Many of us who have been around for a while know that when Washington says $700 Billion, they really mean $1.4 to $2.1 Trillion. Over the weekend, King Henry (Hank Paulson) spoke on the networks about the need to shore up the financial system. He focused on the impact to the average American, not the real beneficiaries- the banks. Most of Paulson’s career was spent at Goldman Sachs. His wealth was created during this time. He is comfortable operating in this paradigm. His net worth is reported to be $700 million. (http://en.wikipedia.org/wiki/Henry_Paulson)
Paulson is shrewd. His compensation package at Goldman Sachs was reported to be $37 million in 2005. Wasn’t that in the midst of this sub-prime and derivative debacle? Hmmm! How can we expect a man who profited from the era of greed to oversee the cleanup? In his request to Congress, he added that there would be no action subject to Court review. What does this mean? It sounds like a "get out of jail" card for all of his former (or current) associates. Congress is being pressured to pass a bill immediately. They have been told "there is no time".
"If financial conditions fail to improve for a protracted period, the implications for the broader economy could be quite adverse," Bernanke said in his prepared statement for the Senate Banking Committee panel.
"We must do so in order to avoid a continuing series of financial institution failures and frozen credit markets that threaten the well-being of American families’ financial well-being, the viability of businesses both small and large and the very health of our economy," Paulson said.
On the FBI’s Fraud Prevention Web Page, the telemarketing ploy to get your money uses the phrase: "You must act ‘now’ or the offer won’t be good." Does this sound familiar? This storm has been brewing for months and years. This website has been warning individuals to prepare themselves for the financial crisis for nearly a year yet Congress has only days to pass a bill that will surely have a negative impact on every American and many in other countries. I guess you should have urged your Congressman to read our website.
Paulson fully participated in the game of greed. Some of his $700 million came from the results of working deals in the derivatives and sub-prime instruments. Once Americans are fully briefed on the new law, they will be outraged. Bernanke and company have only one way to pay for this new liability- hyper-inflate the U.S. Dollar. What will this mean? Higher commodity prices and higher inflation. Oil and gold both spiked up on news of the bailout. Why? Big money understands the impact. The average Joe does not. How do you like the language in the draft:
"Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency," the original draft of the proposed bill says. It goes on to say, "Any funds expended for actions authorized by this Act, including the payment of administrative expenses, shall be deemed appropriated at the time of such expenditure."
America’s greed is placing unbearable weight on the current economic system. This is no different than the societies of the past. The insatiable appetite for "more" is self destructive. If you have a net worth of $700 million, what else do you need? Another $100 million! Mankind continues to operate with logic rather than the heart. Logic tells you to keep this complex system afloat. The heart would tell you to simplify. The financial institutions created an unbelievably complex environment that defies understanding. AIG was saved because it is too big to fail. I would suggest that it is too complex to fail. Nobody in Washington or New York could effectively determine the outcome of the bankruptcy of AIG. Therefore it was too risky to let it fail.
Paulson and Congress want to include just about any debt of any institution in the bailout. However I doubt that you and I will have access to any of that money. They will put plenty of spin on the bailout to make it palatable to the American public. After all, it’s election time.
The perfect storm has three fronts. We are now in the midst of the derivatives storm. Let’s not forget storm #2, Peak oil, or storm #3, the unfunded liabilities associated with the baby boomers that are moving toward retirement!
Get out of debt, simplify, and most of all…. pray!