At least that's my fear and why I continue to support the bailout, despite its possible negative impact on the election for Democrats and Barack Obama, despite the populist outrage I share with the rest of you about the absurdity of Wall Street begging for a bailout from a hurting Main Street, despite the righteous indignation I share with you about corporate greed and crony capitalism that brought us to this point and despite the extreme hesitations I have about listening to any claims of danger that the boy-king who cried wolf on Iraq sounds for Americans.
Now why, despite the fact that the FDIC only insures bank desposits up to $100,000, am I concerned about whether a country as rich as ours can insure all these deposits? Well, as this Bloomberg article hints, the FDIC is nowhere near as safe or isolated from the corporate greed that has caused this global financial meltdown as you or I would want to think.
And the danger of not acting is even worse bank failures than that of Washington Mutual on Thursday night, already the worst bank failure in U.S. history!!!
If I'm right and the president or Paulson or Bernanke or Congress were to level with the American public about the possibility of the fact the FDIC could fail, it would breed anarchy and bank runs across the country that would only serve to make the situation worse. That's my theory of at least why they are being so secretive and cagey about the situation, despite all public assurances that the FDIC's got our back.
Here's Bloomberg's horrifying report on the way the very rich are stealing from our country to the potential bankruptcy of our nation when it comes to the Federal Deposit Insurance Corporation:
As chief of staff of the Federal Deposit Insurance Corp. from 1999 to 2002, Mark Jacobsen was responsible for a safety net that protects U.S. savers. He now runs a company that critics say is designed to stretch that net to its breaking point.
Jacobsen, 42, is president and co-founder of Arlington, Virginia-based Promontory Interfinancial Network, a company that makes it easy for a wealthy depositor to keep FDIC-insured cash in separate accounts at multiple banks. It offers customers up to $50 million of FDIC insurance, 500 times the single-account limit approved by Congress.
``When I first saw Promontory, I was amazed that the regulators would let it fly,'' says Sherrill Shaffer, a former chief economist at the New York Federal Reserve Bank. ``It undermines a lot of the safeguards around the FDIC deposit fund. I'm astounded that the FDIC has not picked up on that and tried to shut down that loophole.''
The loophole Promontory exploits is the FDIC rule that allows an individual to open up federally insured accounts of up to $100,000 at an unlimited number of banks.
So while all of us sleep semi-comfortably when a bank collapse happens thinking that surely a country as rich as ours can afford insuring $100,000 per taxpayer, when you start to look at the real costs it gets a LOT scarier.
Just as we're trying to absorb the news that WaMu is no more, there are talks that it's possible that Wachovia may soon disappear, per the Wall Street Journal.
Wachovia Corp. has entered into preliminary talks with a handful of possible buyers -- the latest in a parade of banks to look for safety in the arms of a suitor amid concerns that the weak economy is pushing them deeper into peril.
The talks came as Washington Mutual Inc.'s late-Thursday failure rattled the shares of other troubled banks. Shares in Wachovia fell 27% on Friday as investors fretted about its massive mortgage portfolio.
Investors are growing concerned that a host of banks nationwide, both large and small, could come under fresh pressure to either raise more capital or else find someone willing to buy them. The trouble stems in part from the fact that a broad range of borrowers, not just mortgage holders, are now starting to default on their debt. For instance, about 2.4% of payments on credit cards are more than 90 days overdue, according to the Federal Deposit Insurance Corp., the highest level since 1991.
Now do you think these market speculators who could be bankrupting these banks on purpose knowing they'll get FDIC payouts have any shame about what they're doing?
William Seidman, the FDIC's chairman from 1985 to 1991, is a board member. William Isaac, who chaired the FDIC from 1981 to 1985, is chairman of the company's bank advisory board.
``These guys know how to work the system,'' says Shaffer, who's now a professor of banking at the University of Wyoming in Laramie. ``They saw a good buck in it for themselves.''
Seidman says he knows Promontory has critics. ``The question can be raised, `Is this what the government wanted when they put in deposit insurance?''' he says. ``One man's loophole is another man's God-given right.''
Well, Mr. Seidman, the Lord giveth and the Lord taketh away. And I have a sinking feeling the Lord may be doing a lot of taketh away from America after all of our financial and governmental leaders' ignorance and recklessness and greed over the past 30 years.
Yes, I recognize the bailout only treats a symptom in the economy rather than is a cure for what's ailing it, but denying a person who is having a heart attack a ride to the hospital because you told him he shouldn't have eaten so many cheeseburgers and he didn't listen doesn't make any more sense than cutting off the nose of Wall Street to spite its face by denying this bailout and letting all of America's banks fail as far as I can tell.
We absolutely need massive regulation of the banks and markets in this country and we absolutely need to hold the negligence and fraud and abuse of Wall Street to account and we absolutely need change in the culture in Manhattan and Washington and we absolutely need to get away from the horrifying credit default swap stuff, but I just fear if we don't step in now with this stop-gap measure first to stabilize the markets until January when the grown ups like Obama can get in there that there will be no way of salvaging our current way of life to get out of this without total chaos whether Obama is president or not.
I tried, but failed, to better explain this overlaying worry about how a crash on the stock market can have drastically devastating impacts for the entire American economy in Why history requires this progressive support the bailout as I got too bogged down in talking about my solutions for how government should drastically revamp its spending and taxing priorities to get of this economic meltdown and not enough about how crucial I think a bailout of the markets in the Panic of 1907 was in averting mass economic crisis, or at least delaying it for a time.
But what scares me the most about a stock market crash like we had in 1929 is not the Great Depression that followed it, but the fascism and World War II that resulted from it and I'd imagine if the American people allowed the entire global financial system to meltdown on its watch it would definitely up the possibility of World War III with a lot of anger aimed toward us in America even if we somewhat redeem ourselves by electing Obama, don't you think?
Well, I doubt I've changed any minds here about this bailout, but I hope I have given you some more to think about as we debate this.