Beware Wall Streeters Baring Solutions
by, 03-31-2008 at 06:13 PM (1703 Views)
Beware Wall Streeters Baring Solutions
“WASHINGTON - The Bush administration Monday proposed the most far-ranging overhaul of the financial regulatory system since the stock market crash of 1929 and the ensuing Great Depression. The plan would change how the government regulates thousands of businesses from the nation's biggest banks and investment houses down to the local insurance agent and mortgage broker. Treasury Secretary Henry Paulson unveiled the 218-page plan in a speech in Treasury's ornate Cash Room. He declared that a strong financial system was important not just for Wall Street but also for working Americans. The administration's plan was already drawing criticism from Democrats that it does not go far enough to deal with abuses in mortgage lending and securities trading that were exposed by the current credit crisis.” By MARTIN CRUTSINGER | AP Economics Writer 9:07 AM CDT, March 31, 2008
US Secretary of the Treasury Henry Paulson is calling for massive government reform of the financial regulatory system and the corporate media megaphones are touting it as a major initiative. On one level you could say this is a good thing, the government is acting aggressively and responsibly to stem the financial implosion. On the surface it is. However given the Bu$h administration’s abysmal track record for truth, honesty and accountability there is more to this than meets the eye. We must recognize the nexus between people like Henry Paulson a former managing partner and CEO of Goldman Sachs one of the largest and successful investment banks in the country and the present crisis facing the US economy and financial system. Paulson has a reported worth of over $700 million dollars. Goldman Sachs is an elite company and they have sent representatives to the government to serve as key economic advisers and policy makers. Prior to taking the position of Secretary of Treasury, Paulson served as the managing partner of the firm’s Chicago office, then he became the COO and eventually the CEO. While to some these credentials are quite impressive, to me they serve as a cautionary warning, a red flag that something shady and unscrupulous is going on. Keep in mind a hallmark of George W. Bu$h’s administration is no one ever gets reprimanded, punished or goes to jail even when there is clear evidence of malfeasance like in 9-11, the Iraq invasion or Hurricane Katrina. Here we go again. Even though the FBI is investigating the Subprime fiasco I doubt any big time Wall Street firms or executives will get indicted or go to jail. Maybe if Elliot Spitzer the disgraced former governor of New York and former New York Attorney general was on the case, but Bu$h’s Justice Department, no way.
Now comes Henry Paulson the consummate Wall Street insider offering a plan supposedly to rectify a gargantuan unregulated financial system as it teeters on the brink of imploding upon itself. It’s like closing the barn door after all the animals have escaped. This is supremely ironic because it was the repeal of 1930's era legislation like the Glass-Steagall Act in the ‘90's under Bill Clinton that helped Wall Street and the financial insiders put us in the mess we are all in now. The Glass Steagall Act was repealed on November 12 1999, just four months after a former Goldman Sachs honcho named Robert E. Rubin stepped down as Secretary of Treasury. Coincidence? Goldman Sachs is one of the top investment banks in the country and an important player in the global scheme. Although rarely in the news about the subprime debacle, Goldman Sachs is just as culpable for the current crisis as was Bear Sterns, Lehman Brothers, Citigroup, Bank of America and the various hedge funds, derivatives and other components of the shadow banking system. This crisis is of their making, they created it and now they are assiduously working to avoid paying the piper.
“The doubts burst into the open on August 9th when central banks were forced to inject liquidity into the overnight money markets because banks were charging punitive rates to lend to each other. At first, the problems appeared more serious among European banks, especially in Germany, where low profitability among state banks led them to take risky bets in subprime markets. The pain in America was concentrated in the largest hedge funds, including those run by Wall Street's biggest name, Goldman Sachs. Increasingly, however, analysts worry about the exposure of American, Canadian and Asian banks to mortgage-backed securities and especially those funded by short-term commercial paper that is becoming increasingly hard to roll over. On August 15th shares in Countrywide Financial, a large American mortgage lender, fell 13% after a Merrill Lynch analyst abruptly changed his buy rating on the stock to a sell, warning of possible funding difficulties. Despite a large liquidity injection by the Federal Reserve on August 15th, the S&P 500 index fell 1.4%. The heavy selling spread to Asian stocks on August 16th.” Banks in trouble The game is up Aug 16th 2007 http://www.economist.com/finance/displaystory
The whole system is in deep trouble including Goldman Sachs. Things are getting worse daily, they need a miracle to stave off another 1929 type crash. Thus far the Federal Reserve Bank’s strategy of pumping money and credit into the banking system and bailing out a major player like Bear Sterns is proving to be a band-aid on a metastasized cancer. So who comes to the rescue? Their boy Henry Paulson, Secretary of the US Treasury and the Federal Reserve Bank a collection of private banks who set US monetary and credit policies. The last thing a man like Paulson who is worth a reported $700 million wants is to see his own wealth and the wealth of his peers crumple to nothing. So he is coming with a “reform plan”. This plan is not designed to help us; meaning working class folks. It is designed to create the illusion something is being done. Paulson’s reforms amount to reshuffling the deck chairs and life boats on the Titanic. It is a total sham. “In response, despite its obsession with surges and bombing Iraq back to its idea of ‘normalcy,’ the White House says it now feels our pain and has decided to act. Well, at least, to let former Goldman Sachs CEO Hank Paulson, now our Treasury Secretary, (in the tradition of former Goldman Sachs exec Robert Rubin who followed the same career path) impose yet another new pacification plan. Paulson has studied the crisis, studied it deeply, and realized the culpability of the brokers and the banks in engineering the disaster. His solution: kick the ball over to The Federal Reserve Bank. He's enlisting the Fed foxes to guard a Wall Street chicken coop at risk from a dangerous form of bird flu. (The technical term is 'greeditis’ enabled by regulatory arthritis.) He knows that most Americans--and most of the media -- think the Fed is a neutral government agency with a public interest mandate. They think it has the expertise and the power to swoop down and save us from our misery despite the fact that eights months of rate cuts and capital ‘injections’ have failed to stem the contagion of collapse. The New York Times pictures the exercise clinically in positive terms as a police raid, sort of like a SWAT team... Sorry to disabuse the newspaper of record and anyone who believes this formulation but the Fed is a private agency with no Constitutional authority run by bankers for bankers. It is a privately owned central banking system. Bankers sit on its many boards. The banks in turn get to borrow money at rates the Fed sets, and tack on interest and fees for loans. The Bank is there to do their bidding, and save them from themselves. When they run into trouble, they are often bailed out.” Danny Schechter http://www.huffingtonpost.com/danny-...y-the-bushpaul
I agree with Schechter. This is total BS. Most people who have reviewed the plan know it will take months if not years to accomplish; long after George W Bu$h leaves office, and it will not resolve the current crisis on bit. But the real kicker is, the essence of Paulson’s plan calls for bankers to regulate themselves!? That’s like the lions guarding sheep. When all is said and done, what’s done counts more than what’s said. Beware Wall Streeters baring solutions.
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