Following Wall St. advice proves costly
|August 20, 2009||Posted by Jeffery J. Smith under Progress Report, The Progress Report|
Following Wall St. advice proves costly
Poll — 57% don’t see stimulus working
Now could be the last big chance for a long time to let the public know about the geonomic solution. We trim, blend, and append three 2009 articles from: (1) USA Today, Aug 19, on Wall St. advice; (2) USA Today, Aug 17, on failed stimulus by Brad Heath; and (3) the Huffington Post, Aug 6, on bailing out Wall St by Arianna Huffington.
by USA Today, by Brad Heath, and by Arianna Huffington
- Following Wall St. advice proves costly
Despite the biggest stock rally since the Great Depression, you would be in the hole if you followed the advice of Wall Street analysts back in March.
Bloomburg says that Citigroup, Bank of America, and more than a dozen other firms advised their clients to buy European energy producers and US drugmakers and to sell banks and retailers. Had you invested $10,000 on their recommendations, you would have lost it all, plus owe $6,000 for “shorting” banks and retailers.
JJS: Despite their bad advice, they themselves still profit and pay themselves handsomely — using tax dollars. Many have concluded that was a misuse of public money.
- 57% don’t see stimulus working
Six months after the US Government approved spending $787 billion to stimulate the economy, a majority of Americans think the avalanche of new federal debt has cost too much and done too little to end the recession.
A USA TODAY/Gallup Poll found 57% of adults say the stimulus package is having no impact on the economy or making it worse. Even more — 60% — doubt that the stimulus plan will help the economy in the years ahead, and only 18% say it has done anything to help improve their personal situation.
Since the plan began, however, the recession has left an additional 2.2 million Americans without jobs.
JJS: While politicians found it easy to bail out backers, they find it hard to fix the system that goes begging for such enormous bailouts!
- Remember That Whole Thing About Fixing Our Financial System?
The window for reform is closing. If we don’t do it soon, we may not have this opportunity for a long while. As Paul Krugman put it, “by rescuing the financial system without reforming it, Washington has done nothing to protect us from a new crisis, and, in fact, has made another crisis more likely.”
Risky derivatives are traded again, bonuses disconnected from performance are being handed out again, bank lobbyists are spending tens of millions to undermine necessary regulatory reforms again.
There are bills in both the House and the Senate demanding transparency and accountability from the Fed. In the House, Ron Paul’s bill to audit the Fed has 274 co-sponsors — including all Republicans.
But as Neil Barofsky made clear in his testimony to Congress, “TARP has become a program in which taxpayers are not being told what most of the TARP recipients are doing with the money, have still not been told how much their substantial investments are worth, and will not be told the full details of how their money is being invested.”
US Treasurer Tim Geithner bragged that: “We’ve already earned about $6 billion for the taxpayer on those investments.” Sounds great until you consider we actually “invested” $4.7 trillion in our bank bailout. Shouldn’t we demand to know what happened to the remaining $4.694 trillion?
Legislation needs to reform executive pay; the bonuses of several of the biggest banks exceeded their profits. How can they pull that off? With your help. Your tax dollars are helping to pay obscene bonuses to executives of banks that would otherwise have gone belly up. Goldman Sachs made $2.3 billion in 2008, but gave out $4.8 billion in bonuses; they also received $10 billion in TARP funds and more than $12 billion of taxpayer money as a counterparty to AIG. JPMorgan Chase made $5.6 billion, but gave out $8.69 in bonuses; they received $25 billion in taxpayer bailout money. Citigroup and Merrill Lynch lost $54 billion, but gave out $9 billion in bonuses. It must have helped that taxpayers wrote them a check for $55 billion.
Reforming the credit-rating agencies, to avoid ratings shopping by financial institutions and the fundamental conflict of having rating agencies be paid by the companies they are rating — no wonder so much junk got AAA ratings — got a hearing, but we may not see further action.
We have pending reforms, and we have necessary reforms that are not even pending.
Let us never again be vulnerable to institutions that tell us: “If you don’t give us the money, we’re going to blow up the whole system.” Actually, what we have now is worse than a hostage system because in a classic hostage setup, after you pay the ransom you get the hostage back. We’ve paid more than a king’s ransom, but have not taken the hostage — our financial system — back from the banks.
JJS: If we’re really going to protect taxpayers and create a more stable system, the most important reform is to not let mortgages include land value. Then mortgages will have too little value to be attractive to speculators like big bankers. To take land value out of price, just tax land or charge a land-use fee or institute land dues. Then landowners would pay their community for land and borrow from lenders to afford the building. Since buildings depreciate, mortgages would become unwanted as objects of speculation. No more bubbles. Indeed, no more exacerbated business cycle. Brought to you by geonomics.
Jeffery J. Smith runs the Forum on Geonomics.
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