Tuesday, 20 October 2009
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How Wall Street Is Making Its Billions
According to this blog post from Phillip Greenspun,
"Because of the Collapse of 2008 financial reforms, the big investment banks are able to borrow money from the U.S. government at 0 percent interest. Then they can turn around and buy short-term bonds that pay 2 or 3 percent annual interest. Now they’re making 2 percent on whatever they borrowed. They can use leverage to increase this number, by pledging some of the bonds that they’ve already bought as collateral on additional bonds."-1. The US government used billions of tax dollars to bail out the banks.2. This wasn't enough to "fix" the system, so the US government allows banks to borrow money at 0% interest.3. The banks are using this money to buy US treasuries that pay 2% interest.What's the result? The US taxpayers are being robbed by the banks (again).What do you think of the federal government bailing out the banks with billions of dollars and then funding their billions of dollars in profits? Why aren't US leaders stopping this from happening?
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Comments (5)
Then the banks turn around and charge high interest rates and sky high late fees to the lowly taxpayer who borrows money from them.
The government is slow to respond due to our representatives being brought off and the contamination of Wall Street insiders in so many government operations.
The purpose of these bank bailouts and low interest rates was to encourage lending to small businesses to stimulate our economy and shorten the recession. Instead, big banks used this money to make money for themselves and to give top employees millions in bonuses.
To quote Bob Herbert's Op Ed in the New York Times:
"We’ve spent the last few decades shoveling money at the rich like there was no tomorrow. We abandoned the poor, put an economic stranglehold on the middle class and all but bankrupted the federal government — while giving the banks and megacorporations and the rest of the swells at the top of the economic pyramid just about everything they’ve wanted.
We cannot continue transferring the nation’s wealth to those at the apex of the economic pyramid — which is what we have been doing for the past three decades or so — while hoping that someday, maybe, the benefits of that transfer will trickle down in the form of steady employment and improved living standards for the many millions of families struggling to make it from day to day.
That money is never going to trickle down. It’s a fairy tale. We’re crazy to continue believing it. "
I knew that a bailout would not work. What sense does it make to hand the same corrupt CEO's of these banks more money? The problem is that the government continues to rely on trickle down economics. Even Obama went back on his word and gave more money to banks and even the auto industry. And the American Reinvestment and Recovery Act was pretty much a joke. Lots of money, little to no results.
What should they have done?
1500 dollars to every single tax payer and those that draw disability and social security. No precondition. It would not be put to back taxes and owed child support. 1500 dollars straight back into the citizens hands. Then these people would have paid off some of the debt they owed, either on mortgages or loans, or even the regular bills. Some would have invested it in savings accounts or simply deposited in their banks. Others would have invested it in a new place to stay or a car. Those that owe money to schools would have made a payment or two. This would have injected money directly into these failing banks and allowed them to unfreeze lending sparing many businesses both big and small from the idea of bankruptcy and closure. The theory is, if you hand people money, especially the poor and lower middle class, it will be spent either on goods or debt. Period.
In the end, this would have been considerably cheaper and possibly more effective than the 800 billion 2008 bailout and then the 1 trillion dollar ARandR of 2009.
Borrowing money without interest and then lending it back to the initial lender for interest.... WHAT THE HECK?! The banks are robbing the US Government... aka our tax dollars!
this is amazing http://www.real-wishes.com