New Stock Market Terms
CEO - Chief Embezzlement Officer
CFO - Corporate Fraud Officer
BULL MARKET - A random market movement causing an investor to mistake himself for a financial genius
BEAR MARKET - a 6 to 18 month period when the kids get no allowance, the wife gets no jewelry, and the husband gets no sex.
VALUE INVESTING - The art of buying low and selling lower.
P/E RATIO - The percentage of investors wetting their pants as the market keeps crashing.
BROKER - What my financial planner has made me.
STANDARD & POOR - Your life in a nutshell.
STOCK ANALYST - Idiot who just downgraded your stock.
STOCK SPLIT- When your ex-wife and her lawyer split your assets equally between themselves.
MARKET CORRECTION - The day after you buy stocks.
CASH FLOW - The movement your money makes as it disappears down the toilet.
YAHOO - What you yell after selling it to some poor sucker for $240 per share.
WINDOWS - What you jump out of when you're the sucker who bought Yahoo at $240 per share.
INSTITUTIONAL INVESTOR - Past year investor who's now locked up in a nuthouse.
PROFIT - an archaic word no longer in use.
# # # # #
If you had purchased $1000 of shares in Delta Airlines one year ago, you will have $49.00 today.
If you had purchased $1000 of shares in AIG one year ago, you will have $33.00 today.
If you had purchased $1000 of shares in Lehman Brothers one year ago, you will have $0.00 today.
But---- if you had purchased $1000 worth of beer one year ago, drank all the beer, then turned in the aluminum cans for recycling refund,
you will have received $214.00.
Based on the above, the best current investment plan is to drink heavily & recycle.
It's called the 401-Keg.
Sunday, March 29, 2009
Monday, March 23, 2009
The United States has 800 military bases on foreign soil...
What we need--- instead--- is 800 public health care centers spread out across the United States where people can universally access, for free, all their health care needs from pre-natal care, to general health care to eye, dental and mental care right through to burial.
Instead of moving in this progressive direction, President Barack Obama and the United States Congress are moving in a most reactionary direction towards establishing military bases in outer space as they seek to insure the profits of both the merchants of death and destruction and the profit-driven health care industries... talk about skewed priorities and your wacky ideas devoid of common sense.
In addition to these 800 U.S. military bases on foreign soil, Barack Obama and the United States Congress continue funding--- with our tax-dollars--- the Israeli killing machine to the tune of tens of billions of dollars.
A network of 800 public health care centers spread out across the United States would create over four-million good-paying, decent jobs--- talk about your "economic stimulus" package!
We would be planting the seeds of socialism while helping to eradicate poverty as we keep people healthy and get them well when sick.
Think about this kind of solution in relation to what Barack Obama, the U.S. Congress and the Wall Street bankers and coupon clippers are offering the American people, and the peoples of the world... just what is the reason for bailing out the banks and AIG and maintaining more than 800 expensive U.S. military bases of foreign soil?
The Mt. Carmel Clinic in Winnipeg, Manitoba, Canada offers us a glimpse at what militarization and wars continue to rob us of.
The problems created by Wall Street will not be solved as long as the military-financial-industrial complex is allowed to squander human and natural resources on militarism and wars... we might just as well be dumping these resources out into the ocean... at least no one would die in wars.
These merchants of death and destruction must be stopped if humanity is to survive in a livable world.
The time has come to talk about the working class Marxist politics and economics of livelihood... capitalism has failed humanity miserably and left us a real mess.
Something for working people to think about and discuss around the dinner table... the capitalist sooth-Sayers certainly are not going to broach such solutions to the problems of working people as they hide behind the skirt of Rosy Scenario as this global capitalist economic depression intensifies.
Alan Maki
Instead of moving in this progressive direction, President Barack Obama and the United States Congress are moving in a most reactionary direction towards establishing military bases in outer space as they seek to insure the profits of both the merchants of death and destruction and the profit-driven health care industries... talk about skewed priorities and your wacky ideas devoid of common sense.
In addition to these 800 U.S. military bases on foreign soil, Barack Obama and the United States Congress continue funding--- with our tax-dollars--- the Israeli killing machine to the tune of tens of billions of dollars.
A network of 800 public health care centers spread out across the United States would create over four-million good-paying, decent jobs--- talk about your "economic stimulus" package!
We would be planting the seeds of socialism while helping to eradicate poverty as we keep people healthy and get them well when sick.
Think about this kind of solution in relation to what Barack Obama, the U.S. Congress and the Wall Street bankers and coupon clippers are offering the American people, and the peoples of the world... just what is the reason for bailing out the banks and AIG and maintaining more than 800 expensive U.S. military bases of foreign soil?
The Mt. Carmel Clinic in Winnipeg, Manitoba, Canada offers us a glimpse at what militarization and wars continue to rob us of.
The problems created by Wall Street will not be solved as long as the military-financial-industrial complex is allowed to squander human and natural resources on militarism and wars... we might just as well be dumping these resources out into the ocean... at least no one would die in wars.
These merchants of death and destruction must be stopped if humanity is to survive in a livable world.
The time has come to talk about the working class Marxist politics and economics of livelihood... capitalism has failed humanity miserably and left us a real mess.
Something for working people to think about and discuss around the dinner table... the capitalist sooth-Sayers certainly are not going to broach such solutions to the problems of working people as they hide behind the skirt of Rosy Scenario as this global capitalist economic depression intensifies.
Alan Maki
Wednesday, March 18, 2009
The big lie about AIG
The big lie about AIG:
From---
U.S.News & World Report (see complete article following my comments)
What's Good, What's Bad About the AIG Bailout
“It's keeping AIG's insurance businesses stable. Here's something that's really startling: The entire problem at AIG was caused by one unit, the Financial Products division, whose employees constituted less than one percent of AIG's overall workforce. AIG's insurance units - the core of its business - essentially had nothing to do with the fiasco. But if AIG had been forced to liquidate, it could have affected the insurance units and millions of policyholders. With a more orderly process underway, the policyholders are now completely protected.”
This is the truth:
The entire problem at AIG was caused by one unit, the Financial Products division
But if AIG had been forced to liquidate, it could have affected the insurance units and millions of policyholders. With a more orderly process underway, the policyholders are now completely protected.
Question:
Who are these AIG “policyholders?”
Answer:
These AIG “policyholders” are the largest multi-national corporations in the world… and include corporations from every industry, from media to banking/mortgage to auto and steel to toys.
Question:
What kind of insurance policies have the multi-national corporations purchased from AIG?
Answer:
These “policyholders” have purchased insurance from AIG to protect their profits.
Question:
What kind of “claims” are they filing?
Answer:
These multi-national policyholders are making claims based upon their loss of profits due to the recession/depression.
Comment:
Our tax-dollars are paying on “claims” being filed by these multi-national corporations for losses in profits as the economy goes south.
Comment:
While the disgraceful tens of millions of dollars in executive “bonuses” paid by AIG are now the justified topic of wide-spread discussion; these “bonuses” are being used a “Trojan Horse” of sorts by the media and politicians who don’t want to disclose to the American people where the hundreds of BILLIONS of dollars are going.
Comment:
Make no mistake, the $170,000,000,000.00 (one-hundred seventy billion dollars) paid out to AIG is just the beginning… as the depression deepens these multi-national corporations will continue filing claims and AIG will have to honor the policies these corporations purchased to protect their profitability… our tax-dollars are going directly into the pockets of the Wall Street coupon clippers and the very mortgage company crooks who ripped off the American people.
Comment:
For the American tax-payer, there is nothing “good” about the bailout of AIG… except to the stock and bondholders and bankers and mortgage companies and the big industrialists and investors who will continue to pocket profits at tax-payer expense, everything about the AIG “bailout” is bad.
Conclusion:
The “bailout” of AIG with our tax-dollars is doing nothing but stabilizing Wall Street “profits.”
AIG’s insurance business is the business of protecting multi-national corporations against a loss in profits.
Once the tax-dollars stop flowing into the coffers of AIG and flooding out to the multi-national corporations, the world stock markets will collapse and we will be in the midst of the worst capitalist economic depression humanity has ever known--- complete with all the accompanying human misery and social strife one would expect--- now being widely predicted by many diverse voices.
On top of all of this, the American dollar will become worthless and we will be forced to purchase oil with Euros and Rubles… then what?
And if the Chinese aren’t dumb enough to buy into the American capitalist economic mess… then what?
In spite of what the highest-paid capitalist sooth-Sayers are telling us, capitalism as an economic system is finished… it is time to explore a socialist solution where production takes place to solve human needs rather than for profit… there is no other solution.
The multi-national corporations purchased insurance policies to protect their profits against recession/depression incurred losses from AIG, a private--- for profit--- insurance company, which assumed the risk in underwriting such policies.
The multi-national corporations did not purchase insurance policies from the United States government; so why should tax-payers be the ones paying out on these claims?
This is the biggest corporate swindle in history… in comparison, Bernie Madoff is a piker… we are being played for suckers.
We need a national “people’s bailout” based on the “Minnesota People’s bailout.”
The time has come to take a “left turn” to get us off this road to perdition as the capitalist system collapses.
Big-business created this economic mess as they reaped the profits while leaving working people with ALL the problems.
Alan L. Maki
U.S.News & World Report
What's Good, What's Bad About the AIG Bailout
http://biz.yahoo.com/usnews/090317/17_whats_good_whats_bad_about_the_aig_bailout.html?.&.pf=insurance
Tuesday March 17, 1:52 pm ET
By Rick Newman
"There are times when one would like to hang the whole human race, and finish the farce."
The latest surreal twists in the AIG bailout bring to mind Mark Twain, who could spot folly as if he were hunting for it with a spyglass. Had Twain had AIG to work with as raw material, we'd probably have another couple dozen enduring epigrams skewering the greedy and the foolish.
Many Americans would like to finish the farce and simply cut AIG off, especially now that the company has paid $165 million in bonuses to executives at the very unit that nearly caused the firm's downfall and triggered an unprecedented taxpayer bailout that now totals $170 billion. To almost everybody, it seems self-evident that traders shouldn't be rewarded for wrecking their company and then burning through vast amounts of public funds. Yet AIG insists it is legally obligated to pay the bonuses, because of contracts signed before the damage occurred and taxpayers got involved. There have also been suggestions that the rascals who devised these complex derivatives deals may be the only ones who know how to unwind them, so AIG has no choice but to keep them around - and pay for the privilege of their company. In other words, the bonuses amount to extortion.
Okay. Breathe deep. Think calming thoughts. Find your center. Amidst this outrage, it's worth keeping in mind that the AIG bailout is actually doing some good. It's also a kind of learn-as-you-go experiment that's never really been done before. Here's a rough scorecard of what's working and what's not:
What's working
The AIG bailout has helped stabilize the financial markets. Take a moment to revisit September 2008. That's when Lehman Brothers failed, Merrill Lynch almost did, and AIG would have been forced into a chaotic bankruptcy if the feds didn't arrange an emergency $85 billion loan. With a bit of hindsight, it's starting to seem that AIG, which brokered more than $2.5 trillion worth of derivatives known as credit-default swaps held by many of the world's biggest banks, was the death star of that troubled troika.
We've survived the Lehman bankruptcy, after all, and Merrill found a buyer. "The real surprise wasn't Lehman Brothers, it was AIG," Frederic Mishkin, a Columbia Business School professor and former member of the Federal Reserve Board, said in a recent speech. "Who would have thought that an insurance company would have been affected by all this? When that happened, all bets were off."
All that federal money has helped AIG redeem some of those derivatives contracts, getting them off its books and out of the system. The financial markets still aren't back to normal, but they're heading in that direction. Forestalling another industrial-strength financial failure, and the chain reaction it would have triggered if AIG had collapsed, has certainly helped.
It's also helping AIG unwind itself. AIG's problems snowballed in September when suddenly it had to produce billions of dollars worth of collateral to back up those credit-default swaps. The collateral call was triggered by an unexpected drop in AIG's credit rating, along with the plunge in value of mortage-backed securities around the world. AIG didn't have the cash, and to come up with it, the only option would have been to sell off illiquid assets like its highly profitable insurance divisions or its aircraft leasing company. Try doing that in a week.
Had AIG been forced to liquidate those assets, it would have had to accept fire-sale prices, which would have led to a sudden collapse in the prices of other similar assets and companies throughout the world. AIG would have gotten pennies on the dollar for valuable assets and many other businesses would suddenly have been devalued, too.
AIG is still in the process of selling off assets, to pay off the government loans that effectively served as its collateral. But it's doing that in a more orderly way, seeking the highest bidders and the best terms. That's generally good for everybody, and it's also the best way for taxpayers to get most or all of their money back.
It's keeping AIG's insurance businesses stable. Here's something that's really startling: The entire problem at AIG was caused by one unit, the Financial Products division, whose employees constituted less than one percent of AIG's overall workforce. AIG's insurance units - the core of its business - essentially had nothing to do with the fiasco. But if AIG had been forced to liquidate, it could have affected the insurance units and millions of policyholders. With a more orderly process underway, the policyholders are now completely protected.
What's not working
Revolting bonuses. It simply goes without saying that giving bonuses to the people who brought down AIG is a perversion of justice. Officials at the Federal Reserve and the Treasury Dept. should have put terms into the original bailout agreement that prevented this. They didn't. It was a chaotic time, and legitimate worries about a global financial collapse obviously clouded thoughts about rules to prevent rapacious traders from holding the government hostage. If it's any consolation, the $165 million bonus pool is relatively small. Still, it grates.
Counterparty payouts. AIG has used much of the $170 billion in government aid to basically refund money to big banks and other "counterparties," to cash out some of those credit-default swaps and reduce AIG's massive liabilities. That's sensible, and it's basically the original idea behind the "Troubled Assets Relief Program," which was intended to get the worst derivatives and other securities off the market.
The problem is that the government has apparently agreed to $105 billion worth of payouts - at the full face value of the securities. That means that banks like Goldman Sachs, Merrill Lynch, Societe General and Deutsche Bank - among the world's most sophisticated investors - are taking no loss at all on securities that had a market value of half their face value or less when AIG redeemed them in full. It's like house prices falling in your neighborhood by 50 percent, and somebody coming in and buying one house for what it was worth at the market peak a couple years ago. And using a government loan to finance it.
Regulators at the Fed, Treasury, and other departments still haven't explained why the counterparties got all their money back. They're certainly going to be asked at upcoming Congressional hearings. But in a situation where just about everybody is taking a loss - taxpayers and consumers especially - it will be tough to make a case that the world's richest banks deserve full redemption.
Secrecy. We keep learning the terms of the AIG bailout well after the fact. Obviously there are times when the feds need to move quickly and can't have a 60-day comment period. But it's not the same crisis atmosphere as last fall. In general, we should learn the details of the bailout as they occur.
AIG strongly resisted releasing the list of counterparties that have been paid back with bailout money, for instance. As recently as March 5, Federal Reserve Vice Chairman Donald Kohn defended that secrecy, saying that firms might be reluctant to deal with AIG in the future if they knew their dealings could become public.
Then a week later, under mounting pressure, AIG released a list of counterparties. The world didn't end. AIG is also refusing to release the names of individuals in the Financial Products division who are getting bonuses. They may lose that battle too, since New York Attorney General Andrew Cuomo has asked for the names and started an investigation, much as he has with Merrill Lynch. Information is going to come out one way or the other, and AIG and its regulators should stop trying to protect the failing company any more than they already are. When AIG pays back that $170 billion in taxpayer money, they can keep all the secrets they want. In fact, once we've got our money back, the less we hear about AIG the better.
Alan L. Maki
58891 County Road 13
Warroad, Minnesota 56763
Phone: 218-386-2432
Cell phone: 651-587-5541
E-mail: amaki000@centurytel.net
Check out my blog:
Thoughts From Podunk
http://thepodunkblog.blogspot.com/
From---
U.S.News & World Report (see complete article following my comments)
What's Good, What's Bad About the AIG Bailout
“It's keeping AIG's insurance businesses stable. Here's something that's really startling: The entire problem at AIG was caused by one unit, the Financial Products division, whose employees constituted less than one percent of AIG's overall workforce. AIG's insurance units - the core of its business - essentially had nothing to do with the fiasco. But if AIG had been forced to liquidate, it could have affected the insurance units and millions of policyholders. With a more orderly process underway, the policyholders are now completely protected.”
This is the truth:
The entire problem at AIG was caused by one unit, the Financial Products division
But if AIG had been forced to liquidate, it could have affected the insurance units and millions of policyholders. With a more orderly process underway, the policyholders are now completely protected.
Question:
Who are these AIG “policyholders?”
Answer:
These AIG “policyholders” are the largest multi-national corporations in the world… and include corporations from every industry, from media to banking/mortgage to auto and steel to toys.
Question:
What kind of insurance policies have the multi-national corporations purchased from AIG?
Answer:
These “policyholders” have purchased insurance from AIG to protect their profits.
Question:
What kind of “claims” are they filing?
Answer:
These multi-national policyholders are making claims based upon their loss of profits due to the recession/depression.
Comment:
Our tax-dollars are paying on “claims” being filed by these multi-national corporations for losses in profits as the economy goes south.
Comment:
While the disgraceful tens of millions of dollars in executive “bonuses” paid by AIG are now the justified topic of wide-spread discussion; these “bonuses” are being used a “Trojan Horse” of sorts by the media and politicians who don’t want to disclose to the American people where the hundreds of BILLIONS of dollars are going.
Comment:
Make no mistake, the $170,000,000,000.00 (one-hundred seventy billion dollars) paid out to AIG is just the beginning… as the depression deepens these multi-national corporations will continue filing claims and AIG will have to honor the policies these corporations purchased to protect their profitability… our tax-dollars are going directly into the pockets of the Wall Street coupon clippers and the very mortgage company crooks who ripped off the American people.
Comment:
For the American tax-payer, there is nothing “good” about the bailout of AIG… except to the stock and bondholders and bankers and mortgage companies and the big industrialists and investors who will continue to pocket profits at tax-payer expense, everything about the AIG “bailout” is bad.
Conclusion:
The “bailout” of AIG with our tax-dollars is doing nothing but stabilizing Wall Street “profits.”
AIG’s insurance business is the business of protecting multi-national corporations against a loss in profits.
Once the tax-dollars stop flowing into the coffers of AIG and flooding out to the multi-national corporations, the world stock markets will collapse and we will be in the midst of the worst capitalist economic depression humanity has ever known--- complete with all the accompanying human misery and social strife one would expect--- now being widely predicted by many diverse voices.
On top of all of this, the American dollar will become worthless and we will be forced to purchase oil with Euros and Rubles… then what?
And if the Chinese aren’t dumb enough to buy into the American capitalist economic mess… then what?
In spite of what the highest-paid capitalist sooth-Sayers are telling us, capitalism as an economic system is finished… it is time to explore a socialist solution where production takes place to solve human needs rather than for profit… there is no other solution.
The multi-national corporations purchased insurance policies to protect their profits against recession/depression incurred losses from AIG, a private--- for profit--- insurance company, which assumed the risk in underwriting such policies.
The multi-national corporations did not purchase insurance policies from the United States government; so why should tax-payers be the ones paying out on these claims?
This is the biggest corporate swindle in history… in comparison, Bernie Madoff is a piker… we are being played for suckers.
We need a national “people’s bailout” based on the “Minnesota People’s bailout.”
The time has come to take a “left turn” to get us off this road to perdition as the capitalist system collapses.
Big-business created this economic mess as they reaped the profits while leaving working people with ALL the problems.
Alan L. Maki
U.S.News & World Report
What's Good, What's Bad About the AIG Bailout
http://biz.yahoo.com/usnews/090317/17_whats_good_whats_bad_about_the_aig_bailout.html?.&.pf=insurance
Tuesday March 17, 1:52 pm ET
By Rick Newman
"There are times when one would like to hang the whole human race, and finish the farce."
The latest surreal twists in the AIG bailout bring to mind Mark Twain, who could spot folly as if he were hunting for it with a spyglass. Had Twain had AIG to work with as raw material, we'd probably have another couple dozen enduring epigrams skewering the greedy and the foolish.
Many Americans would like to finish the farce and simply cut AIG off, especially now that the company has paid $165 million in bonuses to executives at the very unit that nearly caused the firm's downfall and triggered an unprecedented taxpayer bailout that now totals $170 billion. To almost everybody, it seems self-evident that traders shouldn't be rewarded for wrecking their company and then burning through vast amounts of public funds. Yet AIG insists it is legally obligated to pay the bonuses, because of contracts signed before the damage occurred and taxpayers got involved. There have also been suggestions that the rascals who devised these complex derivatives deals may be the only ones who know how to unwind them, so AIG has no choice but to keep them around - and pay for the privilege of their company. In other words, the bonuses amount to extortion.
Okay. Breathe deep. Think calming thoughts. Find your center. Amidst this outrage, it's worth keeping in mind that the AIG bailout is actually doing some good. It's also a kind of learn-as-you-go experiment that's never really been done before. Here's a rough scorecard of what's working and what's not:
What's working
The AIG bailout has helped stabilize the financial markets. Take a moment to revisit September 2008. That's when Lehman Brothers failed, Merrill Lynch almost did, and AIG would have been forced into a chaotic bankruptcy if the feds didn't arrange an emergency $85 billion loan. With a bit of hindsight, it's starting to seem that AIG, which brokered more than $2.5 trillion worth of derivatives known as credit-default swaps held by many of the world's biggest banks, was the death star of that troubled troika.
We've survived the Lehman bankruptcy, after all, and Merrill found a buyer. "The real surprise wasn't Lehman Brothers, it was AIG," Frederic Mishkin, a Columbia Business School professor and former member of the Federal Reserve Board, said in a recent speech. "Who would have thought that an insurance company would have been affected by all this? When that happened, all bets were off."
All that federal money has helped AIG redeem some of those derivatives contracts, getting them off its books and out of the system. The financial markets still aren't back to normal, but they're heading in that direction. Forestalling another industrial-strength financial failure, and the chain reaction it would have triggered if AIG had collapsed, has certainly helped.
It's also helping AIG unwind itself. AIG's problems snowballed in September when suddenly it had to produce billions of dollars worth of collateral to back up those credit-default swaps. The collateral call was triggered by an unexpected drop in AIG's credit rating, along with the plunge in value of mortage-backed securities around the world. AIG didn't have the cash, and to come up with it, the only option would have been to sell off illiquid assets like its highly profitable insurance divisions or its aircraft leasing company. Try doing that in a week.
Had AIG been forced to liquidate those assets, it would have had to accept fire-sale prices, which would have led to a sudden collapse in the prices of other similar assets and companies throughout the world. AIG would have gotten pennies on the dollar for valuable assets and many other businesses would suddenly have been devalued, too.
AIG is still in the process of selling off assets, to pay off the government loans that effectively served as its collateral. But it's doing that in a more orderly way, seeking the highest bidders and the best terms. That's generally good for everybody, and it's also the best way for taxpayers to get most or all of their money back.
It's keeping AIG's insurance businesses stable. Here's something that's really startling: The entire problem at AIG was caused by one unit, the Financial Products division, whose employees constituted less than one percent of AIG's overall workforce. AIG's insurance units - the core of its business - essentially had nothing to do with the fiasco. But if AIG had been forced to liquidate, it could have affected the insurance units and millions of policyholders. With a more orderly process underway, the policyholders are now completely protected.
What's not working
Revolting bonuses. It simply goes without saying that giving bonuses to the people who brought down AIG is a perversion of justice. Officials at the Federal Reserve and the Treasury Dept. should have put terms into the original bailout agreement that prevented this. They didn't. It was a chaotic time, and legitimate worries about a global financial collapse obviously clouded thoughts about rules to prevent rapacious traders from holding the government hostage. If it's any consolation, the $165 million bonus pool is relatively small. Still, it grates.
Counterparty payouts. AIG has used much of the $170 billion in government aid to basically refund money to big banks and other "counterparties," to cash out some of those credit-default swaps and reduce AIG's massive liabilities. That's sensible, and it's basically the original idea behind the "Troubled Assets Relief Program," which was intended to get the worst derivatives and other securities off the market.
The problem is that the government has apparently agreed to $105 billion worth of payouts - at the full face value of the securities. That means that banks like Goldman Sachs, Merrill Lynch, Societe General and Deutsche Bank - among the world's most sophisticated investors - are taking no loss at all on securities that had a market value of half their face value or less when AIG redeemed them in full. It's like house prices falling in your neighborhood by 50 percent, and somebody coming in and buying one house for what it was worth at the market peak a couple years ago. And using a government loan to finance it.
Regulators at the Fed, Treasury, and other departments still haven't explained why the counterparties got all their money back. They're certainly going to be asked at upcoming Congressional hearings. But in a situation where just about everybody is taking a loss - taxpayers and consumers especially - it will be tough to make a case that the world's richest banks deserve full redemption.
Secrecy. We keep learning the terms of the AIG bailout well after the fact. Obviously there are times when the feds need to move quickly and can't have a 60-day comment period. But it's not the same crisis atmosphere as last fall. In general, we should learn the details of the bailout as they occur.
AIG strongly resisted releasing the list of counterparties that have been paid back with bailout money, for instance. As recently as March 5, Federal Reserve Vice Chairman Donald Kohn defended that secrecy, saying that firms might be reluctant to deal with AIG in the future if they knew their dealings could become public.
Then a week later, under mounting pressure, AIG released a list of counterparties. The world didn't end. AIG is also refusing to release the names of individuals in the Financial Products division who are getting bonuses. They may lose that battle too, since New York Attorney General Andrew Cuomo has asked for the names and started an investigation, much as he has with Merrill Lynch. Information is going to come out one way or the other, and AIG and its regulators should stop trying to protect the failing company any more than they already are. When AIG pays back that $170 billion in taxpayer money, they can keep all the secrets they want. In fact, once we've got our money back, the less we hear about AIG the better.
Alan L. Maki
58891 County Road 13
Warroad, Minnesota 56763
Phone: 218-386-2432
Cell phone: 651-587-5541
E-mail: amaki000@centurytel.net
Check out my blog:
Thoughts From Podunk
http://thepodunkblog.blogspot.com/
Tuesday, March 3, 2009
Nationalization, Socialism, and the U.S. Banks
North Dakota has a state owned bank. Benny
Nationalization, Socialism, and the U.S. Banks
By Jim Genova
Associate Professor of History
The Ohio State University-Marion
In the midst of the unfolding global economic crisis politicians, pundits, and bankers have engaged in much hyperbolic discussion about the prospect that major banks in the U.S. may be “nationalized.” On 27 February the U.S. Treasury Department announced that it was converting its “preferred shares” in Citibank into “common shares” giving it a 36% ownership in one of the world’s largest financial institutions. This and other actions taken on the part of the Federal Reserve and U.S. Treasury Department since the crisis began to accelerate last Autumn has led hardened neo-liberal ideologues to exclaim that this is “creeping socialism.” The proclamations of many anchors across the business channels, Conservatives gathered in Washington on 28 February, and Republicans in Congress during the debate over the stimulus bill have elevated to the level of mainstream discourse a conversation over the meaning of the terms “nationalization” and “socialism,” even if the purpose of such right-wing defenders of unbridled global capitalism is to induce ideological confusion and a sense of panic.
On 25 February, members of the House Financial Services Committee asked Fed Chairman Ben Bernanke to explain what he understood to be the definition of “nationalization.” In response, he said it is when “the government ‘seizes’ a company, ‘zeroes out the shareholders and begins to manage and run the bank.” He reassured the anxious Congressmen that “we don’t plan anything like that.”[1] Treasury Secretary Timothy Geithner seconded Bernanke’s comments, describing nationalization as “the wrong strategy for the country and I don’t think it’s a necessary strategy.”[2] Sen. Charles Schumer, member of the Senate Banking Committee, also tried to reassure a nervous investor class stating that a “federal takeover of the banks should be avoided at all costs. No one intends, ever, to have the government running these banks or insurance companies for a long period of time.” His goal, somewhat more ambitious than that proposed by either Bernanke or Treasury Secretary Timothy Geithner, is to have the government “come in, clean them out, take out the bad assets, put in new management.”[3] Despite such reassurances from those at the center of power, howls from the right and from brokers on the floor of the New York Stock Exchange and Chicago Mercantile Exchange continue to charge that the U.S. beginning under the Bush Administration and continuing at an accelerated pace is heading down the road to “socialism.”
None of the half-measures, abrupt shifts in policy, or tenuous interventions in the financial sector over the past year at least (Bear Stearns went under on 17 March 2008) have been effective at stemming the ever deepening global financial crisis. Banks continue to fail, large monopolistic financial institutions are reeling around the world, and the global economy is spiraling into perhaps its worst crisis ever. Events, as the recent contorted interventions to rescue Citibank have shown, are forcing the leaders of U.S. capitalism to make very difficult and, to them, unpalatable decisions. Neither former Treasury Secretary Henry Paulson (a supposed expert on the Great Depression of the 1930s) nor current Treasury head Tim Geithner (Governor of the New York Fed when Lehman Brothers went down in September 2008) appear to have to will to carry off what is historically necessary – the outright seizure of the major financial institutions of this country. This should not surprise us as they are “true believers” in the neo-liberal capitalist world order. For them, the current crisis is perplexing since it should not be happening at all. At the very least, the market should have shown the way out by now. This led former Fed Chairman Alan Greenspan to recently acknowledge before Congress that the theory to which he (along with Paulson, Bernanke, and Geithner) ascribed was “deeply flawed.” No such statement of contrition has as of yet come forth from Bernanke and Geithner.
Ultimately, many analysts believe that the U.S. government will have no choice but to nationalize some of the largest financial firms, including Citibank, Bank of America, and some large regional banks.[4] Nobel Laureate Joseph Stiglitz recently echoed calls from leading economists Nouriel Roubini and Nassim Taleb to nationalize the U.S. banks telling German television network Deutsche Welle “the banks have failed. Nationalization is the only answer.”[5] Stiglitz has much experience at the center of global finance having served as a member of President Clinton’s Council of Economic Advisors (1993-1997) and as Chief Economist and Senior Vice President of the World Bank (1997-2000). During those terms he witnessed the LTCM and East Asia currency crises (1996-1998) that some economists like Paul Krugman warned was a prelude to a global economic depression.[6] What has happened in the meantime is that trillions of dollars have been thrown down the bottomless chute of fundamentally insolvent institutions beyond hope of rescue.[7] Moreover, for all of this public money used to prop up badly run speculative private institutions not once has the government forced the management to resign (the recent move at Citibank showed the first signs of the Treasury making demands about the composition of corporate boards) nor has it called for any “claw back” provisions of the bonuses and extravagant pay for executives who ran their enterprises into the ground. Instead, public wealth is being transferred on a rapidly moving conveyor belt into the hands of unscrupulous and failed bankers. This is becoming one of the greatest thefts in world history. As Stiglitz told Deutche Welle, “separation of ownership from control is a recipe for disaster.”[8]
What is called for is an emergency solution not unlike that confronting Russia in the summer of 1917 when the Bolshevik leader V. I. Lenin wrote The Threatening Catastrophe and How to Fight It. In that pamphlet, Lenin described an unfolding crisis where the wheels of the Russian economy were grinding to a halt. Banks had ceased lending, railroads were shutting down, food supplies were dwindling, and unemployment was mounting. Lenin also noted that there was much public discussion among politicians and leaders of industry that something dramatic had to be done to salvage the situation. “Everybody says that. Everybody recognizes that. Everybody has agreed to that. And nothing is being done.”[9] Even more recently, Sweden’s experience in the early 1990s has been held up as analogous to the broad parameters of the current U.S. situation. There a housing boom in the late 1980s led to speculation on mortgage-backed debt that eventually ended badly leading to the government taking effective control of the largest banks. Sweden then forced the banks to create two institutions under one roof – a good bank and a bad bank. All of the “toxic assets” were concentrated in the bad banks, which gradually (over four years) sold them off.[10] The problem with using Sweden’s banking crisis as a model for understanding our own is that not only is Sweden’s economy a fraction of the size of that in the U.S. but its institutions are not at the epicenter of the global capitalist system. Institutions like CitiGroup, Morgan Stanley, Bank of America, JP Morgan Chase, Goldman Sachs, and others are global monopolistic enterprises with branches, partners, and subsidiaries throughout the world. Moreover, they are the vehicles through which the leaders of U.S. government pass on their way to political power. Consequently, there is an incestuous relationship between the “too big to fail” banks and the officials in charge of their oversight. There was nothing analogous in Sweden’s case. Finally, the U.S. crisis does not stem entirely from a decline in home prices (the much vaunted bursting of the housing bubble). Rather, for decades there has been a mounting structural weakness in the U.S. economy and by extension global capitalism. That is the overwhelming dependence for the survival and expansion of the system on debt of all kinds – credit cards, mortgages, auto financing, leveraged stock trading, and greatly expanded issuing of public debt of many varieties. Since the early 1970s there has been a widening disconnect between the real wages of workers in the industrialized world and the accumulation of public and private debt.[11]
We are at a crossroads in the current crisis. Every leading politician, pundit, and financial analyst acknowledges that the situation requires urgent action. On financial, ethical, and political grounds it is imperative that the U.S. government nationalize the major financial institutions, place them under federal control, unify them into one central bank to provide for more efficient management, and completely dispatch the executive management of those firms that have been seized. Only through that device can the process of daily pumping billions upon billions into dead institutions be stopped. Only through such bold moves can the government gain the leverage it needs to control the credit markets, make interest rates meaningful, and aggressively restructure mortgages. Only through the decisive action of seizing, controlling, and re-directing the functioning of the banks to serve the immediate and long-term needs of the people can the rate of decline be slowed and some stability be restored to the financial sector of the economy.[12]
This should not be confused with socialism. Such labeling is an effort on the part of those ideologues still committed to the failed neo-liberal policies of the Washington Consensus dating to Reagan and Thatcher years of the early 1980s to derail any meaningful assistance to those workers, farmers, and middle class people who are suffering because of the greed of the capitalist elite. Moreover, it is the same callousness that those practitioners of gung-ho capitalism displayed in guiding IMF and World Bank policies on a path to crippling and impoverishing developing countries around the world through “Structural Adjustment Programs.” Lenin clearly delineated the difference between “state monopoly capitalism” and socialism, but argued that it was imperative in the period of impending catastrophe that responsible officials of any government take the decisive measures necessary to save people from mass unemployment, famine, and deep social dislocation. That the global economic crisis portends widespread political upheaval has been attested to by analysts and researchers who work in Africa, Asia, and Latin America.[13] In describing the 1917 crisis in Russia, Lenin wrote that nationalizing the banks would improve “the accessibility and the easy terms of credit, particularly for small owners [and] for the peasantry.” Further, the state would “be in a position to survey all the main monetary operations without concealing them, then to control them, then to regulate economic life, and finally to obtain millions and billions for large state operations.”[14] This addresses many of the most salient aspects of the crisis in the financial sector: transparency, accountability, assistance for those who actually need it, saving funds that will be needed for further stimulus, and it resolves the fatal disconnect Stiglitz identified in the current approach between having ownership without control. Beyond the current crisis, though, since the capitalist ideologues have raised the specter of socialism in the U.S., it is an opportunity for progressive forces to intervene in the public conversation and offer a real understanding of what socialism is while also highlighting the ultimate flaws of capitalism that can never be overcome or resolved from inside the system. This is an historic opportunity for the government to act on behalf of the people to mitigate the effects of a dying system and for progressives to make the case for socialism. The fate of millions of people around the world depends on the abilities of both to do what is historically necessary.
[1] Craig Torres and Bradley Keoun, “Bernanke Rejects ‘Anything Like’ Bank Nationalization,” Bloomberg.com 25 February 2009.
[2] Robert Schmidt, “Geithner Calls Nationalizing Banks ‘Wrong Strategy’ for Economy,” Bloomberg.com, 25 February 2009.
[3] Torres and Keoun, “Bernanke Rejects ‘Anything Like’ Bank Nationalization.”
[4] Matthew Richardson, “The Case for and against Bank Nationalisation,” VoxEU.org, 26 February 2009.
[5] Michael Knigge, “Stiglitz: Nationalized Banks are ‘Only Answer’,” Deutche Welle, 16 February 2009. Reprinted in the People’s Weekly World.
[6] Paul Krugman, The Return of Depression Economics and The Crisis of 2008, New York: W. W. Norton, 2008.
[7] On 27 February Bloomberg Financial Group provided an assessment of the entire contribution made by the Federal Reserve and U.S. Treasury Department to prop up the financial system since the beginnings of the crisis in August 2007. Its conclusion was that to date $11.6 trillion has been either spent or taken on as liabilities in the process. This includes cash injections into the trading markets, the TARP and other emergency programs, loans to banks facilitating their takeover of other even worse off financial institutions, the seizures of AIG, Freddie Mac, and Fannie Mae, loans to the Auto Industry, and the expansion of the Fed’s balance sheet to facilitate the commercial paper market that seized in September and October 2008.
[8] Knigge, “Stiglitz: Nationalized Banks are ‘Only Answer.””
[9] V. I. Lenin, The Threatening Catastrophe and How to Fight It, New York; International Publishers, 1932, p. 5. The essay was written 23-27 September 1917.
[10] Edward Harrison, “Did Sweden Really Nationalize Its Banks?” online blog post, 25 February 2009.
[11] Federal Reserve Table 100.B Data for 1945-2005, published by AutoDogmatic.com.
[12] Binyamin Appelbaum, “What Is Nationalization? Depends Who You Ask,” Washington Post, 25 February 2009. See also Robert Griffiths, “Why Nationalization Isn’t Socialism,” Politicalaffairs.net, 3 November 2008, reproduced from the Morning Star.
[13] Nelson D. Schwartz, “Job Losses Pose a threat to Stability Worldwide,” New York Times, 15 February 2009.
[14] Lenin, The Threatening Catastrophe and How to Fight It. Italics in the original.
Nationalization, Socialism, and the U.S. Banks
By Jim Genova
Associate Professor of History
The Ohio State University-Marion
In the midst of the unfolding global economic crisis politicians, pundits, and bankers have engaged in much hyperbolic discussion about the prospect that major banks in the U.S. may be “nationalized.” On 27 February the U.S. Treasury Department announced that it was converting its “preferred shares” in Citibank into “common shares” giving it a 36% ownership in one of the world’s largest financial institutions. This and other actions taken on the part of the Federal Reserve and U.S. Treasury Department since the crisis began to accelerate last Autumn has led hardened neo-liberal ideologues to exclaim that this is “creeping socialism.” The proclamations of many anchors across the business channels, Conservatives gathered in Washington on 28 February, and Republicans in Congress during the debate over the stimulus bill have elevated to the level of mainstream discourse a conversation over the meaning of the terms “nationalization” and “socialism,” even if the purpose of such right-wing defenders of unbridled global capitalism is to induce ideological confusion and a sense of panic.
On 25 February, members of the House Financial Services Committee asked Fed Chairman Ben Bernanke to explain what he understood to be the definition of “nationalization.” In response, he said it is when “the government ‘seizes’ a company, ‘zeroes out the shareholders and begins to manage and run the bank.” He reassured the anxious Congressmen that “we don’t plan anything like that.”[1] Treasury Secretary Timothy Geithner seconded Bernanke’s comments, describing nationalization as “the wrong strategy for the country and I don’t think it’s a necessary strategy.”[2] Sen. Charles Schumer, member of the Senate Banking Committee, also tried to reassure a nervous investor class stating that a “federal takeover of the banks should be avoided at all costs. No one intends, ever, to have the government running these banks or insurance companies for a long period of time.” His goal, somewhat more ambitious than that proposed by either Bernanke or Treasury Secretary Timothy Geithner, is to have the government “come in, clean them out, take out the bad assets, put in new management.”[3] Despite such reassurances from those at the center of power, howls from the right and from brokers on the floor of the New York Stock Exchange and Chicago Mercantile Exchange continue to charge that the U.S. beginning under the Bush Administration and continuing at an accelerated pace is heading down the road to “socialism.”
None of the half-measures, abrupt shifts in policy, or tenuous interventions in the financial sector over the past year at least (Bear Stearns went under on 17 March 2008) have been effective at stemming the ever deepening global financial crisis. Banks continue to fail, large monopolistic financial institutions are reeling around the world, and the global economy is spiraling into perhaps its worst crisis ever. Events, as the recent contorted interventions to rescue Citibank have shown, are forcing the leaders of U.S. capitalism to make very difficult and, to them, unpalatable decisions. Neither former Treasury Secretary Henry Paulson (a supposed expert on the Great Depression of the 1930s) nor current Treasury head Tim Geithner (Governor of the New York Fed when Lehman Brothers went down in September 2008) appear to have to will to carry off what is historically necessary – the outright seizure of the major financial institutions of this country. This should not surprise us as they are “true believers” in the neo-liberal capitalist world order. For them, the current crisis is perplexing since it should not be happening at all. At the very least, the market should have shown the way out by now. This led former Fed Chairman Alan Greenspan to recently acknowledge before Congress that the theory to which he (along with Paulson, Bernanke, and Geithner) ascribed was “deeply flawed.” No such statement of contrition has as of yet come forth from Bernanke and Geithner.
Ultimately, many analysts believe that the U.S. government will have no choice but to nationalize some of the largest financial firms, including Citibank, Bank of America, and some large regional banks.[4] Nobel Laureate Joseph Stiglitz recently echoed calls from leading economists Nouriel Roubini and Nassim Taleb to nationalize the U.S. banks telling German television network Deutsche Welle “the banks have failed. Nationalization is the only answer.”[5] Stiglitz has much experience at the center of global finance having served as a member of President Clinton’s Council of Economic Advisors (1993-1997) and as Chief Economist and Senior Vice President of the World Bank (1997-2000). During those terms he witnessed the LTCM and East Asia currency crises (1996-1998) that some economists like Paul Krugman warned was a prelude to a global economic depression.[6] What has happened in the meantime is that trillions of dollars have been thrown down the bottomless chute of fundamentally insolvent institutions beyond hope of rescue.[7] Moreover, for all of this public money used to prop up badly run speculative private institutions not once has the government forced the management to resign (the recent move at Citibank showed the first signs of the Treasury making demands about the composition of corporate boards) nor has it called for any “claw back” provisions of the bonuses and extravagant pay for executives who ran their enterprises into the ground. Instead, public wealth is being transferred on a rapidly moving conveyor belt into the hands of unscrupulous and failed bankers. This is becoming one of the greatest thefts in world history. As Stiglitz told Deutche Welle, “separation of ownership from control is a recipe for disaster.”[8]
What is called for is an emergency solution not unlike that confronting Russia in the summer of 1917 when the Bolshevik leader V. I. Lenin wrote The Threatening Catastrophe and How to Fight It. In that pamphlet, Lenin described an unfolding crisis where the wheels of the Russian economy were grinding to a halt. Banks had ceased lending, railroads were shutting down, food supplies were dwindling, and unemployment was mounting. Lenin also noted that there was much public discussion among politicians and leaders of industry that something dramatic had to be done to salvage the situation. “Everybody says that. Everybody recognizes that. Everybody has agreed to that. And nothing is being done.”[9] Even more recently, Sweden’s experience in the early 1990s has been held up as analogous to the broad parameters of the current U.S. situation. There a housing boom in the late 1980s led to speculation on mortgage-backed debt that eventually ended badly leading to the government taking effective control of the largest banks. Sweden then forced the banks to create two institutions under one roof – a good bank and a bad bank. All of the “toxic assets” were concentrated in the bad banks, which gradually (over four years) sold them off.[10] The problem with using Sweden’s banking crisis as a model for understanding our own is that not only is Sweden’s economy a fraction of the size of that in the U.S. but its institutions are not at the epicenter of the global capitalist system. Institutions like CitiGroup, Morgan Stanley, Bank of America, JP Morgan Chase, Goldman Sachs, and others are global monopolistic enterprises with branches, partners, and subsidiaries throughout the world. Moreover, they are the vehicles through which the leaders of U.S. government pass on their way to political power. Consequently, there is an incestuous relationship between the “too big to fail” banks and the officials in charge of their oversight. There was nothing analogous in Sweden’s case. Finally, the U.S. crisis does not stem entirely from a decline in home prices (the much vaunted bursting of the housing bubble). Rather, for decades there has been a mounting structural weakness in the U.S. economy and by extension global capitalism. That is the overwhelming dependence for the survival and expansion of the system on debt of all kinds – credit cards, mortgages, auto financing, leveraged stock trading, and greatly expanded issuing of public debt of many varieties. Since the early 1970s there has been a widening disconnect between the real wages of workers in the industrialized world and the accumulation of public and private debt.[11]
We are at a crossroads in the current crisis. Every leading politician, pundit, and financial analyst acknowledges that the situation requires urgent action. On financial, ethical, and political grounds it is imperative that the U.S. government nationalize the major financial institutions, place them under federal control, unify them into one central bank to provide for more efficient management, and completely dispatch the executive management of those firms that have been seized. Only through that device can the process of daily pumping billions upon billions into dead institutions be stopped. Only through such bold moves can the government gain the leverage it needs to control the credit markets, make interest rates meaningful, and aggressively restructure mortgages. Only through the decisive action of seizing, controlling, and re-directing the functioning of the banks to serve the immediate and long-term needs of the people can the rate of decline be slowed and some stability be restored to the financial sector of the economy.[12]
This should not be confused with socialism. Such labeling is an effort on the part of those ideologues still committed to the failed neo-liberal policies of the Washington Consensus dating to Reagan and Thatcher years of the early 1980s to derail any meaningful assistance to those workers, farmers, and middle class people who are suffering because of the greed of the capitalist elite. Moreover, it is the same callousness that those practitioners of gung-ho capitalism displayed in guiding IMF and World Bank policies on a path to crippling and impoverishing developing countries around the world through “Structural Adjustment Programs.” Lenin clearly delineated the difference between “state monopoly capitalism” and socialism, but argued that it was imperative in the period of impending catastrophe that responsible officials of any government take the decisive measures necessary to save people from mass unemployment, famine, and deep social dislocation. That the global economic crisis portends widespread political upheaval has been attested to by analysts and researchers who work in Africa, Asia, and Latin America.[13] In describing the 1917 crisis in Russia, Lenin wrote that nationalizing the banks would improve “the accessibility and the easy terms of credit, particularly for small owners [and] for the peasantry.” Further, the state would “be in a position to survey all the main monetary operations without concealing them, then to control them, then to regulate economic life, and finally to obtain millions and billions for large state operations.”[14] This addresses many of the most salient aspects of the crisis in the financial sector: transparency, accountability, assistance for those who actually need it, saving funds that will be needed for further stimulus, and it resolves the fatal disconnect Stiglitz identified in the current approach between having ownership without control. Beyond the current crisis, though, since the capitalist ideologues have raised the specter of socialism in the U.S., it is an opportunity for progressive forces to intervene in the public conversation and offer a real understanding of what socialism is while also highlighting the ultimate flaws of capitalism that can never be overcome or resolved from inside the system. This is an historic opportunity for the government to act on behalf of the people to mitigate the effects of a dying system and for progressives to make the case for socialism. The fate of millions of people around the world depends on the abilities of both to do what is historically necessary.
[1] Craig Torres and Bradley Keoun, “Bernanke Rejects ‘Anything Like’ Bank Nationalization,” Bloomberg.com 25 February 2009.
[2] Robert Schmidt, “Geithner Calls Nationalizing Banks ‘Wrong Strategy’ for Economy,” Bloomberg.com, 25 February 2009.
[3] Torres and Keoun, “Bernanke Rejects ‘Anything Like’ Bank Nationalization.”
[4] Matthew Richardson, “The Case for and against Bank Nationalisation,” VoxEU.org, 26 February 2009.
[5] Michael Knigge, “Stiglitz: Nationalized Banks are ‘Only Answer’,” Deutche Welle, 16 February 2009. Reprinted in the People’s Weekly World.
[6] Paul Krugman, The Return of Depression Economics and The Crisis of 2008, New York: W. W. Norton, 2008.
[7] On 27 February Bloomberg Financial Group provided an assessment of the entire contribution made by the Federal Reserve and U.S. Treasury Department to prop up the financial system since the beginnings of the crisis in August 2007. Its conclusion was that to date $11.6 trillion has been either spent or taken on as liabilities in the process. This includes cash injections into the trading markets, the TARP and other emergency programs, loans to banks facilitating their takeover of other even worse off financial institutions, the seizures of AIG, Freddie Mac, and Fannie Mae, loans to the Auto Industry, and the expansion of the Fed’s balance sheet to facilitate the commercial paper market that seized in September and October 2008.
[8] Knigge, “Stiglitz: Nationalized Banks are ‘Only Answer.””
[9] V. I. Lenin, The Threatening Catastrophe and How to Fight It, New York; International Publishers, 1932, p. 5. The essay was written 23-27 September 1917.
[10] Edward Harrison, “Did Sweden Really Nationalize Its Banks?” online blog post, 25 February 2009.
[11] Federal Reserve Table 100.B Data for 1945-2005, published by AutoDogmatic.com.
[12] Binyamin Appelbaum, “What Is Nationalization? Depends Who You Ask,” Washington Post, 25 February 2009. See also Robert Griffiths, “Why Nationalization Isn’t Socialism,” Politicalaffairs.net, 3 November 2008, reproduced from the Morning Star.
[13] Nelson D. Schwartz, “Job Losses Pose a threat to Stability Worldwide,” New York Times, 15 February 2009.
[14] Lenin, The Threatening Catastrophe and How to Fight It. Italics in the original.
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