Friday, September 26, 2008

Bank Bailout

We are being screwed without vasaline.....

1 comment:

Anonymous said...

More than 150 prominent U.S. economists, including three Nobel Prize winners, have urged Congress to hold off on passing a $700 billion financial market rescue plan until it can be studied more closely. I add my voice to theirs. American financial corporations have been fiscally irresponsible on a massive scale for years now.

At this time, virtually ALL of our financial institutions are dependent on derivatives for a large part of their profits -- indeed, for their existence. This is an extremely dangerous situation.

Warren Buffet calls derivatives “financial weapons of mass destruction” with good reason. Derivatives are basically OUTSIDE BETS on what assets will do -- a form of futures trading. All futures trading is essentially speculation, or gambling. In mid-2006, 97% of US bank-held derivatives were in the hands of only five banks, with giants JP Morgan Chase and Citi topping the list. Worse still, this speculative trading is largely done with borrowed money, and a lot more money than they actually own in assets. That means two really BIG negative things are true:

1) Virtually all of our banks -- including the biggest two -- are incredibly overexposed. They're in debt for many times their own worth. And there is not sufficient insurance to cover their debts -- less than $2 billion to cover an estimated $370+ TRILLION in derivatives debt!

2) Meanwhile, that $370 trillion market for these derivatives is 28 TIMES THE ANNUAL OUTPUT of the entire US economy ($13 trillion)! In other words, our banks owe many times more money than our whole nation POSSESSES.

The irresponsibility of middle Americans with no savings and maxed-out credit cards pales in comparison with these guys….

Our financial institutions can no longer be deemed “too big to fail,” when they engage in risky behavior that virtually ensures that they WILL fail, badly. These institutions have gotten away with murder for years now, and our legislators have let them -- in large part, perhaps, because they don't feel knowledgeable enough to inquire too closely into the "complex" world of high finance. However, finance is not all that complex -- only the communication style of the banking elite is. And this is undoubtedly intentional. These boys seek to confuse and bore all listeners to the point where they’ll effectively give them the freedom from review that Paulson now demands outright. Tell him NO.

(BTW, I'd strongly recommend reading a book entitled THE WEB OF DEBT, by Ellen Hodgson Brown.)