Web Site:

Friday night’s presidential election debate between Democrat Barack Obama and Republican John McCain demonstrated that there is no choice in the 2008 presidential election within the confines of the official two-party system. Two candidates stood facing each other, espousing nearly identical positions in defense of Wall Street and American militarism which would, in any other country in the world, immediately identify them as representatives of the ultra-right.

The bipartisan deregulators

Original article, by Lance Selfa and subtitled Both parties have honored Corporate America’s wish for eliminating government regulation, via Socialistworker.org:

LIKE EVERYTHING else in Washington–from the Iraq war to the USA PATRIOT Act–the financial crisis that has already brought down a host of blue-chip Wall Street firms is a bipartisan disaster.

A Personal Story about the RTC and a Conscientious Democrat

Hello, this is my first diary here. It has already been posted and did pretty poorly at DailyKos until being rescued. It is a story of pain and suffering and I believe it is a decent prediction of things to come.

This is an old story from 1994 that has some relevance today. It is a story from a Democratic administration but the victims were forced to deal with a Republican resolution. It is a story that I had to live through.

I live in a 3000 unit apartment complex in the Bronx. It is a massive dwelling on 22 acres that was built in 1961. There was a conversion from a rental property to a cooperative in 1987, the last breath of a housing boom. A complete renovation made the property much more desirable.  

In order to sell many apartments very quickly the holder of unsold shares steered new shareholders towards seven and ten year balloon mortgages. People believing in their own upward mobility put up ten percent and made smaller payments that paid down just a small amount of the principle.

When these balloon mortgages ended so many of those loans were with defunct savings and loans and many residents ended up at the mercy of the Resolution Trust Corporation. Not only were many tenant/shareholders in big trouble, because of the RTC it looked like the entire complex was going to fail.      

Stop The World, I Want To Get Off (Final Update, Last Call)

How lovely.  Just when we need to hear from the candidates about the “financial crisis”, we learn that McSame’s canceling the Friday debate, urging Obama to do the same.  It’s a replay of the Hurricane Gustav “strategy”.  Things are, apparently, too important for politics.  Too important to thrash it out.  No.  What we need is to act presidential, and let somebody else figure out what to do.

The NY Times reports:

Senator John McCain said Wednesday that he would temporarily suspend his presidential campaign on Thursday to return to Washington to deal with the financial crisis and the $700 billion bailout package now before Congress.

Mr. McCain said he told Senator Barack Obama that he was asking the Commission on Presidential Debates to postpone the debate scheduled for Friday night.

“I am calling on the president to convene a meeting with the leadership from both houses of Congress, including Senator Obama and myself,” he said. “It is time for both parties to come together to solve this problem.”

That’s what we need.  No debates about how we got into this mess and how we get out of it.  No debates about who’s paying the tab.  No debates about Congressional review, reports to Congress, and judicial review of the plan.  No debates about the price of securities and how they’re selected. Oh no.   Nothing about the details.  When it comes to important issues, and in this case, the singular most important issue facing the country, what does McSame propose?  We have a nice meeting with lame duck Bush and the leadership, all of whom are directly responsible on some level for the mess, to make yet another backroom deal.

Give me a break.  What we need is a vigorous, no holds barred, forthright, face to face debate on precisely how the present “financial crisis” is going to be resolved.  Anything else, I bet, is just another smoke filled room and a rescue to the people who least deserve it.

Obama should say no, the debate must go on.  But don’t hold your breath for that.

Update: Another thing. According to Reuters McSame is making the exact, same argument he made about Gustav and the convention:

“It’s time for both parties to come together to solve this problem,” the Arizona senator said. “We must meet as Americans, not as Democrats or Republicans, and we must meet until this crisis is resolved.”

He doesn’t get that we’re all Americans and Democrats, Republicans, Independents, and/or third party supporters.  The parties are supposed to stand for something, they’re supposed to be involved in finding solutions to problems, in discussing alternatives, in pressing their viewpoints, in debating, in reasoning, in trying to convince others that theirs is the best course.  That’s what Americans do.  That’s what democracies do.  The idea that we drop those viewpoints to solve problems is ridiculous.  And it leads to backroom deals in which The People get thrown under oncoming transportation devices.

Wall Street Meltdown and a melting globe

Global Warming, it is said, offers perhaps both the greatest challenge humanity has ever faced and perhaps the greatest opportunity we’ve ever had. Either we will figure out how to transform society, to a prosperous and sustainable path, or we will fail to do so with dire consequences.

When it comes to Global Warming and moving forward, one of the greatest challenges has been from those fearful, dismissive, disdainful of “large” government. Yet, to deal with Global Warming will require not just individual action, not just local communities, not just ‘business’ and market activity, but serious government engagement as well — policy, financing, research support, and otherwise.

So, a question that has to be faced: Is Wall Street’s meltdown going to worsen or improve the prospects for navigating the Perfect Storm of Peak Oil and Global Warming? And, the answer is likely: both. It is both challenge and opportunity.

Is This the Stake Through Neoliberalism’s Heart? It Should Be, But …

Original article, by Alexander Cockburn, via counterpunch.com:

Hope walks arm in arm with fear, and so naturally enough Candidate Barack Obama is now reminding us, a la Roosevelt, that we have nothing to fear but fear itself and we must all pull together in a spirit of bipartisanship. Wrong. We have many identifiable things to be frightened of, starting with a bailout program designed to bail out the thieves running our financial system, and stick middle America with the pricetag – heftier than you can imagine. Why pull together with the licensed thug who just stole your money with the pledge that he would be doing it again to your kids?

Maybe we can call it “late late capitalism” now?

This diary will muse upon the events of the last week or so, with especial reference to recent DKos diaries which I’ve been reading, putting them in the context of the real conditions in which we live…  the end result will be to characterize the political economy of the present as “late, late capitalism” while reflecting upon DailyKos.com as a site of lively discussion about current events.

(crossposted at Big Orange)

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