Code Blue In The Financial E.R.: Trauma Time - Can the Masters of the Global Economy "Fix" the Crisi

Code Blue In The Financial E.R.: Trauma Time - Can the Masters of the Global

Economy "Fix" the Crisis?

By Danny Schechter

Created Apr 15 2008 - 8:46am

London, April 14: On the weekend that the Federal Reserve Bank intervened to

arrange a bailout of Bear Stearns, the Economist reported it took 50 years

to build a modern financial system and it almost collapsed in one weekend.

We are not used to reading such scary analyses about the fragility of the

economic order. Later, Fed officials admitted that they acted to save the

system, not just one bank, fearing the collapse of any big major financial

institution could bring others down given all the ways the banks are

entangled with each other.

Just a few weeks later on this Spring weekend, financial ministers from

around the world are playing fiscal surgeons. They revved up their

ambulances, sirens blasting, and raced to the scene of the 'subcrime.' Its

now time for the G7 to squish its collective fingers into a dyke springing

more leaks daily. They are now huddling in the emergency room like a trauma

team from a special edition of ER.

Reports the Washington Post with great gravitas:

"It's a hard time to be one of the masters of the global economy.

Those leaders... are gathering in Washington this weekend to sort out

their reactions to the most profound global economic crises in at least a

decade. The situation could reveal the limitations that international

economic institutions face in dealing with the risks inherent to global

capitalism.

'There's got to be something coming out of the weekend, a way to visibly

assume public responsibility for trying to limit the damage that financial

markets can do to our society,' said Colin Bradford, a senior fellow at the

Brookings Institution. 'The pressure is on politicians this weekend to come

up with an answer.... What is the power structure going to do about this?'"

So far, the best efforts and "answers" of the central bankers have not

stemmed the decline. The International Monetary Fund (IMF) also has

criticized bankers for not disclosing all their losses, and governments for

not regulating the excesses.

The Financial Times reveals that the IMF reports "that America was among the

minority of countries that refused to participate in the Financial Sector

Assessment Program, a joint IMF-World Bank program to alert countries to

weaknesses in their financial systems."

They are not alone in worrying. Recently, 259 top economists saw the

"cascading fallout from the subprime loan crisis... as the economy's gravest

threat."

259 of them say it's a bigger threat than terrorism, even bigger than

climate change. But is it being played this way in our media and by our

politicians? Are our social movements making this calamity a priority?

Now, add into this raging fire, a new crisis, a staggering rise in commodity

prices aided and abetted by inflation spurred by interest rate cuts. Already

there are food riots in Haiti that are sure to spread. The cost of rice has

doubled in some countries. Don't believe how serious it is? Check out your

neighborhood grocery store for cost hikes galore.

What was once an American problem has gone global. Britain cut interest

rates to 5% last week but the Euro countries thought it was a bad idea and

did not go along. The fall in the dollar has led to the rise in gas prices.

Can a "perfect storm" be far off?

What will our world's financial geniuses do? Fix the banks of course--even

though many banks actually created and profited in this crisis.

The Post explains their view: "they will look at ways to strengthen the

regulation of banks and other financial institutions to try to lessen risks

to the global system. They have indicated they will embrace recommendations

of the Financial Stability Forum, an international group of bank regulators

and other government officials. The forum urges such steps as encouraging

banks to be more open with their information and pushing government agencies

to coordinate better and respond more aggressively to risks."

Is this likely to fix the immediate growing crisis?

Short answer: NO!

The newspaper admits, "Actions like those may not do much in the short run

to prevent the problems in financial markets from slowing the world

economy."

Translation: they are fiddling like modern day Neros.

It is the banks that need to be held responsible (i.e. investigated, fined

and prosecuted) for their ponzi schemes and phony-baloney lending

"products." Interestingly, when pressed, many admit they were wrong even if

they avoid using terms like wrongdoing. If there was ever a case ripe for

the use of the RICO anti-conspiracy laws, this is it!

The Financial Times reports banks are only divulging their complicity in

hopes of avoiding unwanted repercussions, "The world's leading banks

publicly accepted much of the blame for the credit crisis in an attempt to

stave off calls for more regulation...."

The British press is far more forthright in explaining, in the words of the

Guardian, "how the banking industry created a global crisis." Perhaps that's

because debt-dependent Britain is now also feeling the pain and fearing a

fall.

"The warnings began eight years ago, but even the most respected

financiers did not understand all the risks. The banking industry is gripped

by a credit crisis that has taken the US economy to the brink of recession.

Two banks have, in effect, been nationalized, house prices are tumbling and

it is harder to secure a home loan."

Reports the Economist: "The origins of this crisis lie in the biggest asset

bubble in history; financial markets have already suffered arguably their

biggest shock for 80 years; and America is not the only developed economy

suffering (Britain's housing market, for instance, is showing the same

symptoms as America's."

All the experts fear a recovery may take a long time.

Yet many pundits in the US media are more ho-hum, blaming it all on vague

business cycles and false optimism on Wall Street, as if this downturn is

just the result of the natural order of things. Some blame borrowers more

than lenders.

Financiers like George Soros are jumping up and down urging more relief for

homeowners facing foreclosure. Even John McCain seems to be changing his

tune, acknowledging that the government may have to act.

So far there has been a lot of rhetoric and "balanced" bills including one

beauty from the Senate--mixing pathetic help for victims with subsidies and

tax breaks for builders and lenders.

The bottom line: We are still, many of us, in avoidance mode or denial, not

really paying attention or protesting, perhaps because we think the crisis

will blow over because others have before.

Many of us think the ongoing economic decline will not affect us.

Think again.

--

NOTICE: This post contains copyrighted material the use of which has not

always been authorized by the copyright owner. I am making such material

available to advance understanding of

political, human rights, democracy, scientific, and social justice issues. I

believe this constitutes a 'fair use' of such copyrighted material as

provided for in section 107 of the US Copyright

Law. In accordance with Title 17 U.S.C. Section 107

"A little patience and we shall see the reign of witches pass over, their

spells dissolve, and the people recovering their true sight, restore their

government to its true principles. It is true that in the meantime we are

suffering deeply in spirit,

and incurring the horrors of a war and long oppressions of enormous public

debt. But if the game runs sometimes against us at home we must have

patience till luck turns, and then we shall have an opportunity of winning

back the principles we have lost, for this is a game where principles are at

stake."

-Thomas Jefferson