Obama’s failure

By Daniel at 15 October, 2009, 11:10 am

Presidents Obama’s failure to effectively restructure the out of control finance sector will come back to bite his administration in the @#$%&!. It is one of the few industry’s that can cause total chaos for everyone else. Finance is a tool that is supposed to be used effectively by supplying capital efficiently to small businesses and the REAL economy. The financial sector led by JPM, GS and BAC has become a monster that has damaged the real economy, promoted and fostered fraud and corruption, and poses a great threat to democracy, and causes boom-to-bust bailout cycles. The entire finance industry from the credit default swaps, to the under pricing of risk, to the misrepresentation of assets, to the repackaging of junk bonds just proves that they are worse than parasitic! Not only does the banking industry continue to hoard capital for its own benefit, they also continually misallocate the remaining capital in ways that harm the real economy in order to reward the already rich financial elites in “investment” banking and government.

All of this new income-producing “financial innovation” was praised by media elites and the SEC because it “reduced” risk. It all very quickly became ticking time bombs in global markets where it was then peddled to hundreds of hedge fund and money market-fund managers. Whether unintended consequences or not, the result has been “markets” where prices do not accurately reflect all necessary information. In the short term, the market simply cannot account and respond to fraud, malpractice or rent seekers. AAA ratings were given to just about every structured mortgage-backed securities by the credit rating agencies. In addition, the ratings agencies were obliged to “assist” in designing these securities so they could qualify for higher ratings, which drove the economy off a cliff.

When the finance industry makes up 40% of “profits” something is clearly wrong. Finance in its entirely should only be used as a middleman to move funds to small business and entrepreneurs who can help the REAL economy. Clearly the $787 billion dollar bailout was used to enrich corrupt corporate insiders through accounting fraud or generous stock options. Instead of allowing funds to flow into the places where it will be most useful to the real economy, capital has been directed to the “investments” that create the greatest fraudulent accounting gains. By making loans to people unlikely to be able to repay them once the bubble burst, and engaging in reckless, extreme leverage finance has taken government hostage.

Banks have successfully secured enormous government subsidies, particularly those that have the greatest political power and would otherwise fail due to incompetence and fraud. Now that JPM has “crushed expectations” we can expect another hyper-inflationary bubble, which will cause the next severe economic crises. The fact is the finance industry needs to be cut down in half if not 75%. Of course we won’t ever hear about it from members of Congress or the media. Instead, we will hear stories about sweat hearts like Jamie Dimon who rose to the top entirely through their shear brilliance and willingness to embrace “financial innovation.” The longer we turn a blind eye to the outright robbery, fraud, manipulation, corruption and coercion; the longer the real economy that creates goods and services, our jobs, and our incomes will suffer. President Obama was voted in to bring about “change we can believe in” so far; he has done NOTHING to address this problem!!

So we can continue to hide the real unemployment figures, the defaults going up again in the avalanche of meaningless press releases but the real economy will likely continue to suffer. Holiday sales will tell it all this year. With GS “Best-in-class” and C “bank that never sleeps” posting “profits” we should be up triple digits again.

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