Does this story sound familiar? Hundreds of billions of dollars handed over by the federal government to the giant banks, the same predatory lenders that helped create this crisis. It looks like the greedy CEOs will not only be able to escape from any serious punishment, but they will likely use the bailouts to hand themselves millions of dollars in golden parachutes.
Since a trillion dollar bailout plan towards the end of 2008, ordinary people have been facing huge monthly layoffs and colossal cuts in social services. Treasury Secretary Timothy Geithner claims the bank handout will be different this time. Geithner, a tax-evader himself, claims his own Department of the U.S. Treasury needs new authority to experiment with responses to the financial crisis. (Washington Post, 11/22/08)
Geithner worked closely with the very same AIG and Wall Street swindlers who handed themselves millions of taxpayer dollars after the bailouts. Should Geithner have the authority to experiment with trillions of dollars of public money?
The proponents of these bailouts, including President Obama, point to Citigroup as an example of a success. After a year of huge losses, the banking firm has reported modest gains in the past quarter after two bailouts, splitting its operations, and having the government become the banks largest single shareholder. Still, the New York Times reports that a substantial share of the profits was simply a result of an accounting adjustment. This is a fancy word for fiddling the books, something the gangsters who run the banks are really good at! Despite Geithners and Obamas claims, the big banks are gambling with our future and they shouldnt be handed more chips to play with.
Headed for Recovery?
There is a possibility that the government buying up massive amounts of toxic assets, injecting hundreds of billions into banks, and taking over part of the banking industry could lead to a brief and weak recovery at some point. However, this upturn would not recreate an economic boom, would not offset the fundamental effects of the crisis, and would not lead to improvements in our living standards. Instead, this economic plan could lead to even bigger problems in the future.
Frightening alarm bells are ringing, not just for labor movement and social justice activists, but also for the most serious economic commentators of the corporate mouthpieces themselves. For instance, the Financial Times commented: Funds from the Troubled Asset Relief Program are only replacing lost capital, not increasing it. When might they end? With key categories of toxic assets still losing value, the answer is: not soon. The scale of lending needed to support a normal cyclical recovery will not materialize. (4/6/09)
Nationalization: Theirs and Ours
The huge crisis has now caused a split in the establishment. Some high-profile economists, while defending the capitalist system, have raised the need to nationalize the big banks. Former World Bank Chief Economist Joseph Stiglitz and Nobel-Prize-winning economist Paul Krugman are raising the need to nationalize the banks as quickly as possible to renew consumer confidence (they also want to turn the banks back over to the gangsters who ran them to the ground at the end of the crisis). This is a big shift away from the previous ideology of the market as a god that could solve all problems.
Democratic socialists want public ownership of the banks, but not to be later handed over to the greedy CEOs and big stockholders. We want democratic public ownership and control to run the banks to promote the production and development of goods and services that can be used in the real economy to improve our lives and create jobs. The boards of directors would be run by ordinary homeowners, workers, and small businesses to promote policies that would benefit the vast majority rather than the profits of a tiny minority..