03-26-2008, 10:28 AM
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#1 (permalink)
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Banned
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Is the Fed Bailout "Corporatist"? Is Corporatism, Fascism?
On the morning of March 14, even as president Bush was saying this publicly, the Fed and US treasury were actually doing the opposite....interfering in markets to support the elite, to "socialize" their losses, but not those of home owners:
Quote:
http://www.whitehouse.gov/news/relea...0080314-5.html
For Immediate Release
Office of the Press Secretary
March 14, 2008
President Bush Visits the Economic Club of New York
11:20 A.M. EDT
THE PRESIDENT:...First of all, in a free market, there's going to be good times and bad times. That's how markets work. There will be ups and downs. And after 52 consecutive months of job growth, which is a record, our economy obviously is going through a tough time. It's going through a tough time in the housing market, and it's going through a tough time in the financial markets....
....Our job in Washington is to foster enterprise and ingenuity, so we can ensure our economy is flexible enough to adjust to adversity, and strong enough to attract capital. And the challenge is not to do anything foolish in the meantime. In the long run, I'm confident that our economy will continue to grow, because the foundation is solid......
...The purpose of government ought to be to help the individuals, not those who, like -- who speculated in homes. This bill sends the wrong signal to the market.
Secondly, some have suggested we change the bankruptcy courts, the bankruptcy code, to give bankruptcy judges the authority to reduce mortgage debts by judicial decree. I think that sends the wrong message. It would be unfair to millions of homeowners who have made the hard spending choices necessary to pay their mortgages on time. It would further rattle credit markets. It would actually cause interest rates to go up. If banks think that judges might step in and write down the value of home loans, they're going to charge higher interest rates to cover that risk. This idea would make it harder for responsible first-time home buyers to be able to afford a home.
There are some in Washington who say we ought to artificially prop up home prices. You know, it sounds reasonable in a speech -- I guess -- but it's not going to help first-time home buyers, for example. A lot of people have been priced out of the market right now because of decisions made by others. <h2>The market is in the process of correcting itself; markets must have time to correct. Delaying that correction would only prolong the problem</h2>......
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Quote:
[12] For examples of the attractions of Fascist and right-wing collectivist ideas and plans for American big businessmen in this era, see Murray N. Rothbard, America's Great Depression (Princeton: Van Nostrand, 1963). Also cf. Gaetano Salvemini and George LaPiana, What To Do With Italy (New York: Duell, Sloan, and Pearce, 1943), pp. 65ff.
Of the Fascist economy, Salvemini perceptively wrote: "In actual fact, it is the State, i.e., the taxpayer who has become responsible to private enterprise. <h3>In Fascist Italy the State pays for the blunders of private enterprise... Profit is private and individual. Loss is public and social." Gaetano Salvemini, Under the Axe of Fascism (London: Victor Gollancz, 1936), p. 416.
</h3>
http://www.mises.org/story/910
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Quote:
http://seattlepi.nwsource.com/busine..._jpbear17.html
Monday, March 17, 2008
Last updated 12:00 a.m. PT
Looming bankruptcy forces Bear Stearns to sell to rival JPMorgan -- cheap
....Also Sunday, the Federal Reserve announced its biggest commitment yet to lend money to struggling investment banks. <h3>The central bank said its new lending program would make money available to the 20 large investment banks</h3> that serve as "primary dealers" and trade Treasury securities directly with the Fed.
Much like a $200 billion loan program the Fed announced Tuesday, this program essentially will allow the government to hold as collateral a wide variety of investments that include hard-to-sell securities backed by mortgages. But Fed officials told reporters Sunday night <h3>that the new program would have no limit on the amount of money that can be borrowed.
</h3>
It was unclear just how much risk the Federal Reserve was taking on, especially in the bailout of Bear Stearns. But analysts said it was clear that JPMorgan Chase was getting an extraordinary bargain, buying Bear Stearns at a tiny fraction of its market value just one week ago, and with the Fed shielding it from much of the risk......
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Quote:
http://bloomberg.com/apps/news?pid=2...lT0&refer=home
March 20 (Bloomberg) -- The Federal Reserve expanded collateral eligible for its auction of Treasuries to include bundled mortgage debt and securities linked to commercial- property loans.
The changes came after "extensive consultation with market participants," the New York Fed said in a statement today. The Fed previously said it would accept residential mortgage-backed securities as collateral and consult on details of the program with the so-called primary dealers, the 20 banks and securities firms that trade directly with the central bank.
It's the first time the Fed will lend Treasuries in exchange for debt that includes mortgage-backed securities. The central bank will increase the program as needed.
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Quote:
http://www.dailykos.com/story/2008/3...365/755/482314
There is nothing new under the sun
Most people think that everything was fine until the stock market crash on October 24, 1929. Then everything immediately fell apart.
In fact, the economy kept rolling along until the later half of 1930, and it didn't have a full-scale meltdown until the spring of 1931. It was in 1931 when the credit markets completely froze up, and that was the year I investigated.
<h3>New York Times, October 11, 1931
New Era In Banks Seen In Hoover Plan</h3>
Last week brought forth two developments of extreme important to bankers, each of which, in a different way, is calculated to assist the banks of the country in meeting the hardships brought upon them by the prolonged depression.
The most important step was President Hoover's announcement early Wednesday morning of plans for a $500,000,000 corporation to discount sound banking assets which are not eligible for rediscount at the Federal Reserve Banks.
[...]
the formation of the credit organization outlined by President Hoover, on which work was speedily begun by a group of New York bankers, is expected to have a profound effect in relieving bankers of one of their greatest sources of anxiety. The institution is to be called the National Credit Corporation, will provide facilities whereby <h3>banks all over the country may realize upon sound assets that are not liquid at present due to abnormal conditions.
So what exactly were those sound assets that were were "not liquid at present"? Why mortgage-backed securities of course. Just like today.
New York Times, October 8, 1931</h3>
Real Estate Men On Hoover Plan
Skepticism as to President Hoover's plan to liquidate frozen bank assets was expressed yesterday by Charles G. Edwards, president of the Real Estate Securities Exchange. The exchange deals almost exclusively in real estate bonds, of which it is estimated that $1,500,000,000 at par value are in default throughout the country.
[...]
"President Hoover's financial plan," Joseph P. Day said in part, "is a step in the right direction towards making real estate investment more liquid. The system will make it possible for the Federal Reserve Bank to issue acceptance notes against sound real estate securities, thus stabilizing their values. Real estate mortgages are commonly regarded in banking as frozen assets. The Hoover plan seeks to take these substantial investments from the frozen asset class and give them a recognized value."
Hoover's Plan didn't work 77 years ago. Will Bush's Plan, using the exact same strategy, turn out any different? It's possible, but somehow I doubt it. It's not like Bush has a track record of success.
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Is what is happening now, shades of fascism as described by highly regarded expert on Italian fascism, the late Italian historian Gaetano Salvemini:
Quote:
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In Fascist Italy the State pays for the blunders of private enterprise... Profit is private and individual. Loss is public and social." Gaetano Salvemini, Under the Axe of Fascism (London: Victor Gollancz, 1936), p. 416.
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If you can permit yourself to discard your prior opinions of American capitalism and free markets, <h3>if it always comes to this, as it did in the early 30s as I documented, and again this month....is it democracy....</h3>and, if it only bails out the wealthy elite, how can it be socialism? If it isn't corporatism or fascism in your opinion, what is a system where the wealthy are guaranteed an unlimited upside in profit, but does not share it with the society that is forced to protect it from the downside, what is that system, to be accurately described as?
Last edited by host; 03-26-2008 at 10:34 AM..
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