[R-G] [BillTottenWeblog] Public losses for private gain

[Bill Totten]

The effective nationalisation of huge sectors of the economy means US
taxpayers are picking up the tab for failing banks

by Nouriel Roubini

guardian.co.uk (September 18 2008)


With the nationalisation of Fannie and Freddie, comrades Bush, Paulson
and Bernanke started transforming the US into the USSRA (United
Socialist State Republic of America).

This transformation of the US into a country where there is socialism
for the rich, the well-connected and Wall Street (that is, where profits
are privatised and losses are socialised) continues today with the
nationalisation of AIG.

This latest action on AIG follows a variety of many other policy actions
that imply a massive - and often flawed - government intervention in the
financial markets and the economy: the bail-out of the Bear Stearns
creditors; the bail-out of Fannie and Freddie; the use of the Fed
balance sheet (hundreds of billions of safe US Treasuries swapped for
junk, toxic, illiquid private securities); the use of the other GSEs
(the Federal Home Loan Bank system) to provide hundreds of billions of
dollars of "liquidity" to distressed, illiquid and insolvent mortgage
lenders; the use of the SEC to manipulate the stock market (through
restrictions on short sales).

Then there's the use of the US Treasury to manipulate the mortgage
market, the creation of a whole host of new bail-out facilities to prop
and rescue banks and, for the first time since the Great Depression, to
bail out non-bank financial institutions.

This is the biggest and most socialist government intervention in
economic affairs since the formation of the Soviet Union and Communist
China. So foreign investors are now welcome to the USSRA (the United
Socialist State Republic of America) where they can earn fat spreads
relative to Treasuries on agency debt and never face any credit risks
(not even the subordinated debt-holders who made a fortune yesterday as
those claims were also made whole).

Like scores of evangelists and hypocrites and moralists who spew and
praise family values and pretend to be holier than thou and are then
regularly caught cheating or found to be perverts, these Bush hypocrites
who spewed for years the glory of unfettered Wild West laissez-faire
jungle capitalism allowed the biggest debt bubble ever to fester without
any control, and have caused the biggest financial crisis since the
Great Depression.

They are are now forced to perform the biggest government intervention
and nationalisations in the recent history of humanity, all for the
benefit of the rich and the well connected. So Comrades Bush and Paulson
and Bernanke will rightly pass to the history books as a troika of
Bolsheviks who turned the USA into the USSRA.

Zealots of any religion are always pests that cause havoc with their
inflexible fanaticism - but they usually don't run the biggest economy
in the world. These laissez faire voodoo-economics zealots in charge of
the USA have now caused the biggest financial crisis since the Great
Depression and the nastiest economic crisis in decades.

_____

This article first appeared on Nouriel Roubini's blog and is edited and
cross-posted here with the permission of the author. Nicknamed "Dr
Doom", Professor Roubini is now widely acknowledged as having accurately
predicted the present crises in financial markets.

This blog was amended at 17.00 on Thursday 18 September, to include more
of Nouriel Roubini's original post.

guardian.co.uk (c) Guardian News and Media Limited 2008

http://www.guardian.co.uk/commentisfree/2008/sep/18/marketturmoil.creditcrunch


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