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Brilliant article really,
in its simplicity.
Despite Obama's recent brave words, the US is lagging the world recognition
that because of systemic distortions in the financial system the banks are in
fact exercising a tax on the real economy that is impeding global recovery.
As recently noted in London's Financial
Times regarding the structural imbalances in the financial
system:
"...as long as they are not addressed, the banks will
make profits – or more accurately, extract rents – out of all
proportion to any contribution they make to the wider economy."
The US is going in absolutely the wrong direction, lessening competition and
strenghtening the grip of a financial oligarchy through its policy of
focusing relief efforts on a small group of Too Big To Fail Banks, at the
expense of the broad economy. Despite assurances to the contrary, this is the
policy being administered by Washington.
This institutionalization of distortion was easier to understand under the
Bush Administration with Treasury Secretary Hank Paulson guiding policy, and
the Clinton Administration under banking insider Robert Rubin. But why this
sort of response from the new reform government? The answer most likely is
centered on three men: Larry Summers, Tim Geithner, and Ben Bernanke. None of
the three has practical experience in business. All three are creatures of
the banking system, and are heavily indebted to the status quo.
The first practical step for Obama would be to dismiss Summers and Geithner,
and if he is wise, the person or persons who recommended them. He also should
encourage the Congress to investigate the bank bailouts in general, and tie
this to Bernanke's reappointment to the Chairmanship and the movement to
audit the Fed.
The most recent scandal regarding the collusion between the government and
the Fed to mask the backdoor bailouts to a few big banks via AIG should be
proof enough that the Fed has no intentions of acting honestly and openly,
and is far exceeding its mandates in its aggressive expanding its balance
sheet and the selective monetization of private debts.
There are disturbing indications that the US is using a few of its large
banks as elements of its policy to achieve certain objectives in the world
markets. Such collusion between the corporate and the government sectors is
the prelude to fascism.
We should keep in mind that financial crisis was indeed created during both
Democratic and Republican administrations, and that simply replacing the
Democrats with traditional opponents is unlikely to achieve genuine change.
Change is what is required. But while the foul stench of corruption hangs
over the political process in Washington, where Big Money readily buys
influence and control over legislation and regulation, there will be no
significant changes, and no economic recovery. Recovery will be in appearance
only.
Financial
Times
How the big banks rigged
the market
By Philip Stephens
18 January 2010
When Lloyd Blankfein met politicians in London a little while ago he brushed
aside warnings that investment banks faced higher taxes if they ignored the
rising public outcry about multibillion-dollar bonus pools. The Goldman chief
executive seemed to believe governments would not dare.
That misjudgment – a measure of the breathtaking hubris that, even
after all that has happened, continues to separate bankers from just about
everyone else – may explain Goldman’s response to the British
government’s decision to apply a 50 per cent tax to this year’s payouts
In the description of Whitehall insiders, Goldman executives reacted with
anger and aggression. The threat was that the bank would scale back its
business in London. For a moment it seemed Gordon Brown’s
administration might wobble. In the event, Goldman’s lobbying failed to
persuade it to soften the impact of the tax.
Britain, of course, is not alone. France has imposed its own bonus tax.
Barack Obama’s administration has just announced a levy to recover an
estimated $90bn (£55bn, €63bn) over 10 years. The centre-right
government in Sweden has gone further by introducing a permanent
“stability levy” to discourage excessive risk-taking.
It is a measure of how far the political debate has shifted against the
financial plutocrats that George Osborne, the Tory shadow chancellor, has
applauded the Swedish plan. If the Tories win the coming general election,
they would support a worldwide levy along similar lines. It is
“unacceptable”, Mr Osborne remarked the other day, for the banks
to be paying big bonuses rather than building resilience against future
crises.
So far, so encouraging. But the process cannot end here. Irritating as it may
be to Mr Blankfein, a one-off bonus tax is not going to change anything in
the medium to long term. Levies such as that in Sweden mark a recognition
that the profits and remuneration policies of the banks are more than a
fleeting problem. But forcing bankers to strengthen balance sheets with money
they would rather put in their own pockets addresses only part of the problem.
The next stage must be scrutiny of the structural distortions that allow
these institutions to rack up such huge profits. Broadly speaking, the
leading players in at least three areas of investment banking –
wholesale markets, underwriting and mergers and acquisitions – have
been operating natural oligopolies.
Their profits have been in significant part a reflection of the absence of
robust competition. There are different reasons for this in the different
areas of business – what economists call asymmetries in some and market
dominance in others. But as long as they are not addressed, the banks will
make profits – or more accurately, extract rents – out of all
proportion to any contribution they make to the wider economy.
Read the rest
of this article here.
Jesse
Please visit Jesse’s Café Américain
for refreshing news on the markets
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