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It is probably columns like this one that get the conservatives all bunched up and angry, but as you will see, it does make a larger point. They will likely end up calling me a commie or worse yet, a socialist (which I am not), because I question the rather tenuous philosophy that America is first and foremost a capitalist country (which it is not), nor does capitalism equate to being a democracy. But here it goes…
Capitalism is tanking right now and the people who claim to be its biggest defenders are the ones responsible for destroying the very foundations upon which the capitalist part of our economy is built –the monetary system. This is evident by just looking at the nosedive of the sub-prime lending fiasco, the bailout of Bear-Sterns (is this welfare for the undeserving?), the devaluation of the almighty dollar and the closure of IndyMac Bank. These are not just the mistakes and bad behavior of a few scoundrels like Ken Lay of Enron, but the intentions of many who believe that the market place should be free and unregulated. See what they have wrought with this misguided zeal for free marketeering!
A few years back, in the glorious days of the Reagan Presidency, the conservatives persuaded Congress to deregulate the Savings and Loan industry and oddly enough the last time we saw this kind of economic meltdown and the collapse of the real estate market was right then and there. What most of us don’t realize is that this panic of capitalism today is really just part two of the same free wheeling under-regulated financial market of the 1990s. Both Countrywide and Indy Mac banks really aren’t banks at all, but Savings and Loans masquerading as banks––regulated differently from the more restrictive federally and state chartered banks. The sub-prime loan packaging scam was just a more creative means of accounting and has left a whole lot of very savvy Wall Street investment firms leaping from the windows of their New York castles.
The dark cloud on the horizon of American Capitalism is that IndyMac is just one of 155 institutions on the “watch list,” FDIC insured of course, who may be taken down with this disaster, not to mention the thousands of depositors who will lose some of their uninsured savings (or the 63,000 homes that are now in foreclosure in just the second quarter of 2008). If it wasn’t for this last line of defense, the New Deal-era banking regulation and FDIC insurance, the whole system would fall like a string of hikers falling to certain disaster with one tied to another ahead of him. This pattern of events is similar to that which caused the Crash of 1929 and the subsequent banking crisis of the Great Depression. Bank collapses have happened many times before in American history, giving rise to the Depression-era reforms. Roosevelt called it the New Deal because the last hand that was dealt the gullible American public was a lousy deal. The deck was stacked against the depositors and in favor of private bankers.
The FDIC, which was created to guarantee deposits and to sustain confidence in the US banking system, seems to have really bungled the takeover of IndyMac leaving throngs of angry depositors standing in long lines to retrieve their deposits wondering if their savings were going to be protected. Some who exceed the $100,000 insurance limit will lose as much as fifty percent of the value of their over-the-limit accounts.
The next act in this monetary debacle is the bailout of the two semi-private mortgage guarantee corporations Freddie Mac and Fannie Mae whose job it is to buy mortgages from lenders like Indy Mac and Countrywide and to package these loans as assets for investors in the stock market. Together, they hold some estimated $15 trillion in real estate loans and the financial world and the country can’t afford to see them go under with the rest of the bad paper being floated. So the US Treasury is being asked to float them a loan to bail them out, to which I say Freddie Mac and Fannie Mae should simply be taken over by the government, nationalized and the profits of this enterprise should be used to invest in sound developments for building homes for the common working class families of America.
This, of course, smacks of socialism, which to the common sensibility of today’s conservative driven politics is seen as “outmoded.” But please tell me what could be more stupid than repeating the mistakes of a deregulated mode of business that has failed not once, but twice in the last three decades? I frankly don’t think this should be dealt with on an ideological basis, but on a pragmatic one––one based upon what works and what does not. Allowing our monetary system to go unregulated is irresponsible. Depositors must be protected to the highest degree possible if only to protect the value of their life’s work and savings or retirements. Even a partial collapse of this system of trust in the banking system or the currency is a betrayal of the American people by the Federal Reserve and by Congress.
If this means that the government nationalizes banks or lending institutions or any other private assets to guarantee the security of the people’s money then so be it! It doesn’t matter what they call it as long as it works. Clearly Wall Street capitalism is in disaster mode and if we ignore the underlying causes it will take main street commerce with them.
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