The man who bankrupted AmericaIf Bank of America gets a $120 billion government guarantee against their toxic asset losses, on top of Citi’s almost $300 billion guarantee last year, it is becoming increasingly evident that losses will be far bigger than that. Why else would such provisions be provided? There's only one answer: because these losses are real, and they are so today, not some time tomorrow. Which in turn indicates that when tomorrow comes, more guarantees will be needed. There is no way that Bank of America has only $120 billion in potential or even already incurred losses on and off its sheets.
All of which points to a development that is devastating for the American public . While nobody requires to see how big the losses are, or even demands to see the paper they come from, there is a silent move towards transferring the colossal losses to the public purse from the corporate one. The new approach, which gains popularity fast, is called a 'bad bank' or an 'aggregator bank'. Once it’s established, in one form or another, we won't find out about Wall Street’s losses until the next bail-out. And that will be just another incomplete number as well.
This process, if it occurs at all, which is a very bad idea to start with, should at least play out in absolutely transparent circumstances. The reason that doesn't happen is clear: if people knew what was going on, what sort of debts are being unloaded upon them, none of it would not be accepted. And apparently, this is not the end; n fact we haven't seen anything yet. Bloomberg reports:
"President-elect Barack Obama’s advisers see an increasingly grave banking crisis and are considering proposals far more sweeping than any steps that have been taken so far". Yeah, just check your wallet. This one too is on you.
Not surprisingly, we still live in a one-dimensional world. None of the $8+ trillion so far thrown at the US economy has helped that economy one bit. It has merely helped to -temporarily- hide losses at institutions , and to allow the richest part of the nation to get out without much damage. For the (wo)man in the street, things have only gotten worse, and a lot, even if (s)he doesn't yet realize that. But once the rich have covered their positions, there'll be no more reason to hide anything. Tellingly, US mortgage rates are at historical lows, but sales are still going down. There's more than one part of the country where foreclosure sales make up the majority of the total housing market.
What is being presented as daring efforts to save the economy and get people working and spending again, will in reality turn out to be biggest ever drama for the American people, and the most daring crime against them in the history of the nation. As for "get people working", it is becoming clear that unemployment will rise to levels no-one dared mention until recently, apart from a few such as me. To wit: Circuit City just announced the loss of another 30.000 jobs. As for the spending, people will have much less to spend in the years that lie ahead than they have in generations.
Barack Obama has only one answer to the trillions in public funds wasted in the past year and a half: he pushes Double or Nothing. America has become a country that has in its entirety adopted the philosophy and lifestyle that have established its darkest (that’s why they need the bright lights) and seediest corners: Las Vegas and Atlantic City. For all the talk of redemption and salvation, there is only one real religion that governs the US: the dual deity of money and gambling. As many who've walked the shadier alleys in Vegas can tell you, that is the sort of belief system that you can rely on to deliver you into bankruptcy. It’s one religion that holds the promise of a certain outcome. And it's all America has left.
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