The only question any of us should have is this: In a country as rich as ours, and in a country where the wealth is visible in certain neighborhoods and shopping streets around the country and in corporate profits, why are we doing so badly?
The latest predictions go something like this: "We ain't seen nothin' yet!"
We’re now at the brink of a new economic disaster that will eventually yank a chicken out of every pot. The Center on Budget and Policy Priorities calculates that the extended Bush-era tax cuts will contribute by far the largest share to the next decade’s deficits — ahead of the recession’s drain on tax revenues, Iraq and Afghanistan war spending, TARP and Obama’s stimulus. The new Congress’s plan to block any governmental intervention on behalf of 15 million-plus jobless Americans guarantees that the unemployment rate, back up to 9.8 percent as of Friday, will remain intractable too.
Obama should have pounded home the case against profligate tax cuts for the wealthiest before the Democrats lost the Senate. Even now Warren Buffett — not a socialist, by the way — is making the case with a Christie-esque directness that usually eludes the president. “The rich are always going to say that, you know, just give us more money and we’ll all go out and spend more, and then it will trickle down to the rest of you,” he told Christiane Amanpour on “This Week” last Sunday. “But that has not worked the last 10 years, and I hope the American public is catching on.”
Everyone will have caught on by 2012, but that will be too late for many jobless Americans, let alone for Obama. ...Frank Rich
And the New York Times front pager is no less gloomy about what's going on state by state.
...Next year could be even worse. ...Tthere are bigger, longer-term risks, financial analysts say. Their fear is that even when the economy recovers, the shortfalls will not disappear, because many state and local governments have so much debt — several trillion dollars’ worth, with much of it off the books and largely hidden from view — that it could overwhelm them in the next few years. ...
And Felix Rohatyn, the investment banker who jumped in to save New York forty years ago, sees no reason whatsoever for optimism.
... The finances of some state and local governments are so distressed that some analysts say they are reminded of the run-up to the subprime mortgage meltdown or of the debt crisis hitting nations in Europe.
Analysts fear that at some point — no one knows when — investors could balk at lending to the weakest states, setting off a crisis that could spread to the stronger ones, much as the turmoil in Europe has spread from country to country.
Mr. Rohatyn warned that while municipal bankruptcies were rare, they appeared increasingly possible. And the imbalances are so large in some places that the federal government will probably have to step in at some point, he said, even if that seems unlikely in the current political climate.
“I don’t like to play the scared rabbit, but I just don’t see where the end of this is,” he added...
...Scott D. Pattison, the [National Governors'] budget association’s director, said that for states, next year could be “the worst year of this four- or five-year downturn period.”
Obviously the trillion-plus stimulus money which the Republicans cut in half would have gone a long way to stem this tide. But they declined to back an adequate stimulus then and they won't do it now.*
Meanwhile, big business gets bigger. In one of the more revolting (and truly American) developments in entrepreneurial ingenuity, we now have a thriving "divorce industry."
With some in the financial world willing to bet on almost anything, it should be no surprise that a few would see the potential to profit from the often contentious and emotional process of ending a marriage.
So far, the number of companies investing in divorce is small — Balance Point is one of the few that do it exclusively. But other businesses are gearing up. A New York start-up, Churchill Divorce Finance, also is planning to enter the business. The company’s chief executive previously co-founded a publicly traded Australian company, ASK Funding, that has invested tens of millions in divorce cases there.
While this business is in its infancy, Balance Point is part of a bigger trend — the growing industry that invests in other people’s lawsuits, arming plaintiffs with money to help them win more money from defendants. Banks, hedge funds and boutique firms like Balance Point now have a total of $1 billion invested in lawsuits at any given time, industry participants estimate. ...NYT
I say we nationalize the banks that made out like bandits and share their profits among the states. Specifically these banks.
The Fed data showed that the biggest recipient of taxpayer assistance was, naturally, Citigroup. It was followed closely by Morgan Stanley, Merrill Lynch and Bank of America. Goldman Sachs was also a large beneficiary during the darkest moments of 2008.
Remember that the Wall Street firms were imperiled by their excessive use of borrowed money, which generated huge paydays when the cost of those funds was cheap and the values of the assets they were buying were rising at a steady clip. After the bubble burst and financing evaporated, the firms were able to tap into a lending program created by the Fed in mid-March 2008 after Bear Stearns collapsed. It was called the Primary Dealer Credit Facility. ...Gretchen Morgenstern
As Morgenstern points out, they paid 2.25% interest on their "taxpayer assistance," rather than the more reasonable 10%. We could use that 8% ($240 billion?) right about now.
...The Fed has never identified any alternative approaches it might have taken other than the one it chose: simply hurling huge snowballs of cash at Wall Street.
One could argue that the size of the subsidy provided by the Fed to financial institutions during the crisis was a direct result of the fact that the government simply had no plan in place for resolving failing institutions.
“I see this as somewhat of a measure of the panic in which the Fed was operating,” Mr. Kane said. “The way I see it, they were mugged. And through them, the taxpayer was mugged.”
*edited for clarity
