Alternatives to Big Bank Bailouts

No.: 
37

Federal Reserve Chairman Bernanke claims that banks need more aid if we hope to return to economic growth anytime soon. What he really means is that banks and leveraged investors need inflationary economic growth if they are to get the type of returns that widen the gap between the wealthy and everyone else. This is why Fed governors have been peppering their speeches with concerns about inflation falling below “desirable levels.” What is the desirable level for inflation? For the Fed and the elites it serves, it is a level (usually 2%-4%) that maximizes the financial rewards that can be gained through leveraged speculation for people with informational advantages. Naturally, when the Fed says that something is desirable, hardworking Americans should ask, “Desirable for whom?”

The Fed Chairman proposes several ways to confront the financial crisis. This is merely Fed-speak for ushering in policies that will construct the economic landscape even further in favor of Wall Street’s wealth class. Mr. Bernanke tells the London intelligentsia that ALL of his proposals tap “public funds.” Why must it be “public funds”? Why not tap the private funds of Wall Street elites? Are there no populist alternatives? Or is there more here than meets the eye? Could it be that Mr. Bernanke pushes plans that disproportionately benefit the same types of investors that the Securities Investor Protection Corporation (SIPC) now intends to aid in the Madoff affair?

In the past, getting money from the SIPC has been like getting honeycomb from a beehive: Better come prepared for resistance. But not this time! At least, not for Madoff’s fraternity. The SIPC is opening its vault, preparing its credit lines, and even thinking ahead about taxpayers’ wallets in an effort to do as much as possible for Madoff’s people.

The SIPC’s CEO is framing the Madoff affair in terms of “stolen money”, this frame likely to be the most fruitful in generating awards for Madoff’s followers. The SIPC recently mailed out packets to 8,000 Madoff-ites to facilitate filing activity. When questioned, the SIPC Chair said he stands ready to go to Congress, if necessary, to get additional money for those who invested in Madoff’s Ponzi scheme.

Fair-minded Americans should ask: Do Madoff’s clients deserve preferential treatment? Is there a connection between the emerging SIPC stance and Ben Bernanke’s determination to make the general public reimburse the NYC crowd for their investment losses? Why doesn’t Mr. Bernanke call for policy that would require the NYC crowd to restore to financial health the institutions they wounded as they drew off massive capital and sent it to Switzerland, to hedge funds in the Cayman Islands, and to tax havens around the world?

Justice in America is supposed to be about “the equality of individuals before the law.” Why is it that some people are preferred by the law and by politicians nowadays when it comes to big money? Why is it when someone criticizes the injustice of such a system they can expect to be pelted with slurs? There has been, in a phrase, “a spiral of silence” on some matters of fairness. This insidious coercion of public dialogue in certain frames is not conducive to America’s goal of “liberty and justice for all.”

It is time to for Americans everywhere to stand up and tell Mr. Bernanke that prejudicial policy from the Fed must stop. Then, Americans should bring some pressure to bear on the new President. Is Barack Obama judicious enough to remove Fed governors “for cause”? Or to drop his Treasury Secretary, Geithner, for not paying his Social Security taxes? (as disclosed to a Senate committee). Does our incoming President have sufficient courage and judgment to take on his handlers and stay true to his campaign promise to be the President of all the people? It can be argued that Obama cannot make good on his macro-policy objectives unless he removes Fed governors who are guilty of preferential policy that is biased in favor of those who gain riches through leveraged speculation. Likewise, the SIPC should be made accountable to resist any pressure to show favoritism to Madoff-ites.

There is only one way to resurrect the legitimacy of federal governance in the U.S.A. and that is to make the devious elites who plundered and misled our financial institutions cough up out of their own private wealth the capital necessary to restore these institutions to good health. If they’re not willing to do so, let an economic depression come that will roll them right out of their leveraged assets. Let well-managed corporations like John Deere or Hewlett Packard buy up Wall Street bank assets a few pennies on the dollar, providing us a new banking system independent from the greed-stained Manhattan Island culture. There are more options than Ben Bernanke is showing in the cards he plays. It is time that Americans demand to see his full hand of cards and the playing deck as well.