Saving Capitalism: Keeping America Strong (Vintage Originals) - Softcover

Choate, Pat

Softcover

ISBN 10: 0307474836 ISBN 13: 9780307474834

Verlag: Knopf Doubleday Publishing Group, 2009

Inhaltsangabe

When the U.S. financial structure collapsed in fall 2008, it quickly became clear that our system of market capitalism was broken, endangered by decades of absolutist market dogma, shortsighted policies, and the abandonment of America's working people. Now, as the Obama administration seeks to repair the country's economy, one thing is clear: this crisis calls for drastic reforms. Regrettably, the government's response, so far, has been inadequate.

In Saving Capitalism, economist and bestselling author Pat Choate offers six game-changing actions that can strengthen the U.S. economy now and stimulate long-term, self-sustaining, noninflationary economic growth that will create millions of better jobs. Here are proposals for:

• Major tax reform
• All-encompassing financial regulation
• A strong social safety net
• A major infrastructure program
• Ways and means to balance U.S. trade with the rest of the world
• The renewal of national innovation

Urgent and provocative, Saving Capitalism is an accessible and informative dissection of the gravest threat our economy has faced since the Great Depression, and a bold and creative blueprint for the future.

Über diesen Titel

Über die Autorin bzw. den Autor

PAT CHOATE is a political economist, policy analyst, and the author of the books Dangerous Business, Agents of Influence, Hot Property, The High-Flex Society, America in Ruins, and, with Ross Perot, of Save Your Job, Save Our Country. A new book, Preparing for War, is forthcoming from Knopf. In 1996, he was Ross Perot's vice presidential running mate. He lives with his wife outside Washington, D.C.

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Chapter One

MONEY

An unending economic hurricane has been ripping apart the U.S. and world economies since December 2007. In the seventeen months between then and April 2009, the number of unemployed Americans increased by seven million. By April 2009, almost 5.4 million of the nation's 45 million home loans, worth more than $717 billion, were delinquent or in foreclosure.

Although the pace of decline seemed to be slowing by the early summer of 2009, far worse is yet to come in 2010. The Treasury Department's stress test of the nineteen largest banks in early 2009 revealed that they could be forced to write off as much as a fresh $600 billion by the end of 2010, increasing their losses to more than $1 trillion. Most of those mortgage defaults will be by people now at work, who once were thought financially immune to such distress, but now are likely to lose their jobs and then their family homes.

The lender of last resort, the federal government, has tried to blunt this depression with unprecedented levels of money infusions into the U.S. economy. Despite federal commitments of almost $9 trillion for direct investments, $1.7 trillion for guarantees, and $1.4 trillion for loans, plus a cut of the Federal Reserve loan rate to banks of almost zero, the prolonged freeze in credit markets cracked only slightly by the spring of 2009.

In the last quarter of 2008 and the first of 2009, auto production fell by half and global trade declined at the fastest pace since the Great Depression. The governments of Europe, Japan, and China are engaged in massive bailouts of their economies. Yet the bottom of this depression is not visible, let alone a domestic or global upturn.

America's money industry is directly to blame for much of the world's economic meltdown. It gambled with other people's money and lost, used faulty risk-assessment tools, and knowingly sold fraudulent assets, including hundreds of billions of dollars of subprime mortgages, for vast profits. The administrations of Bill Clinton and George W. Bush enabled Wall Street's recklessness by scrapping the regulatory safeguards Franklin Roosevelt had erected in the 1930s. Equally significant, the U.S. Federal Reserve System, Securities and Exchange Commission, and Treasury Department failed to exercise their oversight authority adequately.

The salvage program put into place by both the Bush and Obama administrations is designed to restore the U.S. financial system to the way it was before the crash of 2008, with the same oligarchs in control but with a bit more regulation. If that is all that is accomplished, we will have learned nothing and can be sure that we will have a repeat of the behavior that brought us to this crisis.

We must think bigger about what America wants from the money industry and act accordingly. A strong capitalist system requires an equally strong financial sector, whose integrity is safeguarded by strict federal supervision of all money institutions, bans on Wall Street speculation with other people's money, and an adequate and sound currency, thereby ensuring a steady flow of capital and credit to American businesses of all sizes.

We need a money industry that uses the great reservoirs of other people's money that it holds to serve the real economy, as it did successfully for several decades in the post-World War II era, as opposed to the recent exploitation of privileged access for compensation-based looting, speculation, and selfish schemes. American capitalism needs a long era of dull but prudent banking, overseen by suspicious federal regulators.

The free-market absolutism of the past thirty years, most notably the last ten, created such an antigovernment, antiregulatory bias, coupled with the fantasy that the market always knows best and always regulates itself, that the very will to regulate disappeared at the top levels of American government, academia, and business. For sure, other factors affected this crisis, as subsequent chapters will reveal, but it all came together as a perfect storm in the money industry.

Here are the essentials of what happened and recommendations for rebuilding America's financial system.

The Money Industry

The economic origins of the present crash are the oil shocks of the 1970s, when many major oil-producing countries created their production cartel, the Organization of the Petroleum Exporting Countries (OPEC), and radically increased the price of crude oil. The OPEC nations deposited much of their money for safekeeping in major U.S. banks such as Chase Manhattan, Citibank, Chemical Bank, and Bank of America. These banks recycled hundreds of billions of petrodollar deposits as loans for developing countries, eagerly and often imprudently offering high-interest financing to countries such as Argentina, Brazil, Mexico, Nigeria, Ivory Coast, and the Philippines- nations whose leaders repeatedly stole part of the proceeds, wasted part, and used a little for the intended development.

Forgetting how nations defaulted on loans during economic crises in the 1800s and during the Great Depression, Walter Wriston, chairman of Citibank, then considered America's leading banker, proclaimed in the late 1970s that lending to governments was safe because sovereign nations do not default.

Wriston's maxim was totally wrong. In 1982, when Argentina, Brazil, and Mexico defaulted on more than $300 billion of debt, much of it owed to Citibank, the Federal Reserve and Treasury had to scramble to prevent major U.S. financial institutions, including Citibank, from collapsing. By the end of the 1980s, developing nations had defaulted on more than $1.3 trillion of debt, most of which was owed to U.S. banks. A Washington Post Book Company study revealed that more than one thousand U.S. banks were technically bankrupt by 1992.

Despite the rhetoric of market absolutism embraced by every U.S. president from 1981 to 2008, Washington had to bail out the financial services industry eight times, even as it cancelled many of the financial regulations that governed the industry.

1. In 1982, the Federal Reserve and the Treasury bailed out U.S. banks holding Mexican, Argentine, and Brazilian debt.

2. In 1984, Continental Illinois received a $4 billion rescue package.

3. In the late 1980s, the Federal Reserve paid out large loans to save 350 banks that later failed.

4. Between 1989 and 1992, Congress provided $250 billion to support hundreds of insolvent savings and loan institutions.

5. From 1990 to 1992, federal banking authorities provided $4 billion to save the Bank of New England and arranged for Citibank to get capital from Saudi Arabia.

6. In 1994, Congress provided Mexico a $50 billion loan to bail out Goldman Sachs and other U.S. financial institutions that had bought high-yield Mexican debt.

7. In 1997, the Treasury pushed the International Monetary Fund
(IMF) to rescue East Asian currencies in order to save American lenders.

8. In 1998, the Federal Reserve saved Long-Term Capital Management, a massive hedge fund whose investors included leaders from U.S. finance.

Misfeasance, malfeasance, and malversation (corruption of officials) distinguished the finances of this era.

Despite these repeated bailouts and Wall Street's widespread abuse of its clients, federal regulators were extraordinarily tolerant. When a financial institution failed to obey or fulfill a law, regulation, contract, or agreement, punishment was mostly limited to a warning or a fine, sometimes in the hundreds of millions of dollars, followed by a corporate announcement that the company neither admitted nor denied any guilt. Such federal wink-and-nod acceptance facilitated the rise of a gambling culture in the great financial houses where solvency and...

Details zur Ausgabe

• Verlag: Knopf Doubleday Publishing Group
• Erscheinungsdatum: 2009
• Sprache: Englisch
• ISBN 10: 0307474836
• ISBN 13: 9780307474834
• Einband: Taschenbuch
• Anzahl der Seiten: 289
• Kontakt zum Hersteller: Nicht verfügbar
• Verantwortliche Person: preigu; mail@preigu.de; ; Lengericher Landstr. 19; Osnabrück; 49078; Deutschland