Fucking Raping You to Death: The Real Fun Begins

[Update added at the end.]

Part I, sisters and brothers.

Now, we get to serious payback time for the ruling class. You don't know what real pain is yet. It's almost certain we'll all find out very, very soon. Michael Hudson:

The Obama bank bailout is arranged much like an IMF loan to support the exchange rate of foreign currency, but with the Treasury supporting financial asset prices for U.S. banks and other financial institutions. Instead of banks and oligarchs abandoning the dollar, the aim is to enable them to dump their bad mortgages and CDOs and get domestic Treasury bonds. Private-sector debt will be moved onto the U.S. Government balance sheet, where “taxpayers” will bear losses – mainly labor not Wall Street, inasmuch as the financial sector has been freed of income-tax liability by the “small print” in last fall’s Paulson-Bush bailout package. But at least the U.S. Government is handling the situation entirely in domestic dollars.

As in Third World austerity programs, the effect of keeping the debts in place at the “real” economy’s expense will be to shrink the domestic U.S. market – while providing opportunities for hedge funds to pick up depreciated assets cheaply as the federal government, states and cities sell them off. This is called letting the banks “earn their way out of debt.” It’s strangling the “real” economy, because not a dollar of the government’s response has been devoted to reducing the overall debt volume.

Take the much-vaunted $50 billion program designed to renegotiate mortgages downward for “troubled homeowners.” Upon closer examination it turns out that the real beneficiaries are the giant leading banks such as Citibank and Bank of America that have made the bad loans. The Treasury will take on the bad debt that banks are stuck with, and will permit mortgagees to renegotiate their monthly payment down to 38 per cent of their income. But rather than the banks taking the loss as they should do for over-lending, the Treasury itself will make up the difference – and pay it to the banks so that they will be able to get what they hoped to get. The hapless mortgage-burdened family stuck in their negative-equity home turns out to be merely a passive vehicle for the Treasury to pass debt relief on to the commercial banks.

Few news stories have made this clear, but the Financial Times spelled the details buried in small print. It added that the Treasury has not yet decided whether to write down the debt principal for the estimated 15 million families with negative equity (and perhaps 30 million by this time next year as property prices continue to plunge). No doubt a similar deal will be made: For every $100,000 of write-down in debt owed by over-mortgaged homeowners, the bank will receive $100,000 from the Treasury. Government debt will rise by $100,000, and the process will continue until the Treasury has transferred $50,000,000 to the banks that made the reckless loans.

There is enough for just 500,000 of these renegotiations of $100,000 each. It may seem like a big amount, but it’s only about 1/30th of the properties underwater. Hardly enough to make much of a dent, but the principle has been put in place for many further bailouts. It will take almost an infinity of them, as long as the Treasury tries to support the fiction that “the miracle of compound interest” can be sustained for long. The economy may be dead by the time saner economic understanding penetrates the public consciousness.

In the mean time, bad private-sector debt will be shifted onto the government’s balance sheet. Interest and amortization currently owed to the banks will be replaced by obligations to the U.S. Treasury. Taxes will be levied to make up the bad debts with which the government is stuck. The “real” economy will pay Wall Street – and will be paying for decades!

Calling the $12 trillion giveaway to bankers a “subprime crisis” makes it appear that bleeding-heart liberals got Fannie Mae and Freddie Mac into trouble by insisting that these public-private institutions make irresponsible loans to the poor. The party line is, “Blame the victim.” But we know this is false. The bulk of bad loans are concentrated in the largest banks. It was Countrywide and other banksters that led the irresponsible lending and brought heavy-handed pressure on Fannie Mae. Most of the nation’s smaller, local banks didn’t make such reckless loans. The big mortgage shops didn’t care about loan quality, because they were run by salesmen. The Treasury is paying off the gamblers and billionaires by supporting the value of bank loans, investments and derivative gambles, leaving the Treasury in debt.

Mike Whitney:

In truth, Geithner did us all a big favor on Tuesday by exposing himself as a stooge of the banking industry. Now everyone can see that the banks are working the deal from the inside. Geithner has assembled a phalanx of Wall Street flim-flam men to fill out the roster at Treasury. His chief-of-staff is lobbyist from Goldman Sachs. The new deputy secretary of state is a former CEO of Citigroup. Another CFO from Citigroup is now assistant to the president, and deputy national security adviser for International Economic Affairs. And one of his deputies also came from Citigroup. One new member of the president's Economic Recovery Advisory Board comes from UBS, which is currently being investigated for helping rich clients evade taxes. The Obama White House is a beehive of big money guys and Wall Street speculators.

The banking lobby has already set the agenda. All the hooplah about "financial rescue" is just a smokescreen to hide the fact that the same scofflaws who ripped off investors for zillions of dollars are back for their next big sting; a quick vacuuming of the public till to save themselves from bankruptcy. It's a joke. Obama floated into office on a wave of Wall Street campaign contributions and now it's payback time. Prepare to get fleeced. Geithner is fine-tuning a "public-private" partnership for his buddies so they can keep their fiefdom intact while shifting trillions of dollars of toxic assets onto the people's balance sheet. They've affixed themselves to Treasury like scabs on a leper. Geithner is "their guy", a Trojan Horse for the banking oligarchs. He's already admitted that his main goal is to, "keep the banks in private hands". That says it all, doesn't it?

Of course, the administration is not alone in its support for the banks and Wall Street. Congress has its fair share of bank-loyalists, too.

...

This is how the financial system really works--something which seems to be completely beyond the grasp of congress. A shadow banking system has grown up around the process of securitization, which packages pools of debt (mortgages, commercial real estate, student loans, car loans and credit card debt) and sells them as securities to foreign banks, hedge funds, insurance companies etc. Wall Street has muscled into an area of finance that used to be the domain of the commercial banks. According to Treasury Secretary Timothy Geithner, "40 percent of consumer lending" depends on this shadow system for credit. That's why he is determined to resurrect securitization whatever the cost. The Fed has already expanded its balance sheet to $2.2 trillion while providing loan guarantees for over $9.3 trillion dollars. The entire financial system is now backstopped by loans from the Fed without which the global financial system would collapse. The present Fed funding of financial markets forces us to rethink our outdated ideas of the "free market" which now exists only in theory.

A 40 per cent decline in consumer credit is more than sufficient to push the world into another Great Depression.

...

Geithner believes that the function of government is to serve the interests of the big banks not the public. The lip-service to democracy is just rhetorical claptrap. It's meaningless. The government's role is to facilitate the exploitation of its people to fatten the bottom line of the top-hat capitalists. ...

But don't think that the slippery Mr. Geithner doesn't have a solution for our present economic malaise. He does! He would like to see Congress appoint an Uber-regulator that has the authority to monitor market activity and decide whether individual players pose a threat to the overall system.

Sounds great. And to whom should these sweeping new powers be entrusted?

You guessed it; the Federal Reserve, the wealth-shifting, price-fixing, social-engineering scamsters who preside over the bankers cartel which just blew up the financial system. Is there any doubt where Geithner's loyalties really lie?

Needless to say, none of our leading commentators (or leading bloggers) will spell this out for you in the way Hudson and Whitney do. That's because all such "authorities" are propagandists for this corporatist system, or what Gabriel Kolko calls "political capitalism." They do very well for themselves in the existing system; obviously, it's in their interests to see it continue.

So who are you going to believe? The ignorant and/or lying voices of the system that's killing you (at this late date, you can place primary emphasis on the "lying" part of that description), or your own lying eyes?

Most Americans have never chosen to credit their own eyes, since that would require independence and courage unknown to them. So they willingly blind themselves and enthusiastically embrace what they regard as their own stupidity. "Oh, it's so complicated!," they whine. "We have to trust the experts!" (More on this particular issue soon. Added: and see the brief note in the Update.) I shouldn't judge such people too harshly. After all, this approach has worked so well in other areas:

Those people who have followed the foreign policy catastrophes of recent years are repeatedly struck by this phenomenon: all the "experts" who are supposedly so knowledgeable in this area -- that is, all the "experts" who led us into the catastrophes and who were grievously, bloodily, murderously wrong about every significant matter -- remain entrenched in the foreign policy establishment. Moreover, they are precisely the people to whom everyone turns for the "solution" to the disasters that engulf us, both now and the disasters likely to come. This is what it means to have a ruling class. As I have said, the ruling class rules. The ruling class exercises a lethal monopoly on the terms of public debate, just as it exercises a lethal monopoly on the uses of state power.

What you have seen over the last six months and more, and what you will see in the coming months and years, is the same phenomenon in the realm of economic policy. All of the solons who led us into this abyss of mounting debt, worthless securities, failing financial institutions, economic contraction and collapse, rising taxation, and all the rest, will now instruct us as to how we should "solve" the crisis that they have created. The crisis may be ameliorated to a degree, and the worst of the consequences may be postponed for a while. But whatever "solutions" are implemented, whatever reorganization and reregulation is imposed, it will all be done in accordance with the ruling class's desires and goals. It will all be to protect their own wealth and power to whatever extent is possible, and to expand their wealth and power still more, if that remains at all feasible.

Thus we slide further into the inferno. It will probably be a slow burn for all us "ordinary" folk. I mean, it's our money and our lives that provide the ruling class with their immense wealth, comfort and power. Don't want to kill the golden goose too soon and all that, not that millions of deaths matter to the ruling class much at all, should they be required for perceived short-term benefits. At this point, you can either drop out of the system as fully as possible, get the hell out of the country -- or lie back and try to enjoy it.

I suppose brutal, years- or decades-long rape isn't the worst thing that can happen. Anyway, we can keep telling ourselves that. And self-delusion is all too familiar to most of us.

UPDATE: Already, I have received a couple of emails delightedly pointing out my own alleged contradiction. "You criticize others for relying on experts, after you quote at length your own experts! Hahaha!"

I always make the mistake of thinking I can rely on the intelligence of my audience. My bad. (I can rely on it with regard to a couple of hundred people, but not much more than that. You think I sound arrogant and irritated? You bet your ass, as some upcoming posts will explain in more detail.) I had thought the context would make my point clear. In this particular context, I was referring to reliance on "experts" recognized and approved by the ruling class, and no others at all. Hudson and Whitney resoundingly fall into the category of "others." In their own terms, they condemn the ruling class in scathing and comprehensive terms. These are hardly the kind of experts to whom the ruling class will appeal for justification.

A further point, which I will be amplifying in the Tribalism series: I don't look to Hudson, Whitney and the other writers I quote or positively reference to find out what I myself think, or to discover what the "authorities" recommend that I should think (if I wish to be regarded as a "serious" person, among other things). I've arrived at my own perspective through years of painstaking reading and thought, more reading and more thought, and endlessly challenging and refining my own views. I quote Hudson and Whitney here because they agree with me (in the sense that my own analysis and theirs reach the same general conclusions), not the other way around.

Yes, arrogant, if you wish to describe it that way. I recommend you try it at the earliest opportunity. As I say, the Tribalism series will have much more on these issues.