Financial System Riskier, Next Bailout Will Be Costlier, S&P Says

Financial System Riskier, Next Bailout Will Be Costlier, S&P Says

Huff Post- Shahien Nasiripour

First Posted: 04/19/11 05:26 PM ET Updated: 04/19/11 06:00 PM ET

The financial system poses an even greater risk to taxpayers than before the crisis, according to analysts at Standard & Poor’s. The next rescue could be about a trillion dollars costlier, the credit rating agency warned.

S&P put policymakers on notice, saying there’s “at least a one-in-three” chance that the U.S. government may lose its coveted AAA credit rating. Various risks could lead the agency to downgrade the Treasury’s credit worthiness, including policymakers’ penchant for rescuing bankers and traders from their failures.

“The potential for further extraordinary official assistance to large players in the U.S. financial sector poses a negative risk to the government’s credit rating,” S&P said in its Monday report.

But, the agency’s analysts warned, “we believe the risks from the U.S. financial sector are higher than we considered them to be before 2008.”

Because of the increased risk, S&P forecasts the potential initial cost to taxpayers of the next crisis cleanup to approach 34 percent of the nation’s annual economic output, or gross domestic product. In 2007, the agency’s analysts estimated it could cost 26 percent of GDP.

Last year, U.S. output neared $14.7 trillion, according to the Commerce Department. By S&P’s estimate, that means taxpayers could be hit with $5 trillion in costs in the event of another financial collapse.

Experts said that while the cost estimate seems unusually high, there’s little dispute that when the next crisis hits, it will not be anticipated — and it will likely hurt the economy more than the last financial crisis.

MORE HERE

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Republicans Demand a Government Takeover and Bailout of the Oil Spill

The words “government takeover” were originally injected into the discourse by Frank Luntz in the early stages of the health care reform process and have been repeated in the pejorative sense by Republicans across the board.

Despite the fact that thousands of Americans die every month from a lack of affordable health insurance, the Republicans have argued that the government isn’t allowed to “takeover” the industry. It goes without saying that the president wasn’t proposing any such thing and, in fact, publicly denounced single-payer health insurance, but okay. The Republicans truly believe the health care reform bill is socialism and a total takeover of the industry. It’s not.

Likewise, the Republicans and tea party people have been screeching about the bailouts. They insist that the banks and financial institutions (and GM) should have been allowed to fail, rather than receiving emergency loans from the government in order to, at the time, prevent the American economy from being dragged down along with these institutions had they not been hoisted with an infusion of cash.

Speaking of which, the Republicans also loudly opposed the recovery bill, which included, as a total dollar amount, the biggest middle class tax cut in American history as well as a considerable amount of funding for the states. Yet the Republicans, once again, screeched about state’s rights and tried to block the funding.

In his response to the president’s first address to a joint session of Congress, Governor Bobby Jindal of Louisiana famously mocked such obviously hilarious things as volcano monitoring in the recovery bill. Volcanoes? Why should we monitor those?

The dominant centerpiece to all of this outrage has been the Republican idea that the states and the free market should be left alone to deal with problems and crises on its own without “socialist” — or even “communist” depending on which AM radio station you listen to — interference from big government and our America-hating president. No government takeovers. Freedom! Liberty! And no stupid volcano thingees also.

Americans dying from a lack of health insurance? Too bad. No government takeover. The economy about to sink into a second Great Depression? Too bad. No government takeover. The Earth growing warmer due to the burning of fossil fuels? Too bad. No government takeover.

That is until last month.

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Austin Plane Crash: Anti-IRS And Federal Government

Crash Pilot Appears To Have Written Anti-IRS, Anti-Corporate Screed

TPM Muckraker

Zachary Roth | February 18, 2010, 2:45PM

Joe Stack, the Texas man who this morning, say law enforcement officials, flew a plane into an Austin building that houses a local IRS office, appears to be the author of a lengthy online screed, lashing out at the IRS, the federal government, and big corporations, and referring to his coming death.

The rant reflects many of the same populist, anti-government, anti-tax, and anti-corporate themes that have surfaced around the country over the last year. It is entitled, and concludes: “Well, Mr. Big Brother IRS man, let’s try something different; take my pound of flesh and sleep well.”

Stack’s Austin home was on fire this morning, at roughly the same time that he’s said to have crashed his plane, according to the Austin-American Statesman.

Stack died in the crash, officials have confirmed. The paper adds that an IRS revenue collection agent who worked on the building’s second floor is missing, according to another revenue agent who worked in the building. The building, known as the Echelon 1 Building, houses about 190 IRS employees, according to a statement from the agency.

The FAA has said the crash appears to be a “criminal act” and that the FBI would take the lead in investigating the incident. But federal officials have said they don’t consider the crash to be a terrorist attack, according to the New York Times.

In the message, posted at the site EmbeddedArt.com, Stack, a software engineer, writes that the idea of “No Taxation Without Representation” is espoused as a principle, but that in reality, “anyone who really stands up for that principal is promptly labeled a ‘crackpot’, traitor and worse.”

He also appears to denounce the Wall Street firms that helped caused the financial crisis — and even the lack of progress on health-care reform, criticizing Washington politicians for failing to fix “the joke we call the American medical system,” and for doing the bidding of the drug and insurance companies:

Why is it that a handful of thugs and plunderers can commit unthinkable atrocities (and in the case of the GM executives, for scores of years) and when it’s time for their gravy train to crash under the weight of their gluttony and overwhelming stupidity, the force of the full federal government has no difficulty coming to their aid within days if not hours? Yet at the same time, the joke we call the American medical system, including the drug and insurance companies, are murdering tens of thousands of people a year and stealing from the corpses and victims they cripple, and this country’s leaders don’t see this as important as bailing out a few of their vile, rich cronies. Yet, the political “representatives” (thieves, liars, and self-serving scumbags is far more accurate) have endless time to sit around for year after year and debate the state of the “terrible health care problem”. It’s clear they see no crisis as long as the dead people don’t get in the way of their corporate profits rolling in.

Referring to the bailouts of airlines after 9/11, Stack writes: “the Government came to the aid of the airlines with billions of our tax dollars … as usual they left me to rot and die while they bailed out their rich, incompetent cronies WITH MY MONEY!”

He adds: “There has never been a politician cast a vote on any matter with the likes of me or my interests in mind. Nor, for that matter, are they the least bit interested in me or anything I have to say.”

He concludes with a shot at the capitalist system:

The communist creed: From each according to his ability, to each according to his need.The capitalist creed: From each according to his gullibility, to each according to his greed.

Chillingly, Stack signs his message: “Joe Stack (1956-2010).”

You can read the full message here.

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Happy Anniversary: American Recovery And Reinvestment Act

It seems like just yesterday that Republicans, wingnuts and teabaggers suffered a collective schizoid embolism over the passage and signing of the American Recovery and Reinvestment Act.

One year ago today, the president signed the bill amidst protestations from Fox News, talk radio and Rick Santelli about how the “porkulus” spending bill wouldn’t work — how it wouldn’t stimulate economic growth or create jobs. It was called generational theft, socialism, communism, Nazism and any other -ism that could be quickly plucked from the glossary of Glenn Beck’s fifth grade social studies textbook.

Nearly all Republican members of Congress voted against it — the first shot in their “trash and cash” strategy whereby they screech about the evil stimulus and how it’s an unmitigated catastrophe, while also gleefully celebrating the incoming cash in their districts, scores of Republican lawmakers outright begging various cabinet-level agencies for stimulus grant money. In all, 111 members of Congress have engaged in this hypocrisy. One of many reasons why they’re consistent only in their unapologetic self-contradictions.

And, at the end of the day, they can get away with it because of annoyingly common misconceptions about the bill. Chief among these misconceptions is the mixing up of the stimulus and the bailout. A recent CNN poll shows that only 25 percent of Americans think the stimulus helped the middle class, while a majority think it helped bankers. Of course the stimulus had nothing to do with bankers.

CNN Polling Director Keating Holland: “It’s possible that the belief that the stimulus bill helped bankers and CEOs is due to the public confusing the stimulus bill with the various bailout bills that were passed at roughly the same time last year.”

So let’s clear this up.

The American Recovery and Reinvestment Act is “the stimulus.” Those signs you see along the highway just before driving onto super-smooth new asphalt? That’s the stimulus. The recovery act. When you hear “stimulus,” it references this $787 billion spending bill, and it contains the following key provisions.

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The Secrets of China’s Economy: The Government Owns the Banks rather than the Reverse

How can China’s stimulus plan be working so well, when ours is barely working at all? The answer may be simple: China has not let its banking system run roughshod over its productive economy. Chinese banks work for the people rather than the reverse.” Ellen Brown

MASH dude Demarco slays the China Banks

Ellen Brown | Global Research | August 18, 2009

“The banks — hard to believe in a time when we’re facing a banking crisis that many of the banks created — are still the most powerful lobby on Capitol Hill. They frankly own the place.” — U.S. Senator Dick Durbin, Democratic Party Whip, April 30, 2009

While the U.S. spends trillions of dollars to bail out its banking system, leaving its economy to languish, China is being called a “miracle economy” that has decoupled from the rest of the world. As the rest of the world sinks into the worst recession since the 1930s, China has maintained a phenomenal 8% annual growth rate. Those are the reports, but commentators are dubious. They ask how that growth is possible, when other countries relying heavily on exports have suffered major downturns and remain in the doldrums. Economist Richard Wolff skeptically observes:

We now have a situation in the world where we have a global capitalist crisis. Everywhere, consumption is down. Everywhere, people are buying fewer goods, including goods from China. How is it possible that in that society, so dependent on the world economy, they could now have an explosive growth? Their stock market is now 100 percent higher than at its low — nothing remotely like that hardly anywhere in the world, certainly not in the United States or Europe. How is that possible? In order to believe what the Chinese are saying, you would have to agree that in a matter of months, at most a year, no more, they have been able to transform their economy from an export-based powerhouse to a domestically focused industrial engine. Nowhere in the world has that ever taken less than decades.”

ORIGINAL ARTICLE

Bank of China to ‘cherry-pick’ UK mortgage customers as lending drought persists

Telegraph.co.uk | 20 Aug 2009

Bank of China, the country’s third biggest bank, plans to ‘cherry-pick’ UK mortgage customers as the lending drought in Britain remains.

In an interview with Bloomberg, Xixu Sun, the head of Bank of China’s retail operations in the UK, said “before the financial crisis you didn’t have a choice, you couldn’t cherry-pick the good customers.

Now you have that choice, because there’s a drought in terms of mortgage loans provided by banks.”

Bank of China is looking to become a major household name in Britain’s mortgage market, which has seen lending slump as the recession drives up bad loans at many banks. Although house prices have showed signs of stabilisng in recent weeks, the volume of mortgages approved is still less than half the 108,000 monthly average seen between the boom years of 2003 and 2007.

ORIGINAL ARTICLE

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