Reading this piece by Chris Floyd about the $100 billion bailout for the banking industry, I wonder why it is that Americans are expected to stand by political and economic institutions that do not stand by us:
It is not exactly news that the Western world's fetishized "free market" is actually a mixed economy, combining cradle-to-the-grave socialism for the rich with ball-breaking, bomb's-away capitalism for everyone else. This truism was on naked display once again this week as the central banks of the United States, Britain, Switzerland, Canada and the Eurozone announced plans to provide almost $100 billion in taxpayer money to save their banking brethren from the consequences of their own greed and stupidity.
The bailout is, indirectly, a response to the mortgage crisis that has seen whole neighborhoods across America depopulated and abandoned as dodgy loans come home to roost. For years, the bankers shilled the "American Dream" of home ownership to people who couldn't really afford it, via a plethora of gussied-up con jobs which were then repackaged as various complex "financial instruments" and sold on down the line to other rubes. The financial elite made untold billions from shuffling this worthless paper around, touting it to pension funds, state investment funds, schools, small-scale investors, etc. It was a house of cards standing on a one-legged table, and it finally fell, as anyone except a highly educated, well-remunerated investment banker could have foreseen.
Now many of the world's most august financial houses are having to write off tens of billions of dollars in bad debt, with mountains more still lurking out there in the shadows. As a result, they have suddenly – and inevitably – turned on each other. Strapped for cash as they cover their losses – and mistrustful of how much bad paper their compadres might be holding – they have been choking off the inter-bank loans that lubricate the credit system. And so the Money Lords of the West have made an unprecedented collective intervention, proffering the $100 billion boodle to induce banks to start lending to one another again – "a move designed to prevent the worsening credit crunch [from] derailing the world economy," as the Guardian reports.
And indeed, the action has been widely touted as a bold, altruistic measure to save the common folk from the ravages of recession. But read a little further in the fine print, and you will find, as the New York Times notes, that "the move was intended to deal with specific problems in the interbank lending market and would not allay the biggest problems in the credit markets related to the weakening American housing market, where prices are falling and defaults and foreclosures are rising."
Now, if you or I had made a stupid investment, been reckless and greedy with our money, gambled it away in Vegas – or even just hit a patch of bad luck (ill health, unemployment, etc.) – and ended up in the red, that would just be our tough luck. It's a free market, right? You have to take responsibility for your actions; the Invisible Hand sorts everything out in the long run and gives people their just desserts. But if Big Money craps out playing craps with crap "instruments" they've concocted to squeeze a few more coins out of a few more suckers, they must be swaddled and coddled to cushion the blow.
And it is highly unlikely that this injection for the credit crunch will be the last ladling of public money for the gilded poltroons whose blind, rapacious greed has put multitudes at risk. (Indeed, the UK government has just pledged up to £40 billion in public money to bail out the upper-class crap-shooters at Northern Rock bank, after steep losses from the sub-prime orgy led to an honest-to-God, Depression-era run on the bank by customers trying to save their money from the crap-shooters' folly.) While there will certainly be consequences – dire consequences – from the growing bad debt crisis, they will not be borne by those responsible for the mess.
(And yes, I know the money on offer from the Central Banks are "loans," not cash guarantees like the Northern Rock deal; but when was the last time your friends ponied up $100 billion when you were a bit short for the rent? And where are the government-backed loans for, say, families whose finances have been devoured by catastrophic illness, or a PTSD-afflicted vet thrown out on the street by Pentagon "experts" who find that his suicidal, night-sweating dreams of Baghdad alleys are a "pre-existing condition"?)
The socialist solidarity shown by the politburo of high finance in the face of the credit crisis was announced on the same day that George W. Bush vetoed legislation that would have extended medical insurance coverage for the children of working families – and on the same day that House Democrats announced their abject surrender to the much-despised popinjay in the White House, giving up their transparently bogus bid for more domestic spending while giving Bush billions more for the never-ending war crime in Iraq. (Glenn Greenwald has a good round-up on the latter story. For more background, see this recent post. )
Billions for billionaires, billions for carnage, chaos and death…and zilch for the health of the nation's children – all in one day. A clearer snapshot of the actual values of our society could hardly be imagined.