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about capitalism being the problem. The problem is not with the
ideology of capitalism but the fact that, as correctly stated in the
article, "When it comes to big capital, losses are socialized. Only profits remain private." That
is correct and THAT is where it is wrong. We should NOT be bailing out
ANY private firm! The ideology of Capitalism is beneficial to all. It
is the "socialism" associated with it in the form of the tax payers
bailing these failed capitals out that is flawed. Socialism is not the
answer for it always flawed. Even God doesn't promote socialism
otherwise you would not have "Free Will".
Straight Capitalism would NEVER allow the bailout of private enterprise. And with a socialistic society you can not promote and encourage ingenuity, creativity, spontaneous
knowledge, learning from one's own choices, and all those wonderful
individualized and unique qualities that are prompted by humans who are
in control of all aspects of their life for all of that would be
suppressed under the thumb of socialism which mandates the hell out of
individuals and leaves only weak, muttering humanbots doing exactly as
they are told.
That would be a SICK world!
Laura/whereabouts
-------------------------------------------------------------------------------------------------------------------------------
Record Corporate Bailout Reveals the Bankruptcy of American Capitalism
By Barry Grey
13/09/08 " WSWS" -- - The
US government takeover of the mortgage finance giants Fannie Mae and
Freddie Mac has dealt a shattering blow to the ideology of market
capitalism, which has been used for decades to justify a relentless
assault on the working class and a vast transfer of wealth to the
American ruling elite.
The endless invocations of the virtues of private enterprise,
individual entrepreneurship and self-reliance, used to demonize
socialism and defend a system that exploits the vast majority for the
benefit of a financial elite, have been exposed as frauds. When it
comes to big capital, losses are socialized. Only profits remain
private.
The same forces who year after year have inveighed against "big
government" in order to justify the removal of all legal impediments to
the accumulation of corporate profits and private fortunes, and carry
out the destruction of social safeguards for the working class, have
engineered a massive expansion of government power to safeguard the
interests of the financial elite.
The bailout has as well exposed the real relations of political power
and influence behind the façade of American democracy. The largest
government bailout of private companies in world history—whose ultimate
cost to taxpayers is likely to reach hundreds of billions—was
sanctioned in advance by the Democratic Congress and given instant
approval by the leadership of both parties and both of their
presidential candidates.
There have been no investigations into the greatest financial scandal
in world history. Neither party has any interest in bringing to light
the swindling and skullduggery of the Wall Street moguls, because they
are both bound hand and foot to those responsible for the financial
debacle.
What has been revealed is the existence in the United States, behind
the increasingly tattered veneer of democratic institutions, of a
plutocracy—the political rule of the rich. When it comes to the basic
interests of the financial aristocracy, both parties and all of the
official institutions of society snap to attention and do the bidding
of their Wall Street masters.
The bailout of the two mortgage giants—which account for 80 percent of
new home mortgages in the US—is a demonstration of the historic failure
of American capitalism and the profit system on a global scale. It was
precipitated by the deepest economic crisis since the Depression of the
1930s, whose epicenter is the United States. The Bush administration
moved to take over Fannie Mae and Freddie Mac under conditions of a
rapid erosion of international confidence in the solvency of not only
these two companies, but of the United States government itself.
Over the past several months, global investors, including central banks
and government investment funds, primarily in Asia and Russia, have
been dumping their vast holdings in mortgage-backed securities issued
by the US government-sponsored
firms. Fannie Mae and Freddie Mac have a combined liability of $5.3
trillion in mortgage-backed securities which they own or guarantee. The
run on their assets has not only intensified the crisis of the two
companies, which are massively leveraged and have suffered billions of
dollars in losses as a result of the collapse of the US housing market,
it has thrown into question the status of all US government debt,
including US Treasury bonds.
The US, by far the world's largest debtor nation, with a current
account deficit of nearly $800 billion, is sustained by the inflow of
hundreds of billions of dollars from abroad. It currently imports $1
trillion in foreign capital every year, or over $4 billion every
working day.
But the assumption by the US government of the debts of the two
mortgage companies, while averting an immediate financial meltdown,
only compounds the crisis of American capitalism. As Martin Wolf, the
financial correspondent of the Financial Times, wrote on Tuesday, "As a
result, US housing finance has been brought under direct government
control and, in the process, the gross liabilities of the US
government, properly measured, have increased by $5,400 billion, a sum
equal to the entire publicly held debt and 40 percent of gross domestic
product."
At a stroke, US sovereign debt has doubled and is now roughly equal to
America's gross domestic product. On July 14, one day after US Treasury
Secretary Henry Paulson called for legislation to give him unilateral
and unlimited powers to use public funds to rescue Fannie Mae and
Freddie Mac, the Wall Street Journal editorialized on the implications
of a government bailout of the two companies. It wrote: "But with
financial woes mounting, some investors are betting they may profit
from weighing the unthinkable question: Could the US government
default?"
This immense increase in US government indebtedness can only further
undermine international confidence in the credit-worthiness of US
Treasury bonds, resulting in a further decline in the dollar and a
sharp increase in the interest paid by the US to borrow from its
international creditors.
The claims made by the Bush administration, echoed by the US media,
that the bailout of the two mortgage finance companies will consume at
most $200 billion in public funds—itself a massive amount that eclipses
previous corporate bailouts, including the $160 billion bailout of the
savings and loans industry less than two decades ago—are not credible.
An indication of the sums envisioned by US policy makers is the fact
that the legislation passed last July giving Paulson the power to bail
out Fannie Mae and Freddie Mac raised the US debt limit by $800
billion, increasing the cushion between the debt limit and current
government indebtedness to $1.1 trillion.
Some sense of the social priorities of the US ruling elite and its two
parties can be gleaned from a comparison between the sums being
extended to bail out just these two companies and those allocated by
the federal government in 2008 for education ($67.5 billion),
unemployment benefits ($37.3 billion), highways and mass transit ($53.1
billion) and housing ($7.4 billion).
Moreover, the bailout of Fannie Mae and Freddie Mac is only the prelude
to a far broader use of public funds to bolster the balance sheets of
major corporations. Democratic presidential candidate Barack Obama and
his Republican opponent John McCain are both supporting a $50 billion
bailout of the US auto companies, which will inevitably entail further
cuts in jobs and wages. And the plunge of the Wall Street investment
bank Lehman Brothers toward bankruptcy—the firm's stock fell by 45
percent on Tuesday—poses another rescue operation similar to the $29
billion bailout of Bear Stearns last March.
It is already being widely broached that the government establish a
permanent mechanism for using taxpayer funds to buy billions of dollars
in failing assets from major banks and financial companies. The Wall
Street Journal wrote on Tuesday, "Creating a government-backed entity
to buy up these assets could jump-start the market for home loans and
relieve banks and other financial institutions, which are taking big
hits to their balance sheets as they fall in value."
The Financial Times sounded the same theme, declaring, "The US
government might end up having to support the recapitalization of a
much wider range of financial institutions in order to curb the credit
crunch."
These statements give the lie to the attempt to portray Fannie Mae and
Freddie Mac as aberrations, which in their reckless speculation and
pursuit of super profits departed from the norm. On the contrary, they
typify the financial parasitism and outright criminality that have
become pervasive characteristics of the workings of American capitalism
and the social physiognomy of the US corporate elite.
The operations of the two government-sponsored firms are
entirely in line with the unbridled speculation, based on an immense
expansion of debt, that has become the hallmark of American capitalism.
Their role in the housing and credit boom that has now come crashing
down was of a piece with the creation of the vast edifice of paper
values, engineered through the so-called "securitization" of debt,
which sustained the super profits and immense salaries raked in by Wall
Street.
In the wake of the bailout, press reports have noted the bloated
salaries of the companies' CEOs. Before they were sacked as part of the
government takeover, Fannie Mae CEO Daniel Mudd and Freddie Mac chief
Richard Syron took in between them $29.5 million over the several years
they headed their respective corporations. And they stand to receive
another $29 million as part of their exit packages.
But these sums are by no means exceptional. The Financial Times
reported last week that compensation for major executives of the seven
biggest US banks totaled $95 billion between 2005 and 2007.
The collapse of Fannie Mae and Freddie Mac is a paradigm of the US
economy as a whole. Over the past three decades, the decay of American
capitalism has taken the form of a vast growth of financial parasitism.
At its heart, this involves the separation of wealth creation from the
creation of real value in the production process. The American ruling
elite has largely dismantled the productive base of the US economy,
ruthlessly downsizing manufacturing at the cost of millions of jobs and
the destruction of working class living standards, in order to reap
higher profits from increasingly reckless forms of financial
speculation.
The indices of the growth of financial speculation in the US economy
are staggering: In 1982, the profits of US financial companies
accounted for 5 percent of total after-tax corporate profits. In 2007,
they made up 41 percent of corporate profits.
This process has generated ever greater levels of social inequality,
the most telling symptom of the degenerate state of the US profit
system. A report by the Congressional Research Service, updated July
31, provides a measure of the ever growing chasm between the ruling
elite and the broad mass of the American people. It states that the
share of national income accounted for by the top 1 percent of earners
(as reported on tax returns) reached 21.8 percent in 2005—a level not
seen since 1928. The report further noted that in 2006, corporate
profits totaled 12.4 percent of national income, a level not reached in
50 years.
The cost of the ever-expanding bailout of American big business will be
borne squarely by the working class. Even in the midst of growing
unemployment and poverty and a flood of home foreclosures, there is
much talk in the media about the American people "living beyond their
means."
That the next administration, whether headed by McCain or Obama, will
sharply intensify the assault on working class living standards was
spelled out by the New York Times, which editorialized Tuesday:
"Senators John McCain and Barack Obama have both voiced support for the
bailout, which shows good judgment. But what the next president will
need to worry about, and both candidates need to talk about, is the
depth of the country's economic problems. It will take discipline and
sacrifice to address them."
The only alternative to a rapid lowering of working class living
standards and the only rational and progressive solution to the
financial crisis is a socialist program of nationalization of the
entire financial system under the democratic control of the working
people, with provisions to secure the investments of small depositors
and share-holders. The wealth and resources of the country must be
developed and allocated to meet the social needs of the population, not
the money-mad strivings of financial speculators.
This policy can be carried out only through the independent political
mobilization of the working class in opposition to the two-party system
and the financial aristocracy which it serves. The Socialist Equality
Party is dedicated to the building of such a mass socialist movement of
the working class.
By Barry Grey
13/09/08 " WSWS" -- - The
US government takeover of the mortgage finance giants Fannie Mae and
Freddie Mac has dealt a shattering blow to the ideology of market
capitalism, which has been used for decades to justify a relentless
assault on the working class and a vast transfer of wealth to the
American ruling elite.
The endless invocations of the virtues of private enterprise,
individual entrepreneurship and self-reliance, used to demonize
socialism and defend a system that exploits the vast majority for the
benefit of a financial elite, have been exposed as frauds. When it
comes to big capital, losses are socialized. Only profits remain
private.
The same forces who year after year have inveighed against "big
government" in order to justify the removal of all legal impediments to
the accumulation of corporate profits and private fortunes, and carry
out the destruction of social safeguards for the working class, have
engineered a massive expansion of government power to safeguard the
interests of the financial elite.
The bailout has as well exposed the real relations of political power
and influence behind the façade of American democracy. The largest
government bailout of private companies in world history—whose ultimate
cost to taxpayers is likely to reach hundreds of billions—was
sanctioned in advance by the Democratic Congress and given instant
approval by the leadership of both parties and both of their
presidential candidates.
There have been no investigations into the greatest financial scandal
in world history. Neither party has any interest in bringing to light
the swindling and skullduggery of the Wall Street moguls, because they
are both bound hand and foot to those responsible for the financial
debacle.
What has been revealed is the existence in the United States, behind
the increasingly tattered veneer of democratic institutions, of a
plutocracy—the political rule of the rich. When it comes to the basic
interests of the financial aristocracy, both parties and all of the
official institutions of society snap to attention and do the bidding
of their Wall Street masters.
The bailout of the two mortgage giants—which account for 80 percent of
new home mortgages in the US—is a demonstration of the historic failure
of American capitalism and the profit system on a global scale. It was
precipitated by the deepest economic crisis since the Depression of the
1930s, whose epicenter is the United States. The Bush administration
moved to take over Fannie Mae and Freddie Mac under conditions of a
rapid erosion of international confidence in the solvency of not only
these two companies, but of the United States government itself.
Over the past several months, global investors, including central banks
and government investment funds, primarily in Asia and Russia, have
been dumping their vast holdings in mortgage-backed securities issued
by the US government-sponsored
firms. Fannie Mae and Freddie Mac have a combined liability of $5.3
trillion in mortgage-backed securities which they own or guarantee. The
run on their assets has not only intensified the crisis of the two
companies, which are massively leveraged and have suffered billions of
dollars in losses as a result of the collapse of the US housing market,
it has thrown into question the status of all US government debt,
including US Treasury bonds.
The US, by far the world's largest debtor nation, with a current
account deficit of nearly $800 billion, is sustained by the inflow of
hundreds of billions of dollars from abroad. It currently imports $1
trillion in foreign capital every year, or over $4 billion every
working day.
But the assumption by the US government of the debts of the two
mortgage companies, while averting an immediate financial meltdown,
only compounds the crisis of American capitalism. As Martin Wolf, the
financial correspondent of the Financial Times, wrote on Tuesday, "As a
result, US housing finance has been brought under direct government
control and, in the process, the gross liabilities of the US
government, properly measured, have increased by $5,400 billion, a sum
equal to the entire publicly held debt and 40 percent of gross domestic
product."
At a stroke, US sovereign debt has doubled and is now roughly equal to
America's gross domestic product. On July 14, one day after US Treasury
Secretary Henry Paulson called for legislation to give him unilateral
and unlimited powers to use public funds to rescue Fannie Mae and
Freddie Mac, the Wall Street Journal editorialized on the implications
of a government bailout of the two companies. It wrote: "But with
financial woes mounting, some investors are betting they may profit
from weighing the unthinkable question: Could the US government
default?"
This immense increase in US government indebtedness can only further
undermine international confidence in the credit-worthiness of US
Treasury bonds, resulting in a further decline in the dollar and a
sharp increase in the interest paid by the US to borrow from its
international creditors.
The claims made by the Bush administration, echoed by the US media,
that the bailout of the two mortgage finance companies will consume at
most $200 billion in public funds—itself a massive amount that eclipses
previous corporate bailouts, including the $160 billion bailout of the
savings and loans industry less than two decades ago—are not credible.
An indication of the sums envisioned by US policy makers is the fact
that the legislation passed last July giving Paulson the power to bail
out Fannie Mae and Freddie Mac raised the US debt limit by $800
billion, increasing the cushion between the debt limit and current
government indebtedness to $1.1 trillion.
Some sense of the social priorities of the US ruling elite and its two
parties can be gleaned from a comparison between the sums being
extended to bail out just these two companies and those allocated by
the federal government in 2008 for education ($67.5 billion),
unemployment benefits ($37.3 billion), highways and mass transit ($53.1
billion) and housing ($7.4 billion).
Moreover, the bailout of Fannie Mae and Freddie Mac is only the prelude
to a far broader use of public funds to bolster the balance sheets of
major corporations. Democratic presidential candidate Barack Obama and
his Republican opponent John McCain are both supporting a $50 billion
bailout of the US auto companies, which will inevitably entail further
cuts in jobs and wages. And the plunge of the Wall Street investment
bank Lehman Brothers toward bankruptcy—the firm's stock fell by 45
percent on Tuesday—poses another rescue operation similar to the $29
billion bailout of Bear Stearns last March.
It is already being widely broached that the government establish a
permanent mechanism for using taxpayer funds to buy billions of dollars
in failing assets from major banks and financial companies. The Wall
Street Journal wrote on Tuesday, "Creating a government-backed entity
to buy up these assets could jump-start the market for home loans and
relieve banks and other financial institutions, which are taking big
hits to their balance sheets as they fall in value."
The Financial Times sounded the same theme, declaring, "The US
government might end up having to support the recapitalization of a
much wider range of financial institutions in order to curb the credit
crunch."
These statements give the lie to the attempt to portray Fannie Mae and
Freddie Mac as aberrations, which in their reckless speculation and
pursuit of super profits departed from the norm. On the contrary, they
typify the financial parasitism and outright criminality that have
become pervasive characteristics of the workings of American capitalism
and the social physiognomy of the US corporate elite.
The operations of the two government-sponsored firms are
entirely in line with the unbridled speculation, based on an immense
expansion of debt, that has become the hallmark of American capitalism.
Their role in the housing and credit boom that has now come crashing
down was of a piece with the creation of the vast edifice of paper
values, engineered through the so-called "securitization" of debt,
which sustained the super profits and immense salaries raked in by Wall
Street.
In the wake of the bailout, press reports have noted the bloated
salaries of the companies' CEOs. Before they were sacked as part of the
government takeover, Fannie Mae CEO Daniel Mudd and Freddie Mac chief
Richard Syron took in between them $29.5 million over the several years
they headed their respective corporations. And they stand to receive
another $29 million as part of their exit packages.
But these sums are by no means exceptional. The Financial Times
reported last week that compensation for major executives of the seven
biggest US banks totaled $95 billion between 2005 and 2007.
The collapse of Fannie Mae and Freddie Mac is a paradigm of the US
economy as a whole. Over the past three decades, the decay of American
capitalism has taken the form of a vast growth of financial parasitism.
At its heart, this involves the separation of wealth creation from the
creation of real value in the production process. The American ruling
elite has largely dismantled the productive base of the US economy,
ruthlessly downsizing manufacturing at the cost of millions of jobs and
the destruction of working class living standards, in order to reap
higher profits from increasingly reckless forms of financial
speculation.
The indices of the growth of financial speculation in the US economy
are staggering: In 1982, the profits of US financial companies
accounted for 5 percent of total after-tax corporate profits. In 2007,
they made up 41 percent of corporate profits.
This process has generated ever greater levels of social inequality,
the most telling symptom of the degenerate state of the US profit
system. A report by the Congressional Research Service, updated July
31, provides a measure of the ever growing chasm between the ruling
elite and the broad mass of the American people. It states that the
share of national income accounted for by the top 1 percent of earners
(as reported on tax returns) reached 21.8 percent in 2005—a level not
seen since 1928. The report further noted that in 2006, corporate
profits totaled 12.4 percent of national income, a level not reached in
50 years.
The cost of the ever-expanding bailout of American big business will be
borne squarely by the working class. Even in the midst of growing
unemployment and poverty and a flood of home foreclosures, there is
much talk in the media about the American people "living beyond their
means."
That the next administration, whether headed by McCain or Obama, will
sharply intensify the assault on working class living standards was
spelled out by the New York Times, which editorialized Tuesday:
"Senators John McCain and Barack Obama have both voiced support for the
bailout, which shows good judgment. But what the next president will
need to worry about, and both candidates need to talk about, is the
depth of the country's economic problems. It will take discipline and
sacrifice to address them."
The only alternative to a rapid lowering of working class living
standards and the only rational and progressive solution to the
financial crisis is a socialist program of nationalization of the
entire financial system under the democratic control of the working
people, with provisions to secure the investments of small depositors
and share-holders. The wealth and resources of the country must be
developed and allocated to meet the social needs of the population, not
the money-mad strivings of financial speculators.
This policy can be carried out only through the independent political
mobilization of the working class in opposition to the two-party system
and the financial aristocracy which it serves. The Socialist Equality
Party is dedicated to the building of such a mass socialist movement of
the working class.
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