Friday, June 11, 2010

The US Economy is on life support

The Commerce Department said today that retail sales fell by 1.2 percent in May. Although this was a surprise to many economists it has been no surprise to the millions of Americans who are looking for a job, or those that have already thrown in the towel and given up, or for the millions still facing foreclosure.

The US economy has been brought to its knees by the inevitable failure of any meaningful and insightful judgment coming from the Obama administration. Both the president and congress have thrown money in the wrong direction, wasting resources that may cause the US government to find itself in the same place as Greece within the next few years. Yes the banks were saved but at the expense of the US population.

Now after throwing trillions at the banks and a small token at the people, the Federal Reserve under Bernanke is completely lost in its own quagmire of confusion; the system is so completely over run by the bank elite that there is no place in this administration for common sense.

Five banks that set this collapse in motion each KNEW Obama would bring taxpayer aid to their survival. Those banks were Goldman Sachs Group Inc., Deutsche Bank AG, Bear Stearns Cos, Citigroup Inc., and JP Morgan Chase & Co., traders from these banks actually met and devised the instruments to bet against the subprime securities they were themselves promoting, and by playing both sides of the table they couldn’t lose. It was a Las Vegas style Gamble and they took out insurance, literally, taking down AIG and a host of other smaller insurance companies.

Why then did they need a government bailout? Primarily because they actually bankrupted AIG which caused Timothy Geithner from the New York Fed to coerce AIG to pay the banks in full for their second party CDS’s, thus allowing these same banks to be made whole with the exception of Bear Stearns. Why was Bear allowed to fall when the others were not?

Former Bear Stearns chief executive James Cayne, the chairman and CEO said the firm became the first major victim of the financial crisis due to “unfounded rumors”, not because of risky exposures to mortgage-related products with free-falling values.

Bear Stearns in March 2008 experienced essentially a run on the bank as creditors and the markets lost confidence in the institution. Regulators scrambled to find a buyer for the collapsing firm, resulting in a sale to none other than JPMorgan Chase & Co for $10 a share.

Maybe it’s just a coincidence that Bear Stearns was brought to its knees by rumors and ended up in the hands of JP Morgan. In 1907 JP Morgan began a series of rumors that the New York Banks were insolvent causing a similar run which essentially gave Morgan control, and what was accomplished was that which Morgan sought the beginning of the Federal Reserve System where Wall Street actually took control of the US Government.

The belief is that J.P. Morgan actually wanted Bear Stearns. So they arranged it by rumors and a sale, just as they did with Washington Mutual.

On April 17, 2010 the former head of the chief banking regulatory agency that oversaw failed Washington Mutual told lawmakers that the giant savings and loan collapsed because of a run on the bank, not failures by him or other regulators.

Who started the rumors that cause a run on Washington Mutual? Another coincidence Washington Mutual was taken over by non other that JP Morgan Chase who bought it for $2 billion.

Phil Angelides (Crisis Commission) in January accused Goldman Sachs CEO Lloyd Blankfein of treating clients unfairly for creating -- and then betting against -- subprime mortgage-backed securities. And this is essentially what each of these banks did.

Could the US economy have been saved?

Absolutely if that were the real intent of the Obama Administration! But Obama and Congress were to focused on their financial backers to see the forest for the trees, they threw money at the banks, and AIG with the latter allowing the foreclosures to continue, thus giving the banks a twofold profit, the bail out money allowing them to loan it back to the government and the foreclosure where they were paid by AIG and the other institutions that were foolish enough to guarantee these insane investments.

Obama and Congress could have used the same money to bailout both the Banks and the Borrowers, they could have provided the money to the banks per each loan that was modified to reduce the principal and interest. Thereby stopping the onslaught of foreclosures and maintaining a jobs market because there would not have been the financial impact on the economy.

The US Government because they have been substantially absorbed by Wall Street, is now tinkering on the brink of financial collapse. And this collapse is what should have allowed of Wall Street.