PODCAST-TRANSCRIPT-WEEKLY-UPDATE-2009-JUNE-21(FRANCONOMICS.COM)
Hello, welcome to the weekly economic podcast from Franconomics.com for the week ending June 21, 2009. I am Sam Mishra, your favorite economic podcaster, and let’s begin by using a quote from what the elites are now saying, which we have been saying regularly since the beginning of this year through these podcasts, and about which I have been writing for the last two years --- foreclosures, joblessness, and the downward economic spiral pulling down millions of Americans into homelessness, joblessness, and increasingly, family-and-friends-lessness even as the Goldman bankers boldly proclaim that all is well and better, and that they would be paying at least as much bonus in 2009 as in 2008. Now, now, don’t we all know where the bonus is coming from? From the AIG handout of 12.9 billion $ which the taxpayers have coughed up, so that the free-riding bankers maintain their lifestyles even as we suffer --- no jobs, no homes, no peace of mind, nothing enduring to look forward to, except more drainage of taxpayer dollars through TALF, TARP, pPiP, the Federal Reserve, and the US Treasury to keep bankrupt banks going, along with their ill-gotten, I repeat, devil-ill-gotten, multi-million bonus…
So, the quote from Harvard University’s Joint Center for Housing Studies is “Clear signs of a recovery have yet to emerge, and job losses and the steady stream of foreclosures are keeping many markets under pressure.” Hmmm. Folks, what we need is less Harvard ECONO-mists missing the plights of the average American citizen. This podcast is coming to you from Harvard square, where I overheard two elder citizens pontificating that of course our President, who is a Harvard graduate, will keep recruiting Harvard Econo-mists to craft policy. You know who I am talking about, right? Larry Summers of course. In my humble opinion, I feel MIT economists like Simon Johnson and to some extent, Paul KrUUgman, could have been so much better. But hey, we already have MIT PhD Ben Bernanke leading the 14 trillion dollar leakage to the rich and the wealthy and the powerful. And now that figure is 20 trillion dollars, thanks to the 6 trillion dollars in lost value in home asset prices. Looks like somewhere, Harvard and MIT have lost their way. I should know, for I studied basic economics at MIT. But, I have to say that the top schools have lost their way, and they try to teach their students how to make money at the cost of the next human being standing next door, and that kind of sucks. We at FRANCONOMICS will set it straight in the months and years to come. We will stand up for you, the average American, whose hard-work is being exploited by free-riding politicians and bankers connected to each other, and in the elitistic circles, which I have glimpsed up close and personal, it is called networking, being well-connected, doing very well for oneself, etc. We zoomed in on how political campaign contributions in the last decade brought in the Gramm-Liche-Bliley act of 1999, which has contributed to this mess. I think while bringing out this corruption in our campaign finance reform, I didn’t stress an important fact, which is this: Please don’t contribute to this social evil. Don’t pay 5 dollars to that politician when he or she comes begging for the congress or senate election, the senator or the congressman will take your money, make it work against you, and in times of your financial crisis, make sure that the wealthy bankers keep sending their kids to the good prep schools while you grovel outside your foreclosed home, wondering if you should have worked harder….
OK, now let’s analyze the 101 page report published on June 17th, titled Financial Regulatory Reform, which is partially the reason this podcast got delayed by 2 days. In short, this report was disappointing, but before giving this verdict, I had to read it cover to cover. Creation of a CFPA or Consumer Finance Protection Agency, and the creation of a FSOC or Financial Services Oversight Council headed by the Treasury, stood out. The CFPA will prevent theft and looting and fraud through prevention of issuing sub-prime loans with adjustable rates, etc. etc. OK, let me give you a real-life example of how adjustable rates were adjusting in the past from from 3.75% to 5.75% to 7.75% to 9.75% to 11.75%. So, since 11.75% is more than 3 times 3.75%, if you were paying 35% of your salary when the interest rate was 3.75%, you will mathematically get foreclosed when it crept up to 11.75%. The smarter ones were counting on either refinancing or flipping. I don’t want to get into the details, to learn about this, please refer to my 30 minute speech in the Real Estate Section on Franconomics.com. But all this was in the past. People don’t take out sub-prime loans any more. The Indy Macs of the world are bankrupt. Instead of creating the CFPA, if you instead gave 27000 dollars to each consumer, for the 8 trillion dollars which your banker friends drained through the Federal Reserve and the US treasury, which divided by 300 million Americans works out to 27,000 dollars, that would have been good bottom up revival of the economy. That would have really boosted the C component in the GDP = C + I + G macro-economic equation. But that would not have paid for the Goldman bonus. And that is more important.
Now let’s look at the FSOC or the Financial Services Oversight Council, which will be chaired by the Treasury, and where the Federal Reserve Chairman will just be a member. While it looks like snubbing Dr. Ben and elevating Secretary Timothy, it also gives more power to the Federal Reserve. In fact the 101 page report states: the Federal Reserve currently holds regulatory responsibilities over bank holding companies and is best suited
to take on authority and accountability for consolidated supervision of all Tier 1 FHCs. This FSOC will also have as members the chairmen and women of FDIC, SEC, and the newly crafted NBS or National Bank Supervisor. Coming back to who will char this FSOC, as in the US treasury secretary, let’s not forget what the honorable secretary had to say about Goldman a few months ago when quizzed by the Senators on whether the multi-million compensation of the Goldman CEO should not be axed, for he laid off 10% of his work-force, while paying his cronies and huge bonus. Well what the Senator did not add was all this was done directly or indirectly through the tax dollars, for Goldman received 12.9 billion dollar handout from AIG, and also received 10 billion from TARP, and they have returned the 10 billion to escape the compensation czar. But what is interesting is what the honorable secretary had to say in reply: it is up to the Goldman board to decide that.
Please. Once the business, which is going bankrupt, is bailed out by my tax dollars, it is not an independent business any more. It can not pay a 100 million dollar salary plus bonusto its CEO from my tax dollars. In-stead of pulling back those Goldman and Morgan Stanley and JP Morgan bonus dollars back to the US treasury, you just appoint the treasury secretary, who is a huge supporter of Goldman and Goldman board and Goldman bonus the chair of a Financial Services Oversight Council. At least Dr. Ben has a Ph.D from MIT. What does honorable secretary Timothy have? A track record which supports banks. Folks, it is like your home town police chief chiding all your home town cops after a major bank robbery, when he knows who the robbers are, for the robbers have robbed the bank and partying with the looted money in a nearby town, which the police chief will join a little later, after doing his obligatory chiding and admonition. This Financial Regulatory Reform is … is like that police chief chiding the cops: let’s clean up our act. Let’s not let it happen again. The bank got looted. The town suffered. Instead of inspiring the cops: we know who these robbers are and where they party and how they party. Come on boys, let’s catch them. Yeah, the will is lacking in the current administration to catch the real thieves, the wall-street bankers. Putting a Maddoff in jail is just scratching the surface. You want meaningful reform? Then throw a few of those Goldman executives in jail, instead of giving them Treasury jobs!
In fact, that is all this 101 page report does, it is a summary of what happened in the last couple of years, starting with the sub-prime loans, leading up to the financial meltdown. God, the US treasury department hires full-time people for months to write a report like that. Well, you didn’t have to do that, u submissive treasury employees. All you had to was read my articles on real-estate and markets which I have been doing for more than 2 years now, and my articles on the 14 trillion , now 20 trillion dollar value drain, as in 20 trillion dollar looting and rape of the American consumer by the rich wall-street bankers and their cohorts.
Folks, once the dust settles, and the markets are back up, these wall-street boys will gather together and say: hey, let’s make some money. They will cook up some new derivatives. They will deploy a few hundred lawyers to look for loop-holes in these new committees and new regulations, which, I assure you, will lead to nothing. When the intent is not right, how can the results be. How do I mean? I mean the system is corrupt, you work as treasury secretary for 3 years, and then you are looking for a comfortable job in Wall-Street. Naturally, you let the wall-street robbers, as in bankers, get away with the theft, else they won’t let you in, right. Where is the fundamental change you promised us, President Obama? Your economic team, filled with the Summers and the Geithners, have let us down. They have propped Goldman back up, but let the foreclosed, jobless, American totally down. And that will come back to bite you.
Let me do a brief market summary for closure. Dow Jones, as reported in the last podcast, at 8800, was 37% down from its all time high of 14143. And also was 37% up from its 52 week low of 6440. Now, for the week ending June 21, it was down. And it went down 200 points on Monday June 22. We will analyze the stock market returns vis-à-vis the bond market returns in a future podcast, and will also do a deep analysis of US Treasury bonds, as in 10 and 30 year bonds. As you might have noticed, stock and bond markets are global now, for if the Chinese dump the US treasury bonds, prices will fall, interest rates will rise, mortgage interest rates will rise, and even if you hold 30 year fixed mortgages, your ability to refinance will be curtailed. So, even though Dow Jones is an average of American stocks, its rise and fall is tied to the Global Economy, and an educated person can’t ignore that.
Tune in again for our next weekly podcast, and until then, stay well, take care of yourselves, your families, and oh yes, treat the homeless with the kindness they deserve as fellow human beings.
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