Those “securities” could be millions, or (in many cases as we are now seeing) billions of dollars in bad debt that has been passed from company to company at discounted values in order to pass the buck and temporarily make investors think that these companies are in good or decent financial shape- on paper. They are essentially just legal IOU’s whose real monetary value depends completely on the person whom the IOU trail leads to. It’s really not that much different than what happened in the corporate crimes of Enron, Arthur Anderson, Raytheon, etc. Creating artificial value only weaves a spiderweb of deceit which sooner or later, is bound to trap the weaver and everyone associated with it (ie. investors- that includes everyone with a 401(k) plan).
Those company’s had slick finance and accounting people who were able to manipulate accounts, corporate loopholes, and various other shady accounting practices to dupe investors (on Wall St. and Main St.) into thinking that they were bringing in tons of money. In reality, they were losing tons of money and using investments by us the public, to pay off their mounting debt (all the while paying executives and board members exorbitant salaries and bonuses that will last them for several generations).
In many cases, higher-ups who got wind of the “B” word first (bankruptcy that is), dumped all of their stock before the news went public, effectively diminishing any value that others (usually lower-lever workers) with retirement stock options may have had. What might one of those (now happily "resigned") executives say to the line worker or service technician at one of these companies who lost everything because it was all tied to the (now worthless) stock price of the (now defunct) company?
So the Fed has dumped hundreds of billions of our tax dollars (which are already being stretched thin to fund the wars- Iraq alone is costing us $225,000,000 per day) to bail out these companies as a quick stop-gap measure.
Pardon Uncle Sam, but what happened to fiscal responsibility? While it is likely necessary to infuse the stock market with our tax money to keep it afloat, this could have all been avoided had some people in government opposed the increasing deregulation that allowed it to happen. And make no bones about it- this is not just another problem created by the Bush Administration. It started long before that, when then-President Clinton was the head of the show and his good friends at Fanny Mae and Freddie Mack started making some very irresponsible lending decisions.
That is not to say that Bush helped the situation, because he certainly worsened it, but rather I mean to say that this has gone unchecked for far too long- enough is enough. This already mounting trillion plus dollar debt is going to dig us into an insurmountable hole. It’s a mess out here- and the world economy is being adversely affected as well. There needs to be far better accountability and regulation of how companies are valued and how stocks are traded. No more white collar grifting.
John McCain declared (the Monday morning after the collapse of Lehman Bros. was made public) that "the fundamentals of the American economy are strong". Really? That was a very poorly timed statement at best. Sarah Palin on the other hand, apparently doesn't "Get It" in the most remote sense of the phrase. Palin stated on a recent campaign stop that government must "overhaul the financial regulatory system" (which is already regulated to a point). This would imply more regulation in light of what happened and why it happened. She then followed that up with, (complete oblivious to the contradiction in her words) "government has got to get out of the way of the private sector". So an overhaul of the financial regulatory system means, eliminating the financial regulatory system? Mrs. Palin- that is exactly how we got into this mess in the first place. And this is who John McCain picked to be his next in line for the leader of These United States. Think things might be a little shaky economically if they get in office? 'Shaky' would be the best-case scenario.
What has turned into a sort of free-for-all or “you snooze you lose” type market, has tanked big time, and it may not fully rebound just because of the Federal bailout. Keep in mind that the money being loaned to these companies is merely a temporary band-aid for a gaping head wound- somehow they are going to have to pay it back eventually. If not, they will indeed succumb to bankruptcy protection and level this same kind of havoc (or worse) on the economy at another date sometime in the future. It doesn’t take Alan Greenspan to figure out why we are in this quicksand. We need to fix it, and to do that we must elect a president and vice-president who will make sure that this never, ever happens again. So while you ponder about whom you'll cast your vote for November 4th, keep this question in mind- who do you trust to bring in the best, non-partisan economic advisers to help make wise, fiscally responsible decisions that will both repair and ensure the growth and health of our national economy for years to come?
2 comments:
I agree with your comments but you leave out that at least 1/2 of the blame goes to the American consumer who has a proclivity to spend beyond their means both in terms of mortgages and credit card debt. The fact that this will staunch easy money is not necessarily a bad thing. We need a leader (and I hope it's Barack Obama) who can lead us in a different direction than the conspicuous consumption of the current administration. Who by the way told us to go out and spend after 9/11 and that stock market free fall as a wa of showing our patriotism. What an opportunity that would have been to challange us to move away from our dependence on oil.
It IS the Economy, Stupid! Hope people will vote for the folks who will bring real change to Washington. Those folks are not McCain/Palin. That only leaves Obama/Biden, who by the way have sounded a lot more comfortable talking about this crisis than McCain and his pack of lobbyist advisers. the best choice for oiur country is obvious people. WAKE UP.
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