Chaos in financial sector – Who will pay?
By Peter Ewart
Tuesday, September 16, 2008 03:50 AM
By Peter Ewart
The evidence is there for anyone to see. The U.S. financial sector is in the midst of what could be shaping up to be an unprecedented meltdown with the collapse of Wall Street investment bank Lehman Brothers, the forced bailout of Fannie Mae and Freddy Mac, and the impending bankruptcy of several other venerable American financial institutions such as Washington Mutual, IAG investment, and others.
A year ago I wrote an article that was published in Opinion250 entitled “Invasion of the Moneylenders – Part 7 – To shoot a moose.” In that article, which was part of a series of seven - I used the analogy of a wounded moose to describe the state of the financial sector in the U.S. at that time. A gut shot moose will sometimes “charge off into the brush at full clip or even resume feeding on shrubs as if nothing has happened.” So has gone the U.S. financial sector since that article was published. But now, a year later, the moose are starting to “drop.”
We are in a financial crisis that is rapidly spreading to other sectors of the world economy. The critical question arises: Who is going to end up paying for this disaster?
There is no doubt who caused it. U.S. investment banks and other financial institutions were right at the center of a host of financial schemes that some have described as little better than “legalized” fraud and swindling, ranging from bad mortgages to the packaging of toxic securities. Tangled into this mess were a witch’s brew of government and private regulators, non-banking corporations, brokers, politicians and others, who all played their part in what may prove to be one of the greatest and costliest scandals of all time.
It is hard to believe, but, as the Miami Herald newspaper has recently reported, in the state of Florida, at the height of the housing boom, thousands of ex-convicts were actually recruited into the financial services sector, resulting in nearly $85 million worth of outright mortgage fraud, as well as numerous other crimes related to stolen credit cards, identity theft and so on.
But these ex-convicts were small potatoes compared to the Wall Street financial institutions that pulled in hundreds of billions of dollars year after year from their highly questionable activities, and whose CEO’s have walked away with hundreds of millions of dollars stuffed in their pockets.
Now, as a result of this unparalleled greed, the entire U.S. (and possibly world) financial “house” is threatening to tumble down.
And who ends up picking up the bill? Well, the financial elite, in league with their political friends, has already decided that one. They want the American taxpayer and taxpayers around the world to bail them out. They want governments, pension funds, workers, businesses, professionals, as well as other sectors of industry to suck up the losses that these same financial institutions have caused. They also want their own employees, as well as lower level brokers and others in the financial services sector, to accept tens of thousands of layoffs, as well as dashed hopes and ruined careers.
So far, the financial elite appears to be getting much of what it wants, the government bailout of mortgage giants Freddie Mac and Fannie Mae being the most recent example.
But more financial chaos looms. In this economically dangerous environment, people in the U.S. and around the world need to think about just what kind of banking and financial services sector do they want, and put forward concrete proposals. Should the CEO’s and investment banks be allowed to walk away scot-free from the mess they have created? Should financial institutions be allowed to act like pirates and have little or no accountability to the people of the country or countries they are supposed to serve?
As the crisis spreads around the world, people also need to be vigilant about any so-called “emergency measures” proposed by government that are nothing more than bailouts for irresponsible financial institutions and that will saddle taxpayers with debt for years to come. As that old American saying goes: “Those who do the crime, should do the time.”
Peter Ewart is a writer and college instructor based in Prince George, British Columbia. He can be reached at: peter.ewart@shaw.ca
Previous Story - Next Story
Email
Print
Facebook
Twitter
Digg
Del.icio.usReturn to Home
Posted by: northman on September 16 2008 7:20 AM
The current financial system is designed to facilitate fraud at all levels with no transparency for the vast majority of transactions taking place today through the derivative futures markets, and as such no ones knows which sector will be the next domino to fall. The risk is everywhere... because the security against risk is nowhere... because corporate interests have dismantled all the regulatory checks and balances to how the financial sector does business.
IMO the system is in the process of collapse because it was not a system governed by the laws of nature... but rather the laws of short term greed. Already you hear the calls for an interest rate cut to devalue the dollar savings in the hope that the added liquidity will buy some more time before reckoning. I agree that those that do the crime should do the time and that would be the quickest and cleanest way of getting through this... then to ensure it doesn't happen again a new system will have to be created that has regulatory protection over the value of the dollar as the core foundation of the financial system, rather than the fake growth formulas used today to justify a corrupt policy.
AIMHO