Special preview for shoutwire of a blog I'm going to submit tomorrow for an internet advocacy group.
More Lies from Obama?
Last week, Obama announced a surprise head turner: had the sane voices of reason represented by Paul Volcker prevailed over the loot-the-riches Robber Baron Larry Summers and his crackpot team from Chicago? Or, could this possibly be too good to be true given Obama’s proven knack for saying what we want to hear, then going in a completely opposite direction. This has been true in the past, so, for our protection, let us vet his proposal before giving it consideration. Obama needs to be pushed in the right direction since he seems so prone to manipulation by the wrong crowd… so it is imperative that it is we the people that do the pushing.
As the recent Scott Brown electoral victory shows, Americans are sick and tired of Wall Street giveaways as the national priority. Geithner himself gave approval for the 100% payout on credit default swaps (CDS) to Goldman Sachs, and the personal OK to hide it from the public reports, as the latest press leaks indicate. Democrats voted Republican to send a message to the Democratic "leadership" that we're tired of betrayal.
The problem
The leadership is unfortunately blind to reality and is suicidally pressing forward with more insane schemes. Take for example the recent agreement reached where Obama will create, by executive order (if congress won’t do his dirty work), a panel whose duty will be to make cutbacks to our standard of living. I’m not making this up. They will target the most vulnerable Americans, the poor, disabled, and elderly, and will decide in a secretive and undemocratic way which cuts to make. These “recommendations” will then be voted on as an entire package, with an up or down vote, and will be impossible to amend. Sniff, sniff, do you smell that? Smells like our constitution is burning away.
Obama is going to reportedly try to sell this Peter Peterson foundation style austerity board in his state of the union to implement draconian cuts to Social Security and Medicare. So, instead of cutting off the bailouts and taking the money back, he’s going to propose that we continue feeding the vampires on Wall Street. Talk about going off the deep end.
The answer is not draconian austerity; the answer to leverage the power of our (still) sovereign currency and create loans for improvements to the physical economy, instead of the near zero interest loans given to large banks specifically to buy the near worthless toxic assets. Talk about a waste of time and money. Rome is figuratively burning while the bankers trade worthless “assets” on the public dime.
Meanwhile, the still somehow prevailing delusion is that the speculators must be protected! Why do we even need to protect them all? The Fed created trillions of dollars in loans to buy these toxic assets, and even was so kind as to let the big member banks (the Fed is privately owned by the largest banks in the world) know ahead of time what types of "assets" will be bought under the various bailout programs, generating massive profits for them at taxpayer expense! Let's instead use the awesome power of money creation to create trillions of dollars in loans for fantastic new technology and infrastructure for the nation and the world. We can eventually wipe poverty, hunger, and disease out of existence if we can make this decision. We'll build a real recovery so we don't need to make austerity cuts like those that were forced upon Haiti, for example, by the IMF.
What Obama/Volcker proposed
Whereas most European media wrongly present U.S. President Barack Obama's press conference with former Federal Reserve chairman Paul Volcker as a return to the "spirit of Glass-Steagall," some reports come closer to the truth.
- An article in the Financial Times explains why Obama's putative "war on Wall Street" is no threat to the Casino Economy. As concerns "proprietary trading," banks will be able to continue proprietary trading related to their customers' business (i.e., on behalf of their customers). Obama should prevent "client-based investment banking," but that is exactly what he "wants them to continue."
"While banks would be forced to spin off or close proprietary trading desks, they could continue to take risky bets on their own account as part of market-making activities, as counterparties to derivative and structured credit products demanded by clients, and in securitization activities."
Prohibiting banks from investing in hedge funds means nothing: "banks would still be able to lend to hedge funds and private equity funds — and could structure these loans in ways that mimicked equity participation, in much the same way as shariah-compliant securities provided debt-like exposure without violating Islamic prohibitions on interest."
And finally, investment banks "could be the big winners from such reforms if new laws inhibited competition in trading, hedge funds and private equity business from universal banking groups such as JP Morgan or Citigroup."
- Le Figaro, while headlining the article "Obama Attacks Size of Banks," writes that the contrary is true: "For the moment, Obama has said nothing about dismantling giants such as Bank of America, JPMorgan Chase, or Citigroup, which resulted from the merger of commercial banks and investment banks. Each will be allowed to continue to trade on the markets for clients. Therefore, the White House proposals, which still need to be adopted by the U.S. Congress, as well as the entire reform of financial regulation, don't mean a literal return to the Glass-Steagall Act."
- Les Echos, while noting Volcker's surprise comeback, reports that "Barack Obama's team underlines it's not a question of returning to strict separation of these business activities [investment banking and commercial banking], but that only proprietary trading is being called into question." Les Echos quotes an unnamed spokesman from Goldman Sachs — considered by many as "Government Sachs"— saying that for this investment bank, proprietary trading represented "only 12% of average net income since 2003."
What actually needs to be done
First, the scoundrels surrounding the President must be removed. This includes Summers, whose removal along with Geithner, Bernanke, Orszag, and the Emanuel brothers will probably be the first step away careening over the edge of a pit of no return. This is essential because they will vehemently oppose what reforms that must be done. The President is apparently not capable of thinking for himself. We must therefore remove all corrupting influences. We must completely split commercial banks from investment banks so banks will return to traditional banking activities, such as making investments in the community, in the physical economy. They may presently make more profit gambling risking our deposits as leverage to speculate rather than produce, so this is why we must separate them, in order to remove the temptation and turn them yet again into good servants of the community.
Wealth is in production, not paper. Speculation produces no true wealth. Yet, strangely, investment banking functions are valued over commercial lending. This activity actually threatens us all because it dries up credit for the real economy-- the place where we all live and work.
This is why we need a true return to Glass-Steagall, because it will essentially ban the derivative trade which is toxic to growth of the real economy. It isn't the grand solution that will solve everything, but it's an extremely important first step, a first step that must come to pass if we are to progress and recover. This is essential because the $23 trillion bailout (total with TARP, loan guarantees, and interest free loans) was a bailout of mainly the investment banks, hedge funds, and nefarious offshore activity that plays the derivative markets and actually has no real relation to the physical economy.
The derivative bubble is by some estimates over a quadrillion dollars, and when compared to the global economy whose annual GDP is approximately $60 trillion, one can really see how it's a meaningless pile of virtual money-- essentially casino chips, potentially hyperinflationary casino chips, and all the more reason to put it down.
Most of the credit in the world is now controlled by the big banks, thanks to the Bush-Obama bailout. This credit is being tied up by these toxic investment banking activities, like derivative trading that is actually counterintuitive to the health of the real economy, and there is little leftover for any traditional banking functions. Either we force Obama to implement the true Glass-Steagall and really break up the banks, or it's the austerity panels for all of us.
*Special thanks and credit to the good people at LPAC for their fine research and tireless work.