Busted: Bankers and The Global Economy

November 13, 2008

Bush Continues to Drag Heals on Change

Today at the Manhattan institute in New York City, the home of Wall Street, George Bush defended the nation’s free enterprise system of business as the cure for the global financial crisis rather than the cause. “Government intervention is not a cure-all,” a hint that he is not going to sway to pressure for what he clearly sees as restrictive rules while the majority of world leaders see a new protective financial architecture that will save the world. The change is all about power.

george-bush-2008“Our aim should not be more government, it should be smarter government.” President Bush is clearly trying to straddle the fence on the financial crisis. He sees governments share the blame while advocating tougher accounting rules and updated processes. It would seem that George Bush wants the world to remain the same. At the very least, he is doing a good job pretending.

“In the wake of the financial crisis, voices from the left and right are equating the free enterprise system with greed, exploitation and failure.” George Bush has it right. The world and much of the nation’s smaller businesses see that having allowing the takeover of the nation’s and much of globe’s financial fortunes has led to the failure that he indicated. Few people are damning all business, just the kinds of businesses that ruled the economic engine and insured the future for billions.

“The crisis was not a failure of the free market system. And the answer is not to try to reinvent that system.” The real problem resides in the fear within government. Because of the fear of change and loss of control, the U.S. government has bailed out business that should have met its’ own truth without invention. Now that the Bush administration has intervened, the failure to continue to intervene becomes what might appear to be an eternal conundrum.

Europeans want a pledge for concrete changes in just 100 days. The International Monetary Fund said economies of the U.S., European Union and Japan were subject to contract in 2009 as part of the first annual decline by the advanced economies since World War II. You’d think the world was over. However, this is an opportunity for change and new control measures. It just so happens that many leaders are gung ho about a change.

No one is openly suggesting that the free-enterprise business system change. What is being suggested is that the means of oversight and structure must change regarding banking and finance. Banking and finance is not the whole of the business world. More transparency and workability are needed, yet the U.S. finds itself resistant to that. That means that government must change, which is where the real concern and fear exists. The U.S. government likes the control system just like it is. Even so, the propensity for upcoming change is part of the growing digital economy. There is an effort to force the change. ~ E. Manning

November 10, 2008

The Global Finance Summit Rush to Rhetoric

bretton-woodsInternational hullabaloo from UK, France, and Germany for a new international financial architecture moved the G7 Finance Ministers into action. US president George Bush has snubbed the U.N. proposal to host an international summit, instead promoting an G8 summit of key leaders in Washington D.C. on November 15th. If successful, this may be the greatest chance since 1944 to influence the structure of international finance since the Bretton Woods accord. The proposals so far want to put the world’s leading industrialized economies and a select few emerging economies in charge, generally referred to as the G20. The role of central bankers is curiously absent in publicity. Doubtless, central bankers have the pulse of the situation and probably are largely responsible for a more conservative response to the European Union’s vivid promotion and sweeping enthusiasm last month.

global-financial-agreement1Activists have urged world leaders not to lose sight of perceived international challenges like climate change and poverty as authorities focus their efforts to repair the world’s financial system. Politicians are concerned about such things. Central bankers are not.

Not to be outdone or completely humiliated, the president of the U.N. General Assembly announced a high-level task force to review the global financial system, including the World Bank and IMF. ~ E. Manning

October 24, 2008

The Fear of EU Leaders

U.S. quietly key player

U.S. quietly key player

President Nicolas Sarkozy of France, the current placeholder of the rotating EU presidency, is spearheading the planned global summit in New York City. He expects concrete decisions to come out of the economic summit next month, which must address the underlying causes of the crisis rather reciting world crisis effects. “We have all understood that it will not be possible to simply meet and have a discussion. We need to turn it into a decision-making forum.”

Most of the world economies seem keenly interested in creating a new global solution to save the global economy and themselves from much economic pain. EU leaders and some other world leaders have voiced a certain amount of fear regarding the cooperation of the United States, who has remained very much on the back burner of the global summit considering its usual role. The election is undoubtedly playing a role in U.S. hesitation and resistance. 

Even Japan and China have become very interested in global economic solutions. Sarkozy told Chinese President Hu Jintao that he fears the United States, which is wary of excessive regulation, would be content if the summit produced “principles and generalities.” That is the real fear of EU leaders since they seem to be looking for radical global change and protection rather than placation and stop gap measures. ~ E. Manning

Global Financial Overhaul Recommended

October 19, 2008

United Nations wants in on Economic Authority

As the world basks in turmoil of a global financial crisis and proposals of special summits by various world leaders, the United Nations has offered French President Nicolas Sarkozy the U.N. headquarters in New York access and use of their facilities for an international summit. Not long ago, the European Union and Sarkozy sought out U.S. President George Bush. The resulting insider news is that George Bush will be sponsoring a global economic summit in hopes of responding better to the crisis. Sarkozy has appealed to prime economic world leaders to act aggressively and in unity to address the economic meltdown at a summit by December.

The United States has been somewhat hesitant to initiate many of financial policies that some European Union leaders are eager for and relunctant to get involved with the U.N. and Europe. Instead, the Bush administration is working feverishly to put out the nation’s economic fires and to deal with them successfully behind the scenes.

What does the United Nations say? The United Nations considers itself as “the symbol of multilateralism.” U.N. leadership believes that it holds the keys to a universal legitimacy to the endeavor to “demonstrate a collective will to face this serious global challenge.” The United Nations needs the good publicity and a way to wield global influence as well. What better way wield influence than to sponsor a global economic summit in a time when the world scene looks so dark?

Sarkozy is calling to overhaul the global financial system so that it can be better supervised in the wake of the crisis. “Together we need to rebuild a capitalism that is more respectful to man, more respectful to the planet, more respectful to future generations and be finished with a capitalism obsessed by the frantic search for short-term profit.” Those seem to be poetic words for a hurting world that is seeking solace and security from a global debacle wrought by speculation and greed. What will national leaders give up to secure a better future in the eyes of politicians and global economists? The future of currency systems seems to be in question now with some “new ideas” that are likely to be presented. ~ E. Manning

October 14, 2008

Is Inflation King Yet?

superpower confidence

superpower confidence

The media and the perception of confidence took a temporary nosedive after a banner day at the global superpower. There is so much going on, who can really know what is really driving the situation except perhaps confusion? The bottom line is that investors will continue to fret about the stock market and take profits while they can, even in a volatile market. That is human.

As part of the new building blocks in the national economy, the U.S. Treasury finally confirmed plans to use the initial $250 billion to invest in large banks and former investment banks with conditions. All but one bank took the federal government up on the offer. President Bush has requested another $100 billion for bailout aid as well as a move for the Federal Reserve to start buying up short-term debt from companies. Meanwhile, Henry Paulson has hired Mellon Bank of New York to assist the U.S. Treasury in buying failed mortgage securities or troubled assets.

As usual, the Federal Reserve’s main preoccupation is to manipulate public perception of interest rates and the classical perception of low inflation. Ben Bernanke is keenly interested in keeping national confidience in the hope of somehow strengthening the dollar and curbing the tide of what is proving to be nasty inflation in a time of wage stagnation. The Fed simultaneously manages interest rates while working to keep the economy from dropping into a recession. Uncle Ben has his work cut out for him, especially since we are probably already in a recession by his own definition. If he knows that, he isn’t saying. No surprise there. Besides, inflation is now a back door issue.

Uncle Ben has been busy on the dollar and liquidity front as well. Unknown trillions of dollars have been forced into the U.S. banking system in an effort to get banks moving again. Uncle Ben has been working with the help of central bankers around the globe to make this happen. So far, the efforts haven’t worked. One of the conditions on U.S. bailout funds for banks is that the money is used for loans instead of bank protection, which may begin to change the banking equation soon. Whether that condition works remains to be seen.

All this money flowing would appear to generate some positive and decisive activity. A nationally-recognized recession seems evident as Corporate America and Corporate Multinationals are starting to reap financial declines, further jeopardizing any chance at economic expansion and further withering job prospects. Huge injections of cash are generating one large problem that will come home with a vengeance given some time: a rather stiff inflation rate. The U.S. will soon wish for today’s inflation. But, we live in the real world, so we consider the price of food and fuel without faking the facts. Other issues like a high jobless rate coupled with that inflation will be still worse. Could stagflation be around the corner or are we already there? That depends on who you ask. ~ E. Manning

September 30, 2008

Financial Collapse: Fear & National Resentment

monetary whirlpool

monetary whirlpool

Global reports state that the global credit crisis has deepened. Banks have stopped lending to one another. Britain and Europe are encountering many of the same problems as the United States. Central bankers are dumping cash onto the market and playing the same game as the Federal Reserve through auctions to keep commercial banks on life support. Who is to blame? Today, the blame is being cast on the collapse of Lehman Brothers, but the reality is a tragic loss of confidence brought on by bankers themselves. Some of the best educated men and women on the planet have been powerless to improve the situation.

Commercial bankers have locked up the market and the only option central bankers think they have is to dump money into banks, in effect, satisfying the “need for cash.” The need for cash and credit is a symptom of the larger problem: panic by bankers because of their poor choices.

Economists publicly expect the longest recession in a quarter century with or without a bailout plan to rescue the battered banking industry. Most say the next six months are going to be very difficult. Market scare tactics say that if a bailout is not approved, a depression is likely as credit freezes up and markets collapse. The global consortium of central banks dumped an additional $630 billion into the global financial system, which will fuel both inflation and devalue currencies simultaneously. Central bankers are doing the same thing with other major currencies, portending a global debacle in an effort to keep the cash and credit flowing. On the other hand, the central bankers don’t want to be caught holding devalued cash, so now is the time to cleanse their palates. Central bankers only collect and horde gold among themselves since that is how they settle their accounts against each other.

stormy economic skies

stormy economic skies

Whether disaster can be averted or not, the United States has a right to do nothing, even to fail. The reality is that this is already what has happened as politicians and money managers stubbornly cling to the hope of sustaining what currently exists in the current power structure. The problem remains as a global crisis that even central bankers are ill-prepared to deal with.

George Bush warned Congress that they must act or damage to the U.S. economy will be painful and lasting. Congress seems to have rejected that notion. What the nation really has is a credibility crisis. Authorities seem to be more interested in their reputations than possible solutions. Meanwhile, many American scrimpers and savers are in a panic and most American voters resent the bailout efforts, convinced that the rescue effort is for the good of Wall Street and not the average man in America. Considering the decline in the U.S. living standard over the last few decades, the popular opinion to let banks fail and allow the system to unwind naturally is seen as likely to have little effect on meaningful personal assets in the eyes of most Americans. The real problem that panics bankers and politicians lies in the market correction and pricing standards in a bankrupt economy as values fall through the floor, creating still more bankruptcy and poverty for business and citizens.

The correction in the U.S. housing market bore a decline of more than 16 percent in July 2008 alone as the accounting totals have come rolling in. Americans are quickly becoming “upside-down” on mortgages on their homes, encouraging more defaults and foreclosures, even as more Americans lose their employment from an already failing economy.

The public line is that business must have a huge amounts of credit available. Business, like consumers have become increasingly dependent on credit while overpaying executives and paying stockholders instead of reinvesting in themselves. With credit becoming increasingly tight, businesses may find it tough to obtain short-term loans to meet payrolls or purchase inventory. That may lead to job layoffs, which could ripple through the economy in a matter of weeks. The bottom line is that solvent businesses do not need large amounts of credit for everyday business. In the “old days,” business used to borrow for expansion purposes only. Business needs were met by the influx of cash coming in from clients and customers. Have business standards declined so dramatically in the name of personal profit taking or is this statement simply a political red herring to generate urgency?

Increasingly, Americans have become more and more detached from the wealth and prosperity of Corporate and Political America. They have become beasts of burden for the affluent. Considering the circumstances, it isn’t hard to see why many Americans don’t favor a bailout, even if they risk losing a few thousand in a retirement account they may never see anyway. There is an underground pessimism and resentment that has come to rest in much of mainstream America. ~ E. Manning

September 24, 2008

Power: The Truths behind the Meltdown

massive bailout

massive bailout

Americans should feel some value in the fact that the FBI is now investigating toxic firms that have been central to the U.S. financial meltdown. For some time 26 firms have been under intense scrutiny by the FBI. The media has been highlighting investigation of the 4 firms that have collapsed: Fannie Mae, Freddie Mac, AIG and Lehman Brothers.

The mortgage twins, Fannie and Freddie, have already been under investigation for years based on varying problems with financial irregularities and leadership issues. The investigations will focus on the financial firms and the individuals that ran them. Hopefully, middle management will also be scrutinized and judged. The truth is that the FBI needs to find the perpetrators of the fraud rather than single out top dog scapegoats.

financial storm

financial storm

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke made the joint unilateral decision last week that the only way to stop the U.S. financial carnage was to deal with the root cause of all the troubles by rooting out billions of dollars of bad mortgage debt sitting on the books of major financial firms. This debt has triggered the worst credit crisis in decades, “causing” credit markets to freeze up despite the fact that the Fed joined with major central banks around the world to pump billions of dollars of reserves into the financial system. The billions of dollars pumped into the global economy are creating a crisis of stagflation themselves, a nasty round of inflation coupled with the current economic recession and malaise. The results of those actions cannot be undone and are being ignored by panicked authorities.

The reality behind the liquidity lock down that the Bush administration and U.S. Treasury Secretary are panicking about revolves around interbank lending, a problem that has been noticed publicly for at least a year. Why is there a problem? The crisis boils down to an issue of trust. Bankers know that they cannot trust one another and are unwilling to take the fall for the fraud of other bankers. In other words, the bankers know they have been harpooned by the securities that were supposed to make them wealthy. Bankers have put the thumbscrews on lending to protect their solvency.

selling Wall Street

selling Wall Street

The Bush adminstration has its game face on. President Bush says he expects Congress to pass “a robust plan” that deals with the nation’s economic problems. The word robust has become another favorite public watchword that should garner your prompt attention. Robust implies a broad emcompassing scope along with complex provisions that could very well be the downfall of any attempts to band-aid the current situation. Currently, an estimate is that 1 of 254 mortgages is actually in some measure of foreclosure. This is a very small percentage to cause a crisis. What the American press and government is acknowleging is merely the tip of the iceberg. The main problem with securitized loans is that when they were developed and created, a system was not developed to track reality. An internal processing scandal within the process of issuing of these securities is implied. However, government has not been eager to breach this area of the mortgage crisis beyond specifying that the regulations and concepts in the entire financial system are dated and ineffective. Somehow, this idea is supposed to get government, regulators and bankers off the hook.

taxpayer crisis

taxpayer crisis

What should be done to resolve the current foreclosure crisis? Not a soul has bothered to shift gears in addressing the real problem regarding predatory financing and usury in place. Each known problem loan triggered by payment issues needs to be evaluated regarding the current real value of the home. If evaluation of home value is an issue because of a weak market, then half the real value of home should be the mortgage value. This action would assist in correcting inflated home prices and counter price inflation. Any failure of the past verification process through bankers or qualification of the homeowner should be ignored as long as the homeowner is gainfully employed and can make the payments on the new loan. The government then needs to reissue a safe government-backed assumable loan that will allow the buyer to stay in the home at a low interest rate. Ultimately, the goal would be for every loan to be converted to a non-predatory government loan with low interest. Loans would not be securitized or bundled for resale as government securities. Banks would not bundle loans into any internal or banking instruments. Bankers would simply make money from compound interest and providing basic banking services. The bailout needs to be on the side of the taxpayer, the basis and stock of capital and wealth, rather than on the side of corporate interests that often pay few taxes in the real world beyond payroll.

losing the Dream

losing the Dream

If push came to shove, the nation would be better off giving mortgages away than bailing out the endless debt and failure created by Wall Street and the system in place. Americans would then own their homes fair and square with a new national beginning. Trillions in debt would be eliminated overnight. This idea seems radical and expensive, but is assuredly no more expensive than a long-term bailout of government and corporate fraud. The American population would benefit directly from the bailout, as should always be the case. The main problem is that such an action would destabilize the power structure in place. However, the ideas presented here are no less sane than what is being proposed by the Federal Reserve and the U.S. Treasury in the name of the Bush administration. We are a nation of double standards that bolsters government and corporate power at the expense of the populace, a fascist notion. That needs to change.

The FBI has been in various stages of investigation regarding the mortgage debacle since March of 2007, even before most Americans were aware of a scandal. This proves that the Bush administration has been aware of mortgage fraud and scandal before the nation began to see the sign in the summer of 2007. As far back as the summer of 2004, President Bush beamed with pride about the creativity of the banking and mortgage industry, the single force that had maintained the illusion of national prosperity during the last three political administrations, originating from the Clinton administration.

Where are the people that are being investigated and implicated in fraudulent activities? Is the FBI keeping tabs on the movements of those may be involved in the scandal? What Americans should be concerned about is whether the U.S. government is allowing people that are tied directly into these firms to leave the country if they haven’t left already. ~ E. Manning

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