Saturday, October 04, 2008


Post-bailout money machine ready to rock and roll

by Larry Geller

Guess what—the bailout was a huge source of profit for speculators, way beyond the $750 billion or so that is reported in the press.

There is something disturbing about the Black Monday collapse of Wall Street, following the rejection of the proposed bailout by the US Congress, and which has not been addressed by the media.

There was prior information on how the Congressional vote would proceed.

There was also an expectation that the market would crumble if the proposed 700 billion dollar bailout were to be rejected by the US Congress.

Speculators including major financial institutions had already positioned themselves. [Black Monday Galore: A Speculator's Seesaw Paradise, 9/30/2008]

Those financial actors who had advanced inside information regarding the Congressional decision or had the ability to influence the vote of members of Congress made billions of dollars when the market crumbled.

On “Main Street” 159,000 jobs were lost in September, an astounding number. But over on “Wall Street” is was better than business as usual. The bailout action meant huge speculative profits. Michel Chossudovsky explains, in this article from the Centre for Research on Globalization.

Those who were involved in speculative trade prior to Congress' rejection of the legislative process, made billions on Black Monday. And then on Tuesday, they made billions, when the market rebounded, with the Dow jumping up by 485 points, a 4.68% increase, largely compensating for Monday's decline.

Read the article to learn why the author asks:

What is more profitable for the banks: the bailout or speculating on whether the bailout will or will not be adopted?

What a different world Wall Street is to Main Street (I’m not fond of that phrase, actually, because with the increasing income gap and growing poverty, large numbers of Americans can’t even get to “Main Street”).

At one end are those who are losing their homes, or who are being driven to bankruptcy by medical expenses, and at the other… those who, lacking a shred of compassion, profit six different ways from the tragedy and pain of others.

Worse: were the bubble and the bailout planned?

In another Global Research article, Richard C Cook offers:

. . . Note that when Secretary of the Treasury Henry Paulson testified before the Senate Banking Committee last week, he said he was shocked to learn when assuming office in June 2006 that no federal agency regulated mortgage lending. Rather this was an area left to the states.

What Paulson did not say was that when the states attempted to intervene, they were blocked by the Treasury Department’s Office of the Comptroller of the Currency. In a February 14 article in the Washington Post written before he resigned, New York governor Eliot Spitzer wrote:

"In 2003, during the height of the predatory lending crisis, the OCC invoked a clause from the 1863 National Bank Act to issue formal opinions preempting all state predatory lending laws, thereby rendering them inoperative. The OCC also promulgated new rules that prevented states from enforcing any of their own consumer protection laws against national banks. The federal government's actions were so egregious and so unprecedented that all 50 state attorneys general, and all 50 state banking superintendents, actively fought the new rules. But the unanimous opposition of the 50 states did not deter, or even slow, the Bush administration in its goal of protecting the banks. In fact, when my office opened an investigation of possible discrimination in mortgage lending by a number of banks, the OCC filed a federal lawsuit to stop the investigation."

Why did the Bush administration do this? The only possible answer is that it had every intention of producing the housing bubble, one that had the effect of not only inflating the cost of homes and real estate but also pumping billions of dollars of borrowed cash into the economy through mortgage and home equity loans.

The bubble enriched huge numbers of executives, managers, and shareholders throughout the financial and real estate industries, and provided jobs to millions of people. The bubble also brought back foreign capital to U.S. markets that had been scared away by the bust of 2000-2001.

Everyone seemed to benefit, but it was those at the top who skimmed the greatest profits. ["Grand Larceny" on a Monumental Scale: Does the Bailout Bill Mark the End of America as We Know It?, 10/2/2008]

Where will your tax dollars go as this bailout is paid out?

The people in the financial institutions who are getting the money will be passing it on to the big banks that leveraged their criminal lending practices. The giant sucking sound you hear is almost a trillion dollars of future taxpayer earnings going into the vaults of the nation’s biggest banks, such as Citibank, Bank of American, and—the pet bank of the Rockefeller family—J.P. Morgan Chase. Much will also go into the vaults of foreign investors such as the Bank of China.

And these banks have no intention of recycling the money into productive U.S. investments. Despite the political posturing, where much of it will go at the second or third tier is into executive salaries and bonuses. The fat cats are "gittin’ out while the gittin’s good."

So what’s the next engine of the US economy?

This will play out over months or years. In the meantime, what’s the next bubble? It used to be that this country manufactured things to sell to the world. Now it’s all made overseas. What we do to make profit is create and burst bubbles, it seems.

The next bubble is energy. Watch it grow. Watch for huge investments in alternative energy. Watch it burst, much like the dot com bubble before it.



What we do to make profit is create and burst bubbles, it seems.

The next bubble is energy. Watch it grow. Watch for huge investments in alternative energy. Watch it burst, much like the dot com bubble before it.

You've nailed it, Larry. Thanks for this informative, but not at all surprising, post.

I'm already wondering how one can get in on the solar bubble? Sales commissions should be good on that.

Aloha, Brad

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