You think Terrorists are the Enemy? Try Bankers! Facts Everyone Must Learn!

These are unusual times, and the mainstream media are still not reporting much about the financial crisis, including that inflation is a tax and this financial crisis was predicted by the previous one in the '80's.

Some facts about the financial crisis.

All of the following is true, not exaggerated and non-partisan. Check it for yourself.

According to the FED's summary of the savings and loan scandal (U.S. General Accounting Office--July 1996), the savings and loan crisis of the 1980s and 1990s wiped out 747 savings and loan banks, costing about $160 billion (more than double that in today's dollars) most of which was paid for by the U.S. government, i.e., you and me.

The most common causes of failure were bankers giving thousands of loans to people who could not pay them back and outright fraud (giving loans to buddies at ridiculous interest rates or, even, that they never expected to get back). Sound familiar?

Every one of those banks were audited yearly and warnings were not sounded by their accounting/auditing firms . . . hmmm. The biggest S & L auditor was the world's largest accounting firm, Arthur Anderson, Inc. Anderson was later completely destroyed when its complicity in the Enron series of frauds was discovered. Yes, completely. BTW, many of the banks now in trouble were forced to pay fines for their complicity with Enron.

So much for financial industry policing itself.

Did we learn from that scandal? No. Do most American adults even know about it? No.

The Enron disaster forced President Bush to appoint William Donaldson, a reformer, to head the Securities and Exchange Commission. After a few years, Donaldson wanted to tighten banking and hedge fund regulations, so Bush fired him. Fact!

Next, the banking rules, i.e., oversight regulations, were actually loosened. A leader of this "deregulation" was Senator Phil Graham who when recently said, "The recession is mostly mental" was fired as John McCain's leading economic advisor.

Next, a loophole in the SEC regulations, hedge funds are completely unregulated, and on many days hedge funds account for about half of the trades on the NY stock exchange. The average salary of the top 29 hedge fund managers last year was over $900 million. That is almost a billion dollars for a year's "work." No exaggeration here. None.

Today, in what seems to be a recurring nightmare, we find that thousands of financial institutions issued literally millions of subprime mortgages to people who cannot pay them back, causing the greatest financial crisis since the Great Depression.

At least six major financial institutions have failed, and TRILLIONS of our tax dollars are being used to guarantee the banks solvency. This is not an exaggeration. How does it feel to own AIG? You bought it yesterday for $85 Billion!

And things could get much worse. According to the FDIC, at least a hundred more banks are expected to fail. According to CNBC, more major institutions are in trouble including Wachovia, Morgan Stanley, Washington Mutual, Goldman Sachs and Citicorp.

Even more ominous, as the following chart shows, foreigners are beginning to stop purchasing our debt which, when including the FED and trade deficits is easily over a trillion/year.



Foreign buyers exited the market for U.S. dollar-denominated debt and securities when the credit crisis surfaced in August of 2007. And their return since is proving to be somewhat tentative, as revealed in the latest U.S. Treasury report on capital flows. In July 2008, foreigners once again fled the scene, and were net sellers in U.S. capital markets to the tune of $25.6 billion.

The stability of U.S. credit markets relies on foreigners recycling their trade surpluses back into the U.S. economy by purchasing dollar-denominated IOUs. As large financial institutions continue to tumble, and the Fed turns on the printing press in an attempt to limit the damage, the flight to safety will mean a flight from the dollar and further trouble for U.S. markets.

Many news sources have recently reported that the Treasury is now printing money. Gold had its highest daily increase in history yesterday. The already weak dollar crashed further. Why mention this?

We will see more inflation which, as I mentioned in my last untold story, is at the highest level in 29 years, and, again, as I noted, inflation is a tax upon you and I. The government prints/borrows more money, and the price of every thing goes up.

The key question:

Who do you think will do a better job of cleaning up the mess? Democrats or Republicans?

It's a fair question -- a crucial question -- a non-partisan question. Do your own research, but come up with an answer . . . before the election. It is a crisis. It is a big deal. It could affect your children's future.

The answer is much more important than which candidate has the cutest wife or children.

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Have a great day,

Bob

Presenter, Media Educator, Consultant
www.bobmccannon.org

Co-President, Co-Founder
The Action Coalition for Media Education,
www.acmecoalition.org
2808 El Tesoro Escondido, Albuquerque NM 87120
mccannon@flash.net (505) 839-9702

Author, "Media Literacy/Media Education
Literature Review" in Children Adolescents
and Media, 2nd edition - college text, July, 2008

Executive Director, 1993 -2005
The New Mexico Media Literacy Project (founded 1993)