Re: [Marxism] Key Obama backer worth $50 billionprofitsfromtaxpayer bailout of Wall Street

["Joaquin Bustelo" <jbustelo@xxxxxxxxx>]

Mark says, about the economic policies of the Obama administration, "So,
whether asked or not, the question does still stand: 'What next?'"

I'm not sure how long Obama has in terms of public patience, there is a lot
of goodwill for him out there. And it may be he just gets lucky, and the
economy begins to bottom out and starts to climb out of the hole, which then
would be attributed to his policies, although their part in it would have
been. at most, minor. 

But it looks like to me that after a year or a year and a half, Obama is
going to have to change course because what his team is doing really can't
work. The bubble in the financial markets HAS TO BE DEFLATED, not kept
half-inflated with constant pumping in of more and more dollars, whether
from government borrowing of the Fed's printing presses. 

For industrial and service firms, that sort of thing is handled through
bankruptcy reorganization or liquidation, Chapter 11 or Chapter 7. Because
of the nature of banks, that doesn't work, and what happens instead is
nationalization (although the words to use are "receivership" or
"protectorship," and the euphemism REALLY IS right here, for there is no
intention of keeping the banks under government control and running them for
public benefit rather than individual gain). What happens is you wipe out
the stockholders and share the remaining shortfall among the bank's
creditors, declare all those debts and so on extinguished, and then
reprivatize the banks with a certain amount of assets preserved but a lot of
obligations wiped out.

Now the Krugmanites point out that's been done to dozens of small banks
already through the FDIC, in addition to the bigger banks that sold
themselves under government pressure. But it needs to be done at the top of
the financial system. And big shortfalls there --which there are going to
be, that's where the "toxic" assets originated -- would then ripple down the
sector and wipe everyone else out. Maybe a few local banks that still
functioned on the pre-1990's model will survive but that's it.

This is not AT ALL a socialist program, though I daresay many of us will be
quite happy to see a bunch of these rich bastards get royally screwed and
perhaps dumped into prison once the government --and the public-- get a look
at their books. But it would be a program to create from the ruins of the
current financial sector a new, much smaller but "sound" (as advocates of
capitalism see these things) financial sector by wiping out the huge amounts
of fictitious capital that had been allowed to be created and that led to
all these bubbles, or as people like Krugman might say, by recognizing the
losses. 

In terms of policy towards the economic crisis, apart from the stimulus
package, which was a hybrid, Obama has not yet turned away from Clinton-Bush
policies nor Clinton-Bush personnel. 

Joaquin


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