President Obama’s auto task force has reported that if GM goes into bankruptcy, then the bondholders would need to take a 10% stake in the restructured company in exchange for their $27B they hold in GM corporate bonds. The re-emerged downsized GM could acquire another $40 billion in loans, which would be in addition to the already nearly $20 billion they have already received. It appears that the bondholders have been squawking over their deal. I say, too bad. Suck it up or loose it! Where is their “shared sacrifice?” as President Obama has demanded from the workers, and all those peripherally connected to the auto industry? Didn’t anyone tell the bondholders that investment is a risk and not a guarantee; and, that this is a bankruptcy unraveling? The UAW health care group will receive 17.5% ownership stake in exchange for the $20B owed them by GM. The U.S government will take a 60% stake in the company, while Canada will own a 12% piece of the pie.
And then there is the bankruptcy of Visteon Corporation, and Metaldyne Corporation both of which supply parts and chassis respectively for Ford Motor Company.
Automaker sales have plunged 37% this year through April, according to Bloomberg News.
The auto task force wants to see the newly-government owned GM company manufacture future cars in China. This sounds like more of the same strategy of outsourcing American jobs. Ship good paying manufacturing jobs overseas where they can be made cheaply, adding to our trade deficit, unemployment problems, further erosion of wages, and a diminished domestic tax base. This is more of the failed Reaganomics-style policies that failed the nation in the past. Haven’t Democrats woken up yet? Oh, I forgot, many are a part of this problem. Aren’t they?
Robert Reich pointed out in “What Industrial Policy Should Be”, 5-19-09, “So tucked into the latest version of climate legislation unveiled this week by the House Energy and Commerce Committee is a provision that doubles to $50 billion loans to help auto makers comply [to fuel economy targets].” Will such research and development, as well as design and manufacturing be done domestically? Or, will that be outsourced, too?
Ralph Nader and Robert Weissman wrote a letter addressed to both Senators Dodd, and Frank strongly suggesting that the Congress exercise their oversight powers regarding Obama’s consideration of bankruptcy for Chrysler and GM, “or other irreversible moves until after the task force plan has been subjected to close and careful review via thorough Congressional hearings.” It does not appear that such considerations will be honored. Just get rid of middle class jobs altogether appears to be the mantra of the nation’s elite. The richest 400 Americans, who have a net worth of $1.7 trillion, based on 2008 figures, which is around 10% of our GDP, want the welfare state kept in place just for themselves. Remember, they got this rich based on shoddy regulation of the financial industry, and the government’s allowance of over-leveraged mortgage-backed securities, as well as the credit default swap scam that kept the high roller financial bankstas, who had been betting against gains, even richer.
According to Les Leopold, in his piece “Fear and Looting in America…” in 1982, the top 400 of America’s richest, their net worth was $604 million; but, by 2008, this net worth had grown to $1.56 trillion!
It seems that the White House has grown so far removed from the collapse of the economy that there won’t be a recovery strong enough to buy even cheap foreign-made GM cars. What we have heard from the media bobbleheads is how the economy has picked up in May. “Hurray! Has a recovery begun? Will consumers continue to spend money they cannot afford to part with? Let us sure hope so! They better stop saving 4% of their incomes and go back to a zero savings rate. Maybe they will start borrowing again, too.”
Bomlat.blogspot.com wrote that “Personal savings as a percentage of personal income was 5.7% in April, compared with 4.5% in March.” Americans are now getting it. They better save more and spend less.
The bobbleheaded media pundits cannot see the forest through the trees. What happened in May? Well, there were graduations: college and high school. People bought gifts for the graduates. They traveled to college communities to attend these events. They ate in restaurants and bars. High schoolers bought prom dresses, and accessories. College graduates went to department stores and purchased, probably on credit, a few outfits for their interviews. There may even have been a few house parties. OH NO. WE CANNOT HAVE THAT NOW!
I believe such spending can boost the economy a few percentage points. The AP news service reported that the Consumer Confidence Index rose from 40.8 to 54.9. Macy’s Inc., Apple, and Best Buy Co. saw an increase in sales. Such data makes temporary sense. Families may actually spend money they don’t have on short, and local vacations in the coming weeks. Watch credit card debt increase over the next few months. Has anyone noticed creeping gas prices?
Wages have remained stagnant for many. Foreclosures seem not to be taking a rest during this rise in consumer spending. The private economy continues to shrink shedding jobs at a pace of more than 600,000 a month over the last half-year. Where will all these new college graduates find jobs? Will they earn enough to pay down their student loan debts or will they declare bankruptcy? If some are lucky, they will find work in the public sector getting experience from jobs funded through the U.S. government stimulus package. The private sector surely will not be expanding anytime soon in order to bring on new employees. Households have seen their net worth fall down the well at a cost of $13 trillion.
Also found on Bomlat’s blog, “Real gross domestic product-the output of goods and services produced by labor and property located in the United States—decreased at an annual rate of 5.7% in the first quarter of 2009…estimates released by the Bureau of Economic Analysis.” We have seen GDP over the last 2 quarter fluctuate between 5.7— 6.3%. Other economists have stated that our real GDP is actually in negative to zero ranges.
Bomlat also reported that “intermodal volume of trailers or containers was off 19.1% from last year, with container volume down 14.2% and trailer traffic off 37.2%.” This data is not very reassuring that a recover is soon at hand. Can someone call Ben Bernanke and tell him so?
The stock market knows that it has no legs. That game is only for those who can jump in and jump out. It has its own rules separate from reality. It has no long term sustainability.
Fed Chairman Ben Bernanke will be finding $1.7 trillion worth of treasuries coming due. He is printing up $1.75 more treasuries to pay for additional deficit spending. Who is going to buy these bonds? It will be the Fed themselves, more than likely. Will there be a point when foreign central banks and currency buyers stop believing in the continued erosion of the US dollar through debt expansion? Will the price of these bonds be driven down, while interest rates move upward? Will this build a wall in the path of home mortgage lenders and new house builders? Both Bernanke and Geithner already know that business-fixed investment, and non-residential fixed investment, which makes up most of all business investment, is collapsing at an annual rate of 40%. Does this sound like the private sector will be growing? The Bernanke fantasy that our national recovery will realize a 3% growth rate next year, 4% in 2011, and 4.6% in 2012 is just gobbligook. Currently, our GDP is basically negative. He drinks too much Psycho Kool-Aid at lunch.
Economist Niall Ferguson has stated that our 2009 deficit will move above 12% of GDP. He also stated that the Fed will likely be buying $300 billion worth of treasuries this year, but they will probably find themselves having to open up their balance sheet to buy more than that. Economist Paul Krugman claims that the US is currently in debt about 60% of GDP. Will the rest of the world back away from financing our growing debt by purchasing virtually zero percent interest bonds? The U.S is basically producing nothing of tangible value to export in order to bring down the deficits.
China is very happy to see all of our manufacturing going over to their side, so we can keep buying their cheap stuff. But at some point, most Americans will not have any money to keep that going. And, if our debt exceeds our GDP, we no longer are a viable economy. Our currency could become worthless through hyperinflation. If we ship our auto industry overseas, then many jobs, which would be interconnect to it, would disappear, too.
The economist Peter Morici recently wrote that “unless the economists are wrong, this key forward looking indicator of economic health [Durable goods orders in March were down 0.8% and the consensus forecast calls for another 0.3% drop.] would likely indicate that the recession has some to time to run. Until consumers have the confidence to purchase big ticket items and businesses put cash into new technology, the economic recovery is not at hand.”
Michael Whitney stated it beautifully. “The current downturn is not really a recession at all; it’s more like a self-inflicted wound perpetrated by avaricious speculators who put a gun to the economy’s head and blew its brains out. The banks and Wall Street have created a capital hole so vast that the entire economy is being sucked into the abyss. And it all could have been avoided. Credit production is too important and too lethal to entrust it to profit-driven vipers whose only motivation is self-enrichment. The whole system needs rethinking and public input before Bernanke wastes trillions more trying to revive the same crisis-prone business model. If “credit is the economy’s life’s blood”, as Obama says, then it should be distributed through a government-controlled public utility. The real lesson of the financial crisis is that privatizing credit has been a disaster.” (The Real Lesson of the Financial Crisis, Counterpunch.org, 5-19-09).
Thanks for reading, Jerry
Showing posts with label GM. Show all posts
Showing posts with label GM. Show all posts
Tuesday, June 2, 2009
Sunday, May 17, 2009
Congress Fails To Help Working Americans Hold On To Their Homes
If you think Ben Bernanke or Tim Geithner really believes that the recession is coming to a close, think again. These two shills for the Wall Street financial crime syndicate, and mouthpieces for the economic recovery plan designed by President Obama are just performing their clumsy magic act. We are very far from a bottom in the market, or an economic recovery, for that matter. They know what is going on in every market, in every country, and with every central bank. It is clear, just from doing a fraction of the research their teams engage in all day long that the world economy is slowing down day by day, and will continue to do so for a long time into the future. More and more Americans are falling into hard times, and unless help is on the way, there will be long lines at unemployment offices, food banks, welfare services, and legal aid offices all around the country. The nation’s commerce will not be able to sustain itself on the shrinking number of solvent and employed workers. As the nation’s tax base shrinks, those solvent and working Americans will pull back on their own spending in order to have a larger personal cash reserve. Unfortunately, our federal government has not woken up to this grim fact. They continue to wait for a new bubble to inflate the economy in some magical way. And as the world’s commerce shrinks, as we are witnessing today, there will be fewer goods and services bought and sold.
Let me share what I have read from a terrific site called Bomlat .
“Total cargo volume at the [India] 12 gateway ports dropped to 45 million tons, from 46 million tons in the same month the previous fiscal year.”
“Consumer prices fell, [in China] 1.5 percent in the year to April, marking the third consecutive month of deflation after a 1.2 percent fall in the 12 months to March, the National Bureau of Statistics said on Monday.” Bomlat says from graph charts he posted on his site that manufacturing production is suffering. Inflation is low; therefore no one wants to purchase treasuries when there are virtually no interest returns paid. He went on to say that inflation is negative, and the Chinese leadership is freaked out because all of this is happening during a time when they have committed to monetary expansion. After the injection of China’s central bank capital into their economic expansion, it may all just deflate. It is something like if air was being blown into a balloon representing expansion capital, and the balloon got really big, but then suddenly, China let go of the balloon, and let it loose to blast about, the balloon would no longer be filled with capital. All the capitalized-air would empty out of the balloon. The Chinese economic stimulus would fizzle, and inflation would begin to become realized.
Bomlat went on to discuss Volvo truck sales and how their sales have dropped 50-60% and production dropped 70-80%. He wrote that because many manufacturers around the world were producing product in 2007, and now, they are stuck with inventory that is hard to sell, it might take several months, or longer, to begin to reduce that excessive inventory to a point where production can resume, once again. But, in the meantime, workers are getting laid off, their spending is shrinking, and their budgets become fragile.
Here are a couple facts from the American Railroad data regarding tonnage miles for May 9, 2009: down 25.2%. Railway loads of vehicles and equipment were down 49.5%.
Bomlat went on to write about U.S. deflation. “The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2% in April before seasonal adjustment, the Bureau of Labor Statistics of the U.S. Department of Labor reported.” “This index has fallen 0.7% over the last 12 months due primarily to a 25.2% drop in energy prices. The year-over-year declines in March and April are the first since 1955.” Bomlat said, and I paraphrase, we have to point to housing, which became 1% more expensive during the last 12 months. I [Bomlat] think we can see the problems with this inflation calculation methodology because we have experienced, around the world, a big fall in housing prices, as well as a fall in rental prices, but they are trying to convince us that there has been an increase in the cost of housing/shelter.
On the Bomlat site, there was a CNN Money article that said “February’s retail imports, such as clothes, shoes, and home furnishings dropped to the lowest level in seven years.” Bomlat wrote the following, “expect [a] continued [drop in] business for global supply chain providers well into 2010. Ocean, air, TL, LTL, brokers, freight forwarders, distribution center operators, as well as air and ocean ports all need sustained retail volume. Retail business is a critical component [for a] supply chain industry turn-around.”
Bomlat posted a Reuters report which read, “China’s steelmakers are facing low demand and potentially disastrous oversupply, supporting their insistence on a 40% cut in benchmark iron ore prices. China’s steel industry, the world’s biggest, traditionally set a global benchmark…” Mr. Shan Shanghua, secretary general of the China Iron and Steel Association said…this year [there is] too much supply and too little demand.” The secretary general went on to say, “I have not seen any fundamentals to support a sustainable steel price recovery. Major steel mills have cut their production of steel coil remarkably in China and steel mills have already seen their exports falling sharply.”
Bomlat wrote about April’s new big truck orders and how they are down and projected to remain depressed. “North American new truck orders for April ’09 are quoted by FTR to be 7,935—down 9% from March and down 57% from April ’08.” This follows January numbers of a bit over 10,000 units, and February was at 6,200 units, while March was around 8,600 units. He projects that the truck industry will show recovery in 2010.
Then he wrote about furniture imports taking a hit, too. He wrote that furniture imports have been down by 50% from a year ago, due to weak US demand. This decline affects the trucking industry, too.
The biggest shock came from his reporting on the US container import business, which dropped by 15% year-over-year. “Import cargo at the nation’s major retail container ports fell 15% in March, compared to year-earlier numbers.”
It was written in a Journal of Commerce article written by Thomas Gallagher, March 6, 2009, that “retail container traffic at the nation’s ports sank 14.6% in January….This year’s numbers are going to remain well below last year because sales are still slow and most economists aren’t seeing a recovery before the second half of the year at the earliest..”
Bomlat posts all types of American and Chinese commerce figures daily. His data shows that the economy’s of China, and the U.S. are slowing and will likely remain slow. All sectors of industry, of which he reports on, shipping, rail, auto manufacturing, heavy industry, industrial metals, energy, furniture, etc. are demonstrating declining sales, over-capacity in inventory, and reduced consumer spending, as a whole. At the bottom of the post will be a shocking Youtube of thousands upon thousands of empty cargo containers stacked up on idle ports.
General Motors will likely cut 47,000 jobs worldwide this year, and dealership numbers will shrink, too. We will probably find 2600 fewer GM dealers in America reducing their network by a third. What will that do to inventory? Where will all those unsold cars and trucks end up? Will further layoffs occur due to excessive inventory?
The financial sector will end up shrinking their ranks, as well. And, there are now fewer newspapers. Fewer jobs lead to lower wages, less consuming, and a drop in skilled labor jobs. As was seen in the 1981 to 1982 recession, unemployment climbed almost reached 11% with a loss of 3 million jobs. This recession is worse than that. This is worldwide. This recession has leaked into all sectors, especially housing and the ability to hold onto one’s retirement investments. One-third of all mortgages are underwater!!!! That is very scary.
According to the research done by the Columbia University economist Till von Wachter, the economist Jae Song of the Social Security Administration, and another economist Joyce Manchester of the Congressional Budget Office wrote that a typical 40-year old man who found himself unemployed during the 1981-82 recession went on to suffer a 20% loss in lifetime earnings. “People losing their jobs now in permanently downsized industries have to be aware that they’re particularly at risk of pretty large losses” to lifetime wages, says von Wachter, who briefed staff at the Fed and the European Central Bank last month of the effects of mass layoffs. (“Great Recession Will Redefine Full Employment as Jobs Vanish”, Matthew Benjamin and Rich Miller; Bloomberg 5-4-09. Bernanke and Geithner are not being honest with the American people.
President Obama when speaking about the fall of Chrysler Corporation emphasized the “shared sacrifice” that has to be made by the UAW in order to guarantee that the automaker can emerge from bankruptcy stronger, more competitive and viable as it joins forces with Fiat Corporation. What is the president talking about? Firstly, there is no guarantee that the new Chrysler will emerge successfully as he has suggested. Secondly, what is the “shared sacrifice” the Wall Street financial banking industry has had to make? They have made none! They have gotten all of the government bail-out money they wanted at zero percent interest, and with no sacrifice, such as new regulatory rules, new chief operational officers, limitations on their pay, and indictments from short selling their competitor's stock, or even betting against their own demise. The Wall Street financial crime syndicate even strong-armed 12 Democratic Senators to vote against the 'Shared Sacrificial' American people who would have benefited from a law allowing judges to assist desperate homeowners to write down (cram-down) the principal of their mortgage loans in hopes that they might be able to hang on to them instead of losing them.
No “shared sacrifice” allowed for the Wall Street banksters who were responsible for the economic collapse. The way this banking crime syndicate thinks is that property, mortgage property, remains to be their most treasured collateral which they hope will save their toxic “legacy” debt teetering on the brink of further devaluation. As the bank’s collateral falls in value, their debts rise bringing them closer to insolvency. President Obama, regressive Republicans, and the 12 key Democrats who voted against Senator Durbin’s “Helping Families Save Their Homes In Bankruptcy” amendment, obviously felt that further rescue of the banks took priority over any legislation that would benefit the suffering working American.
What they seem to have NOT realized is that they voted for more foreclosures, more bankruptcies, and ultimately, more bank failures. This amendment would have placed a bottom on collapsing home prices, which would have considerably slowed mortgage defaults. Instead of administering simple rescue breaths and chest compressions to the failing heart of the economic crisis, they decided to just kill the patient.
A mountain range of shipping containers
thanks for reading, jerry
Let me share what I have read from a terrific site called Bomlat .
“Total cargo volume at the [India] 12 gateway ports dropped to 45 million tons, from 46 million tons in the same month the previous fiscal year.”
“Consumer prices fell, [in China] 1.5 percent in the year to April, marking the third consecutive month of deflation after a 1.2 percent fall in the 12 months to March, the National Bureau of Statistics said on Monday.” Bomlat says from graph charts he posted on his site that manufacturing production is suffering. Inflation is low; therefore no one wants to purchase treasuries when there are virtually no interest returns paid. He went on to say that inflation is negative, and the Chinese leadership is freaked out because all of this is happening during a time when they have committed to monetary expansion. After the injection of China’s central bank capital into their economic expansion, it may all just deflate. It is something like if air was being blown into a balloon representing expansion capital, and the balloon got really big, but then suddenly, China let go of the balloon, and let it loose to blast about, the balloon would no longer be filled with capital. All the capitalized-air would empty out of the balloon. The Chinese economic stimulus would fizzle, and inflation would begin to become realized.
Bomlat went on to discuss Volvo truck sales and how their sales have dropped 50-60% and production dropped 70-80%. He wrote that because many manufacturers around the world were producing product in 2007, and now, they are stuck with inventory that is hard to sell, it might take several months, or longer, to begin to reduce that excessive inventory to a point where production can resume, once again. But, in the meantime, workers are getting laid off, their spending is shrinking, and their budgets become fragile.
Here are a couple facts from the American Railroad data regarding tonnage miles for May 9, 2009: down 25.2%. Railway loads of vehicles and equipment were down 49.5%.
Bomlat went on to write about U.S. deflation. “The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2% in April before seasonal adjustment, the Bureau of Labor Statistics of the U.S. Department of Labor reported.” “This index has fallen 0.7% over the last 12 months due primarily to a 25.2% drop in energy prices. The year-over-year declines in March and April are the first since 1955.” Bomlat said, and I paraphrase, we have to point to housing, which became 1% more expensive during the last 12 months. I [Bomlat] think we can see the problems with this inflation calculation methodology because we have experienced, around the world, a big fall in housing prices, as well as a fall in rental prices, but they are trying to convince us that there has been an increase in the cost of housing/shelter.
On the Bomlat site, there was a CNN Money article that said “February’s retail imports, such as clothes, shoes, and home furnishings dropped to the lowest level in seven years.” Bomlat wrote the following, “expect [a] continued [drop in] business for global supply chain providers well into 2010. Ocean, air, TL, LTL, brokers, freight forwarders, distribution center operators, as well as air and ocean ports all need sustained retail volume. Retail business is a critical component [for a] supply chain industry turn-around.”
Bomlat posted a Reuters report which read, “China’s steelmakers are facing low demand and potentially disastrous oversupply, supporting their insistence on a 40% cut in benchmark iron ore prices. China’s steel industry, the world’s biggest, traditionally set a global benchmark…” Mr. Shan Shanghua, secretary general of the China Iron and Steel Association said…this year [there is] too much supply and too little demand.” The secretary general went on to say, “I have not seen any fundamentals to support a sustainable steel price recovery. Major steel mills have cut their production of steel coil remarkably in China and steel mills have already seen their exports falling sharply.”
Bomlat wrote about April’s new big truck orders and how they are down and projected to remain depressed. “North American new truck orders for April ’09 are quoted by FTR to be 7,935—down 9% from March and down 57% from April ’08.” This follows January numbers of a bit over 10,000 units, and February was at 6,200 units, while March was around 8,600 units. He projects that the truck industry will show recovery in 2010.
Then he wrote about furniture imports taking a hit, too. He wrote that furniture imports have been down by 50% from a year ago, due to weak US demand. This decline affects the trucking industry, too.
The biggest shock came from his reporting on the US container import business, which dropped by 15% year-over-year. “Import cargo at the nation’s major retail container ports fell 15% in March, compared to year-earlier numbers.”
It was written in a Journal of Commerce article written by Thomas Gallagher, March 6, 2009, that “retail container traffic at the nation’s ports sank 14.6% in January….This year’s numbers are going to remain well below last year because sales are still slow and most economists aren’t seeing a recovery before the second half of the year at the earliest..”
Bomlat posts all types of American and Chinese commerce figures daily. His data shows that the economy’s of China, and the U.S. are slowing and will likely remain slow. All sectors of industry, of which he reports on, shipping, rail, auto manufacturing, heavy industry, industrial metals, energy, furniture, etc. are demonstrating declining sales, over-capacity in inventory, and reduced consumer spending, as a whole. At the bottom of the post will be a shocking Youtube of thousands upon thousands of empty cargo containers stacked up on idle ports.
General Motors will likely cut 47,000 jobs worldwide this year, and dealership numbers will shrink, too. We will probably find 2600 fewer GM dealers in America reducing their network by a third. What will that do to inventory? Where will all those unsold cars and trucks end up? Will further layoffs occur due to excessive inventory?
The financial sector will end up shrinking their ranks, as well. And, there are now fewer newspapers. Fewer jobs lead to lower wages, less consuming, and a drop in skilled labor jobs. As was seen in the 1981 to 1982 recession, unemployment climbed almost reached 11% with a loss of 3 million jobs. This recession is worse than that. This is worldwide. This recession has leaked into all sectors, especially housing and the ability to hold onto one’s retirement investments. One-third of all mortgages are underwater!!!! That is very scary.
According to the research done by the Columbia University economist Till von Wachter, the economist Jae Song of the Social Security Administration, and another economist Joyce Manchester of the Congressional Budget Office wrote that a typical 40-year old man who found himself unemployed during the 1981-82 recession went on to suffer a 20% loss in lifetime earnings. “People losing their jobs now in permanently downsized industries have to be aware that they’re particularly at risk of pretty large losses” to lifetime wages, says von Wachter, who briefed staff at the Fed and the European Central Bank last month of the effects of mass layoffs. (“Great Recession Will Redefine Full Employment as Jobs Vanish”, Matthew Benjamin and Rich Miller; Bloomberg 5-4-09. Bernanke and Geithner are not being honest with the American people.
President Obama when speaking about the fall of Chrysler Corporation emphasized the “shared sacrifice” that has to be made by the UAW in order to guarantee that the automaker can emerge from bankruptcy stronger, more competitive and viable as it joins forces with Fiat Corporation. What is the president talking about? Firstly, there is no guarantee that the new Chrysler will emerge successfully as he has suggested. Secondly, what is the “shared sacrifice” the Wall Street financial banking industry has had to make? They have made none! They have gotten all of the government bail-out money they wanted at zero percent interest, and with no sacrifice, such as new regulatory rules, new chief operational officers, limitations on their pay, and indictments from short selling their competitor's stock, or even betting against their own demise. The Wall Street financial crime syndicate even strong-armed 12 Democratic Senators to vote against the 'Shared Sacrificial' American people who would have benefited from a law allowing judges to assist desperate homeowners to write down (cram-down) the principal of their mortgage loans in hopes that they might be able to hang on to them instead of losing them.
No “shared sacrifice” allowed for the Wall Street banksters who were responsible for the economic collapse. The way this banking crime syndicate thinks is that property, mortgage property, remains to be their most treasured collateral which they hope will save their toxic “legacy” debt teetering on the brink of further devaluation. As the bank’s collateral falls in value, their debts rise bringing them closer to insolvency. President Obama, regressive Republicans, and the 12 key Democrats who voted against Senator Durbin’s “Helping Families Save Their Homes In Bankruptcy” amendment, obviously felt that further rescue of the banks took priority over any legislation that would benefit the suffering working American.
What they seem to have NOT realized is that they voted for more foreclosures, more bankruptcies, and ultimately, more bank failures. This amendment would have placed a bottom on collapsing home prices, which would have considerably slowed mortgage defaults. Instead of administering simple rescue breaths and chest compressions to the failing heart of the economic crisis, they decided to just kill the patient.
A mountain range of shipping containers
thanks for reading, jerry
Tuesday, April 7, 2009
The Team Obama Rip-off-The Financial Stability Plan
The rip-off seems to be continuing. The only real decision that occurred at the G-20 summit was that the top 5 representatives formed a new Doo-wop singing group—
The Great Dee-Fleck-Tors. All kidding aside, the big news was the passing of the G-20 economic hat that filled up with a modest $1 trillion that will go to crumbling, struggling and barely developing countries. No doubt, that money will go to make sure that those countries don’t default on their debt payment loans that the IMF is hungrily waiting for. That was not what we heard from President Obama. He framed it so we are to believe that the money is for more economic purposes, but I doubt it very much.
Back here at home, Professor Michael Hudson (How the Scam Works, Counterpunch.org) made it perfectly clear how the new Financial Stability Plan to subsidize the sale of “legacy assets”, ie, toxic mortgage debt, will be ripping us off. He explained that if a bank says that their package of collateralized debt obligations (CDO) is worth to them $10 million, it is likely they have overstated that fact. In late 2007, a recent Fitch rating agency study discovered that most of these junk mortgage debts are riddled with financial fraud, and the bank’s $10M package is likely only worth $2M. Isn’t this reassuring since the taxpayers are hoofing up 85% of the costs. Now, if another bank, hedge fund or equity fund decides to pony up $3M, then the scam becomes enhanced. The more money offered for the debt, the more TimmyG puts in, so why not make it a cool $5M. What we got now is the Treasury, with its 85% contribution, laying down $4,250,000. All the “investor” has to fork up is an easy $750,000—its 15% share. The legacy asset seller, B of A, or Goldman Sachs, or JPM, for example, which might even be hiding behind their own sacrificial equity fund they set up to buy the toxic debt which they might later fold up into bankruptcy disposing of the debt altogether, now gets $4,250,000 for its junk mortgage bond that was really only worth $2M! What a way to recapitalize an insolvent and bankrupt banking system! The $2T used for this Ponzi scheme is debt created into bond securities, none of which the private sector wants to touch, from credit cards, commercial loans, student loans, auto loans, and such through the Public-Private Partnership Investment Program (PIPP).
Back here at home, Professor Michael Hudson (How the Scam Works, Counterpunch.org) made it perfectly clear how the new Financial Stability Plan to subsidize the sale of “legacy assets”, ie, toxic mortgage debt, will be ripping us off. He explained that if a bank says that their package of collateralized debt obligations (CDO) is worth to them $10 million, it is likely they have overstated that fact. In late 2007, a recent Fitch rating agency study discovered that most of these junk mortgage debts are riddled with financial fraud, and the bank’s $10M package is likely only worth $2M. Isn’t this reassuring since the taxpayers are hoofing up 85% of the costs. Now, if another bank, hedge fund or equity fund decides to pony up $3M, then the scam becomes enhanced. The more money offered for the debt, the more TimmyG puts in, so why not make it a cool $5M. What we got now is the Treasury, with its 85% contribution, laying down $4,250,000. All the “investor” has to fork up is an easy $750,000—its 15% share. The legacy asset seller, B of A, or Goldman Sachs, or JPM, for example, which might even be hiding behind their own sacrificial equity fund they set up to buy the toxic debt which they might later fold up into bankruptcy disposing of the debt altogether, now gets $4,250,000 for its junk mortgage bond that was really only worth $2M! What a way to recapitalize an insolvent and bankrupt banking system! The $2T used for this Ponzi scheme is debt created into bond securities, none of which the private sector wants to touch, from credit cards, commercial loans, student loans, auto loans, and such through the Public-Private Partnership Investment Program (PIPP).
This is like taking the dead body (toxic mortgage debt), stuffing it into a sack (transferring this debt onto the bankster's shell company's balance sheet), allowing the bankster to steal the contents inside the wallet and then deposit the amount into their re-capitalized bank account (taking Geithner's 85% taxpayer contribution for over inflated toxic mortgage debt). Now they dump the body (the transferred toxic mortgage debt) encased in cement booties into the Hudson River allowing the shell company with the toxic mortgage debt as its only holding, to go bankrupt erasing the debt, while the bankster ends up making out like the bandit he has been allowed to be. All done with the White House's golden seal of approval given by Geithner, Summers, Bernanke and Obama. If this isn't the Royal Scam of century, I don't know what is! The banking emperors get their toxic debt incinerated through bankruptcy, and they end up with a big reward, ie, Geithner paying them two to three times what that toxic mortgage debt was worth at taxpayer's expense. Walla! Now the zombie banks have nothing to write down on their balance sheets. They have been magically re-capitalized by the Treasury and Fed. And no one is the wiser, but you and me. PIPP, PIPP Hurray!
A missing piece for the banks to get the Accounts-keeping Seal of Approval for jacking up the market value of the toxic debt that is really barely worth anything is to get the Financial Accounting Standards Board (FASB) to rewrite the financial accounting rules allowing the mega-empire-banks, 5 in total, to decide for themselves what the value of the toxic mortgage debt is worth to them. These new rules and guidelines give the bankstas a veil of fabricated legitimacy of which they needed to drape upon the value of their toxic mortgage debt. This would allow Geithner to go forward with his inflated and subsidized offers to the banks with the cover needed from the quasi-governmental agency--FASB. We don't need no stinkin' mark-to-market rules! We are the crime bosses of Wall Street! Step aside. WE make the rules around here, mista! Mista Obama, we are comin' through. Geithner, get your checkbook out and ready! These magical rules were back dated to cover the last few weeks to make sure all bases are covered.
Now, what is worth-less, is now worth-more. A lot more! You have to admit it is a beautifully designed Royal Scam. All bases covered. The banks can now get their worthless debt valued at gleefully inflated amounts thanks to new FASB rule changes. The banks can set up their own shell equity funds to sell, ie. transfer, the toxic mortgage debt onto a new balance sheet, at a 15% cost. The banks, in return, get to receive from Treasury a subsidized purchase price (at 85%) for the toxic mortgage debt, now valued 2 to 3 times its actual mark-to-market value. Now the banks have no toxic paper on their balance sheets thanks to all of us, China, and the Fairy God Mother. This is what is referred to as a "Clusterf**k"! The plot against Caesar Americus by Brutus Geithnerslut and Da' Boys has finally arrived.
Here is another kicker. F. William Engdahl wrote in Geithner’s Dirty Little Secret, that there are only 5 mega-banks that hold “96% of all US bank derivatives positions in terms of nominal values, and an eye-popping 81% of the total net credit risk exposure in event of default”, as was reported by the Federal Office of Comptroller of the Currency, in its Quarterly Report on Bank Trading and Derivatives Activity. JPMorgan holds $88 trillion in derivatives. Bank of America holds $38 trillion; Citi holds $32 trillion; Goldman-Sachs holds $30 trillion; Wells Fargo-Wachovia Bank holds $5 trillion. And, out of Britain, HSBC USA holds $3.7 trillion.
Mr. Engdahl called this a banker’s coup d’etat. The $180B bailout to AIG went to rescuing the 5 mega-banks, since they were AIG’s biggest counterparty clients.
Tim Geithner says, “We need better, smarter, tougher regulations”, so TimmyG, why hasn’t the Glass-Steagall Act been reactivated? Why hasn’t the Commodity Futures Modernization Act 2000 been trashed? Yet, TimmyG is still blowing his rusty horn and wanting to bring in better, smarter and tougher regulations. Let’s hear ya play another tune for us because this one is down right bad. What is amazing is that Timmy, when he was chairman of the New York Federal Reserve, reporting to Bada Bing Ben Bernanke, was supposed to enact regulatory rules, but he says that was not his role. Yet, according to his job description, he was to act as a banking regulator. Watch William K. Black, a former regulator and economist say so to Bill Moyers.
Dr. Dean Baker, economist, wrote in “Geithner’s Plan Will Tax Main Street to Make Wall Street Richer”, “Oh, by the way, some people will get very rich off the Geithner plan. Some hedge and equity fund managers could make hundreds of millions or even billions off the Geithner plan. And, under current law, they will pay a lower tax rate on this money than a schoolteacher or firefighter. Are you sold yet?”
Michael Whitney quoted the economist Jeffrey Sachs in “Geithner Hog Wild”, “Geithner and Summers have now announced their plan to raid the Federal Deposit Insurance Corporation (FDIC) and Federal Reserve to subsidize investors to buy toxic assets from the banks at inflated prices. If carried out, the result will be a massive transfer of wealth—of perhaps hundreds of billions of dollars—to bank shareholders from the taxpayers (who will absorb losses at the FDIC and FED)…”
It sure seems to me that the Geithner plan is like allowing gangstas who have terrorized the village store owners by breaking windows and knocking down doors, as well as looting the cash registers while stuffing their pockets with merchandise as they run out the door, to then be given government neighborhood block grants to open up their shops in the places where the former businesses had been established. And then, tell the villagers they will be spending their money in the gangsta’s new shops. This is the kind of nation we seem to be living in from my perspective.
TimmyG now wants Congress to grant him full regulatory power so he can decide which institutions need to be shut down because they maybe dangerously too large of a risk to go own without HIS form of regulation. So now, we have place Brutus (Tim Geithner) as Caesar’s (Obama and US) bodyguard. Or, you might say that now that the three little pigs have hired on the wolf to do their housecleaning.
Dr. Baker went on to say, “The core problem is that many of the largest banks are bankrupt. They are currently concealing this bankruptcy by listing assets on their books at prices that are far above their market value. In principle, they can do this for a long time, unless the government forces them to write-down the value of these assets. As long as the banks are bankrupt, they will not make new loans, limiting the ability of many businesses to get capitalized.”
So, what would be the incentive for these government subsidized mega-banks to risk the “gifts” Geithner has given them through Treasury and Federal Reserve hand-outs in the form of TARP, TALF, and Federal Fund Window exchanges during a time when the economy is shrinking, unemployment figures show we may see 700-800,000 unemployed per month as the year progresses (1 in 4 or nearly 14 million unemployed: a 25 year high now at 8.5%; average full-time work week hours are down to 33.2 per week- a record low, over 5 million jobs lost; 2.4% jobs lost over the last 4 months; 1 in 4 people have been looking for work over the last 6 months).
What appears clearer and clearer is that the Obama presidency’s prime players are not willing to upset or disrupt the function, structure, or process within the financial sector, but they are very willing to increase the lines outside the nation’s unemployment offices and continue to hurt the American working people as they sacrifice in order to stay solvent without one penny of a bonus, or an increase in their expense accounts, or when finding themselves on the street not having the opportunity to land upon a cushy Golden Parachute.
Once the stimulus begins to circulate through the paychecks of working America, we will be able to assess if there will be a noticeable impact in spending. I believe out of the $900B stimulus there will only be around $200B filtering through the hands of workers spreading out throughout the entire country. This is so small in comparison to the $12 trillion (pledged, promised, and portioned) that has been leveraged on behalf of only a handful of mega-banks through this Trickle Down economic policy in hopes that this economy will begin borrowing in the face of a shrinking and unstable consumer market. Does any of this make a speck of sense?
There has been no tough talk to the bankstas. The Obama Team has not said that if you don’t write down your mortgage debt at the mark-to-market price, and raise private capital within a 30-day time, then you will otherwise have to go into receivership. If taken over, then the government would handle the write-downs of the toxic assets (debt) and own the assets.
Had they done what Dr. Dean Baker suggested, which was for the bondholders to be guaranteed full protection if their bankstas unwound in 30-days, but if the process were to take longer, dragging it out, then the bondholders would be less protected. How brilliant!! So, why isn’t Dr. Baker our Treasury Secretary? Oh, I forgot, he is not a Trojan Horse for Wall Street. That appears to be a requirement for joining Team Obama.
The contrast between the breakneck speed that was used to bailout Bear Stearns, in March 2008, that took only a weekend, or the sale of Merrill Lynch to Bank of America, or the initial bailout of AIG, or the impressive speed that was engineered when Washington Mutual was placed into the hands of JPMorgan-Chase, or the 5 insolvent mega-banks that Washington found new capital to bathe them with, or the overnight firing of Mr. Goodwrench Wagoner over at GM, so demonstrates that Team Obama has put finance before labor, as they diminish, lessen, reduce the interests of labor, and the nation’s need for labor and manufacturing in order to rescue the country from further collapse and give favor to what is called the “real” economy over the “monopoly-financial-capitalist” economy.
Here is another kicker. F. William Engdahl wrote in Geithner’s Dirty Little Secret, that there are only 5 mega-banks that hold “96% of all US bank derivatives positions in terms of nominal values, and an eye-popping 81% of the total net credit risk exposure in event of default”, as was reported by the Federal Office of Comptroller of the Currency, in its Quarterly Report on Bank Trading and Derivatives Activity. JPMorgan holds $88 trillion in derivatives. Bank of America holds $38 trillion; Citi holds $32 trillion; Goldman-Sachs holds $30 trillion; Wells Fargo-Wachovia Bank holds $5 trillion. And, out of Britain, HSBC USA holds $3.7 trillion.
Mr. Engdahl called this a banker’s coup d’etat. The $180B bailout to AIG went to rescuing the 5 mega-banks, since they were AIG’s biggest counterparty clients.
Tim Geithner says, “We need better, smarter, tougher regulations”, so TimmyG, why hasn’t the Glass-Steagall Act been reactivated? Why hasn’t the Commodity Futures Modernization Act 2000 been trashed? Yet, TimmyG is still blowing his rusty horn and wanting to bring in better, smarter and tougher regulations. Let’s hear ya play another tune for us because this one is down right bad. What is amazing is that Timmy, when he was chairman of the New York Federal Reserve, reporting to Bada Bing Ben Bernanke, was supposed to enact regulatory rules, but he says that was not his role. Yet, according to his job description, he was to act as a banking regulator. Watch William K. Black, a former regulator and economist say so to Bill Moyers.
Dr. Dean Baker, economist, wrote in “Geithner’s Plan Will Tax Main Street to Make Wall Street Richer”, “Oh, by the way, some people will get very rich off the Geithner plan. Some hedge and equity fund managers could make hundreds of millions or even billions off the Geithner plan. And, under current law, they will pay a lower tax rate on this money than a schoolteacher or firefighter. Are you sold yet?”
Michael Whitney quoted the economist Jeffrey Sachs in “Geithner Hog Wild”, “Geithner and Summers have now announced their plan to raid the Federal Deposit Insurance Corporation (FDIC) and Federal Reserve to subsidize investors to buy toxic assets from the banks at inflated prices. If carried out, the result will be a massive transfer of wealth—of perhaps hundreds of billions of dollars—to bank shareholders from the taxpayers (who will absorb losses at the FDIC and FED)…”
It sure seems to me that the Geithner plan is like allowing gangstas who have terrorized the village store owners by breaking windows and knocking down doors, as well as looting the cash registers while stuffing their pockets with merchandise as they run out the door, to then be given government neighborhood block grants to open up their shops in the places where the former businesses had been established. And then, tell the villagers they will be spending their money in the gangsta’s new shops. This is the kind of nation we seem to be living in from my perspective.
TimmyG now wants Congress to grant him full regulatory power so he can decide which institutions need to be shut down because they maybe dangerously too large of a risk to go own without HIS form of regulation. So now, we have place Brutus (Tim Geithner) as Caesar’s (Obama and US) bodyguard. Or, you might say that now that the three little pigs have hired on the wolf to do their housecleaning.
Dr. Baker went on to say, “The core problem is that many of the largest banks are bankrupt. They are currently concealing this bankruptcy by listing assets on their books at prices that are far above their market value. In principle, they can do this for a long time, unless the government forces them to write-down the value of these assets. As long as the banks are bankrupt, they will not make new loans, limiting the ability of many businesses to get capitalized.”
So, what would be the incentive for these government subsidized mega-banks to risk the “gifts” Geithner has given them through Treasury and Federal Reserve hand-outs in the form of TARP, TALF, and Federal Fund Window exchanges during a time when the economy is shrinking, unemployment figures show we may see 700-800,000 unemployed per month as the year progresses (1 in 4 or nearly 14 million unemployed: a 25 year high now at 8.5%; average full-time work week hours are down to 33.2 per week- a record low, over 5 million jobs lost; 2.4% jobs lost over the last 4 months; 1 in 4 people have been looking for work over the last 6 months).
What appears clearer and clearer is that the Obama presidency’s prime players are not willing to upset or disrupt the function, structure, or process within the financial sector, but they are very willing to increase the lines outside the nation’s unemployment offices and continue to hurt the American working people as they sacrifice in order to stay solvent without one penny of a bonus, or an increase in their expense accounts, or when finding themselves on the street not having the opportunity to land upon a cushy Golden Parachute.
Once the stimulus begins to circulate through the paychecks of working America, we will be able to assess if there will be a noticeable impact in spending. I believe out of the $900B stimulus there will only be around $200B filtering through the hands of workers spreading out throughout the entire country. This is so small in comparison to the $12 trillion (pledged, promised, and portioned) that has been leveraged on behalf of only a handful of mega-banks through this Trickle Down economic policy in hopes that this economy will begin borrowing in the face of a shrinking and unstable consumer market. Does any of this make a speck of sense?
There has been no tough talk to the bankstas. The Obama Team has not said that if you don’t write down your mortgage debt at the mark-to-market price, and raise private capital within a 30-day time, then you will otherwise have to go into receivership. If taken over, then the government would handle the write-downs of the toxic assets (debt) and own the assets.
Had they done what Dr. Dean Baker suggested, which was for the bondholders to be guaranteed full protection if their bankstas unwound in 30-days, but if the process were to take longer, dragging it out, then the bondholders would be less protected. How brilliant!! So, why isn’t Dr. Baker our Treasury Secretary? Oh, I forgot, he is not a Trojan Horse for Wall Street. That appears to be a requirement for joining Team Obama.
The contrast between the breakneck speed that was used to bailout Bear Stearns, in March 2008, that took only a weekend, or the sale of Merrill Lynch to Bank of America, or the initial bailout of AIG, or the impressive speed that was engineered when Washington Mutual was placed into the hands of JPMorgan-Chase, or the 5 insolvent mega-banks that Washington found new capital to bathe them with, or the overnight firing of Mr. Goodwrench Wagoner over at GM, so demonstrates that Team Obama has put finance before labor, as they diminish, lessen, reduce the interests of labor, and the nation’s need for labor and manufacturing in order to rescue the country from further collapse and give favor to what is called the “real” economy over the “monopoly-financial-capitalist” economy.
thanks for reading, jerry
Subscribe to:
Posts (Atom)
