EU-Digest: The road to financial disaster? - by Rick Morren

EU-Digest editorial on the US economic struggles

The road to financial disaster? - by Rick Morren

A report on Wednesday from Bloomberg which showed that the US Fed is prepared to lend another $7.4 trillion on behalf of U.S. taxpayers to "further" rescue the troubled US financial system, got my attention. According to that story, this $7.4 trillion dollar amount is half of the value of everything produced in the US in the past year! This enormous pledge of funds includes $2.8 trillion already siphoned off by financial institutions in the most important response to an economic emergency since the New Deal of the 1930s, according to data compiled by Bloomberg. The commitment also dwarfs the only plan that was actually approved by the US Congress, the so-called Treasury Department’s $700 billion Troubled Asset Relief Program (TARP), better known before as the bail-out plan. The report also notes that the US Federal Reserve lending last week was 1,900 times the weekly average for the three years before the crisis.

When Congress approved the TARP on Oct. 3, Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson acknowledged the need for transparency and oversight. Now, as regulators commit far more money while refusing to disclose loan recipients or reveal the collateral they are taking in return, you can only wonder why this is happening. Worse, it is happening without much or any reaction from the Congress or the Public at large.

You don't need to be an Einstein to see that there seems to be something "fishy in Denmark", as to the huge amounts of liquidity the Bush Administration is pulling out of the US national coffers at warp speed before they leave office? Whether it’s lending or spending, it’s tax dollars that are going out the window and the US taxpayer is apparently ending up holding "collateral" they don’t know anything about. Shouldn't the "Obama team" start blowing the whistle? Where is all this transparency we were promised by all of them.

IHT: G20 meeting Washington - Paulson could face backlash from poorer countries

For the complete report from the International Herald Tribune click on this link

G20 meeting Washington - Paulson could face backlash from poorer countries

Treasury Secretary Henry Paulson may get an earful Saturday in a meeting with developing country officials whose economies have been harmed by the global credit crisis, analysts said.The move puts emerging market economies such as China, South Korea, and India on a similar footing as the richer countries that make up the G-7, which will meet with Paulson on Friday. On Monday, Robert Zoellick, president of the World Bank, said the G-7 should be expanded to include major growing economies such as Brazil, China, India, and Mexico.

EU-Digest: US economic meltdown -The Bailout : The mother of all Government scams

A special EU-Digest report on the US Congress bail out

US economic meltdown -The Bailout : The mother of all Government scams

The US House of Representatives on Friday passed a modified version of the $700 billion Wall Street bailout bill which it had rejected on Monday. What changed their minds? In one word: fear, says New York Times business columnist Joe Nocera.

Without holding any meaningful hearings or public discussions and listening only to those most responsible for the economic disaster, Federal Reserve Board Chairman Ben Bernanke and Treasury Secretary Henry Paulson, Congress abdicated its responsibility to the American people Individuals working for Wall Street finance, insurance and real estate companies and the companies’ political action committees have contributed more than $47 million to the campaigns of Senator Obama (three of top five sources) and Senator McCain (top five sources), both of whom voted for the bailout. More to the point, Wall Street has contributed more than $1.1 billion dollars to congressional candidates since 2002. Nine of the top ten House recipients of Wall Street “largesse”, who each received an average of $1.5 million, are on the financial oversight and taxation committees.

Locking out most members from all discussions, the congressional "leadership" emerged from their back rooms with legislation that grants Secretary Paulson the ability to spend at least $700 billion to "take such actions as [he] deems necessary" ... " to promote financial market stability. Entrusting tremendous political and financial power (and a ton of borrowed money that taxpayers will have to repay with interest) into Paulson’s sole discretion, members of Congress must have been aware that, prior to his cabinet appointment in 2006, Paulson worked for 32 years at Goldman Sacks, one of the Wall Street firms that stands to benefit greatly from his "actions."

Paulson, who cashed out his Goldman stock valued at $575 million to become the Secretary of Treasury (without having to pay any taxes on the sale), earned more than $53 million in pocket change during just his last two years at Goldman Sacks for innovations such as a new line of "Mortgage Backed Securities." Gambling more than a trillion dollars on risky subprime second mortgages, Paulson cleverly converted them into AAA-rated "secure" investments by purchasing guarantees from the American International Group.

“The $700 billion bailout for Wall Street is driven by fear not fact. This is too much money in too short a time going to too few people while too many questions remain unanswered. Why aren’t we questioning the underlying premise of the need for a bailout with taxpayers’ money?” Kucinich asked from the House floor Monday. “Why have we not considered any alternatives other than to give $700 billion to Wall Street? Why aren’t we asking Wall Street to clean up its own mess? Why aren’t we passing new laws to stop the speculation, which triggered this?aren’t we putting up new regulatory structures to protect investors? How do we even value the $700 billion in toxic assets?”