Let me get this straight.
First you con people who can’t afford to buy a home that they can get one with no deposit down at a great rate, which will shoot up next year but never mind, don’t worry — your house will be worth so much more then, you’ll be able to borrow more money against it to pay off your mortgage.
Then you take these mortgages, bundle them with other mortgages in various packages called credit derivatives, and you sell these debts to another company and take your commission on the sale. Then that company resells the debt to another company, who sells it to another company, on and on, each company repackaging it, and each taking a commission, till nobody knows who holds what or what it is they hold anymore. Some time along the line, insurers watch all these commissions being made, and they say, hey, for a commission, we’ll insure your debt (in things called credit default swaps).
Now the funny thing is, these debts are being bought by debt. Yes, the people buying the debt have borrowed tons of money from other people to buy the debt with. In fact, for every dollar in real money they have, they’ve borrowed $30 with which they’ve bought more debt.
People figure all this debt in the world amounts to around $45 trillion plus. To give you an idea how much this is, people say the Iraq War will cost us around $1 trillion. So we’re talking 45 Iraq Wars of debt here.
This is not money printed by the government. This is money made up out of nothing but bad deals by Wall Street institutions, i.e. investment banks like Bear Stearns, Lehman Brothers, Morgan Stanley, and Goldman Sachs, and insurers like AIG, and mortgage holders like Freddie Mac and Fanny Mae, in some new kind of Ponzi scheme.
Why do they do it? Listen, every time they sell the debt, they make a commission, and all the busy sellers get million-dollar Christmas bonuses — the 2006 Wall Street bonus payout was $62 billion. They call this raising capital, but it’s actually just going into more debt.
Sooner or later, the poor saps who were suckered into the American dream of owning their own homes find they can’t keep up with the mortgage when the rate shoots up the second year. Plus, instead of going up, home prices start to drop, because what goes up often comes down. The Ponzi scheme starts to unravel. Pop goes the bubble.
So what happens?
The guys who’ve been borrowing money to buy debt find that nobody wants to buy the debt they peddle or own anymore, and the insurance they took out is not there anymore, so they’re holding worthless debt, and their stock price is tanking, so what do they do?
They run to the government. Please help us, they say. We’re the financial system, the Masters of the Universe, and we’re going to collapse, and everyone will suffer most grievously, so do something.
Don’t worry, boys, says the government, who in this case is a guy called Henry Paulson, the Secretary of the Treasury, who two years ago was the CEO of one of the using-debt-to-buy-and-sell-debt companies, Goldman Sachs, an ex-Master of the Universe himself.
He’s their guy, so of course he’s going to help his buddies on Wall Street. He takes $85 billion of the tax-payers’ money and gives it to the guys who insured a lot of the debt, AIG – but, he says, now we own you, so we’re firing the guys who ran your company, but they can walk away with $100 million plus severance packages (which is what failed CEOs in this world get for messing up).
To failing Lehman Brothers he says: I’m not going to help you, because I’m a former Goldman Sachs man, and as a competitor of my old firm, you can go screw yourself.
Then he says, what the heck, to help the rest of you out, my old buddies, I’m going to use $700 billion of the tax-payers’ money to buy all your bad debt, and tell everyone I’ll resell it later when everyone is not so panicky anymore. Meanwhile, we’re going to stop people from short-selling the tanking shares of all my buddies on Wall Street.
Note that Paulson doesn’t say, I’m going to use $700 billion to give credit to those deserving firms who were hoping to get credit from the failing institutions and now can’t. Or I’m going to use $700 billion of the tax-payers’ money to buy the mortgages of the poor suckers who are losing their homes, to help them hold on to their American dream of owning their own home.
No. I’m going to use the tax-payers’ money to help the guys who conned these saps. We’re not going to help the suckers, we’re going to help the predators.
This is what they call the free market. A better name would be the free-for-all market. An even better name for it is casino capitalism.
But it’s slightly different from honest gambling. The way Wall Street gambles, you bet with someone else’s money, and when you lose it all to the casino, you say, hey, I want my money back, and you get the casino management to get the maids who clean the hotel rooms to fork over their taxes to you.
Let’s note that personally these guys never suffer. They’ve been drawing millions in hard cash from their gambling commissions, and they’ve stashed these millions in big houses and yachts and cellars of fine wine and art works by Van Gogh and Francis Bacon and shower curtains spun from pure gold. The only things that will suffer are their corporations. Corporations are a great invention, because what they do is protect the guys who own and run them from personal accountability. If my corporation pollutes your water, the corporation is responsible, not me. If my corporation goes bust, you have to sue it for the debt I’ve made, while I walk away with hundreds of millions, which I’ve been drawing out of the corporation while it’s been screwing you on my orders.
So the casino capitalists want the government – that’s us poor taxpayers — to bail them out of their own bad deals. Or the sky will fall on everyone, they claim. As Martin Luther King used to say about capitalism, it’s socialism for the rich and free enterprise for the poor.
One thing you have to know about capitalism is that there is only one good thing about it. It lets you, an individual, start your own business. And it lets you build your business by raising capital for it — from your family, from venture capitalists, from banks, and on the stock market. That’s a terrific thing, and it’s the reason capitalism works great, because it encourages entrepreneurs. The rest that capitalism does is mostly massive harm, and that’s why we need government — to make regulations so corporations are forced to clean up after themselves when they pollute; so Enron crooks can go to jail; so deals can be transparent; so intellectual property laws can be enforced; etc. etc. If there were a truly free market, capitalism would quickly devolve into monopoly capitalism, because that’s what happens if you don’t regulate it. Which is why we have too many monopolies already since voodoo economics started under Ronald Reagan — from Microsoft to agribusiness, from media to car makers.
Milton Friedman and the Chicago Boys and the Washington Consensus and the Wall Street Journal and Reaganomics and all the rightwing conservative Republican Party “free-market” propagandists are all wrong, and have been finally proven hideously wrong with this latest blowup. Reagan killed Savings and Loam regulations, and the Savings and Loan scandal duly followed. Warren Buffett warned us all back in 2003 when he called credit derivatives “financial weapons of mass destruction.” He knew then what the rest of us have found out today. The “free-market” fundamentalists should please shut up forever. Their philosophy is bunk. The Wall Street Journal should fire their propagandists. Unfettered free-marketers are the terrorists lurking in the bosom of capitalism. Only highly regulated capitalism works. The minute any corporation complains about a regulation, you know it’s necessary, because they wouldn’t be complaining if it weren’t.
Let’s face it, these Wall Street guys are sissies. They can’t stand to suffer themselves the pain they cause others. They love to pass their pain on to Main Street. They are not men. They don’t know how to take responsibility. They come from Ivy League universities that teach their entitled students how to stay entitled without ever taking responsibility for anything they do. Sometime, some Ivy Leaguer has to write a thesis on how it is that our Ivy League has consistently, over the last 30 years, produced the worst elite in the world – a greedy American elite who is worse than the Russian, African and Arab elite combined.
These casino capitalists don’t create anything solid. They don’t, like Steve Jobs, make products that people like to own. They don’t build things. All they do is make money from making debt. They’re parasites. Over 30% of our corporate profits last year came from these financial corporations. It’s the non-productive side of capitalism – FIRE (finance, insurance, and real estate).
These FIRE guys are Ivy League scum. At their posh Ivy League universities, and from their entitled parents and peers, these entitled elite bastards learn that greed is everything. They think it’s OK to take this precious thing they have, their lives, and use it to do nothing but make money. They are not teachers, or doctors, or firefighters, or nurses. They’re bottom-feeders in the same moral universe as thieves. Worse: they prey on poor people. They are the predators of the American Dream.
So how is it possible for Wall Street to pull this latest major casino con on Main Street?
Easy. You just go to Congress. You’ve heard of the military-industrial complex, haven’t you? That boondoggle of the century that uses our taxes to build a military machine that’s bigger than the rest of the world’s armies combined, with over 700 military bases in every corner of the world – this in a country that no other country would ever dare to attack, given the fact that the first and last country who tried it, Japan at Pearl Harbor, got two whole cities nuclear-holocausted for their hubris? Heard of it?
Well, there’s a financial-congressional complex that is just as bad. A senator called Phil Gramm masterminded two pieces of deregulation — the 1999 repeal of the 1933 Glass-Steagall Act and the Commodities Futures Modernization Act of 2000. The last one was passed by tagging 262 pages of dense language onto an 11,000-page omnibus bill on the Friday before the Christmas recess. “The act freed complex derivatives from any regulation,” says Michael Greenberger, who served in the Commodities and Futures Trading commission in the late 1990s. “It set the stage for the present mess.”
Phil Gramm is the guy who said we’re having a “mental recession” and we’re “a nation of whiners.” He was John McCain’s chief economic adviser and is the guy most likely to be Treasury Secretary in a John McCain administration. In which case, Wall Street will once again have their man in the Treasury, so they’ll be free to invent a new game to con all us suckers on Main Street.
Because hey, John McCain might just make it to president. After all, he’s pulling a great con on the suckers of Main Street right now with Sarah Palin and his story of what a big war hero he is.
Let’s take a look at this candidate for president, and see why he would be even worse than Bush.
1. John McCain came bottom of his class at Annapolis but gained promotion in the Navy because his Dad was a big-shot admiral. He became a navy pilot, and crashed more planes than anyone, but kept his job because his Dad was a big-shot admiral.
2. He was shot down over Vietnam and became a POW. They beat him up and put him in a few stress positions (nothing as bad as what we’ve done to guys in Afghanistan, Abu Ghraib and Guantanamo). So what does John McCain do? He sings like a canary. He tells his captors the secret US flight routes over Vietnam and they use this information to shoot down his buddies. When they find out he’s the son of a big-shot admiral, he gets better treatment than all the other POWs, and they even offer him early release, which he heroically refuses. Afterwards they treat him OK. Check out pictures of McCain when he was released. He looks sleek and well-fed, as fit as a fiddle.
3. While he’s a POW, his loyal wife back in the States gets into a disfiguring accident. When he sees her again, he’s somewhat freaked and starts cheating on her. He finally dumps her for a rich, beautiful heiress. His new father-in-law bankrolls his first run for Congress.
4. He spends the rest of his life mooching off his rich wife. He owns seven homes. He wears $600 Italian handmade shoes.
5. His bosom buddy Keating went to jail for his major role in the Savings and Loans scandal, but John McCain escaped jail and got a slap on the wrist from the Senate. His bosom buddy Phil Gramm created the deregulation that led to our current crisis and John McCain wants to make him his Secretary of the Treasury.
6. He picked Sarah Palin as his running mate, a woman who can connect with an audience and read a speech great that someone else writes for her, but who is the Earmark Queen of Alaska and got more pork for her city and her state than anyone, and got the Evangelicals behind McCain because she believes the earth was created in seven days 6,000 years ago.
This is John McCain, the joker who is trying to con Main Street into voting for him. Many of them are falling for his con, especially regular folks. They think this rich elitist who cruised on his Dad’s name and his wife’s riches will be able to understand the problems of regular folks. They think he’ll be a terrific Commander-in-Chief because he was a POW in Vietnam. WTF? A terrific Commander-in-Chief? The man is legendary for his bad temper. He’s given to fits of uncontrollable rage. You think he’s got the temperament to be our Commander-in-Chief? He’s on six medications a day to keep himself stable. It’s very probable something happened to his mind in those years of being a POW – something that made him unfit to be our Commander-in-Chief. But nevermind, we’ll vote for this angry old geezer who wants to start another war with Iran.
Anyway, the Big Wall Street Con is working. Paulson will get the money to bail out his buddies on Wall Street. Things will get worse before they get better, but Wall Street is going to make out like bandits again because the casino capitalists who are too sissy to drink their own medicine will get the socialism for the rich – corporate welfare — they always ask for. As for the rest of us on Main Street, we’ll get suckered again and, if we’re dumb enough to vote John McCain, it’ll happen sooner than later.
This is America, folks, where you and I live. The last best hope of humankind. Dream on, suckers.