Bernanke calls for banking clean-up

Ben Bernanke called for fresh efforts to clean up the US banking system on Tuesday, warning that fiscal stimulus measures alone would not be enough to overcome the economic crisis.

Speaking in London, the Federal Reserve chairman said he would like the Obama administration to combine capital injections with a plan to cut troubled assets from bank balance sheets – the idea behind the original version of Treasury secretary Hank Paulson’s troubled asset relief program (Tarp). “More capital injections and guarantees may become necessary to ensure stability and the normalisation of credit markets,” he said.
bernanke

Financial Meltdown: The Greatest Transfer of Wealth in History

"Admit it, mes amis, the rugged individualism and cutthroat capitalism that made America the land of unlimited opportunity has been shrink-wrapped by half a dozen short sellers in Greenwich, Conn., and FedExed to Washington, D.C., to be spoon-fed back to life by Fed Chairman Ben Bernanke and Treasury Secretary Hank Paulson. We’re now no different from any of those Western European semi-socialist welfare states that we love to deride."– Bill Saporito, "How We Became the United States of France," Time (September 21, 2008)

On October 15, the Presidential candidates had their last debate before the election. They talked of the baleful state of the economy and the stock market; but omitted from the discussion was what actually caused the credit freeze, and whether the banks should be nationalized as Treasury Secretary Hank Paulson is now proceeding to do. The omission was probably excusable, since the financial landscape has been changing so fast that it is hard to keep up. A year ago, the Dow Jones Industrial Average broke through 14,000 to make a new all-time high. Anyone predicting then that a year later the Dow would drop nearly by half and the Treasury would move to nationalize the banks would have been regarded with amused disbelief. But that is where we are today.1

Congress hastily voted to approve Treasury Secretary Hank Paulson’s $700 billion bank bailout plan on October 3, 2008, after a tumultuous week in which the Dow fell dangerously near the critical 10,000 level. The market, however, was not assuaged. The Dow proceeded to break through not only 10,000 but then 9,000 and 8,000, closing at 8,451 on Friday, October 10. The week was called the worst in U.S. stock market history.

On Monday, October 13, the market staged a comeback the likes of which had not been seen since 1933, rising a full 11% in one day. This happened after the government announced a plan to buy equity interests in key banks, partially nationalizing them; and the Federal Reserve led a push to flood the global financial system with dollars.

The reversal was dramatic but short-lived. On October 15, the day of the Presidential debate, the Dow dropped 733 points, crash landing at 8,578. The reversal is looking more like a massive pump and dump scheme – artificially inflating the market so insiders can get out – than a true economic rescue. The real problem is not in the much-discussed subprime market but is in the credit market, which has dried up. The banking scheme itself has failed. As was learned by painful experience during the Great Depression, the economy cannot be rescued by simply propping up failed banks. The banking system itself needs to be overhauled.
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Liquidating the Empire

So Treasury Secretary Andrew Mellon advised Herbert Hoover in the Great Crash of '29.

Hoover did. And the nation liquidated him – and the Republicans.

In the Crash of 2008, 40 percent of stock value has vanished, almost $9 trillion. Some $5 trillion in real estate value has disappeared. A recession looms with sweeping layoffs, unemployment compensation surging, and social welfare benefits soaring.

America's first trillion-dollar deficit is at hand.

In fiscal year 2008 the deficit was $438 billion.

With tax revenue sinking, we will add to this year's deficit the $200 to $300 billion needed to wipe the rotten paper off the books of Fannie and Freddie, the $700 billion (plus the $100 billion in add-ons and pork) for the Wall Street bailout, the $85 billion to bail out AIG, and $37 billion more now needed, the $25 billion for GM, Chrysler, and Ford, and the hundreds of billions Hank Paulson will need to buy corporate paper and bail out banks to stop the panic.

As Americans save nothing, where are the Feds going to get the money? Is the Fed going to print it and destroy the dollar and credit rating of the United States? Because the nations whose vaults are full of dollars and U.S. debt – China, Japan, Saudi Arabia, the Gulf Arabs – are reluctant to lend us more. Sovereign wealth funds that plunged billions into U.S. banks have already been burned.

Uncle Sam's Visa card is about to be stamped "Canceled."

The budget is going to have to go under the knife. But what gets cut?
WAR ON YOU