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Kiss the Banks Goodbye
Dave Lindorff
Counterpunch
Friday, March 6, 2009
The futility and stupidity of the Fed’s and the Obama administration’s policy of pumping ever more money into failing banks and insurance companies in a vain effort to get them lending again was demonstrated—if anyone was paying attention—by the collapse in auto sales this past month, with all the leading companies, Ford, GM and Toyota, reporting sales down by about 40%.
This fall off in car buying was despite record discounting by the auto industry, and offers of 0% financing.
Clearly, obtaining financing is not the reason people are not buying cars.
People are not buying cars because they are worried about having a job to enable them to pay back the loan.
It’s the same reason people aren’t buying houses. It’s not that you cannot get a mortgage. There are plenty of smaller banks that would be happy to lend money to buy a house these days. But who’s going to go out and buy a house in this economy? First of all, to buy a house, unless you are a first-time buyer, you have to sell your current house, but that would mean taking a huge loss. Indeed, one in five homes in America today is technically “underwater”—that is, it is worth less than the outstanding mortgage on the property. Probably another one in five are worth little more than the outstanding mortgage. No one would sell a house under either such circumstance.
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The point here is that if people aren’t willing to spend money, then what good is it to give more money to banks and their shareholders, in hopes that they will start lending it? The lending business has two sides—those offering to make a loan, and those wanting to borrow. If there’s no borrower, no amount of money available for lending is going to change the fact that there will be no loans written.
Commercial lending is not that different in this regard. Companies generally borrow money to expand. You don’t need to borrow money when your business is shrinking, unless it is to try and stave off collapse. What a company does when its markets contract and its sales and earnings fall is it cuts back on production and lays off workers. It doesn’t need to borrow money to do this. Of course, if sales collapse too fast, the company could be caught owing back wages to workers. That’s true. And in that case, a company might want to borrow in order to meet its obligations, but that’s hardly the kind of loan a bank would want to make—to a dying enterprise unable to meet payroll.
Business borrows when it is expanding, because that’s a great investment. If you know that you can earn a 15% return on your investment in a period of economic growth, and you can borrow money for expanded production at 4%, that’s a great deal. It’s also a great deal for the bank, since lending to a company that is expanding is a pretty low-risk proposition. The central government wouldn’t have to press banks to lend to such companies. The banks would do it on their own.
So, with the economy still in free fall, with companies laying off American workers at a rate of over 20,000 per day, with real unemployment soaring past 18 percent—one in six American workers are now either out of work and looking for a job, out of work and giving up looking, or involuntarily working part-time—and with family wealth more than 50% eroded away, there is simply no way that Americans are going to turn around and start borrowing and spending again. And given that the American economy is 72% composed of consumer spending, there is no way that the economy is bouncing back anytime soon.
That means that the hundreds of billions of dollars that are being poured into the likes of Citibank and AIG are being completely wasted. It is simply a pointless and scandalous transfer or wealth from the American public to the shareholders of these companies—the very companies and people who caused this catastrophe in the first place.
If you wanted evidence of this futility, just check out the current market capitalization (the current value of all shares of a company) of Citigroup and AIG. Citigroup, despite having received $75 billion in taxpayer bailout money, is now worth $5.4 billion–which is less than Autozone, a chain of car parts stores, and less than H&R Block, the franchise chain of tax preparers. As for AIG, which has received an astonishing $180 billion in taxpayer bailout funds, its total market value today is less than $1 billion! All that bailout money has been lost into thin air, and the government today could buy both companies outright for about what it’s blowing every month in Iraq.
It’s time to put a stop to this farce.
Restoring the American economy is not going to be a matter of simply jump-starting consumer spending, or even business investment. It’s going to take a long, hard, focused effort to move away from a parasitic consumer economy in which profits are largely made through speculation, and towards a real economy that actually makes things that people both here and around the world need.
The sooner this truth is recognized, the more resources the government will still have left to put into the kind of investments that can help make that happen—things like job creation, income supports, home refinancings and medical system reform that could help Americans get back on their feet. Of course, it would also be necessary to end the wars overseas and to dramatically slash military spending.
When former companies like Citicorp and AIG are history, and when former Lehman Brothers, Citibank and AIG managers, as well as most of the Pentagon Brass, are out working at civilian conservation corps camps helping to restore watersheds or replant forests, we will know that the government has finally “gotten” it.
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25 Responses to “Kiss the Banks Goodbye”
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March 6th, 2009 at 2:10 pm
YAY – When all Banks Go under – I am FREE of DEBT
– when they disappear off the face of the planet – i will have NO ONE to pay the debt to, so – If I DO NOT PAY anymore – I have a reason/excuse to NOT TO.. 
oh and Remember The Gov. is NOT STUPID – if u say they are – U ARE STUPID
and keep getting stupider the more u say they are – they are smart – where would they be if this WAS NOT TRUE? and WHERE are U?
I hope people out there get my point… in other words – THEY HAVE A PLAN AND IT’s WORKING OUT AS PLANNED – WHAT U SEE ON TV, ETC… ARE FAKE SAD/MAD, ETC.. EMOTIONS.. It’s all been planned from every aspect of their lives – every emotion, word, etc… ie: THEY KNOW EXACTLY WHAT THEY ARE DOING….
STILL IGNORING GOD? Reply:
March 6th, 2009 at 7:35 pm
I beg to differ. It’s all a spiritual battle and has been for centuries. A repeat of history after repeat after repeat. A prophecy in the dark that relies heavily on human hands, while their knees buckle over crap shooters who miss their mark. If the devil had his way the grand fruition would have occurred long time ago. Many times they failed; though they played into God’s hands without ever realizing it.
Ever hear the song entitled, “Money”?
Seems to me God is trying to get your attention. Everyone is up in arms over the fact that its been stolen. Well it has been. Highway robbery at its best.
But have you ever stolen? No? Ask yourself if you robbed your family. I’m talking the ‘real’ gold. Have you fed them the American Dream void of God? Were your aspirations simply to get ahead regardless of whomever you needed to step over to reach the top? Did it ever matter that your own kid was spiraling down spiritually? but as long as he had a padded bank account, you considered yourself a successful parent? How many times did you close your eyes to the neglected; who are at the center of His heart. Was your tithing spent on dates and fine dining? Did He not allow you to keep the 90 percent?
Yes, the money has been stolen from you. But I believe God wants to restore more than that back to the families. No, you’re not going to starve to death America and a holocaust is out of the question; you can thank your Creator who has His heel on the head of the serpent. But the sting of its tail is to wake you up to the issues that are far more important than the ‘almighty’ dollar.
Many a country has looked upon American people who can no longer get in touch with who they are because their minds eye has been so blinded by economic gain. That part was planned; you’re correct. But it was also a test God allowed. We didn’t pass the test and cemented the outcome with a brazen rejection of Him to make matters worse.
Repent of an indifferent heart America; just like many other countries are doing right now. This is what He’s waiting for. Within one hour, and He could turn the whole ordeal around. But what would happen if He did? Would you return to business as usual? Your ideologies of what success is? Or can you give Him first place in your life, just like you yourself desire in a relationship you’re sold out to. Will you feed your kids the poison of materialism, that clouds the senses, or food for their soul – capable of carrying them through any of life’s trials with an inner peace that no amount of money can offer.
Yes, the money was stolen and you haven’t yet recognized that you even robbed yourselves of the greater riches that only God can give. You’ve looked everywhere and spent much on pleasures that only offer temporary satisfaction.
This is not to push you over the edge, but to push you ‘upward’ because you were heading backwards without realizing it.
JOHN 3:16
TheTruth Reply:
March 6th, 2009 at 9:41 pm
God is a Myth you Moron. (God is trying to get your attention??) Please what is his power running out. You are one brainwashed twit!
The real deal Reply:
March 7th, 2009 at 2:15 am
Dear STILL IGNORING GOD?
Your post is rich with wisdom and full of truth. People like “ the truth “ who are spiritually dead are extremely hard to reach and it takes an extremely long time to wake them up even one iota. Looks like they are going to blow this creation cycle but after another 13,000.000.000 years they will get another shot. . In eternity there is enough time.
Think! Reply:
March 7th, 2009 at 8:50 pm
SPIRITUALTITY HAS NOTHING TO DO WITH THIS GOD THING! THERE IS NO GOD!!
The real deal Reply:
March 7th, 2009 at 9:09 pm
That means that you also don’t exist. Dont think about it.
planetp Reply:
March 6th, 2009 at 11:27 pm
http://www.youtube.com/watch?v.....annel_page Bankster
willyc Reply:
March 7th, 2009 at 2:05 am
i would like to conquerr. they are doing this purposefully. somthing is a foot/ between all this stuff coming out in the media and in holly wood, ie watchmen, international.
I would also like to note that the people who made the international was atlas films, which uses the same logo as the statue in rockefeller center.
March 6th, 2009 at 2:16 pm
Unless we realize that it is the general man in the main street who is the victim, there will be no salvation form the present crisis.
The man in the street has to be financed for the economy to kick start. So long the real victims are neglected, any amount of money pumped in the banks and auto industry or for that matter any other place will only make bad things worst.
So please write off all the bad loans and let the people survive.
March 6th, 2009 at 3:25 pm
gee… ya think??
That is like telling us that Ron Paul lost the election.
March 6th, 2009 at 3:30 pm
While I thoroughly enjoyed the simple elegance with which these economic realities have been presented above, I am once again frustrated by the wrong headed assertion at it’s base. Simply, that these guys in charge “don’t get it”.
How long are we going to naively believe that this calamity is the result of a mistake? That these educated and experienced Wall St. insiders simply pushed the needle too far by accident. This is no accident! They get it! They have done and are doing PRECISELY what was planned and intended all along. To think otherwise is akin to chalking up the Great Depression to a well intentioned Federal Reserve Board who just didn’t understand the consequences of their stubborn refusal to expand the monetary base.
“The result tells the truth”, I read somewhere. That is always true. As we flounder around wondering where our next meal comes from the banking elite is laying the groundwork for an international monetary system that will preside over the governments and peoples of the earth for generations to come. That is the intended result and that result will tell us all the truth when history is written. Unless we stop it NOW!!
March 6th, 2009 at 3:37 pm
Oh. and the Truth will NOT set you free if it lands your ass in jail!
Doc Freedom Reply:
March 6th, 2009 at 5:17 pm
Oh hear now Navy: Now hear this: Under TYRANNY a lot of people, especially INNOCENT people finds their ass in jail.
March 6th, 2009 at 4:09 pm
More propaganda, the banks chose not to lend even thought they get billions in bailouts, they use it to cover their read ink from a system that creates endless amounts of money via interest and there simply not enough principle in the world to pay off an exponential function, not only that but everything that has happened is planned, the people who orchestrated this know what they are doing, they very much get it and are happy to swindle the government and the sheeple of their life savings. It has always been a ponzi scheme to reap a great harvest at the end for the rich. The real question is when will the people get mad and not take it anymore? I hear alot of talk but i dont see anyone grabbing their pitch fork just yet and taking to the streets, until that happens on capitol hill nothing will happen, the only change that is coming is the new world order and this time around there is technology that can kill the masses and crowd control effectively, there is rfid to track everyone and nazi policies hav become science. The best the brightest and the most cold blooded bastards are working for the government, its very much end game people guns food and ammo wont save anyone this time, everyone knows this subconsciously that is why the end of democracy wont come with a thundering applause or a revolution but through the deafening silence of the majority.
March 6th, 2009 at 4:49 pm
This should be required reading for Congress and all CEOs.
March 6th, 2009 at 6:33 pm
You know what? Maybe when more people in this Country lose their homes and jobs they will finally start listening to us. Most people I talk to are really dumbed down on what’s really happening. We need to post this website around in any way we can to wake these people up. It’s fine that we know, but we must tell others also.
March 6th, 2009 at 7:13 pm
The “Too Big to Fail” method is obviously failing.
This article hits the nail on the head.
You cannot sell cars and homes if no one is buying.
Big business is laying off people because people are saving to pay their debts.
Which is exactly what is supposed to happen!! Instead of borrowing your way out of debt.
The biggest failure was pumping that money into the big companies instead of small and new business growth.
Many people are unemployed and trying to start their own businesses to make ends meet.
When natural selection fails, there is a rebirth of new species that flourish in it’s place.
I am a new small business and could use that money to create new jobs.
But I cannot afford the lobbyist GM, AIG, and Banks that can afford to keep us from growing into competition.
What he have seen is the monopoly of big business to stop all competition and therefore laying off people because their quest to conquer costs too much.
It is not the average persons savings that is causing this. It is the hoarding of Billions by the big business and extreme wealthy that is causing this.
I am really upset that after giving them the money, they just took it and kept it. Then liquidate their companies and stick us with the bill.
I am not one to see the government buying bankrupt companies.
If they buy them, it needs to be sold to smaller business!!!
March 6th, 2009 at 9:56 pm
They are winning, as long as we bicker amongst ourselves. This is the thing we must realize. Can you not bitch at one another, but with one another?
March 6th, 2009 at 11:51 pm
Well lets see, the ballot box don’t work
the bankers box isn’t working
Well boys only one box left aye
March 7th, 2009 at 2:34 am
March of the Zombie Banks.
March 7th, 2009 at 8:39 am
i love it when people argue whether or not god exists. Its the most stupid fucking argument ever. you arent going to prove it either way so just shut the fuck up.
you religous zealots need to shut the fuck up.
you atheistic zealots need to shut the fuck up.
March 7th, 2009 at 2:46 pm
DO NOT FEED THE NWO BEAST BANK, THEY JUST KEEP WANTING MORE!!!!
March 7th, 2009 at 2:49 pm
TELL US ABOUT IT WHEN YOU ARE ON YOUR DEATH BED, THEN YOU WILL KNOW THAT GOD IS REAL!!!!!
Ken D. Webber Reply:
March 8th, 2009 at 7:51 pm
I’ve been on a “deathbed” when I had brain surgery. God is not real and I went off under the mask secure in that thought knowing there was no guarantee I would come back. You live your brainwashed life with a mythological crutch because of your own weakness of mind and then you spill out on forum boards that have nothing to do with your topic. The topic is banks and what should be done about them. Let them fail. Let their crutches fall out from under them.
March 9th, 2009 at 7:17 am
So why doesn’t the government simply buy these companies outright if they are only worth a pittance of what they were worth?
No answer to that question says reams about what these bailouts really are about, which is Republicans and Democrats enriching their political contributors. What a scam!
Didn’t the whores being flown in from London and the Free Speech Zones give anybody a clue as to what it’s really about?
If they had a war and no one showed, you think their wouldn’t be bodies?