Saturday, December 13, 2008

Fatal Focus on Banks Rather than People

Someone finally notices the double standards! Banks are given massive cash injection, consequence-free and oversight-free. The auto industry, on the other hand, is given intense scrutiny, with specific plans and terms demanded. The common person, given nothing.

And our politicians are just now beginning to question this? Where have they been the past two months as this has been going on? These committees and investigations are just a way for these cowardly politicians to evade responsibility and blame others for taking action when they stood paralyzed in a state of ignorance and fear. Notice how the report only asks questions, as they notice the Treasury plan totally failing. It does not actually recommend anything.

The economy continues to collapse, at a rate "unexpected by analysts". In short, these so called experts don't know anything. Regardless of how many times their predictions are wrong, or how many bad policies they sign off on, they are never fired or even questioned. The common people are the ones who suffer most, and we need protection from these pretentious crooks.

With a skeptical tone, a congressional panel reviewing the government's $700 billion rescue package for the financial sector is questioning the Bush administration's spending of bailout funds and challenging its reluctance to use the money to reduce foreclosures. The tough reviews come as the Bush administration is considering seeking access to the second half of the $700 billion fund. All but $15 billion of the first $350 billion has been allocated in the two months the program has been in place.

Many Republicans, such as Hensarling, were suspicious of the bailout from the outset. And Democrats, including President-elect Barack Obama, have argued that instead of simply injecting money into banks, the government needed to use the funds to halt rising foreclosures. Federal Reserve Chairman Ben Bernanke has predicted foreclosures in 2008 will reach about 2.25 million.

Much of the criticism aimed at Paulson centers on his decision to shift the program's mission from purchasing troubled assets from banks and other financial institutions to infusing capital into banks by buying stakes in their equity.

At one point the report notes that Congress is demanding that the auto industry restructure itself in exchange for $15 billion in bridge loans and challenges the Treasury to do the same with banks.
"Has Treasury required banks receiving aid to: Present a viable business plan; replace failed executives and/or directors; undertake internal reforms to prevent future crises, to increase oversight, and to ensure better accounting and transparency; undertake any other operational reforms?" it asks.

Last week, the GAO concluded that the government must toughen its monitoring of the bailout fund to ensure that banking institutions limit their top executives' pay and comply with other restrictions. The auditors said the Treasury Department has no mechanism in place to track how institutions are using $150 billion in taxpayer money that the government injected into the banking system as of last month.

Other news:
Wholesalers cut back on their inventories in October by the largest amount since the period following the 2001 terrorist attacks while they watched their sales plunge by a record amount.

Analysts predict more grim news in the months ahead as the current recession deepens.

The Commerce Department reported Wednesday that wholesalers, the companies in the supply chain between manufacturers and retailers, reduced their inventories by 1.1 percent in October, the biggest cutback since a similar drop in inventories in November 2001.

The inventory decline was much bigger than the 0.2 percent decrease economists expected.

Sales at the wholesale level plunged by 4.1 percent in October, the largest decline on record.

The huge declines in inventories and sales provided further evidence that the economy is in a steep recession. Many analysts believe the current recession, which has already lasted 12 months, will drag on until the middle of next year. If it lasts past April, it will become the longest recession in the post World War II period, surpassing recessions in the mid-1970s and early 1980s that both lasted 16 months.

Overall, sales dropped 2.7 percent last month, according to the Goldman achs-International Council of Shopping Centers index based on 37 stores. It was the worst showing since at least 1969, when the index began.

Germany officially fell into recession in November, after a 0.5 per cent contraction in the economy in the third quarter followed a 0.4 per cent contraction earlier this year.

Germany's economy accounts for a third of the 15-nation eurozone.

British industry is contracting at the fastest pace since 1991. The speed at which the economy is shrinking has doubled to at least one per cent in the past three months, from an already severe 0.5 per cent officially reported for the third quarter, according to NIESR.

The UK economy is expected to officially fall into recession in the fourth quarter of this year — the technical definition of a recession is two consecutive quarters of negative growth. The most recent release of worrying economic data showed that industrial production, which counts for just under a fifth of Britain's GDP, fell by 1.7 per cent in October, the biggest slump since January 2003, official figures show.

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