If you don’t want more bad news, then don’t read about Henry Paulson‘s latest bailout plan to “help” consumers by luring them even deeper into debt in hopes that their overall debt payments will be more manageable. So what if your financial obligations stretch into the next century so your great-grandchildren will have to keep paying them down?
Spare yourself the agita: Don’t compare Paulson’s plan to the one announced yesterday in Britain that would boost taxes on the rich and on petrol and would provide more social services to help commoners survive the crisis.
Yes, Paulson plans for the government to soak up a lot of bad consumer debt. But his emphasis so far on his tardy bailout of average Joe the Plumbers is to convince us to buy even more cars and refinance our mortgages and wear out our credit cards — all that would generate millions in additional bank and broker fees that we would pay as a further bailout of Paulson’s corporate pals.
Now about those fees: One of Barack Obama‘s key advisers, Austan Goolsbee, several years ago broke down the scam of fees during the Bush regime’s push to privatize Social Security (think what a disaster that would have been to give Wall Street investment banks control of that cash and then see the Dow head down).
Of the fees that brokers could have gotten from us for “managing” our Social Security monies, Goolsbee termed the scheme “the largest windfall gain in American financial history.”
See my January 2005 item “Going for Brokers” for details of that “individual accounts” trickery.
I noted Goolsbee’s September 2004 analysis of the real scam behind the Bush/Cheney plan to privatize Social Security:
Creating individual accounts in the social security system would lead to a massive increase in payments of financial fees to private financial management companies.
Under Plan II of the President’s Commission to Strengthen Social Security (CSSS), the net present value of such payments would be $940 billion.
These expenses amount to more than 25 percent of the existing deficit in social security over the same period. Rather than using the money to close the social security gap, the plan would transfer this money to private financial managers and mutual fund companies.
If the government were to offset the cost of these fees by raising the retirement age, the age would need to rise by about 6 months – just to cover the administrative costs of the individual accounts, not even the accounts themselves.
The fees would be the largest windfall gain in American financial history. The $940 billion payment to financial companies would be an increase more than 8 times larger than the decrease in revenue from the 2000-2002 collapse of the bubble.
The way that McDonald’s makes its real profits on soft drinks, fees are the real (and hidden) generator of profits for banks. Hence Wall Street’s continued push to get consumers to spend and borrow — and borrow and spend.
So it’s good news, amid some of the troubling selections by Obama for his new regime, that he’s bringing Goolsbee to D.C. As Bloomberg notes this morning in a story about the appointment of former Federal Reserve chairman Paul Volcker to head a panel that will, in effect, replace Paulson as the bailout czar:
President-elect Barack Obama will name the 81-year-old Volcker as chairman of the new President’s Economic Recovery Advisory Board today …
Austan Goolsbee, a University of Chicago economist, will be the top staff official on the board and be a member of Obama’s Council of Economic Advisers.
Maybe this panel will do more than figure out ways to generate fees for bankers and brokers by trying to make average Americans borrow.
The British government proposes doing its own borrowing so it can increase social services. Here? The only services that people like Paulson want to protect is their car service.
While you’re waiting to open the door of Paulson’s limo for him …
NO PARTICULAR ORDER:
Wall Street Journal: ‘The Paulson Plan: “Truly Idiotic” ‘
On Tuesday, [Henry] Paulson almost casually unveiled a new $800 billion scheme to ease the flow of credit to homebuyers and small consumers, unfreezing such vital economic engines as auto loans and credit card lending.
The plan calls for the Federal Reserve to soak up $600 billion of mortgage-backed securities in a bid to ease home loan rates, and also to buy up $200 billion in consumer debt.
That brings the total money pledged to rescue the disintegrating economy to nearly $8 trillion — more, even in inflation-adjusted dollars, than America spent fighting all her wars in the last 100 years.
Wall Street Journal: ‘Fed Aid Sets Off a Rush to Refinance’
Telegraph (U.K.): ‘Relax — the recession will keep the lights on’
Oil Drum‘s summary of the story: A spokesman for the National Grid said, apparently with a straight face, there were “suggestions” that the credit crunch “could lower demand, so the situation has become more comfortable.”
So there we have it. The only thing that will keep the lights on in the years ahead is the fact that the economy is collapsing.
N.Y. Daily News: ‘Even with LeBron James, fixing Knicks is a tall order’
AP: ‘Gazans using tattered notes because of cash crunch’
Desperate Gazans crowded into banks Monday, jostling to get to the front of lines as they sought to withdraw money amid a worsening currency shortage caused by Israeli sanctions.
Israel has refused to allow cash to enter Gaza in recent weeks to ratchet up pressure on the ruling Hamas militant group. With the supply of currency dwindling, banks have limited withdrawals over the past two weeks, and some have posted signs telling customers they cannot take out any more money.
N.Y. Daily News: ‘Let my brother out, Mr. President!’
AP: ‘Obama picks graybeards as wartime Cabinet’
Washington Post: ‘Obama’s Energy Department’
The Energy Department is an odd beast. Thirty-six percent of its $25 billion budget is related to national security, dealing with nuclear materials from things like decommissioned nuclear weapons and naval reactors. Another 25 percent of its budget goes to environmental management and civilian nuclear waste management. Another sizable chunk goes to the national laboratories, over which the secretary exerts modest control at best. So it hasn’t been the most sought-after cabinet post.
But, it could become more connected to actual energy issues because President-elect Obama wants to make a big research and development and subsidy push for carbon capture and storage, which would make coal use more palatable in an era of climate change worries.
That would happen through the Energy Department. The Energy Department could also get more involved in pushing for renewable energy, such as geothermal. If there is a program to promote electric cars through some sort of infrastructure spending, then that might go to Energy (if it doesn’t go to the Transportation Department). Finally, Obama wants to do more to promote energy efficiency and the Energy Department is the home for setting appliance standards and other energy efficiency goals.
ABC: ‘Obama on Auto Execs’ Private Jets: “A Little Tone Deaf” ‘
Bloomberg: ‘Fed Risks “Spitting in the Wind” With New $800 Billion Pledge’
ZDNet: ‘$873m judgment against spammer in Facebook case’
Facebook has won a $873 million judgment against a Canadian man who sent some four million sex spam messages to users of the social network, AP reports.
It will be a long, long time before alleged spammer Adam Guerbuez of Montreal is found, much less coughs up that much money, but Facebook hopes the size of the judgment will scare off other spammers.
N.Y. Daily News: ‘AIG bosses agree to Cuomo request and zap bonuses’
Windsor Star (Canada): ‘Melting Arctic, Afghanistan top general’s concerns’
Global warming is melting Arctic ice faster than the military projected, posing greater challenges for Canadian Forces already facing a deteriorating security situation half a world away in Afghanistan, says Canada’s top soldier.
“Global warming is happening very quickly. I think any projection we have has been underestimated. Flying over Ellesmere Island and not seeing very much snow up there and seeing the Arctic Ocean as a blue water ocean was quite revealing to me,” Gen. Walt Natynczyk, the chief of the defence staff, said Monday in a candid and sweeping assessment of the challenges faced by the military from the sun-baked deserts of Afghanistan to the not-so-frozen Far North.
This article from the Village Voice Archive was posted on November 26, 2008