[R-G] [BillTottenWeblog] Forget About "Recovery"

[Bill Totten]

Clusterfuck Nation

by Jim Kunstler

Comment on current events by the author of
The Long Emergency (2005)

www.kunstler.com (March 09 2009)


At the risk of confirming my critics' dumbest charge - that I am a
"doomer" - the mandate of clarity requires me to ask: to what state of
affairs do we expect to recover? If the answer is a return to an economy
based on building ever more suburban sprawl, on credit card
over-spending, on routine securitized debt shenanigans in banking, and
on consistently lying to ourselves about what reality demands of us,
then we are a mortally deluded nation. We're done with that, we're
beyond that now, we've crossed the frontier and left that all behind,
and we'd better get our heads straight about it.

I maintain that there are countless constructive tasks waiting to occupy
us on a long national "to do" list for rebuilding a national economy,
but they are way different than the ones currently preoccupying
government and the mainstream media. The Obama White House, Congress,
and The New York Times are hung up on exercises in futility - "rescuing"
banks and insurance companies that cannot be rescued (because they are
hopelessly trapped in "black hole" credit default swaps contracts), and
re-starting a "consumer" binge that was completely crazy in the first
place, based, as it was, on a something-for-nothing standard-of-living.

Meanwhile, if the buzz on the blogosphere is a measure of anything - and
I think it is - then a new consensus is forming out there about where to
start doing things differently. Unfortunately after less than two months
in office, President Obama finds himself awkwardly behind-the-curve on
this. It begins with the understanding that a general bank rescue is
hopeless and, going a step further, that the people who caused the train
wreck of "innovative" securities have to be prosecuted. The public's
collective voice on this is muted but growing. It has been muted by the
general air of blackmail that the banks have used to enthrall policy and
opinion - the "too big to fail" idea - in effect holding the nation's
future for ransom.

Last week, New York State Attorney General Andrew Cuomo hauled Bank of
America chief Ken Lewis into his office to explain who, exactly,
received an aggregate several billion dollars in bonuses late in 2008
after the US Treasury forked over billions of dollars in TARP money to
his bank. That was a good start. Mr Lewis, being lawyered-up to the max,
had the temerity to reply that answering the question would compromise
his ability to keep talented people in his employ. For that impertinence
alone, Mr Lewis ought to be dragged over fifteen miles of broken
chardonnay bottles behind a GMC Yukon - but that is not how we do things
in American jurisprudence. To be more realistic, a simple indictment
would be in order, and then Mr Lewis can answer this question, and a few
others, in the comfort of an air-conditioned courtroom. Ultimately, that
might lead to Mr Lewis becoming the wife of a bodybuilder in one of New
York State's houses of correction - a just outcome that would go far in
rejiggering the nation's expectations about how people in authority
ought to behave. And such an outcome might lead to the conviction of
many other brides-to-be from the Wall Street debutante pool.

Now it has come to light, just last week in the wake of AIG's latest
bail-out, that previous AIG bail-out money to the tune of $50 billion
was distributed to a set of banks including Goldman Sachs (former
employer of then Treasury Secretary Hank Paulson and then New York
Federal Reserve Governor Tim Geithner), plus Morgan Stanley, Merrill
Lynch, Mr Lewis's Bank of America, and a long list of European banks
with operations in the USA. Since the transactions took place in New
York State, the investigation of these irregularities alone could solve
the unemployment problem here if NY Attorney General Cuomo were given a
free hand in hiring staff to depose everyone involved - including the
hiring  of caterers to bring in coffee and meals for round-the-clock
proceedings.

All of this raises another awkward question: where is United States
Attorney General Eric Holder in this situation? Surely the federal
statutes offer some grounds for inquiring about the misuse of Treasury
funds - and many other issues arising from Wall Street's stupendous orgy
of misbehavior. What I'm hearing out in the blogosphere is a growing
clamor to call people to account before we are really able to move on to
the massive task-list that awaits us in rebuilding our economy.

The bigger question for now is whether any of these authorities will act
effectively before the public simply goes apeshit and starts burning
down Greenwich, Connecticut. The dangerous shift in public mood is
liable to occur with shocking swiftness, in the manner of "phase
change," where one moment you see a bewildered bunch of flabby
clown-citizens vacuously enraptured by "American Idol", and the next
moment they are transformed into a vicious mob hoisting flaming brands
to the window treatments of a hedge funder's McMansion. The moment of
opportunity for avoiding that outcome is looking sickeningly slim right now.

Another thing that President Obama can set into motion anytime - and
pull himself back to the head of the curve of leadership - is to either
by executive order or by proposal to congress, shut down the credit
default swap system for a period of time while procedures are drawn up
to place all these dubious contracts in a "clearing" market, where the
holders of them will have to come clean about what they're sitting on.
The lack of this procedure is allowing zombie banks to hold the United
States hostage for never-ending bail-out ransoms. None of these banks
are going to survive another six months anyway, so the basic blackmail
motif that the whole money system will collapse if ransoms are not paid
is a bluff that has to be called sooner or later in any case. So Mr
Obama might as well get on with it.

Once these two matters are dealt with - an earnest start-up of
prosecutions and disabling the credit default swap blackmail racket -
then perhaps a stressed-out and impoverished public might be induced to
not go apeshit and instead get on with the mighty task of rebuilding our
nation along lines that have a plausible future.

_____

My new novel of the post-oil future, World Made By Hand, is available at
all booksellers.

http://jameshowardkunstler.typepad.com/clusterfuck_nation/2009/03/forget-about-recovery.html


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