Even if the bailout somehow unclogs the banking sector, few economists think it will jumpstart the consumer credit machine. For one, over-leveraged, money-strapped banks will eagerly dump near-worthless securities on taxpayers for cash to bulk up their reserves. Plus, with working hours and wages declining, unemployment, home foreclosures and inflation surging, banks are in no mood to give consumers more credit, so consumption – and hence the economy – will continue to contract.
This is why the bill is a scam. For all the talk of transparency in the bailout, there has been zero transparency in the political process. We weren't allowed to see any details of the bailout other than the government will go on a shopping binge of buying toxic mortgage-backed securities.
Our elected officials – who work for us – are trying to hide the fact that the fix is in. They are planning a shotgun wedding by slathering makeup on a rotting corpse, dumping it at the altar and hoping taxpayers don't catch on before we're trapped in a 30-year marriage to pay for this financial debacle.
The plan will be sold as fair to everyone and "the best deal" possible. Bullshit.
First, the cost is being minimized. The Wall Street Journal cheerily reports that in the worst-case scenario, the annual cost would be a measly $42 billion in interest and principal. http://online.wsj.com/article/SB122245659564179649.html
A new study of banking crises around the world, however, puts the average cost at 16 percent of a country's gross domestic product, which would amount to more than $2 trillion here. That's more than $10,000 of future income for every single adult in the United States. http://www.economist.com/finance/displaystory.cfm?story_id=12305746
Everything else in the proposed bill is window dressing. Language in the draft states "The government can use its power … to help reduce the 2 million projected foreclosures in the next year." That's can, not will. Other measures for housing relief amount to tax breaks – so the banks get socialism, while the rest of us get to eat conservative orthodoxy.
Similarly, there are waffling words like "Meaningful judicial review of the Treasury Secretary's action." Does anyone believe that a Republican administration of the present or future would subject itself to "meaningful" review?
~ more... ~
No comments:
Post a Comment