Sunday, October 09, 2011

Age of Greed

Wednesday, September 14, 2011

From "Counterpunch"

From "Counterpunch" Vol18, no.15 - 20110901-15

The “Jobs” Speech
By Andrew Cockburn

There are plenty of reasons for
presuming that Obama’s “jobs
plan,” as outlined in his speech
last week, will prove as ineffectual as
his previous rhetorical assaults on the
economic depression, the most obvious
reason being the ranks of stony-faced
Republicans staring up at him in the
House chamber. More fundamentally,
however, the president gave no sign that
he understands, let alone is prepared to
address, the fundamental problems facing
the economy.

As is now generally accepted, the
global financial storm that blew up in
2007 and reached full fury the following
year was caused by banks speculating
on real estate property loans so wildly
with borrowed money that they went
bankrupt. Or, at least they should have
gone bankrupt but, with the exception of
Lehman Brothers, Goldman, J.P. Morgan,
Morgan Stanley, Wells Fargo, etc., were
saved by assistance from Washington – a
bailout mostly engineered in deep secrecy
lest citizens discover what was being
done in their name with their money. No
banks were restructured, nor were any
senior managements fired, still less
hauled away in handcuffs.
Thus we live today under the same system
that brought us to disaster four
years ago, with an identical team manning
the controls. The crash of 2007-08
was initiated when the bankers’ efforts
to conceal their losses on mortgage loans
(to poor people, at loan-shark rates) fell
apart. Though government assistance
apparently saved them, their appearance
of financial health was underpinned by
the pretence that billions of loans, still
on their books, were sound, generating
interest and profits. But they were
not. Some $500 billion have been written
off in worthless loans (i.e., those which
generated no income and would never be
repaid). But all indications are that a further
$500 billion lurk on the books in the
form of loans deemed “sound” by banks
and their complaisant accountants, but
which are far from that.

Overall, 11 million families are underwater
on their mortgages, with an average
of $65,000 in negative equity, and
millions of these have simply stopped
making their mortgage payments. But
this sad state of affairs is not reflected
in the banks’ books, where many of the
loans are carried as “current,” as there
was a feasible hope of repayment, because
to write them off would undermine
the banks’ own financial standing
– a policy essentially endorsed by the
Bush/Obama administrations, as exemplified
by Treasury Secretary Timothy
Geithner. Conscious of their real and
precarious situation, the banks hoard
their capital rather than extending credit
to worthy borrowers, who might actually
give someone a job. So, credit and
demand continue to contract, along with

Obama has advanced some feeble efforts
on behalf of the hapless debt-burdened
homeowner, HAMP, HARP, etc.,
but at no time has he or anyone else in
Washington shown the slightest desire to
grasp the nettle and wind up institutions
like Bank of America or Citibank, jailing
those who committed fraud, write off the
bad debts, institute a wholesale policy of
principal mortgage-loan reduction, and,
thus, relieve the crushing burden of debt
that inevitably stifles his own puny economic
initiatives. CP

Andrew Cockburn was co-producer of
the documentary, American Casino, on
the financial crash.