Crazyman’s Economics

The Book Wall Street Doesn’t Want You To Read

T.E. Scott on WISH-TV Indianapolis

August 26th, 2008 · No Comments

→ No CommentsTags: WISH-TV · crazymans economics · gambling

How was YOUR summer?

August 25th, 2008 · No Comments

Photobucket

For oil companies, speculators and Congress, it was record-breaking!

Angry yet?

→ No CommentsTags: Oil companies · crazymans economics · fat cats · nymex · oil prices · oil speculation

Ah, the naive’ enthusiasm of youth…

August 24th, 2008 · 2 Comments

We got a mention about our book and site today from an 18-year old blogger named Dillon Godley on his blog site. Dillon bills himself as an enthusiastic fighter for the right, but is seriously misguided when it comes to Crazyman’s Economics and our mission.

We have taken a purposely non-partisan approach to our book and our efforts, because the greed of Wall Street affects EVERYONE, regardless of political affiliation. We want Congress to force Wall Street to be accountable to investors.

But Mr. Godley mistakes our passion for Wall Street reform for as an unequivocal devotion to Joe Biden. According to Godley:

“(Biden’s) preternatural disposition to Robin Hooding taxpayers and corporations (which involves going after the “fat cats” like T.E. Scott “educates” us through his asinine Marxist toilet paper) makes my skin crawl, as well as that of others who value liberty, life, and property.”

Why does it make Godley’s skin crawl? I have no idea. Why does Godley consider our site (and presumably our book) “asinine Marxist toilet paper?” I have no idea. Why does Godley think he has the collective insight as an 18-year old of everyone who, according to him, “value liberty, life and property?” Again, I have no idea. The quote above is the only mention of T.E. and the book. No explaination of why he believes this. 

I have read through Godley’s blog, and he certainly is passionate and considers himself a “free-market conservative libertarian.”  However, like a lot of 18-year old pseudo-intellectuals, why use a simple word when a complex word makes you look smarter. Take this passage:

“…currency mismanagement can undermine economic growth and make capital growth possibilities more constricted, especially under superfluous new regulations concomitant with the current fiat currency stupidity. Stable currencies are paramount to economic growth; without stable units of account, one cannot effectively tabulate the magnitude of factors upon the economy as well as the degree of performance currently undergone.”

Well written, lots of impressive words, and the ladies will certainly be impressed when he breaks out that verbiage at frat parties in college. But as he’ll learn, he uses a lot of unnecessary words to not say much.

“Marxist toilet paper” is a nice dig, but has no meaning without why he believes that. He connects us to Biden, though the nice letter we have from Congressman Ron Paul about our book may surprise him. Republican Congressman Dan Burton said nice things about our efforts to address speculation in the crude oil commodities market. Are the distinguished Congressmen “Marxists” as well?

Mr. Godley, T.E. Scott worked as a blue-collar laborer for 32 years; you’ve been alive for 18. After that, T.E. Scott started and owned a company for 24 years before he retired, that in 2007 grossed $45 million and employs 150 people. That’s six years longer than you’ve been alive. He has 3 times more business experience than you have life experience. Keep that in mind.  

We believe in capitalism and the encouragement of private businesses like Scott Pet Products. But what happens when they go public and they use the “free capital” to develop an unfair advantage to bully private companies? These companies in many cases don’t run more efficiently than private companies, or run the companies with the best interests of minority shareholders or employees in mind.

We’re not Marxists for insisting on corporate accountability when CEO’s run companies into the ground and leave with multi-million dollar “golden parachutes.” We’re not Marxists when we oppose the Federal Reserve bailing out not only Fannie Mae and Freddie Mac, but private Wall Street firms that mismanaged our investments with no accountability or culpability. We’re not Marxists when we want people to keep their money and invest in their local communities instead of handing it to Wall Street with their influence over Congress and the media.

Mr. Godley, you’re obviously a bright kid, and I prefer your passion for doing what you believe is right as opposed to the vapid “The Hills/Real World” idiots we’re presented as representing the youth of America. I would suggest you read the book and understand what we’re trying to achieve, and I would be surprised if you end up agreeing with us.

As for Obama/Biden, if they support real Wall Street reform, we’ll support them. If McCain, Barr, Baldwin, Nader, McKinney or General Zod provides a real agenda of campaign reform, we’ll support them. Our mission is to protect the people from Wall Street. Does that make us Marxist? No, it makes us Americans. 

→ 2 CommentsTags: dillon godley · free-market · joe biden · john mccain · libertarian · marxist · ralph nader · ron paul

A personal account of falling victim to Wall Street’s scam

August 22nd, 2008 · 1 Comment

I noticed I was receiving some interesting comments on our YouTube site from a poster who appeared to understand how the markets are a giant pyramid scheme. I e-mailed him directly and asked him to tell me his story. The rest below is exactly as he sent it, and he was gracious enough to give me permission to reprint it.
So, below is Dave’s story. He studied the markets, did his research, did everything right, and still lost lots of money. Those who say the key to the markets are education and research miss out on the key point: It’s still gambling and it’s still rigged. Some may be LUCKY enough to make money, but many, many more lose. You can’t beat the system. If you can, publish it and make a kazillion dollars.
“Well, my name is Dave Samson. I began involvement in the stock market in 1999. At first I was buying all kinds of different stocks that were being touted in I-net websites. The vast majority of the time I ended up losing money, sometimes LOTS of money. Eventually, if you hit someone over the head often enough, you quit playing. Which is what I decided to do…but only for a while.

“My problem was that I kept thinking that it was something wrong I was doing in my investment decisions. Eventually, I stumbled upon a Yahoo message board of a company I maintained a small number of shares in. I was losing on that stock too, but I happened to read more, much much more about this particular company (ticker ALU, now bankrupt). I began to learn about PE ratios and other fundamentals that I was not aware of. One poster had the most to say about ALU, and I became more confident about buying larger amounts of shares as the stock declined. Eventually, I owned about 20,000 shares.

“After I did my largest purchases, I called the company and spoke to a PR firm hired by said company. It dawned upon me (finally) that it really didn’t make sense why stocks went up or down on a daily basis–even after earnings reports or “news” of some sort, there was never any consistancy about any particular stock going up or down (I noticed that some went up after supposedly bad earnings, while others went down after good earnings). I told the PR rep lady that the entire thing seemed like a pyramid scheme. I said it tongue in cheek because I really did not want to believe that it was in fact such a scheme (especially considering my large position I know held in ALU). Her response? In a sort of sly but honest tone of voice she told me, “That’s riiiight…” So I asked her, “So how DOES a stock go up or down?” She replied, “Well, do you have friends and family? Tell them to get in…” At that point I was dumb struck…and very very scared since most of my money was now tied up in nothing but a caniving pyramid scheme game! In the end, I got lucky, and actually got out with a profit that time.

“But foolishly, I continued to participate in the scheme. Eventually, I lost more money. However, around 2001 I read on various stock chat message boards about the concept of short selling. I then realized just how bogus the entire stock market was. Because when I studied the fundamentals of most companies, I realized that there were many totally worthless and other grossly overvalued companies trading at insane market caps. I then began short selling, and quit buying altogether. I had some success, some failures. But as time went by, I realized that the one’s I covered at a loss had I been patient I would have ended up with profits as well. So, I then decided to go more heavily into shorting.

“After a while, I was up something like $35,000 at one point. I was then very confident. Though I didn’t always win, I was successful most of the time. So then, I decided to short more heavily, the most obviously blatantly overvalued (and worthless) companies trading. Problem was, around that time, almost every other small time stock trader was learning the same things I already knew, and they too started shorting everything in sight. It was at that point that the shorting game blew up. The Institutions who run the BID-ASK show then practically cornered all their shares between themselves, and (I believe) collusively decided to bid all their own junk back up. I ended up giving back my gains, and losing an additional $35k or so. I had had enough. I saw it was a controlled and rigged scam against the retail small time traders versus the Institutions who have every weapon at their disposal. Indeed, while all the little small time do it yourself type stock traders were shorting, the Fed mysteriously continued to lower interest rates to almost nothing in the face of economic data that clearly showed that no such action was warranted.

“But not one to give up hope, I stumbled upon other financial chat boards that presented a number of companies paying fat dividends, a very enticing concept considering where interest rates were at the time. So, I began buying some of these stocks in a small way. I was buying mostly MREITS, bond funds, municipal bond funds, and oil transporting companies. In the beginning I was getting big dividends and often time the stock prices were going higher. I was making my money back at last. As I gained more confidence, once again I went overboard and bought more heavily, especially in one MREIT, ticker NFI. I was up about $30k again and felt good and confident; my retirement was going to be great because of all of those dividends. Or so I assumed.

“Eventually, the prices started to dip. But I felt so confident, that I just kept buying those dips. I wasn’t about to be “shaken out.” To make a long story short, I bought so many dips that I ended up losing about $150,000 in very short order. The Fed this time mysteriously began raising rates to levels way beyond I think anyone’s expectations. The excuse that it was the Fed’s fault for causing the real estate debacle was now in place. In the mean time, the insiders of these companies I lost so much of my money in were still taking their fat salaries and cashing out their stock options.

“I then remembered what the PR rep lady told me years ago, about the stock market really being a pyramid scheme. I should have not only listened, but acted by staying out of the scam altogether. It was my fault, but I accuse the entire system of fraudulently hyping itself as something more than an ongoing institutionally controlled BID-ASK inspyramid scheme, where only the insiders, fund manager/brokers, and perhaps a wealthy few of the latter’s clients who get the inside scoop end up making a real cash profit in the “long term.” Sure, you can win. Just like I did. But when you win some, you get confident. You think everything is on the up and up. So of course you don’t quit while you are ahead. Of course you play more and more, until you end up losing not only your gains, but your principle as well. I may have been a fool, but the system is, as you say, an incredibly ingenious con created by people with tremendous skills and wisdom and conning you into their game. So am I the only one to blame for my losses? No, the con men who set up the system should not be permitted to continue their systematic psychological financial control game that they call “The stock/bond/commodities markets.” It’s all just a pre-planned extremely clever manipulation scheme invented by the wealthy few to try to lure in the majority of non-wealthy into their game with their ultimate goal of taking outsider’s monies. And then after their game is eventually over, which could take decades, they will have their excuses ready so as to pin the blame on something other than themselves to try to pacify the angry masses who end up losing.”

Do you have a similar story you want to share? The more people that realize that they are part of the majority that are taken advantage of by Wall Street, the greater the chances of actually doing something about it.

→ 1 CommentTags: 401k · YouTube · crazymans economics · gambling · stock market · wall street

Welcome Thom Hartmann fans…

August 20th, 2008 · No Comments

Welcome to Crazyman’s Economics. This site is maintained by Stephen Edds on behalf of T.E. Scott. Please take time to brouse the site and check out the blogs, podcasts or prior interviews and hopefully support our cause of forcing accountability on Wall Street by purchasing our book. On the right is a listing of several ways you can purchase the book.

Below are some key links to Crazyman’s Economics’ various properties on the web. Please include us in your web activities and let us know how we can help get the word out about Crazyman’s Economics.

Main site: http://crazymanseconomics.com
To purchase the book on Amazon.com: http://www.amazon.com/Crazymans-Economics-T-E-Scott/dp/1598586408/ref=sr_1_1?ie=UTF8&s=books&qid=1212514865&sr=8-1

Crazyman’s Economics’ MySpace: http://myspace.com/crazymanseconomics
Crazyman’s Economics’ Facebook: http://www.facebook.com/profile.php?id=1326785291
Crazyman’s Economics’ YouTube: http://www.youtube.com/crazymaneconomics
Twitter: http://twitter.com/crazyman_econom
Podcasts of prior media interviews: http://www.bigcontact.com/crazymanseconomics

Thanks!

T.E. Scott and Stephen Edds

→ No CommentsTags: 401k · air america · crazymans economics · patrick byrne · thom hartmann

Government Policy Rewards CEO Lying, So We Get More of It

August 20th, 2008 · 1 Comment

I’m a sports fan and a NFL fan, (T.E., not so much) and I enjoy reading Gregg Easterbrook’s Tuesday Morning Quarterback column on ESPN.com. Easterbrook brings insight and research to the NFL that is not normally offered by the “jock-ocracy.” However, he also finds ways to incorporate science and politics into the mix as well.

This week, during his AFC preview (in which he correctly picks my beloved Colts to return to the Super Bowl,) he takes time to give an honest and infuriating account of Fannie Mae and Freddie Mac.

“Increasingly Fannie Mae and Freddie Mac are looking like little more than devices to transfer money from the pockets of taxpayers to the pockets of Fannie and Freddie senior executives. Former Fannie Mae boss Franklin Raines paid himself about $50 million for years in which, we now know, the company lied about its earnings in order to inflate executive bonuses, while management was playing fast and loose with other people’s money. Beginning in 2007, Fannie Mae and Freddie Mac went off the cliff, their stocks plummeting to less than 20 percent of their previous values, and taxpayers were put on the hook as guarantors of the firms’ bad management decisions. The Congressional Budget Office estimates the Mae-Mac debacle will cost taxpayers $100 billion or more. Yet Freddie Mac CEO Richard Syron was paid $14.5 million for 2007, including a $2.2 million “performance bonus.” Syron has taken home $38 million total from Freddie in the past five years. Fannie Mae CEO Daniel Mudd got $14.2 million for 2007, plus a substantial prepaid life insurance policy and other perks including “financial counseling, an executive health program and dining services,” the Washington Post reported.”

As we talk about in “Crazyman’s Economics,” CEO’s with excessive salaries and stock options does not guarantee that they are motivated to do what is best for the corporation, the employees and the stockholders. Easterbrook points this out as well:

 

“Executives receiving very high pay justify their deals on two grounds: that they are risk-takers in high-pressure situations, and that they have valuable expertise. Now we know that no one at the top of Fannie Mae and Freddie Mac took any personal risks — everything was federally guaranteed, and all mistakes billed to the taxpayer. Here, the New York Times reports that Syron was repeatedly warned in 2004 that the organization was taking on bad loans, and did nothing. Syron justified his inaction by complaining to the Times that he was under pressure from various Fannie constituents. That’s why he was paid so much, to take the heat! Yet he took no heat, rather, devoted himself to avoiding responsibility. If things go well, executives are lavished with money and praised as risk-takers. If things go poorly, executives are lavished with money and blame others.

“And just what incredible expertise do Syron and Mudd possess? They made billion-dollar blunder after billion-dollar blunder; they failed to realize things as basic as buyers borrowing without documentation of income may not be able to repay loans. People chosen at random from the phone book could hardly have performed worse. Yet the federal bail-out legislation just signed by George W. Bush does not require them to give back any of their ill-gotten gains.

“This is the core lesson of CEO overpay scandals: The corrupt or incompetent executive always keeps the money. He may be caught and embarrassed by bad press, but he keeps the money while someone else — shareholders, taxpayers, workers — is punished. Raines recently settled a federal legal complaint by agreeing to return about $3 million of his $50 million, but kept the rest; his employment contract was worded such that even if he was malfeasant, whatever he took from company coffers was his. Hilariously, federal prosecutors claimed victory because Raines “surrendered” to the government a large block of stock options — options now worthless, owing to the Fannie Mae decline Raines helped set in motion by lying about Fannie numbers. Until Congress enacts a law that allows money taken by corrupt or incompetent executives to be recovered, the lying will continue. Lying by CEOs is what society rewards!”

People falsely believe because such high-profile people as Enron’s Ken Lay serve prison time, that this is justice being served. But the truth is that Ken Lay was the exception, not the rule. Time and time again, we see CEO’s with golden parachutes leave a company in ruins and making a fortune off our trust. “Crazyman’s Economics” talks about how CEO’s, Congress, the MSM and Wall Street all have the same interests that don’t match those of the public. Easterbrook takes it one step farther:

“Why does Congress tolerate the swindle aspect of Fannie and Freddie? For the standard reason: Congress is on the take. Here, Lisa Lerer of Politico reports that in the past decade, Fannie and Freddie spent almost $200 million on campaign donations to Congress and on lobbying members of Congress, some of the lobbying money going to former members. This year, for instance, Fannie gave the legal max of $10,000 to Speaker of the House Nancy Pelosi and to Republican House Whip Roy Blunt, neither of whom face meaningful re-election challenge. As for costly lobbying, the implied deal is: Don’t rock the boat while in office and someday you too will be a former member getting easy money to lobby former colleagues. During Senate debate on the Mae-Mac bailout, Majority Leader Harry Reid refused to permit a vote on an amendment that would have barred Fannie and Freddie from giving money to members of Congress. Reid did not merely oppose the measure, he refused to allow the Senate to vote on it — so that members of Congress could remain on the take, without having to go on record about the matter.

“Now that taxpayers are covering Fannie and Freddie’s cooked books, the $200 million diverted to Congress in effect came from average Americans, forcibly removed from their pockets — and thanks to Senator Reid, more will be forcibly taken from your pocket and placed into the accounts of senators and representatives. This is what TMQ calls a Sliver Strategy. The Sliver Strategy is a means to disguise embezzlement. Congress looked the other way while Fannie and Freddie approved vast amounts of bad debt, in order to shave off a sliver for itself — in this case, the $200 million in lobbying and donations. Had Congress simply awarded itself $200 million, editorialists would have been outraged. Because the money was slipped in to a larger fiasco of much greater sums wasted, Congress got away with it.”

I am not in favor of socialism or against capitalism, but there is a better way to promote responsible and accountable corporate leadership.

P.S. Please tune in to Thom Hartmann’s show today at 2:00 PM Eastern time to hear T.E. Scott talk about “Crazyman’s Economics.”

→ 1 CommentTags: Gregg Easterbrook · Richard Syron · congress · crazymans economics · fannie mae · franklin raines · freddie mac · harry reid · lisa lerer · nancy pelosi · new york times · politico · tuesday morning quarterback

Are you “mad as hell” at Wall Street robbing us blind?

August 11th, 2008 · 2 Comments

Thirty plus years ago, a character named Howard Beale made a permanent mark on American cinema in the movie “Network.” What Beale promoted and prophesized was so relevant and ahead of it’s time, that as we sit here awash in the mind-numbing excess of Reality TV and the media/corporations/wall street/government sharing in one big capitalistic orgy, one wonders when someone is going to be “mad as hell, and not going to take it anymore.”

This scene from Network is one of the most powerful and honest explanations of how we have evolved from a democracy to a corporation. Ned Beatty as Arthur Jensen delivers a powerful and evangelical speech that is as chilling as it is truthful. And Jensen also understands the power of television in shaping our views.

Is someone else going to be mad as hell? As part of our overall mission to take on Wall Street, we’ll be releasing a video soon pointing out the similarities to our real life situation today with the chilling speech that Arthur Jensen gives on the future in 1976, a shocking assertion made at the time. Our own video has some prescient warnings to share.

If you share our anger at Wall Street getting away with theft for all these years, please help us get the word out. Like T.E. Scott, you may be called a “crazyman” by those who can’t comprehend that one of the foundations of American business is actually a giant rigged casino.

Politicians won’t act until they feel the pressure of the public. The public won’t act until they know the truth about Wall Street. You, me, WE need to move this mission forward. This goes beyond just selling a book, this is us taking on a seemingly impossible task because if we don’t who will?

→ 2 CommentsTags: 401k · arthur jensen · crazyman · crazymans economics · howard beale · network · stock market · wall street

Losing in the stock market costs more than just money…

August 9th, 2008 · No Comments

One person who trusted Wall Street and lost everything:

 

Do you have a similar story, or know someone who does? Fill out the form on the left and let us know. It’s only when we look around and begin to notice that there are millions who are in the same boat as Jim can we put pressure on Congress to take action.

→ No CommentsTags: 401k · crazymans economics · scam artists · stock market · wall street

Wall Street issues report, concludes “Oops, our bad!”

August 7th, 2008 · No Comments

According to the New York Times, a group of Wall Street executives have released a report detailing what went wrong and steps they can do to prevent it from hapening again.

OK, quit laughing.

According to the article:

Wall Street failed to anticipate how wide-reaching problems with mortgage bonds would spread into seemingly distant corners of the financial markets, the report said. Awash in easy money, banks doled out credit without sufficiently charging for the risk. Wall Street also created complex structures that masked connections between asset classes as well as compensation incentives that pushed traders to take risky steps for short-term gain. The industry’s failings have now translated into pain for the broader economy, the report said.

Ya’ think?

The article goes on to make what I see as a claim so based in a combination of arrogance and cluelessness as to stagger the mind.

In a cover letter to Treasury Secretary Henry M. Paulson Jr., the group attributed some of the crisis to human psychology.

“The root cause of financial market excesses on both the upside and the downside of the cycle is collective human behavior — unbridled optimism on the upside — and fear — bordering on panic — on the downside,” the letter said. The panic underlying the collapse of the investment bank Bear Stearns was clearly on the minds of executives as they worked on the report.

So, it’s OUR fault that we buy into the marketing that Wall Street sells us that we can be millionaires by investing the “right” way? It’s OUR fault that we panic when we see our retirement nest egg shrinking away and want to do something to stop it? It’s OUR fault that Wall Street’s unbridled greed grew even larger when they discovered the loophole that made predatory lending legal, thus bringing in billions more in fees and commissions? It’s OUR fault that regulations are not strong enough to prevent Wall Street from taking advantage of the general population that is just trying to have a secure future and own their own home?

It reminds me of the scene in the movie “Wolf” where Jack Nicholson has Michelle Pfeiffer lock him in a cage so when he turns into a wearwolf, he doesn’t hurt anyone. “Please regulators, lock us in a cage before we convince more people to trust us with their money!”

We make the point in “Crazyman’s Economics” that one of the reasons Wall Street has been able to con people out of their money time-and-time again is that they convince us that when we lose money, it’s OUR fault because we didn’t make the right decision. The quote above says the same thing.

The report suggests that the industry create a way to close-out trades, should another major financial player face trouble. It also said the markets may be more “accident prone” because of new ways of doing business like Wall Street’s loan packaging, in which banks that originate loans to consumers then repackage them to sell to investors. And it listed the ability to make bets against credit — a trade that made some investors rich — as a possible cause of market instability.

I’ll add another old and out-dated pop-culture reference when I say this reminds me of the old Steve Martin bit where he says the use of the words “I forgot” is a great way to avoid responsibility: “I’m sorry, I forgot that robbing a bank was a crime.”

The report should have said: “We’re sorry, we forgot that issuing billions of dollars with no way to repay them was wrong.”

Mr. Corrigan said he knows the report presents a challenge, but that Wall Street firms need to adopt more of a spirit of “financial statesmanship.”

If ever two terms don’t belong together, it’s “Wall Street” and “Financial Statesmanship.” It’s like linking “Professor” and “Paris Hilton.” Never happen. Ever.

I don’t know what this so-called “report” was supposed to achieve, except that certain media types (*cough* Jim Cramer *cough*) will hail this as a new beginning and a sign that Wall Street is concerned with doing the right thing.

Don’t believe it. Not even for a second.

Please buy our book, join our cause, and let’s make sure Wall Street doesn’t continue to get away with this!

 

→ No CommentsTags: Jim cramer · crazymans economics · federal reserve · goldman sachs · henry paulson · jp morgan · merrill lynch · new york times · stock market · stock market reform · wall street

Bailing out the Bad Guys, and Your Congressional Rep Helped!

August 5th, 2008 · 2 Comments

William Greider writes in The Nation about “America’s Economics Free Fall” and documents and details how Washington worked in an incredible show of bi-partisian effort to completely cave in to the interests of Wall Street and excuse and reward the incompetency of failing institutions and, even worse, proposed plans that will continue to encourage this reckless behavior by Wall Street at the expense of all Americans.Your Congressional Representative should be forced to explain why they keep bailing out these financial institutions without consequence! The info to contact them is on the left column of the site.

In the article, Greider writes:

 

Washington can act with breathtaking urgency when the right people want something done. In this case, the people are Wall Street’s titans, who are scared witless at the prospect of their historic implosion. Congress quickly agreed to enact a gargantuan bailout, with more to come, to calm the anxieties and halt the deflation of Wall Street giants. Put aside partisan bickering, no time for hearings, no need to think through the deeper implications. We haven’t seen “bipartisan cooperation” like this since Washington decided to invade Iraq.

The danger of bi-partisianship when it comes to Wall Street is that, as we argue in “Crazyman’s Economics” (http://www.crazymanseconomics.com)  it ceases to become red or blue, it’s all about GREEN. Democrats are just as much to blame as Republicans on this issue, because anyone who takes on Wall Street is seen by both sides as “anti-American” or a “socialist.”

Greider continues:

 

In their haste to do anything the financial guys seem to want, Congress and the lame-duck President are, I fear, sowing far more profound troubles for the country. First, while throwing our money at Wall Street, government is neglecting the grave risk of a deeper catastrophe for the real economy of producers and consumers. Second, Washington’s selective generosity for influential financial losers is deforming democracy and opening the path to an awesomely powerful corporate state. Third, the rescue has not succeeded, not yet. Banking faces huge losses ahead, and informed insiders assume a far larger federal bailout will be needed — after the election. No one wants to upset voters by talking about it now. The next President, once in office, can break the bad news. It’s not only about the money — with debate silenced, a dangerous line has been crossed. Hundreds of billions in open-ended relief has been delivered to the largest and most powerful mega-banks and investment firms, while government offers only weak gestures of sympathy for struggling producers, workers and consumers.

Greider also does what few, if any, in the MSM appears willing to do…challenge the role of the Federal Reserve. A quote I’ve become more fond of the more I see is “The Fed is no more Federal than Fed Ex.”

 

The Federal Reserve’s dereliction of duty is central to the financial failures. It betrayed the purpose for which the central bank was first created, in 1913, abandoning the sense of balance the Fed had long pursued and that Congress requires. Most politicians, not to mention the press, are too intimidated to question the Fed’s daunting power, but their ignorance is about to compound the problem. Instead of demanding answers, the political system is about to expand the Fed’s governing powers — despite its failure to protect us. Treasury Secretary Paulson proposed and Democratic leaders have agreed to make the insulated Fed the “supercop” that oversees not only commercial banks and banking conglomerates but also the largest investment houses or anyone else big enough to destabilize the system. This “reform” would definitely reassure club members who are already too cozy with the central bankers. Everyone else would be left deeper in the dark.

So, a financial fire is blazing out of control and Congress’ solution is to hand an arsonist the keys to a fuel tanker and tell him he’s in charge of the fire.

 

The political system, once again, is rewarding failure. The Fed is an unreliable watchdog, ideologically biased and compromised by its conflicting obligations. Is it supposed to discipline the big money players or keep them afloat? Putting the secretive central bank in charge, with its unlimited powers to prop up troubled firms, would further eviscerate democracy, not to mention economic justice.If Congress enacts this concept early next year, the privileged group of protected financial interests is sure to grow larger, because other nonfinancial firms could devise ways to reconfigure themselves so they too would qualify for club membership.

So, companies may start purchasing financial institutions to become part of the “protected few” while further damaging the financial structure of the US.Among the recommendations Greider recommends is this:

 

Begin the hard task of re-creating a regulated financial system Americans can trust, one that recognizes its obligations to the broad national interest. This requires regulatory reforms to cover moneypots like private-equity funds and to clear away the blatant conflicts of interest and double-dealing on Wall Street, and also to give responsible shareholders, workers and other interests a greater voice in corporate management and greater protection against rip-offs of personal savings.

We argue in “Crazyman’s Economics” that if we can educate the populace to the point that the losers in the market quit losing, then the correction can happen naturally. However, if Congress keeps rewarding poor performance by encouraging more of it, while burying it’s head in the sand about the converns of the people, then we’ve just begun to feel the pain.

Our Congressmen are home, make sure you ask them why they’re supporting Wall Street while every Main Street in America suffers.

“[Crazyman's Economics is] not a typical investment book, to be sure. Having read through it…I have to say that it is not crazy at all, but actually applies good, solid horse sense to the financial markets.” Gary Weiss - Fmr. Business Week senior writer and the author of the acclaimed books, “Wall Street Versus America” and “Born to Steal”  

→ 2 CommentsTags: bailout · congress · federal reserve · the nation · wall street · william greider