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Wall St. Ticks Off the World Financial crisis, not armed terrorists, greatest threat to U.S. security By Eric Margolis April 05, 2009 "Toronto Sun" -- The current international financial disaster brought on by Wall Street has created 25 million unemployed around the globe. People everywhere are mad as hell at both their leaders and America. U.S. intelligence says this financial crisis, not al-Qaida, is the greatest threat to national security. Politicians from leading industrial nations sought safety in numbers at the G20 summit in London this week attempting to show they are resolving the worst economic crisis since 1930. President Barack Obama was a huge hit. He urged Europe and Asia to join the U.S. in spending more billions to stimulate their battered economies. The U.S. government and Federal Reserve have already spent, guaranteed, or lent $12.8 trillion, an amount equal to 90% of total U.S. 2008 economic output. To aid the financial industry, the Fed slashed interest rates to nothing, savaging savers and retirees. Unable to further lower rates, the government is now flooding the economy with billions of dollars created from thin air that will inevitably generate future asset bubbles, stoke inflation, and eventually drive down the U.S. dollar. By contrast, Europe, Russia and Japan resisted more stimulus deficit spending, rightly fearing inflation. They have declining populations and cannot, like the U.S., saddle the next generation with monster deficits. France's President Nicholas Sarkozy and Germany's Chancellor Angela Merkel properly demanded more regulation of the international financial industry. Europe and Asia blame America's and Britain's financial gamblers and fraudsters for the Panic of '08. Reckless borrowing caused this world crisis; more massive debt hardly seems the correct remedy. However, the G20 summit finally compromised on $1 trillion US in more spending and some more regulation. But this financial crisis won't be resolved until the rotten U.S. financial sector is restored to health, transparency, and integrity. Many major U.S. financial institutions are insolvent: their liabilities exceed assets. Neither they nor the Obama administration will admit it, or take necessary action. That's because the U.S. financial industry has grown far too powerful. Today, finance is America's leading industry at about 24% of GDP. Manufacturing has shrunk to 12%. Wall Street's "Masters of the Universe" grew so rich they were able to buy or manipulate most politicians and government regulators. Investment banks such as Bear Stearns, Lehman, and Goldman Sachs routinely lent $35-$50 US per dollar of assets. Banks borrowed money at 1% and invested in billions worth of fraudulent subprime mortgages at 4%, netting 3%. Money was made from money, not productivity. Hedge fund managers paid only 15% income tax. Collapse When this house of cards finally collapsed, the money men used their clout to get the George W. Bush and Obama administrations to bail them out. At the heart of the financial web dominating America is the bank, Goldman Sachs. Ironically, many of its alumni have been managing Bush and Obama's "rescue plan." In the outrageous, obscene AIG bailout, Goldman alone got $12.9 billion US from Washington, no strings attached. Obama, John McCain, Hillary Clinton and everyone important in Congress received embarrassingly large cash contributions from Wall Street. Now, the money men are trying to block meaningful financial reforms. If U.S. banks don't admit their true losses, and if the White House keeps propping them up, they will become like Japan's bankrupt "zombie" banks in the 1990s: Dead men walking. The right answer is to make them come clean and fire the mountebanks and con men who ran them into the ground. Then temporarily nationalize these banks and break them up into smaller firms that are not too big to fail. The bankers, brokers, traders and credit rating agencies responsible for the greatest fraud in U.S. history, the subprime and Alt-A mortgage scams, should join Bernie Madoff behind bars. The panic of '08 laid bare just how much Wall Street controlled and manipulated the U.S. government. The axis of sleaze between Wall Street and Washington's politicians has to be broken. Time for Obama to drive the money lenders from the temple. Eric Margolis is a columnist for The Toronto Sun. A veteran of many conflicts in the Middle East, Margolis recently was featured in a special appearance on Britain’s Sky News TV as “the man who got it right” in his predictions about the dangerous risks and entanglements the US would face in Iraq. His latest book is American Raj: Liberation or Domination?: Resolving the Conflict Between the West and the Muslim World © 2009 Toronto Sun |
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