“I have rarely seen a gamester cured, even by the disasters of his vocation.”
   - Thomas Jefferson

I was browsing used cars on Craig’s list the other day, and continually ran into posts that seemed all too good to be true—late model Honda Accords and Civics, in immaculate condition, for ridiculously low prices. Just for yucks, I contacted several of the sellers and always learned the same thing: 1) The car was not in the advertised market area, but in some distant city, or even overseas. 2) It was supposedly owned by a member of the US military, you know, guys we Americans trust implicitly, 3) the bogus “sergeant” had to ship out to Afghanistan and so he was unloading his wheels dirt cheap, and he could have the military ship the car to the buyer with no problems, 4) a third party escrow service would be used—the buyer pays, but the service holds the money until they take delivery of the car. Fat chance. It was just another scam, one of hundreds that appear like perennial weeds in the garden of life. The only problem is that half the cars advertised there that I can afford to buy turn out to be scams. I’ve had correspondence with half the US army in the last three months, sergeants, lieutenants, and newly divorced captains all desperate to ship me a car on a C-130. The caveat “buyer beware” is so true in this world, from the classifieds of Craig’s list to the boardrooms of our largest banking institutions.

If you want to figure out what the latest scam in the system is, all you have to do is watch the ads on TV asking you to part with your money. Advertising offers us endless products and services to solve some perceived problem. It hides behind a thin veneer of credibility, touts convenience, affordability, long term benefits, if we but part with our hard earned money now. That’s the game, the great scam, and it is never ending. A look at our recent economic history is educational. Let’s visit the last three scam bubbles and note some of the advertising that accompanied them.

The Dot Con

The typo was intentional, for I call the old “dot com” boom the first real con of the new century. The Internet and World Wide Web was sprouting thousands of new web sites per day, companies keen to attract new investment capital by any means possible. Stock prices for new “dot com” companies were soaring to astronomical levels. During the boom it was discovered that AOL had a clever scam going to pad revenue reports. Techdirt.com reported: “AOL had this trick where it would "swap" ads with other sites, where no money changed hands, but both sides would record revenue. That let them boost revenue (up to a billion dollars for AOL) without any actual revenue coming in. It's a nice little trick... and it's also illegal. Though, it all took place in the 2000/2001 timeframe, so it's not clear why it took the SEC seven years to do something about it.”  That’s no mystery. The ingenuity of people intent on bilking someone out of their money by far exceeds the diligence and skill of law enforcement.

Silicon Valley in Northern California exploded with new startups as venture capital fueled the build out of the world wide web. New stock IPOs followed in short order, but it was later learned that many deals, exuberantly negotiated over power lunches in San Jose, never really made it off the napkin blueprint stage. They were clever ideas that  generated no revenue, and became nothing more than huge money sinks. The bankruptcies, mergers, and acquisitions followed soon after, as the luster came off the web when it was realized that only a very few startups ever made money. Share prices fell from over $100 to the penny stock level on many concerns, but the fallen stocks were still hawked with the old shyster standby—that now they represented a great buying opportunity, for profitability was always “just around the corner,” beating somewhere in the ceaseless tick of the market.

The mob even got in on the game, as Stacy Tisdale reported on MarketWatch: “A case of greed, stock manipulation, and murder solicitation led to $50 million in losses for investors. Members of five organized crime families conspired to manipulate 19 stocks in what's called the biggest investment fraud scheme in history. (At that time) And the SEC has suspended trading in two of the companies, Wamex. Investors' insatiable greed for Internet stocks was behind the scam's success, at least while it lasted.” Yes, the old maxim that a new sucker is born every day was never more apparent.  $50 million seemed like a lot when that story first broke. The mob is small potatoes now. Bernie Madoff bested them by a factor of 1000. He bilked investors out of $50,000 million.

Rick Giombetti made an interesting comment concerning the short lived dot com boom on his blog Eat The State.com: “There was no rational reason to buy into a bunch of money losing e-commerce start-ups, but a significant number of people did it anyway. Yet today this socially destructive model of investment is enabled by a system of regulation and public subsidy that only encourages it. The speculative model of investment has moved into other areas, like global currency exchange rates and savings and loans, with predictably disastrous consequences.”

The Market Bull

The over-speculated illusion of dot com riches was further fueled by a general bull market in stocks, which became the next great game. The market was making steady gains, and new TV shows like Cramer’s “Mad Money” served to cheer on the crowd as everybody and their mother suddenly became expert day traders. It was another perfect opportunity to part fools from their money, and again, you have only to recall the predominant advertising of the day to see where the scam was. Remember white haired Peter Lynch mugging the camera with his exhortation to “roll that money over?” Remember the many variations on cheap stock trade ads where you could make a stock play for just $9 bucks?  The brokerage houses, and companies like E*Trade, played the game with devious skill. They pandered to this new crop of upwardly mobile, affluent yuppies who needed no advice on how to day trade, because they were so damn smart—right? E*Trade ran ads featuring an adorable toddler sitting at a computer keyboard and making stock orders with a single keystroke. “If I can do it, you can do it!” the baby explained.

Notice that the blame is set squarely on the borrower in that ad, who is now portrayed as a selfish, spoiled ass who borrowed recklessly and now needs help from—guess who—yes, Lending Tree, the very same company that foisted all the loans on him in the first place! It was all intended, all planned. This was the last stage of the boom-bust cycle, where the banks continued to squeeze the last points, fees, and interest from the orange before credit froze and re-fis became impossible. As the housing market continued to decline, crushing debt laden consumers into default and foreclosure, the Lending Tree ads suddenly morphed into public service announcements admonishing consumers to “borrow wisely.” Again, the ads clearly convey the notion that it was not the bank’s fault, but the irresponsible consumers who they now deemed “sub-prime.” Nothing was said about “lending wisely.” The banks, perpetrators of all the lending and securitization schemes that have now collapsed, continued to pose as upstanding organizations, representatives of “Society” with a capital S. We were just the selfish schmucks who wanted them to lend us money—now the inverse is true, as all the big banks feed at the public trough. Yet they brand us with their little FICO scores, as if we posed some threat to the system by being two days late on a payment, this while hundreds of billions were being destroyed in the boardrooms on Wall Street.

The NY Times wrote: “Whether you are saving money, looking for a loan or managing a business, you can always depend on Chase,” assert ads for the JPMorgan Chase Bank. Ads for New York Life promote a “commitment to our policy holders and their peace of mind” while repeating the words “financial strength” four times — including the first two words of the headlines. Astoria Federal Savings ads promote its longevity, being in business for “more than 118 years,” and use soothing phrases like “We’re part of your community, and we’re here when you need us.”  Yes, “like a good neighbor, State Farm is here!”

Notice how the banking and insurance industry always portrays itself as the bedrock of society, so dependable and reliable, the repository of civility and morality, the template for what is proper and business-like, and always with the best interests of the consumers at heart? In their advertising they are just wholesome Jimmy Stewarts, good neighbors out to help the community. Nothing could be farther from the truth. Here when you need us? Where are the banks today? They’re sitting on a mountain of taxpayer dollars, paying out big bonus money, throwing lavish parties, buying expensive furniture, planning acquisitions and, now that their securities schemes have collapsed, lending has frozen.

BofA CEO Ken Lewis told congress he is out to make “every good loan we can.” I guess that means no more option ARMs or interest only loans that actually see the principle due increase month after month. All these clever loan products were once standard operating procedure, and became the bad loans that undermined the entire system. Now Lewis has suddenly seen the light. He wants to make “good” loans. It’s a pity that wasn’t happening between 2000 and 2006. It’s a pity we don’t know who pocketed the enormous profits raked in during those years, or that we can’t learn who is receiving bonus money, bailout money, loans from the Fed. It’s all being kept “secret.”

Well the facts are no secret to anyone with an ounce of sense these days. With their predatory lending, crushing 30% interest rates and fees on credit, deliberately rigged loan resets, manic over-leveraging into securities, the banks have single handedly taken a wrecking ball to home after home, family after family, neighborhood after neighborhood, city after city. The damage wrought by their housing boom lending schemes has gutted the nation and ruined the economy. It is as if we were strategically carpet bombed by the banking industry, and still they pose as upstanding pillars of society behind their three piece suits and cigars. This illustration is closer to the truth than any TV ad ever spawned by the financial industry.

The Washington Post reported on a list of banks that were paid by the large insurance company AIG after it was bailed out by the government late last year while Bush and Paulson were still at the helm. Here’s where $50 billion of your tax dollars went--to fill the depleting coffers of big world banks, and insure that the wheeler-dealer “investors” who lost money on their securities schemes were repaid.     * Goldman Sachs     * Deutsche Bank     * Merrill Lynch     * Société Générale     * Calyon     * Barclays     * Rabobank     * Danske     * HSBC     * Royal Bank of Scotland     * Banco Santander     * Morgan Stanley     * Wachovia     * Bank of America     * Lloyds Banking Group

So what are we seeing on the airwaves now? TV and radio ads are crowded out by companies offering to negotiate or consolidate people’s debt. Ads exhort people to mail in their gold jewelry for cash. Gold is at $1000 per ounce but people will only be paid a fraction of its real value when they send in their jewelry. It’s just another scam. The vultures have descended on the fallen carcasses of debt strapped consumers, and where stock trade and re-fi companies once flourished, debt managers and gold diggers now rise to the occasion. It’s a sad sign of the times, which can be read so easily by simply following the ads on TV and radio. All the snooty house flipping homeowners are now groveling in debt, while the banks come falling down, one after another, the few still standing being propped up by the US Treasury.

The rot is finally being exposed on all the scams, fraudulent investment schemes, and criminal heists that were going on the last eight years on Wall Street while Bush and Cheney kept the media and public distracted with the kabuki theater they called “the war on terror.” The real terror was being quietly and deviously leveraged on Wall Street. Where was the SEC and FBI? It was recently announced that Bernie Madoff never bought a single share of stock for his bilked clients over a thirteen year period. This from the former head of the NASDAQ itself!  Stanford was supposedly being investigated for 15 years, but was never busted. What more will it take before the public demands the whole rotting system be demolished and rebuilt? This application has performed an illegal operation--time to shut it down.

After the shock of the Madoff Ponzi scheme, I read many articles on the net claiming the whole banking system was, in effect, a Ponzi scheme. Indeed, there is a line of opinion that shows how banking itself is a cleverly rigged game, with rules and regulations all crafted to enrich the banker at the expense of the borrower. Their own money grubbing greed led the banks straight into the pit of insolvency, but they still clamor to take public money so that they can get back to “business as usual.” Jefferson had it right when he said: “I have rarely seen a gamester cured, even by the disasters of his vocation.”

Stock in the once mighty Citigroup fell to $0.97 cents on March 5, and BofA lost over 28% of its dwindling market cap value in a single day. The Government could now buy both banks outright for a tiny fraction of the money they have already given them. Talk of nationalization continues to rise like a chorus in the background of these events. I wonder how they will sell that in the TV commercials? What is also amazing is that there was a crop of big insiders, like Madoff, Stanford and so many others, who were willing to see the demise of the whole system simply to fill their own coffers with ill gotten gain. I have long pondered just what drives a man to further greed after securing his first $100 million. God only knows. It was as if they deliberately set about to bring down the US financial system, and brother, they have done exactly that. Why would government, the agent of “the people,” be in any way interested in restoring the system to the old status quo while leaving the same men who bankrupted the nation still in charge? It’s astounding. Time to push the “reset” button on this whole stinking network we call “the banking system.”

The Greatest Scam of All Time

“The system … was designed to fail. The US was saddled long ago with a debt-based monetary system, whereby the only way money can be introduced into circulation is through bank lending. It was the system that was instituted in 1913 when Congress gave away its constitutional power over money creation to the private banking industry by passing the Federal Reserve Act. It was then that the catastrophe we are now facing became inevitable. It took nearly a century to get here but it finally happened... We could have seen it coming when the dot.com bubble collapsed in 2000-2001, and Fed Chairman Alan Greenspan worked with the Bush administration to substitute the housing bubble for a real recovery. The day of reckoning is here.” Richard C. Cook Global Research

Let’s get right to the heart of the matter: there was never a greater scam than banking itself. Anyone who can simply decide to turn $1000 into $10,000 dollars with the wave of a hand really has a great game going. That’s what banks do when they lend—they simply create money through “fractional reserve lending,” where they only have to hold 10% of the money they lend out. Customer A puts $1000 dollars in the bank. The bank holds $100 and lends out $900 to Customer B, who deposits that in another bank. This bank then lends out $810 to customer C, and holds $90.  Customer C deposits this, which allows a loan of $729 to be created, which gets deposited to create a loan of $656, which gets deposited to create a loan of $590, which gets deposited to create a loan of $531, which gets deposited to create a loan of $478. You see where this is going. By the time the process completes, the banks have “created” some $10,000 from that original deposit of $1000, which, by the way, they still hold in their vaults as the “reserve” underpinning all these loans.

While each loan they “make” appears to be based on deposited money, in fact, the money is simply being created from thin air by the cleverly defined rules of fractional reserve lending. Nice hat trick, eh? And the neat part of that game is that the banks charge and collect interest on all this money they create at their whim, and set the payback tables up so that a typical 30 year mortgage doesn’t really begin to attack the principle in any meaningful way for at least 15 years. The banks front load the loan arrangement so that they pocket over 90% of the interest due on any loan up front, in those early years of repayment—and these are the rules of the very best mortgage products offered, a 30 year fixed interest loan. Consider then the exotic variable rate loans, option ARMs, interest only loans that suckered in a whole generation of hopeful first time buyers, and you see how the banks scammed the entire nation with their lending schemes. No need to belabor the point with an explication of how their credit card lending racket works. You have only to look at your monthly statements.

See why Lending Tree had all those bankers competing for your business? They knew the loans they were making would reset to levels that would make it all but impossible for the borrower to repay—just like the credit card game where the balance and interest can be set so it takes the cardholder over 20 years to pay off the debt. It was, and remains, the greatest scam in history, all masquerading as a public service and dressed out with words like “trust” and “security.”  The “securities” the banks dreamed up invented a whole new level of fraud for profit schemes that now threaten to plunge the entire world into the misery of economic depression. Congressman Charles Lindbergh, Sr. had it right when he stated: “From now on, depressions will be scientifically created.” No wonder Ben Bernanke is so dead set on keeping the inner workings of his little kingdom secret.

Sir Josiah Stamp, Director, Bank of England, 1940 made a simple boast that was entirely true: “Bankers own the earth; take it away from them but leave them with the power to create credit; and, with a flick of a pen, they will create enough money to buy it back again... If you want to be slaves of bankers and pay the cost of your own slavery, then let the bankers control money and control credit.”

When will we learn? What will it take? Let’s face reality: the snake oil salesmen in the banking industry sold this nation into debt slavery, and now the bill has come due as consumers finally collapse—only this time the banks have gamed themselves into bankruptcy. The CEOs and Wall Street Wizards concocted such an enormously over-bloated matrix of “counterparty risk” that few can grasp its true inner workings. Those that do are bemused by the lure of temporary profits, or as the Rothchilds said: “The few who understand the system will either be so interested from it's profits, or so dependent on it's favors, that there will be no opposition from that class.” Just Google up quotations on the ‘evils of banking’ and you can read for hours.

The damage already done to our economy now will be paid by forthcoming generations of Americans, embittered by a declining standard of living that no one alive today would have ever thought possible in this country. The years ahead will be characterized by scarcity, poverty, austerity, frugality, making do, squeaking by, and pinching pennies to “make ends meet.” The $9 day traders are gone. Flip that house is over. The Home Depot granite countertop remodeling craze is toe tagged. It’s enough now for people to simply juggle their credit card bills, which may reach the 10% default level this year according to big issuers like BofA and American Express. That default level will cut profits in the great credit card swindle in half, yet another banking scheme gone bust. So American Express decided to offer customers $300 if they would retire their balance due by March 31st, and close their account. They can see the train wreck coming, and want to recoup as much money as they can before things get worse.

When asked about getting the economy moving again by stimulating spending, when excessive spending was the cause of the problem, Obama was clear on how this crisis developed. He stated correctly that it began with the banks, with reckless investing, over-leveraging, and lax lending. Lack of regulation allowed securities exposures so vast that, when even a small percentage of the loan base defaulted, bank assets were placed in grave jeopardy. This, in turn, led to the “credit crisis” as banks halted lending to preserve capital and service debt. The loss of credit then slammed Main Street, as businesses and customers alike could not get financed. The result was what we have seen, unemployment, and a subsequent death of consumer spending. Will reinvigorating spending become the cure? Obama again told it straight: “That’s unsustainable,” but he indicated his immediate concern was to stop the downward spiral, stabilize the economy, get credit markets unfrozen, and then take a look at our long term sustainability in terms of the spending we rely on to drive our economy. Someone in government actually spoke the word: “sustainable.”

There is perhaps hope, for it is exactly this task of reconfiguring our society to a new and sustainable model that is now before us. But getting things “stabilized” will be a difficult, if not impossible task.  Obama’s dilemma is that he has placed men like Geithner, Summers, and Rubin at the wheel of economic policy. These old banking industry insiders have a clear agenda of preserving the private power and wealth of their old system. They do not see the necessity of radical reform or, if they do, they cannot bring themselves to take on the task. It will be enormously painful—just like being forced to hit that “reset” button after toiling hours at the computer and losing all your work. This vested interest in the Good Old Boyz banking network is the greatest obstacle to our recovery from the calamity these men have made of our economy. No one in the new administration has, as yet, voiced the full truth about our situation, or demonstrated the resolve to do what is necessary to cure the problem. There has been endless word spinning but little real truth.

When heavyweights like Alan Greenspan and Senator Chris Dodd remarked that some banks might have to be nationalized for a short time, a firestorm of speculation followed on the Internet. It prompted the White House to affirm its belief in a private banking system, and sent CEO Ken Lewis of BofA to the plate to deny rumors of nationalization. The NY Times reported: “Kenneth D. Lewis, the chief executive of Bank of America, dismissed talk of nationalization as uninformed speculation. "We see no reason why a company that is profitable, with strong levels of capital and liquidity, and that continues to lend actively should be considered for nationalization," he said.”

What is Mr. Lewis talking about? Here’s a MarketWatch headline from Jan 22, 2008: “Bank of America profit falls 95% on writeoff, trading loss.” At that time Lewis said: “Our fourth-quarter results were severely impacted by ongoing dislocations in capital markets and the slowing economy.”  Then here’s the report on Q1 2008: “Bank America Profit Hit: Falls 77%. CEO Frets for Consumer.” Q2 results came with this CNN headline: “Bank of America profit tumbles 41%”  Q3 2008 profits fell another 68% prompting Lewis to tell the Washington Post: “It’s a damn disaster… We are making every good loan we can find” but “it’s not going to be pretty for awhile.” And all this was before the market crash and severe crisis of September 2008. Weeks later the bank was on government life support. By January of 2009 we read: “BofA reports loss, gets more federal aid.” Lewis, like all the other CEOs before him, is just feeding the public a line of bullshit. It’s the same dangerous deception that sees the banks themselves still in denial concerning the gravity of their situation and the enormity of the damage they have done to the economy, the nation, and the American people. Thanks Ken. If Bush were still in office he might say “heck of a job.”

The situation at BofA, Citigroup, and other banks is far more grave than the public realizes. The corporate owned media continually underplay the magnitude of the crisis. These massive corporations have been reckless and selfish. They operate with only their own interests at heart, and not the interests of the nation and the American people who are their customers. The most exasperating thing is that even if lawmakers see this, they appear unwilling to muster the backbone to do anything about it. CNN reported: “Senator Christopher Dodd, D-Conn. said. ‘AIG's trading partners were not 'innocent victims' here - they were sophisticated investors who took enormous, irresponsible risks.’ Dodd, who chairs the Senate Banking Committee, was echoed by the panel's ranking Republican,  Senator Richard Shelby of Alabama. He called the September collapse of AIG the ‘greatest corporate failure in American history’ and described the recent history of the company a "very disturbing story of malfeasance, incompetence and greed.” Talk is cheap.

The woodshed hearings in congress are pure theater. What congress has done, however, is to reward all these sophisticated investors who took ‘enormous and irresponsible risk’ with train loads of public money. They have given their blessing to all the ‘malfeasance, incompetence and greed’ by signing checks over to the banks by the billions. AIG, once the largest insurance company on earth, has seen its stock value evaporate to just  $0.39 cents a share. The government paid about $175 billion in bailout money to the firm, giving it, (meaning us), an 80% stake. The whole company is now virtually worthless. There is no chance this taxpayer funded investment will ever be recovered. When will lawmakers realize this and do something about it beyond blustering at the hearings?

Ilargi of the Automatic Earth blog commented: “Words spoken about confidence and trust and pulling together as a nation to enable an economic turnaround will ring eerily hollow in the face of tens or hundreds of billions of the people's money transferred to the private accounts of global financiers and market makers who've bet on the wrong horses.” ...Particularly while people lose homes, jobs, retirement savings all across this nation while the bonus money just keeps on rolling on Wall Street.

More than one president has regretted the enormous power so imprudently given over to the banking industry. President Wilson immediately lamented the creation of the Fed on his watch when he said: “I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the civilized world. No longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and duress of a small group of dominant men.” President Lincoln saw the truth of the matter long before that when he wrote: “Corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands, and the Republic is destroyed. I feel at this moment more anxiety for the safety of my country than ever before.”

So do I, Abe. So do I.

I have seen no credible argument that any of the pending bailout or stimulus plans will work to halt the economic decline. Quite the contrary. Everyone from Greenspan to George Soros, to Nouriel Roubini to Pulitzer prize winning economists and all the analysts on the blogosphere are now slowly facing the reality of the depression settling into the veins of the economy. Arnold Schwarzenegger shook down the Republican governor’s convention saying he would take any unwanted stimulus money available from other states. And while he was at it, why not demand their motorcycles, clothes, and boots at the same time! The Terminator almost faced the termination of the California state budget last month. It was saved by arm twisting a single Republican holdout so he would vote for tax hikes that will wipe out 50% of what the government has promised in stimulus relief for Californians.

Across the Internet, the collective consciousness of the news feeds and blogs has slowly moved into an understanding that depression is here, that banks are insolvent, that nationalization at some level is inevitable. Now the mind chatter is trying to fathom the bottom, and wondering just how bad things will get.

Meanwhile, governments have fallen in Iceland and Lithuania. Ukraine is tottering on the brink. There have been mass demonstrations in Greece, France, Russia, Poland, Bulgaria, Ireland and England. Tiny island states like Guadeloupe in the Caribbean serve as microcosms of what may become a rising unrest across the world. Protests over soaring prices and falling wages took the well worn path to street riots there recently. Crowds of angry protestors turned first on wealthy white families, who have crowded the airport with foreign tourists in an effort to flee the island. News agencies reported the general looting of stores, restaurants, and burning of cars, which has quickly become “full scale urban warfare.” France, the administrative authority on the island, has rushed 300 riot police to attempt to restore order. Protests are beginning on the neighboring island of Martinique. The ire of the crowds is clearly being focused on the white colonials, who hold 90% of the wealth. Get this picture?

This is a template that will soon repeat itself across the world. If the wealthy think they can always find an airplane to jet away to safety, and a deposit box for gold in Switzerland, they may be sorely mistaken. The basic inequity Lincoln was talking about, where wealth continually migrates upwards into fewer and fewer hands, can only result in disaster and eventual social breakdown. In boom times no one notices the poor in this country until a hurricane like Katrina blows the roof off the football stadium where they have huddled against the storm. This economic crisis is exposing the same imbalance of wealth in our own nation. One Rich Dad, but Poor Dads in the tens of thousands. Take the basic means of living from the Poor Dads, as these staggering unemployment numbers will, and you will get a recipe for revolution. 50,000 people rallied outside City Hall in Manhattan on March 5 to protest budget cuts to education, services, and health care.

The rumblings in the ranks have only just begun in this country.  Americans have been largely complacent in the face of enormous corruption for one reason only—they aren’t hungry yet. The fact that there is still food on most tables  has kept people off the streets, (though 37 million need food stamps to eat each month). That, and the fact that the electricity still keeps the PCs and TVs all running, is the only reason we still have relative calm in our cities these days. People are not yet desperate. The laid off workers are in line for their unemployment benefits, and living off meager savings. All this could change in a matter of months or even weeks.

So where are we now? The screen is blue, the message in the daily news plain to read concerning our banking system and economy. “This application has committed an illegal operation and will be shut down.” It’s the Blue Screen Of Death—the death of the old system, which will be a necessary for the building of something new in this country.

In my opinion, the only thing that can save us is a complete shutdown and reboot of the system. The problem is simply too severe to ignore any longer. It started in a single household somewhere in Detroit… It spread to households all across America , then to Wall Street as one bank after another came crashing down. Soon the only thing standing will be the US government, bravely guaranteeing all this massive bank debt. This is perhaps why FDIC head Sheila Blair bungled an attempt to raise fees on the banks to restore the waning funds in that institution last week. The FDIC has only about $19 billion left to “insure” your bank deposits. Citigroup alone, just one of the big three banks in the US, has $600 billion in deposits! It’s no surprise that Senator Dodd has now floated the idea of setting up a $500 billion fund to restore the FDIC. That would almost back up Citigroup should it go the way of WaMu and Wachiovia. Now what do we do about the billions in BofA and JP Morgan Chase, not to mention the 8500 other banks in the US, many of which are insolvent.

For that matter, Uncle Sam himself is already bankrupt. The government runs on a massive deficit, and the national debt is ten times bigger. Do you see now why “fixing” the banking system is such a complex and challenging  task, and why the current powers that be of every stripe, whether they be in the Fed, the Treasury, Congress, or the White House, are so reluctant to truly face the problem and do what is necessary to cure it? Everything done to date, all the trillions expended since September of 2008,  has been a half-hearted, stop-gap measure simply aimed at keeping the old system going. A real solution would be as shaking and final as pressing that reset button. It would be the most dramatic and wrenching moment in US history, and the world would ride the maelstrom until a new monetary and financial system was finally put in place--for any real solution would have to be global in scope. Accomplishing that without risking a complete unraveling on a political level will be an enormous task. There is even talk that our great Uncle may have to default as well. At the very least he, or rather we, will be passing this massive debt on to our children and grandchildren. Of this prospect Jefferson wrote: “The principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.”

Are we going to continue to reward the swindlers and pass on this burden to successive generations, or are we going to fix this mess here and now? That is the salient question of this moment, the challenge of our time that Obama so eloquently speaks of. How will we answer it?


John Schettler
March 2009

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