Worst Day in a Century For US Financial Markets

Well, Merrill Lynch, one of the biggest, if not the biggest stock brokerages in the US, has gone under. Bank of America bought them out for $50 billion, but if they would not have, Merrill Lynch would have had to file for bankruptcy. At the same time, the huge, 158 year old Lehman Brothers financial firm, the fourth largest in America, has filed for bankruptcy. This venerable firm is apparently history.

30,000 have been laid off around the world and the company has $600 billion (WTH!?) in outstanding debt. There were negotiations between Lehman and Barclays and Bank of America to buy out Lehman, but without guarantees of the US government (taxpayers) taking responsibility for the soaring peaks of bad debt on Lehman's books, no one wants to touch this bad apple with a ten foot pole and an eleven foot extension.

Some are calling the crash of Lehman Brothers the worst day in a century for global financial markets. That was what Alan Greenspan called it.

At the same time, AIG, one of the nation's largest insurance firms and at one point the largest insurance company in the world, is in serious trouble, and its stock is being pounded into the ground. I am not sure what it is up, but apparently they are caught up in the subprime bad housing loans catastrophe.

The Bank of England injected $5 billion into markets to keep them going, and the EU Central Bank pitched in $30 billion for its share.

Some call AIG, Lehman Brothers and Merrill Lynch thetop three names on Wall Street.

If these three go under, billions in pension funds will be zeroed out and banks and financial firms all over the world will be hammered. Washington Mutual, one of the US' largest banks, is also seeing its stock beat up badly, and it is in danger of going under.

Wall Street hemorrhaged an unbelievable 500 points on Monday, September 15. I'm amazed they didn't stop trading. I'm terrified at what tomorrow holds.

The Bush Administration seems to be taking a hands off approach and saying to let these huge firms go under. This is the classic free market evangelical fundamentalist approach and it is one that John McCain is advocating.

McCain is taking the apparently completely insane position that the cure to this chaos and Hell caused by deregulation is even less government. He proposes more tax cuts for wealthy persons and corporations, and this is going to fix the mess up just fine. Even Ayn Randist objectivist and ultra-reactionary Alan Greenspan says that's nuts. Obama promises more socialist regulatory measures as a nostrum, which is what this crisis needs.

McCain also seems to edge towards calling for privatizing Fannie Mae and Freddie Mac. He and Palin wrote an editorial a week ago that called for "downsizing" the two institutions. That's probably a completely disastrous notion. It was wild privatization of everything in sight, including oversight, that caused this whole mess. The Bush Administration's takeover of Fannie Mae and Freddie Mac was a socialist move, but it was right and proper.

It arguably should have been done long ago. The reason the two institutions got into too much trouble was because it was too private and not public enough, and in the process of becoming more and more private and less and less public.

Both Obama and McCain oppose a bailout of Lehman Brothers. I don't know enough to comment on that. However, Paul Krugman, whom I deeply respect, says that the US government is playing Russian roulette with the financial system.

After Bear Stearns went down six months ago, socialist regulations should have been put in immediately to try to stem the hemorrhage. Instead, the Bush Administration did nothing at all. At the time, Krugman called that move foolhardy. He is looking more and more right, and I don't want him to be.

McCain opposed the Bush Administration's socialist bailout of Bear Stearns. It was painful, but arguably necessary, and inaction would have been much worse. It certainly slowed this crisis down and bought it some time.

At the time, McCain called for less regulation of financial institutions, not more. McCain and Palin both seem to be resolutely and reflexively opposed to more regulation of the financial sector, or even of regulation period. In this way, they are even further to the right of ultra-reactionary George Bush.

McCain-Palin's economic plan, what little we learn of it, sounds really frightening. They would continue the insanity and idiocy of Bush economics and have vowed to actually make things even worse.

I'm no economist, but I'm not sure that's such a good idea. Government bailouts are nasty, but the alternative may well be worse. Anyway, I'm a socialist, and bailouts can be seen as a kind of socialist intervention.

The Bush Administration, and frankly, Republicans for the past 30 years, have created this whole mess. I must admit sadly that "free market Democrats" like Jimmy "Atari Democrat" Carter and Bill "Eisenhower Republican" Clinton had their mitts in this mess too. This is because Democrats have increasingly been adopting radical neoliberalism over the past 30 years, with the predictable results.

But the biggest players have always been Republicans and one of the biggest culprits of all is one of George Bush's and John McCain's best buddies, Phil Gramm of Texas.

Now retired, Gramm is probably responsible more than anyone else for dismantling regulations set up in the wake of the Stock Market Crash of 1929 in order to prevent it from happening again. Many reforms were enacted during the Depression and afterward. It's best to call these socialist reforms because that is what they were.

These socialist reforms tamper the insanities of the free market like lithium smooths the moods of a psychotic bipolar patient. Or another analogy could be a fog layer and an ocean along a seacoast that moderates the weather and produces a nice Mediterranean climate for much of the year.

True, if you love wild swings, you can go inland to the deserts where there is no moderating weather and it's 120 in the daytime and 30 at night.

This is what the capitalists want. Capitalists are basically sick people - they behave like the mentally ill or sex or drug addicts. They are like untreated psychotic bipolar patients who live for the wild manic rides. Capitalists are like a pathological gambler in a casino with a no-limit credit card blazed on coke and downing cocktails. There's no limit to the runs.

The capitalist wants the ability to run up huge profits in crash and burn, live fast die young, boom and bust economics. Neoliberal free market economics is just great for the boom and bust crazies. Like the wasted gambler with the stolen credit card in the casino, the capitalist thinks there's no limits to the run-ups. He keeps going to new tables and doubling down.

You tell him his manic episode is going to crash hard at some point and he turns around to punch you in the face and charges at you like a buffalo as you race out of the building for your life.

With capitalism, as with boys on a playground, adult supervision is necessary. Capitalists need to be supervised by adults called government and socialism. Even Adam Smith himself acknowledged that the unregulated free market was one of the worst evils known to man. He said the free market had to be regulated by the state to prevent total economic chaos. The heirs to Smith's throne seem to have forgotten his books.

They got rid of almost all of the progressive socialist legislation we put in that prevents wild run-ups and Gold Rush style booms but at the same time also dampens down the inevitable free-fall busts that always follow the booms, like day follows night.

It used to be, you went to get a mortgage and if your income was about 1/3 of the mortgage and your credit was good, you got the loan. The bank wanted to make dead sure you were going to pay back the loan so they vetted you carefully. Those days are gone.

In recent years you could get a loan for 7 times your income, and the lenders assumed you would not be able to pay it back. But they didn't care anymore because you weren't even going to pay it back to them.

They took your bullshit loans and packaged them into some bullshit thingies called CDO's, which were some weird investment vehicles made up of thousands of home mortgages, many of which were known to be bad loans. Then they got crooked accountants to mark these crap securities with AAA ratings when all they were were turds with fancy paint all over them.

They then hocked this ripoff fraudulent packages to suckers in the financial world, while claiming they were worth their weight in gold. The deregulations had gotten rid of the notion that investment banks should be separated from consumer banks. There was supposed to be a solid wall between the two, so if one went down, it would not take down the other.

If a financial bank went down, it would not take down consumer banks. When banks were allowed to be both financial and consumer banks, they failed in 1929, causing the Great Depression. This wall, called Glass-Steagall, has been progressively whittled away for many years now to the point where it is about gone.

Republicans, especially Mr. Gramm and his diabolical Dragon Lady Korean wife, were the worst offenders. The destruction of Glass-Steagall is an important reason why we are seeing these financial meltdowns right now. Another reason was the whittling away of standards for home loans. The lending industry has always hated regulations making it so that those who took out loans to buy homes could pay back their loans.

By the 1960's, regulations were in pace that enabled banks to make vast numbers of home loans, very few of which went bad. As the banks itself ate it when the loan went bad, applicants were vetted religiously. This was progressively gutted over the years to the point where loans were given out gleefully to folks who in no sane world should have gotten a loan.

White nationalists have posited a theory (and now pro-business freemarketeers havejumped in) that the subprimes and other bad loans were ordered by the US government eager to get Hispanics and Blacks into home ownership, hence the niggers* and the Mexicans are responsible for the devastation of our economy! Wow, what a breathtakingly audacious theory.

There appears to be little evidence to back this up. For many years, banks had different standards for Whites versus non-Whites and many Blacks found it almost impossible to get a home loan no matter how good their credit was. The Feds started cracking down on this under Clinton 10-15 years ago, and there was no housing crisis then.

The notion that PC Feds pushed poor, innocent, mortgage banker criminals into making bogus loans to irresponsible non-Whites appears false.

The mortgage bankers made lots of money on every loan, so they would practically sign up a German shepherd if one walked in and asked for a loan. The criminals quickly sold the loans in fraudulent packages to poor suckers in financial institutions, so it was out of their hands they didn't care whether it was paid back or not.

True, people took out loans they could not afford, but in a sane society, those loans never get made in the first place. Loan officers criminals were con artists who slickly pitched the loans to ignorant people who had no business being there. They got them in at very low teaser rates and didn't really explain well that the rate was going to go up later on.

The lenders were as low as Nigerian email scammers.

But it's not up to the borrower to determine if he qualifies for a loan, and a borrower is not irresponsible for taking out any loan.

The burden of responsibility in a sane society lies on lenders. If lenders eat it when loans go bad, then they are unlikely to loan to the undeserving, who are shown the door. Blaming Blacks and Browns for this housing collapse is an appalling exercise in White racism.

When the loans went bad, as any idiot knew they would, they pounded financial institutions all over who had bought huge quantities of these crazy things without really knowing what they were getting into. Financial houses poured billions into fools gold securities that disintegrated in front of their eyes to pennies on the dollar.

Soon they were out billions with bills coming in continuously and frankly no money in the drawer to pay any of them. You can only go on for a while like that.

John McCain has had his mitts in this bullshit for about 30 years. He's supported just about every crazy deregulation package that came down the pike. If he ever opposed one, let me know.

Furthermore, McCain was in very, very deep in the same horrible Savings and Loan collapse. He spent much of the 1980's, while prophets were screaming in the wilderness about the doomsday looming S&L mess, barking about the need for fewer and fewer regulations on S&L's. Look what happened.

McCain hasn't learned a Goddamned thing. Here it is, 20 years later, and he's back doing it all over again. He's like a sociopath impervious to punishment.

McCain, the Bush Administration and Republicans in general are overwhelmingly responsible for the collapse of the housing market and the resulting failures and collapses in the financial market, banks and insurance companies. Democrats are also responsible, but much less so, and hardcore liberals like Obama probably have little dirt on them.

John McCain now says he's coming in as a "maverick" and he's going to flip and change 30 years of deregulation mania as he becomes some kind of born-again reformer. Just as Bush ran as a "compassionate conservative in 2000, when he had many years in office proving the opposite, McCain's record speaks for itself. McCain the socialist big government regulator? Get real.

*used sardonically