By Number Six
Sunday, January 18, 2009 at 10:23 AM
Long years ago, Merle Travis penned a song that became a hit for Tennessee Ernie Ford, the clasic Sixteen Tons. In the song, it details life in the pre-union coal mining era:
You load sixteen tons, what do you get
Another day older and deeper in debt
Saint Peter don't you call me 'cause I can't go
I owe my soul to the company store.
Well, guess what? We all do.....now.
The current "credit crisis" was the disastrous result of a slick plan manufactured by the banking industry: Get everyone in America hooked on the idea of paying for things on credit.
Worse, it's not just consumers who are hooked on credit; it is also corporations and government. Oh, yes, our darling news media ain't too swuft on telling us that, yes.
A question I posed to someone recently: "What, when push comes to shove, must you have credit to purchase, where you can't begin to scrape up that much cash to afford?"
Answer: Houses and transportation devices. In some cases, too, appliances.
But, that only covers consumers, not industry. What do they need credit for?
Oh, not much, just stuff like tooling, payroll, research and development, expansion, so on. Ain't much, is it? Yes, I can go to eBay and grab up a few 757's cheap, correct? A punch press or six? Employees?
The media has only hinted at that concept: Industry, too, got screwed by banks and Slee-Z-credit(c 2009, Number Six for WTW, LLC, thank you). Slee-Z-credit: Do they have a pulse? Here, here's $1,500,000! Don't forget the payment book on the way out!
Slee-Z created the Big Finance Era, starring names like Citicorp, Wachovia, Lehman, Washington Mutual, Bank of America, and I could sit here and type them out all week long. From 1st National Mom-n-Pop to Merrill...they were all in on the scam.
The scam? Get it where the entire nation, or, the planet, yes, became hooked on credit....for everything.
And then, along comes housing bubble, which goes blooey, and suddenly, the scam started to unravel. Seems some of these banks were underwriting Slee-Z loans to unsuspecting suckers...um...customers...to purchase houses they could not otherwise afford. Add to the list? Credit cards with "magic" interest rates (Now-u-see-it, now-u-don't), you know the kind:
Zero percent interest for....low interest rates for....The rest, of course, buried in a contract, that, if we apply reality, reads as follows:
We can do what we bloody well please. You cannot sue us. We use anything up to Ouija board to determine what you will pay. Bitch and we'll double the payments.Small problem: As jobs evaporate and go overseas, too many of us held on as hard as we could, not realizing that charging stuff meant....our souls went to the company store.
Lehman went first, and after that, the poop smacked the rotors. As of this moment, WaMu is a memory, Wachovia is now Wells Fargo, and Citicorp is looking like Wile E Coyote...grasping at a ledge. Oh, yes, even small banks are in deep doody.
But, they asked for it, didn't they? Over the years, the banks and other lending firms bullied congress into lax laws, no laws, no regulations, no oversight. Washington Mutual's old CEO wanted them to "become the Wal-Mart of banking. You won't recognize us in ten years!"
Ten years? I don't recognize WaMu now, and it's just been a few months.
So, the banks kvetched to Hank Paulson: "WE NEED MONEY AND WE NEED IT FAST OR WE'RE ALL DEAD! ARRRRRRRRRRRRR!!!"
Paulson, as we recall, practically threw Nancy Pelosi to the dirt, begging for the first TARP bailout, a lovely mega-billion-dollar deal, to hand to the banks to cover "their losses."
Boy were we fooled!
Paulson's Theorem, of course, was the idea that if the government backed these banks on their "bad paper", the new money would allow credit to flow once again. See, banks don't actually have the money they loan out: It's purely fictitious, doesn't really exist...until the sucker..oops...the customer pays it back in full. Hence, Fractional Reserve Banking.
But, Paulson didn't realize, nor did we, nor did congress...the banks lied. As the funds were not "earmarked", nor regulated, the banks saw the cash as....well, cash.
And guess what they're not doing with it? Guess. No, come on, guess.
Right. They are not loaning any of it out.
From The New York Times, a small snippet as to how the banks are seeing this:
At the Palm Beach Ritz-Carlton last November, John C. Hope III, the chairman of Whitney National Bank in New Orleans, stood before a ballroom full of Wall Street analysts and explained how his bank intended to use its $300 million in federal bailout money.Wow! What balls to tell the public to go fuck itself, eh?
“Make more loans?” Mr. Hope said. “We’re not going to change our business model or our credit policies to accommodate the needs of the public sector as they see it to have us make more loans.”
Meanwhile, outfits like Citicrop are raising the rates on their cards, and why not? They're scared that some will default, and it's time to raise more cash, of course!....but not by making new loans, of course.
It doesn't make sense, now, does it? Banks exist to make money, and they make money on loans. Easy as dirt. No, banks don't make a dime on deposits, never did. They exist to make loans.
So, that being the case, how do they get by? Simple: The TARP funds aren't being used to generate more loans, oh no, they're being used as....well, anything but.
For the banks, fearful that the economic downturn could deepen and wary of risking additional losses, the question of what to do with the bailout money comes down to self-preservation.(Bold is mine, yes.)
Mark Fitzgibbon, research director at Sandler O’Neill & Partners, which sponsored the Palm Beach conference, said banks seemed to be allocating the bailout money for four general purposes: increased lending, absorbing losses, bolstering capital and “opportunistic acquisitions.” He said those approaches made sense from a business perspective, even though they might not conform to popular expectations that the money would be immediately lent to consumers.
The "acquisitions" thingie? Go out and buy another bank. But, no, don't lend it out! Hold onto it! HOLD ONTO IT!!
So, there's why Honda, Ford, Chrysler, Hyundai, Circuit City and hosts of others are either in financial hot water or...closing their doors: The banks that created "the company store"...aren't offering loans...to anyone...anymore.
Without credit, cars go unsold, houses stay empty, appliances sit in the store. Kids don't go to college. Airlines can't grab up new planes.
Too, we can soon expect a "second tier" collapse as suppliers go down with the tide, like Smurfit-Stone, whose stock used to trade for over $10, the other day, down as low as...5 cents per. Others, yes, are soon to follow.
What's needed? My take would be for President Obama and congress to enact legislation to earmark bailout funds exclusively for hurting customers, or...an independent and US-run "superbank"...that sells direct to the customers. Business loans, houses, cars, planes, whatever, and gee, no Wachovia to deal with, eh?
Something must happen and soon: At the current rate, this recession will deepen further still, and when we call it Great Depression Number Two...the banks aren't going to matter anymore. Banks must be made...to make loans or else face government takeover.
And...it's either that or....we take over, and that result is always...messy.