The Federal Reserve and U.S. Treasury decided not to rescue Lehman Brothers, a Wall Street investment bank caught in the vise of moral hazard and the crashing housing market. Bank of America is buying Merrill Lynch. The State of New York is allowing insurance giant AIG to borrow money from itself to make its books balance.
As they keep saying how strong the economy is, they begin to sound like children whistling in a graveyard.
If one can read into their actions, letting Lehman Brothers fail poses little threat to the entire system. On the other hand, letting AIG borrow from its own subsidiaries looks like Arthur Anderson-style accounting. Late in the day, the Fed offered to help bail out AIG. The stock market plunged as investors dumped these and other firms whose recent profits were built on huge risks.
Throughout the day as I wrote this, the situation changed repeatedly. New developments destroyed paragraphs more quickly than I wrote them.
The question remains how dangerous these problems are. Fed Chairman Ben Bernanke has written extensively on the causes of the Great Depression. He believes that a contracting money supply and huge amounts of debt caused the Great Depression. Because of his belief, he has worked to keep money flowing in the financial markets. Keeping the money tap open cuts both ways, however.
As long as the money supply is loose, debt continues to grow. This scenario can hardly continue indefinitely. Eventually a strong wind will blow and bring the house of cards down with it. It may be happening right now.
Many factors in play mirror the onset of the Great Depression. These include investor malfeasance, burgeoning debt and rising unemployment. The economy shows signs of contracting. Construction is down, and demand for goods is beginning to fall off. Henry Paulson, the Secretary of the Treasury says there is a major "correction" going on, but one wonders what kind of correction could get men like Paulson and Bernanke to abandon the golf course and work on Sunday.
The free market is often heartlessly callous. One can only hope that its next victims are at least the big players that have cheated fate rather than the poor, battered American taxpayer.
The Handbasket Chronicles, a weekly column by Ann Weaver Hart, appears on Monday evenings, and consists of commentary on political and social issues.
recommend this
email
print
link to this page
Comments: 42
When have you ever seen, the "victims are at least the big players that have cheated fate rather than the poor, battered American taxpayer." Ain't gonna happen. The Over-undeserving money-blessed always seem to come out of such debacles none the worse.
Until America gets her jobs back (and that won't happen under McSame and Pale-in) we will continue the downward spiral. Whilie we promise to rebuild a nation we had no business bombing in the first place. Perhaps we had all better learn how to shoot wildlife, so we can feed our families?
Could it get any worse? Sure! Four more years of the same Bush-Lite/war mongering attitude will take us right under.
Wilka
ANYWAY, THIS IS SO BAD, JUST FEAR AND THERE ARE A FEW THINGS PEOPLE CAN DO, I'D ADVISE TO DO THEM NOW!
Bush has ruined things completely.
In other news, I have written a new article. When you find the time, can you come by and read it? Here's the link: Neversaynever.Whenhurricanetypewindsattack
Gather Broadcasting: Have it your way
Insightful...
Obama has president could bring a surge of optimism and take some bold step to put people to work....there is plenty to do...all the homes ruined by storms and roads.
Our economy cannot be just to consume we have to be producers especially those things we need, rather than import them.
I may go back in business myself...
Hmmm, didn't Bush say get rid of Social Security and let the poor man put it into stocks on Wall Street? or other investments? How many people this time have lost their long worked for retirement money???
I was a lowly cop/EMT for years if I had been given the money that went into S.S. back then it would have had to go to feed my children, four of them who I raised by myself, or to cloth them I couldn't have put it into stocks besides not knowing what to buy any way.
As for the executives it would serve them right if they lost everything but want to bet not a one of them will lose their homes! Not a one of them will lose a nights sleep over the people who once worked for them who lost or will lose everything they have worked for.
:O\
I don't see any improvement, nor have I seen anything written about America having a strong economy. None of us would buy that song. We are a patriotic people, but we're not blind.
Ann, we all know on whose backs the weight of this financial debacle will fall. We had better start a Gather workout group to build up strength to carry the load.
It's easy in hindsight to say the government should have seen this coming. Who knows?
I do know I'm glad we have some knowledgeable people in the Fed and Treasury and certain financial businesses who are doing their best to smooth out what would otherwise have been a total meltdown.
But gas, repairs, food, bills, paying off debt, and keeping finding a job - yeah, that always becomes difficult in lean and leaner times.
Ever since Reagan, things have been going to hell in a handbasket. Deregulation led to this wild financial scheming and everyone will pay for a decade or two, at the least.
Oh, and your article is Featured in the Triple Name Club.
The hell it won't, Bush policy, enacted by the fed let them ignore state regulators entirely, and federal deregulation that happened on an agency level, under Bush appointed managers, is entirely responsible for lack of Federal oversight, and full ownership of this debacle. That dog hunts damned well, and he's sniffed us out a passle of liars and thieves, Bush at the head of them.
just today McSame AGAIN said "the major underlying principles of our economy are strong".
Sound familiar?
Following the wishes of the CONS, Social Security being privatized would have basically
obliterated all funds for those who need S.S.
As for those employees who were lied to last week by Lehman Bros. bosses ('all is going to be okay'), well, here's another group of thousands sold down the river by some extremely wealthy people with no concern for anyone or anything except their offshore accounts and their 6 (or is it 7?) mansions.
S.O.S.D.D. in America.
The Sun Also Sets on another empire.
And on those of us who were lead to slaughter by lobbyists, congressmen, the President,
the Vice President (and his portfolio in trust earning billions in KBR-Haliburton stock), and all of the unelected bureaucrats that failed to enforce the meager regulations left unstripped by the last three CON administrations.
I am not to blame.
Jan may be, but I am not.
I do voice my opinion with my elected officials both in person and via email, phone, etc.
Unfortunately, 9 Judges obliterated the votes of the majority of this country, and then a
large bunch of sadly delusional people made a huge mistake and placed into office two of the most evil and incompetent men in the history of the world.
Did you do that?
I did not.
Everybody batten down the hatches things may get tough. All the fat cats have been blowing hot air up our collectives popos telling us if we would just give them all of our money they might just let a little trickle back down to us.
These are the same guys Bush wanted us to give the social security money to. Wasn't that a great idea. It would all be gone by 2012. The fund managers would have made out like bandits though.
Obama 08
The huge monetary surplus, the economic growth, the low unemployment rate, all disappeared very quickly when Bush took office. And you can't blame it on the Democratic Congress....they weren't in control. It was a rubber stamp congress.
Ron is right...Bush has treated this country as his personal kingdom and the rest of us be damned.....and we are getting perilously close.
Also good point,Carla....the GOP was hoping that this would all happen after the election. This changes the whole direction of the campaign. Suddenly the economy is once again back on the front burner and lipstick is taking a rightful back seat.
Don't any of you find it bizare that we have all these resources and all these talented people wanting to work (and immigrants to the U.S. wanting to work) and we will just stop producing anyway if a Depression hits? Money is in the human mind. It has no physical reallity. That which makes a metal disk money or not money is in the way people look at it. Why is one piece of paper money and another not money? It's all in how people look at it.
This whole economic mess could be completely eliminated and made impossible quite easily if people just knew what to change. Read Invisible Hand to see the nature of the problem and the simple, effective, and no cost solution which both guarantees your freedoms and makes everyone richer.
One person can make a huge difference, but there has been a movement of greed supported by free trade and celebrated by raw, feral capitalism.
Is it over for off-shoring Corp.s that get tax breaks too?
Is it over for the NO Bid friends of Dick?
Is it over for the deregulating CONS who helped to create this economic mess in the first place?
Maybe you know lots of people who have been 'sitting on their butts', I don't.
I know many very hard working Americans that work thru their lunch breaks and after 20+ years at the same company are sick with worry over their futures.
I know many many good hard working Americans who have to choose between heating their homes and buying food.
Vacations? Investments? Those are for the well to do now days.
Even with 100% career evals every year, I and most are lucky if any yearly increase we may be fortunate to receive barely covers the raging inflation.
What part of America are your Myopic eyes looking at?
Freddie Mac and Fannie Mae? Both parties in Congress contributed to that mess, Obama was right to admit that.
Sometimes regulation is necessary, but don't look to Obama for a silver bullet.
As article states, it is about Greed, but how do legislate against that
Another group that should be looked into and you rarely hear anyone mention are the 3 main credit rating agencies, Moodys, S & P and Fitch. They allowed places like Merrill, Bear, et al to play a merry go round of finding which one would sign off on the highest ratings possible for their version of CDO making it seem like there was low risk to these products. Now that there is uncertainty surrounding underlying valuations, the rating agencies are lowering ratings on the debt triggering calls on the holders to put up more money to insure against default. This is leading to ever tightening credit markets, companies being driven into being over leveraged and huge jumps in the cost of credit to even keep operations going.
Greed is not necessarily a bad thing. It depends on how it's focused. And if people were being openly honest, I doubt you'd find many who were complaining about laxity on the way up while they watched their ballooning investments and home valuations. People would be wise to take a page out of Buffet's book. Just like he won't invest in a company he can't understand, people should not invest in things they don't understand. And very few understood what all these products that securitized mortgages actually were including those on Wall Street.
I just wanted to say I am finally going through my currently over 6,500 pieces of gather new mail that is in my inbox on here. So with that in mind I have finally come to a piece of mail that was addressed to me in regards this article submission you have created to share with the gather community. Thank you for taking the time and sharing your piece with us here at gather. :o)