Now we have the Republican agenda taken to its logical extreme: war without end Amen (the GWOT with its "fronts" in Iraq, Afghanistan, Somalia, and elsewhere), and Total Economic Meltdown.
Not only have some of the biggest banks gone bad, oil prices become an issue, and the housing market gone bad, but the stock market made its worst decline in years, and most analysts are saying this is the worst thing to happen since the Great Depression.
Not just "internet rumors", no...everybody who knows. Take Bloomberg, for example:
In the biggest reshaping of the financial industry since the Great Depression, two of Wall Street's most storied firms, Merrill Lynch & Co. and Lehman Brothers Holdings Inc., headed toward extinction.
But to most people, what is a "reshaping of the financial industry"? What does it mean that
``The tectonic plates beneath the world financial system are shifting, and there is going to be a new financial world order that will be born of this,'' said Peter Kenny, managing director at Knight Capital Group Inc., the Jersey City, New Jersey-based brokerage that handles about $1 trillion worth of stock transactions a quarter. ``It's an ugly and painful process.''
What is this "new financial world order"? Ugly and painful to whom?
Lehman, which employed 25,935 people at the end of August in 61 offices around the world, had a balance sheet totaling $786 billion as recently as February.
What will happen to those 25,935 people? And $786 billion can't just evaporate. Can it?
But where does the pain spread beyond Wall Street hotshots? Main street and the middle class are now in this boat since the Republicans' touted mixing of speculative stock market investments with retirement funds, pictured as a "free-market" bonanza a la Reaganomics gone futuristic, made 401K's a form of universal retirement security. It was the GOP dream of replacing the government with big corporations and Big Business. And it is a total disaster. Witness, oh world, the debacle.
The GOP attacks the US economy on multiple fronts: attempting to gut their sole source of adequate revenue, taxes, from their largest source, the rich and powerful including corporations; spending uncounted - and I mean black budgeted - treasure on wars and war equipment to the point of bankrupting the government; and rampant deregulation, trusting businesses to regulate themselves, pushing it with the glorification of greed and the denigration of compassion.
In short, the GOP
- Guts revenue from the wealthy, called "cutting taxes" (but only for the rich)
- Spends heavily on wars without accountability
- Deregulates all sectors of business and industry, leading to abuse
- Privatizes what should be accountable public services
Note the features of these policies:
- Lack of accountability, especially for the rich/powerful
- Faith-based "belief" in the moral authority of greed and self-serving
- War on compassion as somehow morally objectionable, a "free lunch"
The net result of these policies for the economy?
- Unregulated businesses can't make the hard realistic choices
- The big swallow the small - even in the bailout and aftermath of the debacle
- Smaller investors, small business owners, employees are crushed
- There's a culture of continual increase without balance or realism
- Without balance, there's collapse
The results are in:
The industry convulsions that started last year have already eliminated Bear Stearns Cos., forced into a cut-price sale to JPMorgan Chase & Co. with government support in March. A week ago, the U.S. Treasury placed mortgage companies Fannie Mae and Freddie Mac into conservatorship, guaranteeing their widely held debt securities while all but erasing their equity value.
American International Group Inc., once the world's largest insurer, is struggling to raise cash to avoid a credit-rating downgrade that could cripple its business. AIG shares fell as much as 52 percent in New York Stock Exchange composite trading today and were down $5.49, or 45 percent, to $6.65 at 10:50 a.m.
The five New York-based securities firms that dominated Wall Street have been reduced to two: Goldman Sachs Group Inc. and Morgan Stanley. While both firms are scheduled to report a drop in third-quarter earnings this year, their business has remained profitable throughout 2008 -- unlike Lehman and Merrill. As concerns swirled about their futures, Goldman's stock dropped as much as 7.9 percent and Morgan Stanley's fell as much as 13 percent in New York Stock Exchange composite trading today.
That's the problem with the "free market", and even more so with greed. Values can't just keep rising indefinitely. If this is the ABC of logic, why didn't anyone act on it? Because this is GOP-driven faith-based investing. Housing will always go up, they say. Based on what? That real estate is Jesus. It will wash away our sins.
``I've been on Wall Street for many years, and I've never seen a weekend like this one,'' said Michael Holland, 64, chairman and founder of New York-based Holland & Co. ``We are unwinding what has been years of silliness in the financial markets, and the silliness is being vaporized as we speak, unfortunately with the stock price of a number of companies involved in it.''
But is it just "silliness" being vaporized, or billions of dollars? And whose money is this? Whose property? Am I living in one piece of this debacle? Probably, yes.
In fact, this AP report indicates that the repercussions are much greater than anyone can really grasp:
Banks are not the only ones struggling in the growing financial crisis. The fund established to insure their deposits is also feeling the pinch, and the taxpayer may be the lender of last resort.
The Federal Deposit Insurance Corp., whose insurance fund has slipped below the minimum target level set by Congress, could be forced to tap tax dollars through a Treasury Department loan if Washington Mutual Inc., the nation's largest thrift, or another struggling rival fails, economists and industry analysts said Tuesday.
Treasury has already come to the rescue of several corporate victims of the housing and credit crunches. The government took over mortgage finance companies Fannie Mae and Freddie Mac, and helped finance the sale of investment bank Bear Stearns to J.P. Morgan Chase & Co.
Eleven federally insured banks and thrifts have failed this year, including Pasadena, Calif.-based IndyMac Bank, by far the largest shut down by regulators.
Additional failures of large banks or savings and loans companies seem likely, and that could overwhelm the FDIC's insurance fund, said Brian Bethune, U.S. economist at consulting firm Global Insight.
"We've got a ... retail bank run forming in this country," said Christopher Whalen, senior vice president and managing director of Institutional Risk Analytics.
Now hold on a second. What does that mean? It means the banks are making a run on the federal government and on the FDIC itself. Yes, it's not people making a run on banks. It's the banks making a run on their sole guarantor, the FDIC. What would America be without the FDIC?
A Washington Mutual failure would dwarf the largest bank collapse in U.S. history — Continental Illinois National Bank in 1984, with $33.6 billion in assets.
By comparison, WaMu and its subsidiaries had assets of $309.73 billion as of June 30 and IndyMac had $32 billion when it shut down.
And where does WaMu go when their assets are deemed "junk"? The Fed.
Arthur Murton, director of the FDIC's insurance and research division, said that when large institutions have failed in recent years, the hit to the fund has been about 5 to 10 percent of the company's assets.
Or, failing that, Daddy Warbucks... I mean, the Department of Treasury.
If the FDIC doesn't have enough cash to cover the initial costs of a bank or thrift failure, one option would be short-term loans from the Treasury. That last happened in 1991-92, during the last part of the savings and loan crisis, when the FDIC borrowed $15.1 billion from the Treasury and repaid it with interest about a year later.
But nobody asks, what if Daddy Warbucks is actually Daddy WarSpender? What if the Treasury Department can't take all the pressure?
Think about it for a second. Greed. Deregulation. The rich get richer. The poor get poorer. Then the "Supply Side" itself starts to collapse. Who's going to shore them up? The People?? They're the first to go. We always say, "Don't worry. The FDIC guarantees all." It's faith-based Republican economics. The FDIC is now Jesus. The FDIC will save us. But what if the FDIC itself can't save us?
Then we turn, at long last, to the Grandaddy of them all, the GOP's Great Satan: The Federal Government. But the businesses whose taxes were gutted to make way for their greed and profit have no more profits. Without profits, their tax revenues will be even less. And without revenues, the Federal Government will go bankrupt. And if the Federal Government goes bankrupt, we face the following:
We lose the war in Iraq and head home, 'cause we can't afford to be there.
We lose the war in Afghanistan, 'cause we can't afford to be there either.
We lose the war on terror, because we haven't yet figured out what the hell it is, let alone afford it.
We lose our status in the world, because we will have major problems with all the countries financially entangled with our affairs.
Oh, and on the home front? Our "homeland" will have a lot more crime, thanks to poverty, a lot less justice, thanks to "Homeland Security", and a lot more homelessness, thanks to ... "trickle down" housing crisis.
All those things hyped by the GOP will be lost. Because the Great Satan is not government corruption, but corruption itself is the Great Satan, and no corporation or powerful entity or nation, for that matter, is immune. Corruption starts with immunity to compassion. It holds nothing sacred but self-interest. And self-interest, as we are beginning, hopefully, to see, is blind, and ultimately self-defeating.
Or was it only the GOP? The Clinton years saw a lot of the same policies and deregulation. Some say,
This is not about Republican or Democratic policies, but systemic bipartisan deregulation. Only a quick bout of sweeping and decisive regulation can fix what's broken.
The New Deal's Glass-Steagall Act essentially put federal regulation in control of greed, by "saying" to the banking industry:
"If you want to raise capital through speculative investors at home or overseas -- fine. But as an investment bank, you don't get our backing and you don't get to mix it up with citizens' lives or use their capital to fund your trading activities."
McCain is still pandering to the disastrous notion of tax cuts being a panacea for all financial ills. It never worked before, and it will only make things worse. At least Barack Obama is using his mind. And note that the New Deal was a Democratic idea. It basically saved America from the brink. Now we are again on the brink. Why doesn't anybody feel it? Or maybe they will...
And if they don't, and put the GOP back at the helm, it will give a chance for the rest of the world to "inherit the earth." The ultimate GOP legacy seems to be the destruction of all their stated goals.