01
Oct
Market Climbs As Big Banks Report Big Subprime Losses
We are now in the third quarter with Citibank reporting a plunge in profits partly because of subprime loan “write downs.” UBS reports a $3.4 BILLION dollar hit for the same reason. This proves how deeply complicit big banks were in the subprime scam. The Marketwatch website has a front page feature titled: “COULD IT CRASH AGAIN?” They are referring to the market drop of l987.
CNBC carried this report: “The warning from Citigroup that its quarterly earnings will drop 60% could be a sign of things to come from U.S. banks and brokerages.
“I believe there is a systemic debt problem and it will take years to work out — and the Federal Reserve cannot resolve the issues,” said Richard Bove, bank analyst at Punk Ziege.”
I was in Boston last weekend. There was euphoria about the Red Sox winning a division title, but the team is also literally selling off bleacher chairs to raise funds to help repair Fenway Park. At the same time the Boston Globe reported on its front page “THOUSANDS BRACE FOR MORTGAGE RATE JUMP.” Ten Thousand mortgages will be reset upwards. Hundreds, if not thousands, of homeowners are not expected to be able to afford the hike. An epidemic of defaults is anticipated.
On the way home, I saw USA TODAY leading with the housing mess, and then as I got closer to New York, a newspaper in the affluent town of Greenwich Connecticut reported foreclosures at a record level. In tony Greenwich! The Globe also noted that many in the housing sector believe the Fed will cut the interest rate again.
As for the banks: I loved a report that JP Morgan was fined heavily for failing to disclose shady internal emails in a law suit The Bank had claimed falsely that the emails disappeared because of 9/11, a claim that officials repudiated. Now that is sleazy!
DEBT CEILING RAISED
And then there was this serious development which received so little attention:
“The Senate voted 53-42 to raise the debt ceiling to $9.815 trillion, the fifth increase in the U.S. credit limit since President George W. Bush took office in January 2001.” The Senate Finance Committee Chairman said: “We have no choice but to approve it. If we fail to raise the debt ceiling soon, the U.S. Treasury will default for the first time in its history.”
The article said U.S. debt stood at $5.6 trillion when Bush was elected, and quoted a Senator: “Increasing the debt limit is necessary to preserve the full faith and credit of the United States of America.” [Emphasis added][
As the Kansas City Star explained, this means the US debt rising $1.36 billion daily . ”We have increased the debt in the last 10 years by 50 percent,” responds Oklahoma Republican Sen. Tom Coburn, who voted against a higher ceiling..
ANOTHER CRISIS ON THE WAY
Robert Manning, author of Credit Card Nation and editorial advisor to IN DEBT WE TRUST writes: “
The US debt crisis hits with the coming economic slowdown. It will not only hit students and recent grads but also parents that will spend money helping with student loans rather than contributing to their retirement accounts in the post-”defined” pension era. Oh, my, it is going to be bad…
His note was accompanied by an AP article headlined:
“High-Priced Student Loans Spell Trouble
Explosion in High-Priced Student Loans Sow Seeds of Trouble for U.S. Economic Growth”
DEJAVU ALL OVER AGAIN
It was dejavu all over again when I watched Bill Moyers interview John Bogle, 77, the businessman who created The Vanguard Group, Inc., in 1974, and which today is one of the two largest mutual fund organizations in the world, and was was the first index mutual fund. He retired as Chairman and Chief Executive Officer of the fund in 1996, yet remained Senior Chairman until 2000.
While Moyers had Bogle on to discuss the way that private equity companies –often using debt as a big part of their financing strategies– take over companies and strip mine then, he echoed many of the arguments made in IN DEBT WE TRUST about the way financial institutions have taken over our economy and bleed and us dry.
“My estimate is that the financial sector takes $560 billion a year out of society,” Bogle explains to Bill Moyers. “Banks, money managers, insurance companies, certainly annuity providers. They’re all subtracting value from the economy.”
Rather than just manage money for customers, they manage it with the goal of enriching themselves. (Low paid Hedge Fund Managers make $129 million a year.) Rather than work in the interests of customers, they work in their own interest out of greed and short term gain.
These attitudes and practices have led to what Moyers calls the “ Crisis of Capitalism.” This is important because usually the “C-word” capitalism is rarely used in polite company or in our media. But the people in business have no such compunctions. They know what they are doing. And they know why, and its often with a me-first, society be damned approach. That’s part of what led to this subprime—subcrime scandal.
Greenspan’s Dark Legacy Unmasked
By Stephen Lendman
Already the top 1% owns 40% of global assets; the top 10% 85% of them; the top 1% in the US controls one-third of the nation’s wealth; the bottom 80% just 15.3%; and the top 20% 84.7%. In contrast, the poorest 20% are in debt, owe more than they own, and it’s getting worse.
By Harold Meyerson
The American middle class has toppled into a world of temporary employment, jobs without benefits, and retirement without security.
