Breaking down the Bailout

Breaking Down the Bailout

Did you get upset when you heard that AIG executives were giving themselves $165 million in bonuses? It gets worse…

At the core of the AIG meltdown was the rampant sale and lack of regulation of ‘credit default swaps’.

“Credit default swaps are a type of credit insurance contract in which one party pays another party to protect it from the risk of default on a particular debt instrument. If that debt instrument (a bond, a bank loan, a mortgage) defaults, the insurer compensates the insured for his loss.”

The crux is you don’t have own the “bond, bank loan, or mortgage” to buy or sell an insurance policy on it. Like the “60 Minutes” report said “it was effectively a bet”. We were living in Casino Capitalism.

Since Credit Default Swaps were (along with almost everything else) unregulated and didn’t require collateral to back up the policies, AIG sold BILLIONS of dollars of them and posted huge ‘profits’. This ‘income’ listed as ‘profit’ was in fact liability. But AIG, Lehman, and other banks used this ‘income’ (actually liability) to swallow other companies and to pay out billions in bonuses. Much of this income was hardly (if at all) taxed because of the Bush tax policy. Many Wall Street types became fantastically wealthy, cash wealthy, and since cash is now king, most of them still are.

AIG and other companies merged themselves into a mega-conglomerates “to big to fail”. This effectively meant that they would be forced to be backed/bailed by the government if anything happened. Any Wall Street tycoon could tell you a company that size collapsing would be a bullet to the heart of the US economy: very bad.

If you ask me this was done ON PURPOSE because it would allow Greedy Wall Street types to sell even more CDFs and devise other complex and exotic financial ‘instruments’ and take huge risks because they and those buying them knew the deals are essentially backed by the US Treasury… and they have money, they are literally printing money.*

* They are actually borrowing it from the Federal Reserve which is a privately held company, but they do print it. It a complicated issue that there are books written about. I recommend checking them out.

Since most of America’s economy wasn’t real i.e. the ‘income’ was actually ‘liability’ and the mortgages were never going to be paid because they were mostly given under fraudulent circumstances to make money in fees and bonuses it was all destined to fail. You could bet on it… but I’ll come back to that.

Bush effectively delayed this unraveling/collapse a few years by loosening the Fed Purse strings creating “cheep or even free money”. FannieMae and FreddyMac were told to give mortgages to anyone basically. This kept people happy while Bush Co. spent trillions on a war. Trillions of dollars America did not have because it’s economy was 30-40% liability.

The public and congress was lied to about this. They were told by Bush Co. that everything is fine. The insiders knew all this, they knew it was going to crash so they bet on it. They bet against (or bought insurance on the debt in case it defaulted) America and it’s consumers. They paid pennies on the dollar for these CDF policies that had made AIG and other institutions wealthy, and when the crash came they made out huge… With just one catch.

The problem was since the money wasn’t there to pay these CDF “bets against the US economy” insurance policies, (the bets that essentially created the collapse) how where these going to be paid? All that ‘income’ (liability) was listed as profit and had been given as bonuses, it’s gone. How were these people who wanted the US to fail and bet on it going to be paid?

Bush Co. (under pressure??) had the solution: The Tax payers

The Casino Capitalism economy Wall Street lobbied congress for and were given in 2000 was used to effectively rob the middle class of it’s wealth. Not just by creating the illusion of wealth and pushing people to buy what they could not afford and then take it back, but also by strapping the tax payers with the massive debt (the "bailout" money to pay these CDFs was borrowed) that will take decades to pay off. The interest on the money given to AIG to pay in full (another contentious issue) it’s CDF debt will amount to billions a year. That’s billions the government in all likelihood won't be getting back, will be paying interest to the Federal Reserve on and so it won’t be going to schools and national parks.

Basically the US was set up to fail by people that wanted to make money from it defaulting. In the New World Order most large international institutions have no allegiance to any country. In fact many corporations are bigger and more powerful than most countries. They will bet against or crash the US if it can make them richer. They can take the risk because they can force the government to bail them out if they are wrong. They can’t loose!

The issue I have is that the US tax payers should not be “bailing out” companies that did not have their best interests at heart. They should have been allowed to fail, or only have been partially paid. The 'capitalist' market should have been allowed to correct itself. Some say that would have been ‘catastrophic’ but I think it’s the way capitalism works!!

$600 billion dollars could have kept the US population fed and powered and stable while the market corrected itself. This would have forced out and into the limelight all the people and institutions that created the problem. The US could have created an “Emergency Bank” with say $200 billion of tax dollars that would make loans to “Ma & Pa” small business to keep them going. After all they are the real economy right? This would have allowed time to audit the banks asking for money and put in place measures to keep them from taking the money and using it to reward themselves for failing the US and its tax payers.

It really bothers me because we should have been put onto the green energy and fiscal responsibility path years ago. None of this had to happen. America did not have to have hard times. It was done to make the rich richer and the poor poorer. Plus it helped keep the war going and made oil companies rich. So now we are in a recession and are being strapped with trillion in debt used to bailout banks and companies whose extravagance and bonuses created the problem.

It seems we will always be under the yoke, because that’s they way those with the money want it.

Since we cannot go back... well actually we can.

It's called auditing. It's so simple!

It's time for a full audit off all the institutions that took bailout money. All the executives and all the subsidiaries need to have there books checked by a reputable uncorruptable aduitor(s). Time to assemble the worlds most powerful auditing machine, it will create thousands of jobs and will no doubt reveal billions in unpaid taxes! It will pay for itself ten fold! Plus the fees that will be collected from the executives who broke tax laws and will settle with the IRS to avoid prison time... it just keeps sounding better!

Since the government (the tax payers) owns these companies essentially the reports and who got paid how much should be public, and available. I feel as a tax payer I deserve to know where my money is and has gone.

I think it's the only closure and justice that can be had from this mess.