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9/21/2008

Fear and the blank check

  6:43 am

Private presentations by the Fed are terrifying congressional leaders, motivating a decision to commit some $700 Billion dollars to prop up failing financial institutions.

Their financial records are not transparent to the government, and it seems the banks themselves have no way to know with any certainty the extent of their own predicament. Perhaps the books have been overcooked so long as to be completely illegible.

Sadly, this is bailout request is reminiscent of the ‘blank check’ Bush was given by Congress to pursue the disastrous Iraq war. The cost of that war now includes an estimated 1 million murdered Iraqi people, 5 million displaced Iraqi people, over 4000 murdered and killed U.S. troops, an estimated financial cost of 3 trillion dollars, and many other costs which include a dramatic loss of U.S. credibility in the region. Bush’s ’smoking gun in the form of a mushroom cloud’ was in fact a dramatic propaganda ploy for which we will all be paying a hefty price for years to come.

Now the alarming news is that these secretive and under-regulated institutions have brought the entire U.S. economy, and potentially the global economy, to the brink of a cataclysmic breakdown. Despite the cruel inequalites and unjust priorities of our globalized economic system, certainly a meltdown of this order would result in untold hardships for countless people around the world, a severe punishment not limited to McCain’s “greedy” Wall Street investors.

The lost elephant in the room here is the question of trust. Just as the government of the United States deceived its own people to begin an unjustifiable war, these crumbling financial giants have hidden their unsound practices from external regulation and apparently even from themselves. Congress now proposes to solve the problem with a staggering commitment of $700 Billion dollars. If this problem is really just about bad housing loans, $700 Billion would be enough to directly enable every endangered homeowner become solvent enough to complete their mortgages, and that aspect of preserving bank solvency could be addressed. But of course the problem goes way beyond unrecoverable home loans, it’s just that the visibility and certainty of missed monthly mortgage payments has drawn attention to this corrupt house of cards and broken mirrors like a gust of cold wind, shaking the imaginary foundation.

This financial implosion can be likened to the collapse of the twin towers, with the momentum of the falling floors from above slamming through the ones below, ultimately bringing down the entire structure. The top floors of the economy have already begun to fall, and Congress is scrambling to stop the cascade, throwing billions upon billions of devalued dollars into the wreckage.

This is an historical moment where the ‘free’ market neo-liberal economic model has utterly failed. Without enormous government intervention, this economic system is broken, and therefore this is a critical turning point. When one model falls, others can and will emerge to replace it. Ideally the new economic model would be chosen carefully and democratically. More likely, in panic, both the democrats and republicans will capitulate to the demands of the power, writing yet another blank check for which future generations will be responsible for, while gaining little in the deal except perhaps breathing room to ascertain the extent of the damage before the next floor falls.

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