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*Obama Administration Careening Towards Disaster (& taking US with IT)*

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http://www.thiscantbehappening.net/?q=node/286



*Obama Administration Careening Towards Disaster*
*(and Taking the Country With It)
*Sun, 03/22/2009 - dlindorff

Six months after the failed Bush administration effort to "rescue" the US
financial system, and after two months of failed efforts by his own new
administration, at an expense to the American public of several trillion
dollars and counting, the Obama administration is announcing plans to blow
another $1 trillion in a massive taxpayer giveaway to investors who will be
subsidized in an effort to get them to buy the so-called toxic assets on the

books of the nation's biggest banks.

The problem with this plan is that its goal--getting these zombie banks to
start lending again--is not going to work.

It doesn't matter how good the balance sheets of the banks are. Good
companies, and even individuals and families with good credit, are simply
not borrowing. As I wrote last month in the magazine Treasury and
Risk<http://www.treasuryandrisk.com/Issues/2009/February%202009/Pages/Follow-the-Money.aspx>,
the
problem isn't that banks are too weak to lend (though the zombie banks
certainly are), it's that the strong banks don't want to throw money at bad
borrowers.

It is the nature of economic downturns like this current one that companies
and ordinary families don't borrow, but rather cut back on their spending
and try to reduce their debt, the better to ride out the hard times. It is
only the companies that are in trouble, like General Motors, Ford and
Chrysler, that are looking for loans, and no bank is going to want to lend
to them regardless of how much money the government pumps into it. (And if
the public decides that it is in the national interest to prop up such
companies, it is much more effective to have the government loan them the
money directly, rather than try to get banks to lend it to them at much
higher interest.)

What this means is that all the Obama administration, the US Treasury and
the Federal Reserve are doing by buying the toxic assets off the books of
banks like Citigroup, Bank America or Wells Fargo is giving a taxpayer
handout to those banks' investors and bondholders--the very people who
enabled those companies to invest in the corrupt credit default swaps and
other shady derivatives in the first place.

What should happen? Citibank, Bank of America, Goldman Sachs, and the other
financial institutions that made bad bets on these structured financial
instruments, should be allowed to fail, taking with them the investors who
played this dirty game, and the managers who decided to gamble instead of
run conservative banking operations.

The government would protect the assets of depositors in those failed banks,

which would be sold to healthier, better run banks, making those banks much
stronger and better capitalized in the process--and thus ready to start
lending as needed. This is standard operating procedure for the Federal
Deposit Insurance Corp.

Note that this process would mean no crisis in the economy, since the
ability to access credit would not be crimped in the least by the failure of

some of the country's larger banks. It would, in fact, probably be enhanced.

The toxic assets would be eliminated through the bankruptcies, and the
government--and taxpayers--would be $1 trillion less in the red.

Why isn't the Obama administration doing this? Because Obama has put his
trust in the advice of men--Treasury Secretary Tim Geithner, Chief Economic
Advisor Larry Summers, and, informally, former Clinton Treasurer Robert
Rubin, all linked to the investment bank Goldman Sachs, which was also the
corporate home of Bush Treasury Secretary Henry Paulson. The same Goldman
Sachs which was given $10 billion in Troubled Assets Relief Program funds
directly, and which then snagged another $13 billion in TARP funds in
secret, which was laundered through the now-government-owned insurance
company AIG.

Columnist and Nobel economist Paul Krugman writes in today’s New York
Times<http://economistsview.typepad.com/economistsview/2009/03/paul-krugman-financial-policy-despair.html>
that the latest White House bank rescue plan will fail. He goes on to say,
"This is more than disappointing. In fact, it fills me with a sense of
despair. ... It's as if the president were determined to confirm the growing

perception that he and his economic team are out of touch, that their
economic vision is clouded by excessively close ties to Wall Street."

It should be clear at this point that the Goldman cabal burrowed deep inside

the Washington apparatus is working not to rescue the US economy, but rather

to ensure the survival and enrichment of the big banking establishment, and
of course Goldman Sachs.

What we are witnessing in the policies of the Obama administration is not
the creative experimentation of a modern-day Franklin Roosevelt, but rather
the greatest heist in the history of mankind, as trillions of dollars in
public funds are shifted from taxpayers' pockets into the hands of the very
banks and bankers and bank investors who brought us this financial debacle.

Instead of decrying the bonus payments to AIG executives, the American
public should be demanding the indictment of Paulson, Summers, Geithner and
Co. for IGL: Incomprehensibly Grand Larceny.

Instead of trying to rescue the nation's giant banks, we should be demanding

that they be shattered into little harmless pieces.

Come to think of it, maybe it's time for a run on the banks--not because
your money is not safe at Chase or Citibank or B of A, but because these
institutions need to be killed off for the good of the nation.

If you have an account at any national bank, go there tomorrow and take it
out. Transfer it to a local bank in your community, or better still, into a
Credit Union. You'll get better service, your money will still be just as
safe, and you won't be propping up institutions that have been stealing the
country blind.
http://www.thiscantbehappening.net/?q=node/286


######

Now We Can See Why Open Government Is the Only Way to
Go<http://www.thiscantbehappening.net/?q=node/284>
03/18/2009 — dlindorff
http://www.thiscantbehappening.net/?q=node/284