Sunday, September 14, 2008

Two More Down

It looks like Merrill Lynch is being saved by Bank of America, although there will be massive layoffs to be sure. The short story tells you everything you need to know about how few wealthy individuals control the economic fates of this country:
“A hundred guys flew this firm into a mountain,” said a broker who works for Merrill in California and asked to remain anonymous because he did not have permission to speak with reporters. “It’s really sad. Now we’re going to be a bank like every one else.”
Sorry they'll just be a bank, as if there's something wrong with that, but over at Lehman Brothers it's worse. In fact, this 158 year-old company, formed by three brothers in Montgomery, Alabama to act as a brokerage house for buyers and sellers of cotton, is just going bankrupt.

What does this mean for the average investor? If you own shares of Lehman, it probably means they're worthless. As Lehman primarily served institutions rather than reg'lar folks like you and me, it may not hit the residents of Main Street in their homes, but it sure as hell will play havoc with the capital markets, including start-up type funds, the kind that help America stay ahead in the 21st Century global order.

Oh, and insurance giant AIG (American International Group) is close to doomsday as well, seeking $40 billion in bridge loans from the Federal Reserve.

And if you aren't nervous yet, there's another load of high-flying investors preparing to crash more firms in order to make themselves wealthier still:
In May, David Einhorn, one of the most vocal short sellers on Wall Street, made no secret he was betting against Lehman Brothers. Now, some investors are afraid that fund managers like him will take advantage of the climate of fear stirred up by the troubles of Lehman to single out other weak financial firms whose declining share prices would bring them rich rewards.
Are we looking at a run on the banks? Is Monday, September 15th, going to turn out to be another Black Monday? Or, worse, like this Black Monday?

I'll leave it to my more finance-knowledgeable readers to fill us in, if they like. But the bottom line has to be that this huge crash, just like the 1987 crash precipitated by the Reagan-era market deregulation, has to be laid at the feet of the Republican Party and all fellow travelers on the road of deregulation.

Folks, we just socialized the mortgage system in this country a week ago today. After having allowed all kinds of high-risk home borrowing in order to give Pyrrhic boost to the economy (no thanks, Alan Greenspan) and permitted these unsafe mortgages to be used as financial instruments for trading and gambling, with all kinds of "derivatives" that scant laypeople could ever understand, after deregulating the walls between banks, brokerages, insurance companies and more in order to "create wealth" for the wealthy, isn't it clear that unfettered markets lead to unmitigated catastrophe?

If America elects as President a self-admitted economic moron like John McCain with sclerotic notions, cronies who contributed wholeheartedly to this disaster (Phil Gramm) and no economic plan he can even speak of (other than a bullshit rallying cry against "earmarks!"), then America will get what it deserves.

A vote for Obama, and I pray it won't have to come to this, may very well turn out to be a vote for our next FDR.

1 comment:

Anonymous said...

Who's to blame?

Two words: Alan Greenspan.