Jon Stewart takes Jim Cramer to task for CNBC’s failure to cover the illegal and unethical behavior of banks and financial companies that created our current economic crisis.
Part 1:
Part 2:
Part 3:
How a run on Money Market accounts on September 18th almost collapsed the global economy – terrifying stuff that is just coming out now about what the Treasury and Congress were doing behind the scenes.
Quoting from Zero Hedge:
LiveLeak has caught a scary moment of previously undisclosed insight by Paul Kanjorski where he reveals some facts that have not been captured by the media previously. At 2 minutes and 20 seconds in the video below, Democratic Representative Kanjorski explains how the Federal Reserve told Congress members about a “tremendous draw-down of money market accounts in the United States, to the tune of $550 billion dollars.” According to Kanjorski, this electronic transfer occurred over the period of an hour or two. And it gets worse. Kanjorski paraphrases the following disclosure by Bernanke and Paulson:
On Thursday (Sept 18), at 11am the Federal Reserve noticed a tremendous draw-down of money market accounts in the U.S., to the tune of $550 billion was being drawn out in the matter of an hour or two. The Treasury opened up its window to help and pumped a $105 billion in the system and quickly realized that they could not stem the tide. We were having an electronic run on the banks. They decided to close the operation, close down the money accounts and announce a guarantee of $250,000 per account so there wouldn’t be further panic out there.
If they had not done that, their estimation is that by 2pm that afternoon, $5.5 trillion would have been drawn out of the money market system of the U.S., would have collapsed the entire economy of the U.S., and within 24 hours the world economy would have collapsed. It would have been the end of our economic system and our political system as we know it.
We are no better off today than we were 3 months ago because we have a decrease in the equity positions of banks because other assets are going sour by the moment.
Interestingly, Kanjorski, and likely more and more Democrats, are starting to shift to the camp that more time is needed to make a correct decision this time (which may explain Geithner’s decision to postpone the “bank-rescue” announcement by one day to Tuesday), instead of rushing into another half-baked plan. Very scary stuff.
If you didn’t catch Friday night’s Rachel Maddow show, take the time to watch it now. What she has to say on the Senate’s vote about the economic stimulus bill is critical.
Scary bits in the news, all coming at once.
Publisher O’Reilly lays off 14% of it’s staff – 30 of 222 employees.
Indianapolis insurer Wellpoint lays off 600 people.
Circuit City closes and liquidates remaining stores.
Citigroup reports $8.29 billion loss; twice as much as expected.
Bank of America Posts Quarterly Loss After Bailout
Lots to be happening all at once.
Editorial Ass has some good advice for those in the book publishing industry. Since I’m one of those people, and I’m married to one, and most of my friends have something to do with publishing, I’m going to quote quite a bit of this blog post:
Let’s talk a little bit about what happened in October.
You’ve heard about the massive layoffs at Doubleday; you’ve heard about Harper’s terrible state of profit, BNN’s worst quarter and projected year ever, and the closing of Impetus, an indie press (which, as I’ll explain below, I don’t think was Impetus’s fault even vaguely).
Yes, there’s a crisis.
However. Anyone who wants to talk about “the death of publishing” can leave the room. I’m at the beginning of my career and I plan on being an editor for a long time; a lot of you are yet-to-be-published authors and I’m sure you’re equally intent on not seeing book publishing fold (not that it’s going to; that’s ridiculous). So instead I want to talk about what’s actually causing the problem–it might help us come up with solutions for protecting what’s important to us.
I don’t think anyone’s being really straightforward about what exactly happened, and a lot of it is not very complicated.* The crux of the problem is that book publishing is a returnable industry. That means that say Big Chain Store (BCS) agrees to stock a book that my company publishes. They buy 100 copies at, say, $1 a piece (to be easy). They give me $100; I send them the books. Two months later, they didn’t sell any, so they send them back. I have to give them $100.
Keep in mind a couple of things about this system that don’t work in the publisher’s favor:
1) Shipping costs. Books are heavy.
2) Production fees incurred by the publisher (because, unfortunately, we can’t return the books to the printer).
3) Inflation. Haha.Why do publishing companies put up with this? Yeah, it’s stupid. But it’s an industry standard, and if we don’t let BCS have the option to return books, they simply tell us they won’t stock them. They can carry CDs and calendars and greeting cards, instead.
All right, but this has been the case for awhile. So what went wrong in October?
As you MIGHT have heard by now, we’re having some kind of economic hardship (or something like that). So people spent less cash in September and October. So bookstores sold fewer copies in those two months, and were hit hard like all the other businesses in the country and in a lot of the world.
However, BCS and all its chain compatriots are counting on Christmas sales to save them. They need to stock up! They need to plump their stores with new enticing merchandise so they can convince customers to save them from foreclosure!
Where to get the cash for all the holiday books they needed to stock in October and November? Three. Guesses.
In October, bookstores returned so many books that most publishing companies had more coming into them than going out of them. For some companies, the incoming number was more than several months’ outgoing.Although bookstores are suffering (and how), it was the publishing houses that had to absorb the cost of this cash flow creator. This is why Impetus, a relatively new indie company without the history to survive this shock, folded. Some houses lost so much money in returns in October that profits from the entire rest of 2008 have been negated. Can you imagine? Losing enough in a month to destroy your entire year? (Keep in mind that publishing is a very low profit margin enterprise in the first place; now see how if one month involves more outgoing than incoming money you can easily undo the good of an entire year or more.)
Now you can see the ripples that are happening, the layoffs, the dwindling advances, the precautions about acquiring anything in this climate. If publishing companies are shelling out money to publish books that bookstores only bother to stock for a minute and a half, we are all going to hemorrhage money until there is nothing left standing.
This would be a bad situation for more than the sake of my job or your future novel. It’s about a lot of things–education, hampered information dissemination, conglomerations swallowing mass media, censorship. Whatever. I could extenuate, but I’ll spare you. The point is, when you have a problem, the best thing to do is try to solve it.
For anyone who cares about the book publishing industry and wants to do their part, there’s one simple action step:
Buy a book this weekend.
Just buy one.
Over the weekend, we got caught up on watching our saved Rachel Maddow shows — one thing that struck me was than when she interviewed Pat Buchanan, he keep going to the same talking point — “McCain is suffering in the polls over the last three weeks because of the economy taking a nose dive!”
And McCain is on that meme now, as noted in the Huffington Post: “the economy has hurt us a little bit in the last week or two.”
The trouble is, this economic crisis DIDN’T JUST START a couple of weeks ago. It’s been going on for the middle class for a long time.
Way back on July 2nd I noted that my friends and family were having difficulties caused by our crappy economy, and I started tallying up how many people I was worried about.
On July 23rd, I posted about Matt Taibbi’s article in Rolling Stone “It’s a Class War, Stupid” about the economic crisis that was looming over us — and I actually called it a depression then.
This economic crisis didn’t start with the stock market. It started with employment problems and financial issues quite some time ago. The poor and the middle class have been struggling for a long time, and it’s only just now trickled up to the financial sector.
The difference is that the candidate Obama knows that — and has known for a long time; he’s been talking about domestic and economic issues throughout his campaign. McCain thinks it’s just now happening because it’s just now that his rich friends are affected.
A few days ago, Heather Armstrong posed a question on her blog:
Indulge me for a second and consider this scenario: let’s say you’re given the opportunity to donate some money to a desperate family who would use it to feed their children, but were only able to do so if you donated the same amount of money to someone you knew would use it to buy crack. Would you do it?
The responses were interesting: lots of yes answers, peppered with people who had some angry ideas that the question was really about taxes and how they shouldn’t have to support people on welfare.
I was really struck by the responses of people to her second blog post about the question; the one where she explained WHY she asked it:
But something happened during that Christmas vacation that changed a fundamental part of me, and I bet you he doesn’t even remember this. I’d forgotten about it until last week when my brother and I met for lunch, and sitting there across from him at that sushi restaurant and listening to his stories I remembered what a profound effect his influence has had on me.
It was Christmas 1990, and he and I went shopping at a local mall to find gifts for the family. It was bitterly cold outside made worse by a cutting wet breeze, winters in Memphis are like that, and as we pulled out of the parking lot at the mall we passed a man standing on the median of the road selling single stem roses for $2. He was wearily disheveled, not dressed at all for the weather, and looked like he hadn’t eaten in days. He could have been starving, but he also could have been a drug addict. I’ll never know.
We’d always been taught that you ignore these people, they’ll take your money and use it to buy booze, or they’re somehow scamming you. Better to keep your money and do something more productive with it. Except Ranger pulled right up to the man, handed him a twenty dollar bill and said, “I’d like a rose for my sister,” and he pointed toward the passenger seat. “I haven’t seen her in months.”
The man looked down at the bill as if he were holding a fragile newborn animal, and his hands started to shake.
“Aw man,” he said. “I ain’t got no change for this. You got something smaller?”“No,” said Ranger, and then as he shifted the car into drive he continued, “Please keep it.”
The window was still down as the car pulled away, and I’ll never forget how he called after us, “YOU’LL NEVER KNOW, MAN! YOU’LL NEVER KNOW!”
As we pulled up to a stop light in silence Ranger finally spoke up. “I saw him when we first drove into the parking lot hours ago. No telling how long he’s been out there, and he doesn’t have change for a twenty? LET HIM HAVE MY TWENTY.”
The answers to THIS post are striking: — lots of people saying that they’d rather give money to the homeless than to Lehman Brothers executives.
Reading this article today on what the AIG executives did after the nation bailed out their company nearly made me throw up with anger:
Have you heard of anything more outrageous – a week after taxpayers commit $85 billion dollars to rescue AIG, the company’s leading insurance executives spend hundreds of thousands of dollars at one of the most exclusive resorts in the nation…Let me describe for some of you the charges that the shareholders, taxpayers, had to pay. AIG spent $200,000 dollars for hotel rooms. Almost $150,000 for catered banquets. AIG spent $23,000 at the hotel spa and another $1,400 at the salon. They were getting manicures, facials, pedicures and massages while American people were footing the bill. And they spent another $10,000 dollars for I don’t know what this is, leisure dining. Bars?
There’s a finite amount of natural resources. There are finite amounts of American human workforce. Certainly there are no limits on innovation or imagination, but it’s not like there are many CEOs and executives actually USING innovation or imagination daily.
So where do the rich corporate slugs and the free-market lobbyists and politicians think all these untold millions, billions, trillions are coming from? The future? Outer space?
The reality is that there is a finite amount of real assets, and the more the rich get, the less the rest of us get. And if you shove billions in your pockets, others will starve. That is a simple reality that Americans chasing the “Rags to Riches” ideal just don’t want to hear.
And since when did the American Dream become about getting rich, especially getting rich for shifting around pieces of paper from here to there?
The American Dream was about coming here to feed your family something other than potatoes and dirt. It was about putting a roof over your family’s head that wasn’t full of holes. It was about being able to taking your kids to the doctor when they get sick.
Most Americans are living the American Dream every single day, and they’re so busy chasing financial unicorns that they don’t even know it.
I know I spoke out against bailing out greedy rich Wall Street investors last week, and I still feel that way. But even at that time, I understood that some sort of financial intervention into the economy needed to happen — preferably one that helps the middle and lower classes. I sort of assumed that the bill would actually get passed, and was lamenting that there wasn’t enough there to protect the little guys. But something needs to be done by Washington — a bill NEEDS to be passed, or businesses will start to fail and people will start to lose their jobs.
Treasury Secretary Henry Paulson emerged after the vote and warned of a credit crunch that would affect American businesses and said families would find it harder to get student loans and car loans.
“We need to work as quickly as possible,” he said gravely. “We need to get something done.”
Peter Morici, a professor of business at the University of Maryland, told Early Show anchor Maggie Rodriguez, that the effects of the credit crisis will be felt across the economy, especially since the bailout package failed.
“This impedes the ability of banks to make loans to businesses, to hire people and to just keep their payrolls going,” Morici said. “You know, a lot of department stores borrow money to buy the goods that they sell and pay them back when the goods are sold.“If people can’t borrow money to stay in business or the cost of borrowing becomes prohibitively high, they lay people off and don’t hire workers, so we’ll see unemployment rise more rapidly than we anticipated as the economy slows and see the slowdown deepen. It’s that simple and as more people lose their jobs it recycles through and you get into the downside of the power curve, so to speak.”
The sense of urgency was not universal. Many opponents of the bill argued that the package amounted to a too-costly commitment of taxpayer money to bail out financial institutions for their own mistakes.
Rep. Dean Heller, R-Nev., offered a typical sentiment. “I cannot with good conscience put Nevada’s taxpayers on the hook for the foolish excesses of Wall Street,” he said. “Congress should pass legislation that protects the taxpayer, assists with bad assets and allows the market to correct itself.”
The problem is that the market CAN’T correct itself, because it’s fundamentally broken right now. It’s true that good debt can be sorted out of the mess and loans that actually have assets will still have value – but the credit crunch is stalling anyone from being able to purchase those. The credit contraction has gone too far; there’s no “reset” button. There does need to be some sort of financial intervention on the part of Washington.
Lawmakers need to start talking about this bill differently to the American people, because the word “bailout” is both a misnomer and a button-pushing show stopper, and they need to get serious about making sure the middle and lower classes are shielded from the effects of Wall Street excess.
That’s what the Democrats want to do — provide mortgage protections for you and me:
When asked by Smith why enough Democrats didn’t vote for the bailout to cover for reluctant Republicans, Moran said, “Speaker Pelosi had said to Minority Leader Boehner, ‘If you can put 110 votes up, we’ll match it. We will at least do half of this task, but we don’t want to own this bill. This is your bill. If it’s our bill, we want to put in mortgage protections to help out the homeowners as much as we do Wall Street. We want to pay for the bill so we can do other initiatives rather than financially strapping the country for the next decade.’
“There are a number of things the Democrats wanted [and didn’t get] but nevertheless they realize the urgency of the situation, so almost two-thirds of it went ahead and voted for it,” Moran said.
Here’s an idea we all floated around the table at lunch, and Democrats and Republicans all agreed it was great:
Rather than use the $700 billion (or whatever the hell number) to bail out failing banks, why not take that money and pay off the mortgages of every single American who makes under $1 million a year?
THAT would stimulate your economy, right there. If my mortgage were paid off, we would immediately start building a big carriage house/garage with an apartment above it. I’d also buy a wii.