PODCAST-TRANSCRIPT-WEEKLY-UPDATE-2009-JULY-19 (FRANCONOMICS.COM)
Hello, welcome to the weekly economic podcast from Franconomics.com for the week ending July 17. I am Sam Mishra from Franconomics.com, a website devoted to understanding the current financial crisis, pulling back the Goldman and other such big bonus, and if required, putting some of these Guilty bankers in jail for commiting financial fraud. If you have followed our podcasts, we have been consistent in our demand that not only Goldman not be allowed to distribute that big bonus this year for it is part of the 20 trillion dollar value drain or looting of the jobless and homeless American by the corrupt but powerful banker, but also that the bonus of 2007 and 2008 be pulled back as well by taxing it at 100%. And now with JP morgan Following up with 2.27 billion dollars in profit afer Goldman Sach’s 3.4, this is what Robert Reich, a former secretary of Labor, had to say in his recent blog: Antitrust law was designed to prevent just this sort of market power and political heft (OK here he is referring to JP Morgan Gobbling up bear Stearns and Washington Mutual with government assistance). The Justice Department or the Federal Trade Commission should investigate the new-found dominance of Goldman and JP -- and, if warranted, break them up. Alternatively, Congress should impose a SURTAX on the newly-exclusive group of Wall Street firms, most notably Goldman and JPMorgan, which are now backed by implicit government bailout insurance guaranteeing that, should they get into trouble, taxpayers will keep them afloat. The surtax would approximate the economic benefit to these firms of such government largesse, which I'd estimate to be at least 50 percent of their profits from here on.
Nice work Mr. Reich.
lso, Simon Johnson, an ECONO-MIST at MIT has been basically saying the same thing: break these big banks up. In fact, when the taxpayer is losing his job and his home, and when in many cases he can’t get meaningful health-care, why should the taxpayer insure through scams like TALF and TARP and pPiP that rich bankers, when they get in trouble, be bailed out from taxpayer money as bailout insurance?
On pPiP, and why it failed, and from our perspective of a trillion dollars of taxpayers money would have been wiped out, it is now only 40 billion. [Thank God]. we have a theory, and at this point we may be only speculating, but Krugman wrote in his recent article titled “The Joy of Sachs”, that Goldman didn’t believe its own hype. Other banks invested heavily in the same toxic waste they were selling to the public at large. Goldman, famously, made a lot of money selling securities backed by subprime mortgages — then made a lot more money by selling mortgage-backed securities short, just before their value crashed. OK, so our franconomics.com theorey is that if the street eventually heard that GOLDMAN was shorting the toxic waste, why would anyone go long, even with the extraordinary pPiP leverage? Further, we hear elsewhere that pPiP is alive and well in other markets like the credit card loan markets: but what might be happening is that someone is hyping it up, and as people keep jumping in, those who hype it will sell it short before it crashes, and make money that way. Don’t we think we need some regulation around these long and short positions? For they have led us into this mess! But I haven’t heard anything about repealing the Gramm-Leach-Bliley act, which should have been repealed by now? Our investigations into past quotes from Goldman Sachs as late as just 2 years ago, reveal that Goldman CEO Lloyd Finklestein had said this around June of 2007: If you take an historical perspective, we've come full circle, because that is exactly what the Rothschilds or J.P. Morgan the banker were doing in their heyday. What caused an aberration was the Glass-Steagall Act. For those tuning in for the first time, this Gramm-Leach-Bliley act threw away the Glass-Steagal provision disallowing banks to merge or carry diverse businesses so that they can become too big and fail. Have we heard anything about this Gramm-Leach-Bliley Act being repealed? Instead, what we hear is the government violating ant-trust laws by enabling big banks to merge, like Bank of America arm-twisted to buy Merrill Lynch. Something is VERY VERY wrong here and, let’s discuss more on this merger next.
So, this week, the architect of the current bailouts, the ex-Goldman-CEO and the ex-treasury secretary Hank Paulson was there again in the Congress to testify on the BofA and Merill Lynch Merger. We are glad to report you what congressman Lynch of Massachusetts asked him:
“If you had come up here with Mr. Bernanke and said, ‘I have got a plan, I want to take $800 billion in taxpayer money and I want to give it to my pals in the nine biggest banks of America,’ how many votes do you think you would have got?” Way to go Congressman!
Congresswoman Marcy Kaptur (D) told Paulson at the end of a particularly hot exchange, referring to the large number of her constituents who face foreclosure and eviction: "You ought to come visit Ohio and see the results of your handiwork." Nice saying Congresswoman!
But as we have reported in prior broadcasts about “toxy-morons” who loot and plunder, and all their greed is after is more millions in their bank accounts and more bonus and even more bonus, Responding to that criticism, Paulson defended his acts saying “many others” (hmm, I would think the other “toxy-morons”) initially “underestimated” (hmm, that is why they also cooked up the TALF and the pPiP along with the 700 billion dollar TARP) the extent of the financial crisis. He also said that the government needed to change gears on the TARP program as the “situation began to crumble around the world,” and that Congress allowed for such flexibility and taxpayers will get the bank-rescue money back with profit. As we reported in the last podcast, the government lost some $11 million because a few small banks bought back their TARP related warrants. But more important, even if we get back the 700 billion TARP funds, the calculated value drain, as per our proven math, is 20 trillion. So, you mean to say, Hank, that the other 19 trillion which your banker buddies digested, is off limits, like keep that hands off my stash, money its gas, just as Goldman, your ex-employer digested the $12.9 billion from AIG which will not be paid back, ever.
Larry Summers, the man behind the Brilliant Obama Economic Policies, and a friend of the bankers, asserted this week that the world is back from the economic abyss. Well folks, we reported to you how the official unemployment is 9.5%, which translates to 15% full-time and up to 25% full & part time unemployed as per our equations, and we also have an article titled Real Unemployment under Podcast-Concepts on Franconomics.com.
In his speech this week to the Petersen Institute of International Economics, a Washington DC Think Tank, Dr. Summers said: The rebuilt American economy must be more export-oriented and less consumption-oriented, more environmentally-oriented and less fossil-energy-oriented, more bio- and software-engineering-oriented and less financial-engineering-oriented, more middle-class-oriented and less oriented to income growth that disproportionately favors a very small share of the population. OK let’s dissect it: The rebuilt American economy must be more export-oriented and less consumption-oriented. Well more export-oriented, I understand, else we will be just buying Chinese Stuff from Wal-Mart which will keep breaking down faster. But why less consumption oriented. Why can’t it be both export and consumption oriented. You mean to say Dr. Summers, that only your banker friends have the appetiate to consume to trillions that they looted, and we common people don’t. We also want to consume nice vacations, nice cars, nice jobs like you do, not to mention trillions in TALF and TARP and PPiP. Folks, we have the GDP = C + I + G equation where we explain how 70% of our GDP comes from C or Consumption. Why the GDP will keep going down and not up as Dr. Summers predicts, is because the trillions that were drained from us have gone to a small minority, namely the bankers. Obviously, the G portion as in Government Consumption and Investment in toxic assets has expanded, btw, hence the term toxy-moron. A toxy-moron is an oxy-moron who supports toxic assets on fraudulent cooked up balance sheets of banks, as opposed to real living-breathing people on main street.
“more environmentally-oriented and less fossil-energy-oriented.” OK, I agree. I sincerely hope America does not monger any more war, does not attack another Iraq, for OIL. Yes, this one I agree with too. Let’s see…
“more bio- and software-engineering-oriented and less financial-engineering-oriented.” This I whole-heartedly agree, having been a software engineer in the past. BTW, I studied a little financial engineering at MIT Sloan School, and if you ask me, it was all about going to Goldman or Merril or JP Morgan and making the big banking bucks. I am glad I did not do that, for I would not be able to do these podcasts. In fact, I believe that MIT Sloan School or for that matter, Wharton or Chicago or any of these top b-schools should scrap some of those financial engineering programs and replace those with course work like ethics and law, which will create the real leaders of tomorrow, and not these blood-sucking bankers and their friends driving policy from DC.
The rebuilt American economy must be more export-oriented and less consumption-oriented, more environmentally-oriented and less fossil-energy-oriented, more bio- and software-engineering-oriented and less financial-engineering-oriented, more middle-class-oriented and less oriented to income growth that disproportionately favors a very small share of the population. “more middle-class oriented and less oriented to income growth that disproportionately favors a very small share of the population.” Oh wow, is that why 1500 GM dealerships and 800 Chrysler dealerships got the axe, even as Goldman and Merrill and JP Morgan got bailed out?
OK, In this speech, Dr. Summers also asserted that the economy is back from the abyss it was in when Obama took charge. I would argue that the abyss should not be tied to leading indicators like stock markets going back up, and remember we still don’t know if this is a bear market rally or the beginning of a bull-market. But the turning point from th abyss will come when the GDP starts going up,not down. And more importantly, when unemployment starts going UP, not down. And also beause this recession was precitiated by housing and mortgage related scams originating in banks such as Goldman, the abyss would be behind us only when foreclosures start coming down. So Dr. Summers, this is not the abyss. The abyss was when Ed Harris hit the ditch in the movie by the same title. But this is not a movie Dr. Summers, and there isn’t an alien ship which will bail us out. If you keep letting the banks loot the treasury with plans like the TALF or the pPiP or what have you, if you keep bubbling the mudpots with more fiscal stimulus to these rotton institutions, how will the abyss be behind us. Stop being a toxy-moron, and start behaving like a human being first. Then, at some point, may be you will be an Econo-MIST again, whom people can respect…
This brings us to the end of this podcast. I believe this was a good podcast, with the following productive outputs and action iteoms:
1. Congress: Thanks for roughing up Hank Paulson. Now, repeal the Gramm-Leach-Bliley Act.
2. MIT Sloan and other b-schools: Instead of peddling “financial engineering” courses, give more courses focused on “law” and “ethics,”if you want to create better leaders.
3. Summers & Co: Please understand that GDP = C + I + G. Unless you focus on “C,” as in the American consumer, which constitutes 70% of the GDP, you have no chances of coming out of the “abyss.”
Tune in again for our next weekly podcast, and until then, stay well, take care of yourselves, your families, please treat the jobless, the homeless, and those who are without family and are lonely … with the kindness, courtesy, and respect they deserve, for these are our fellow human beings. Thank you.
Listen / Subscribe to this PODCAST
Using:
DOWNLOAD
THE PODCAST MP3 FILE >>
|
|
|
|
|
|
|
|
