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Foreign Correspondent
INSIDE TRACK ON WORLD NEWS

by international syndicated columnist &
broadcaster Eric Margolis
6 April 2009

TIME TO BREAK THE AXIS OF SLEAZE

The global financial crisis that began on Wall Street has put the world in a surly, frightened mood. At least 25 million peoples have been thrown out of work by the made-in-USA crisis.

People around the globe are angrily blaming the international crisis on the United States and on their own leaders. Politicians everywhere are in a panic as public unrest grows.

Last week, leaders of the world’s leading industrial nations sought safety in numbers at the G20 summit in London to demonstrate they are taking positive action against the worst economic crisis since the 1930’s.

Interestingly, at the same time, Adm. Dennis Blair, the US intelligence chief, warned the global financial crisis, not al-Qaida, Taliban or assorted Muslim miscreants, pose the greatest threat to US national security.

As with many summits, the London G20 jamboree produced mixed results.

President Barack Obama and wife Michelle were a huge hit. Obama came as a zephyr of spring after the winter of George Bush, who was probably the most hated man on earth since World War II.

Obama urged Europe and Asia to join the US in spending more billions to stimulate their battered economies. He even allowed that the US bore some of the responsibility for the current economic mess. But Europe looked askance at Obama’s spending plans to date, and with good reason.

The US government and Federal Reserve have already spent, guaranteed, or lent a staggering $12.8 trillion to jumpstart the US economy, an amount equal to 90% of total US economic output in 2008.

To aid the financial industry, the Fed slashed interest rates to nothing, punishing middle class savers and retirees. Unable to further lower rates, the US government is 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 US dollar.

By contrast, Europe, Russia and Japan resisted more stimulus deficit spending, rightly fearing inflation. They have declining populations and cannot, like the US, saddle the next generation with monster deficits as the Obama team plans to do.

Come to think of it, were not most of the people now running Obama’s financial `rescue’ the very same people who presided over Wall Street’s meltdown? Like the wonderful Claude Raines in `Casablanca,’ they are now `shocked, shocked’ that such chicanery went on in Wall Street under their noses.

France’s President Nicholas Sarkozy and Germany’s Chancellor Angela Merkel 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 a $ 1 trillion more spending for the International Monetary Fund and some more vague regulation.

Particularly interesting were comments by Britain’s PM Gordon Brown that a new world economic order is emerging from the London summit. Meaning: the days of total US economic hegemony are ending and a multi-lateral world economic order will replace it. Given that Britain is a virtual US protectorate, Brown’s words were startling. China also lost no time in rubbing salt into America’s bleeding financial wounds.

But this financial crisis won’t be resolve until the rotten US financial sector is restored to health, transparency, and integrity. Many major US financial institutions are insolvent: their liabilities exceed assets. Neither the bankers nor the Obama administration will admit it, or take necessary action.

That’s because the US financial industry has grown far too powerful. Today, finance is America’s leading industry at about 24% of GDP. Manufacturing has shrunken 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 like Bear Sterns, Lehman, and Goldman Sachs routinely borrowed $20-30 billion daily, and lent out US $35-50 per dollar of assets they owned (commercial banks generally were restricted to a 10:1 ratio). In what became known as the `carry trade,’ 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 while ordinary workers paid full taxes. Investment became run amok gambling, as Wall Street used other people’s money to take death-defying risks and rake in billions.

When this house of cards finally collapsed, the money men used their clout to get both the 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 US $12.9 billion from Washington, no-strings attached. Barack Obama, John McCain, Hillary Clinton and everyone important in Congress received embarrassingly large cash contributions from Wall Street. Now, the money lenders are trying to block meaningful financial reforms.

If US banks don’t admit their true losses, and if the White House keeps propping them up, they will become like Japan’s bankrupt `zombi’ banks in the 1990’s: dead men walking.

The right answer is make financial institutions come clean and fire the fraudsters who ran them into the ground. Then temporarily nationalize these banks and insurers 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 US history, the subprime and Alt-A mortgage scams, should join crook Bernie Madoff behind bars.

The panic of 08 laid bare just how much Wall Street controlled and manipulated the US government. The axis of sleaze between Wall Street and Washington’s politicians has to be broken. But, so far, this is not happening.

Copyright Eric S. Margolis 2009.

Published at Bigeye.com since 1995
with permission, as a courtesy and in appreciation.

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Email: margolis@foreigncorrespondent.com
FAX: (416) 960-1769
Eric Margolis
c/o Editorial Department
The Toronto Sun
333 King St. East
Toronto Ontario Canada
M5A 3X5

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