Here is the US, our efforts at handling our financial crisis. We have made whole the people, whose criminal greed imposed the crisis upon us, given the political party most responsible for enabling it tremendous gains in the last election, and done virtually nothing for the millions if Main Street Americans harmed as a result. Kudos to the EU for finding a better way, at least in one aspect, as this article by William Greider demonstrates.
At the midnight hour, when financial-market wise guys were predicting disaster, Europe’s political leaders proved to be stronger and braver than America’s. The big nations of the EU worked out a deal to resolve their financial crisis that does what US politicians, including the president, lack the nerve to pursue. The Europeans are whacking the bankers big-time.
Yes, the sovereign governments of Europe have to put up more billions to rescue debt-soaked smaller nations like Greece. But the bankers who lent all that money will be compelled to share in the pain—a 50 percent write-down on the sovereign-nation bonds they are holding. Ouch.
This may be the beginning of wisdom—forgiving debts that in any case will never be repaid. That giant step should give Europe a clean start for economic recovery. It’s a much smarter alternative than imposing perpetual austerity on people who are already broke.
American politicians are not there yet, not even close. Republicans are manning the barricades to defend the bankers on everything, even the most modest reform measures. The Obama administration is tinkering around the edges with small-bore adjustments that won’t accomplish much.
Rhetoric notwithstanding, Obama is still shielding the largest banks—the Wall Street Six—from the consequences of their own recklessness. The biggest US banks are still holding a lot of debt paper, especially mortgage-backed securities, that has effectively failed but is still booked as okay assets. Federal regulators could pull the plug on these illusions and force an honest accounting but are afraid to hurt big guys who are already fragile. Until debt reduction is undertaken in a major way, especially for home mortgages, American recovery is going to be an on-and-off-again affair. (See my article, “It’s Time for Debt Forgiveness, American-Style,” in this week’s issue of The Nation.)… [emphasis added]
Inserted from <The Nation>
I readily admit that I’m basing the following statement on back channel buzz, so it is speculation that I cannot definitively support. I understand that, shortly after Obama’s election, the Clintons took Obama under their wing. If I am correct, that explains why Obama replaced the progressive economic team that helped him win the election with advisers from the Clinton camp, the worst of which is Timmy the Tool Geithner. I believe that they convinced Obama that he could give the banks a haircut without causing their collapse. He needs to realize that Too Big To Fail is Too Big to Exist. An excellent step would be to fire his economic team and bring in Robert Reich and Paul Krugman.
To make matters worse, Banksters are trying to move toxic derivatives into FDIC insured accounts to stick it to taxpayers again. That MUST be stopped.
Another necessary step is to reinstate Glass-Steagall, something Democrats passed in the House and attempted in the Senate, but were blocked by Republican filibuster.
11 Responses to “How Europe Handled the Financial Crisis”
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It seems like a form of a bail out to me. I’m not sure though.
See below, Patty.
I’d be a lot happier if he had kept Christina Romer (Obama’s chairwoman of the Council of Economic Advisers) around … and actually LISTENED to what she had to say. She was one of the few economic advisors that he should have paid attention to; but she didn’t see eye-to-eye with Sommers, and so she left.
Much of our continued problems have been exacerbated by the three blind mice: Geithner, Bernanke and Sommers.
Sometimes a simple solution is the best– but the likelihood of that is pretty damm slim–
Too true!
1. Dump enough conservative Republicans and DINOs in the election next year to give true progressives the upper hand.
2. Reinstate Glass=Steagall.
3. Fire Timmy.
4. Break up all the too big to fail banks and put an outright ban on Wall Street speculation.
5. Close ALL the wealthy’s tax loopholes.
6. Start jailing tax evaders, and break up huge tax offenders like GE.
7. Ban all private financing of elections and replace it with 100% public financing.
Presto change-o! Our deficit and our economic problems diminish and eventually disappear.
Bingo!
In the EU, this is not a bail out as such but it will smooth things over as long as there are major changes to regulations. What the EU has come up with is a write-off of some of the debt, that write-off to be taken by the banks who promoted it, and not by the people. Only when the people ie government prop up the bank with cash does it become a bailout and that is a political decision.
Example:
Although this example is very simple, it shows that the bank is being held accountable for this debt. But doing this alone will not solve the crisis. There are requirements in the US that need to be implemented to keep things right and in perspective:
Other things that would help the entire greater situation are as Jack mentioned and I repeat for clarity (thanks Jack)
Thanks Lynn.
I learned from a friend on Care2 that the 50% they are taking from the banks with one hand, they are giving back with the other. As a Brit, he should know. When I’m wrong I say so, and it sure looks like I am here.