Code Blue In The Financial E.R.: Trauma Time

Can the Masters of the Global Economy “Fix” the Crisis?

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.

– News Dissector Danny Schechter’s film IN DEBT WE TRUST (indebtwetrust.com) is being screened in the US Congress on Tuesday. His new book WE ARE SCREWED is coming out this month. Comments to Dissector@mediachannel.org

Popularity: 2% [?]

“Great Milton’s ghost, the economy is dead, Neither Uncle Milties shock therapists nor Greenspan’s paddles can bring that thing back except as a zombie. Bones couldn’t save this dead cat. The tricorder shows no vital signs.”
Why not bury the dead and start over again this time being rational and thinking about a finite earth?
The economy is far too important to be left to the care of bickering economists and worse the politicians. Why not trash greed and bleed and move to something human.
“You can ever raise a dead man. Oh no: you can praise him but can’t raise him.”
Brecht